Michael E. Borton(3) | * | | | (1) | Mr. Chisholm ceased to be a director, officer and employee effective January 5, 2020. |
| | (2)Elizabeth T. Wilkinson(4) | Mr. Snively ceased to be an officer and employee effective February 28, 2019. As this was prior to the implementation of the 2019 long-term incentive program, Mr. Snively was not included in the long-term incentive program.1.35 | | Denise Allen | 1.35 |
(1)Mr. Gibson did not participate in the 2020 long-term incentive program of the Company, but instead was granted certain options and rights to purchase stock of the Company pursuant to his employment agreement. For more detail, please see the description of Mr. Gibson’s employment agreement below. (2)Mr. Chisholm ceased to be a director, officer and employee effective January 5, 2020, which was prior to the implementation of the 2020 long-term incentive program. As a result, Mr. Chisholm was not included in the program. (3)Mr. Borton joined the Company after the implementation of the 2020 long-term incentive program and was not included in that program. In lieu of inclusion in the 2020 long-term incentive program, Mr. Borton was granted certain stock options pursuant to his employment agreement. For more detail, please see the description of Mr. Borton’s employment agreement below. (4)Ms. Wilkinson ceased to be an officer and employee effective June 15, 2020. Awards made under the long termlong-term incentive plan areprogram were of two general types: restricted stock subject to time vesting (“Restricted Stock”), and stock based on relative total shareholder return (“TSR Stock”). Restricted Stock. Each executive iswas granted restricted stock equal to (a) the executive’s award factor multiplied by (b) the executive’s salary and (c) 40%, divided by (d) a deemed share price of $4.00.$1.58. These shares vest ratably on the date that is one year after the grant, December 31, 20202021 and December 31, 2021.2022. TSR Stock. TSR Stock awards are based on two types of notional “units” granted to the relevant executives. The first type of unit is intended to reward performance based on performance of the Company as compared to the Peer Group (“TSR Peer Group Units”). Each participating executive iswas granted a number of TSR Peer Group Units equal to (a) the executive’s award factor multiplied by (b) the executive’s base salary and (c) 30%, divided by (d) a deemed share price of $4.00.$1.58. After December 31, 2021,2022, the performance of the Company iswill be compared to the performance of the companies in the Peer Group during the period from January 1, 20192020 to December 31, 20212022 (the “Performance Period”). This is done by calculating the “Total Shareholder Return” for the Company and each company in the Peer Group by subtracting (a) the average closing price of the common stock of the applicable company for the last 20 trading days of the Performance Period from (b) the average closing price of the common stock of the applicable company for the 20 trading days immediately preceding the Performance Period (the “Beginning Price”) and then dividing the resulting difference by (c) the Beginning Price. The TSR Peer Group Units are converted to restricted stock in the Company by multiplying the number of TSR Peer Group Units by a conversion rate equal to (a) 200%, if the Total Shareholder Return of the
Item 2: Advisory Vote on Executive Compensation Company is equal to the 75th percentile when compared to the Peer Group, and (b) 100%, if the Total Shareholder Return of the Company is equal to the 50th percentile when compared with the Peer Group. If the Total Shareholder Return of the Company is between the 50th and the 75th percentile when compared to the Peer Group, the percentage used to calculate the conversion of the TSR Peer Group Units will be determined by linear interpolation. If the Total Shareholder Return of the Company is less than the 50th percentile when compared to the Peer Group, no TSR Peer Group Units will convert to shares in the Company. The second type of unit is intended to reward performance based on the performance of the Company as compared to the Oilfield Equipment Services and Oil and Gas Drilling Global Industry Classification constituent companies of the Russell 2000 Index (the “Index Group”) during the Performance Period (the “TSR Index Group Units”). Each participating executive iswas granted a number of TSR Index Group Units equal to (a) the executive’s award factor multiplied by (b) the executive’s base salary and (c) 30%, divided by (d) a deemed share price of $4.00.$1.58.
At the end of the Performance Period, the performance of the Company is compared to the performance of companies in the Index Group in the same manner as for the TSR Peer Group Units. The TSR Index Group Units are converted to restricted stock in the Company by multiplying the number of TSR Index Group Units by a conversion rate equal to (a) 200%, if the Total Shareholder Return of the Company is equal to the 75th percentile when compared to the Index Group, and (b) 100%, if the Total Shareholder Return of the Company is equal to the 50th percentile when compared with the Index Group. If the Total Shareholder Return of the Company is between the 50th and the 75th percentile when compared to the Index Group, the percentage used to calculate the conversion of the TSR Index Group Units will be determined by linear interpolation. If the Total Shareholder Return of the Company is less than the 50th percentile when compared to the Index Group, no TSR Index Group Units will convert to shares in the Company. For both the TSR Peer Group Units and the TSR Index Group Units, the conversion rate can never be greater than 100%, if the Total Shareholder Return for the Company during the Performance Period is a loss greater than 5%. Unvested Restricted Stock and/or the right to convert TSR Peer Group Units and TSR Index Group Units are forfeited in the event the executive is not employed with the Company at the end of the Performance Period, although the Compensation Committee has the right to determine vesting in the event an executive dies, becomes disabled or retires prior to vesting. If there is a change of control of the Company during the Performance Period, the TSR Peer Group Units and TSR Index Group Units convert at a rate of 100%. Other Stock Awards
Executive officers of the Company may be awarded one-time awards of Restricted Stock in connection with the closing of significant transactions. In 2019, Restricted Stock was awarded to several of our named executive officers in connection with the sale of Florida Chemical Company to Archer-Daniels-Midland.
20192020 Long-Term Incentive Results
The amount of Restricted Stock and notional units awarded to the 20192020 named executive officers is detailed onin the table below. As described above, Restricted Stock vests over three years, and TSR Peer Group Units/TSR Index Group Units are not actual awards of common stock, but rather the potential to convert into common stock if the Company meets certain performance objectives in future years. | | | | | | | | | | | | | | | | | | | | | Restricted | | TSR Peer | | TSR Index | | | | | | Stock | | Group Units | | Group Units | | Total (3) | John W. Chisholm (1) | | $ | 668,013 |
| | $ | 581,938 |
| | $ | 575,441 |
| | $ | 1,825,392 |
| | Elizabeth T. Wilkinson | | $ | 277,998 |
| | $ | 222,134 |
| | $ | 219,716 |
| | $ | 719,848 |
| | James A. Silas | | $ | 157,752 |
| | $ | 180,933 |
| | $ | 178,913 |
| | $ | 517,598 |
| Joshua A. Snively, Sr. (2) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| | (1) | Mr. Chisholm ceased to be a director, officer and employee effective January 5, 2020, at which time all time-vesting Restricted Stock, TSR Peer Group Units and TSR Index Group Units awarded as 2019 long-term incentives were forfeited by Mr. Chisholm, other than 123,750 shares of Restricted Stock granted pursuant to the 2019 long-term incentive program, which was settled in cash at the time of Mr. Chisholm’s departure for $257,400. |
| | (2) | Mr. Snively ceased to be an officer and employee effective February 28, 2019. As this was prior to the implementation of the 2019 long-term incentive program, Mr. Snively was not included in the long-term incentive program. |
| | (3) | Amounts assume that the TSR Peer Group Units and the TSR Index Group Units convert at 100% and are valued as of the date of award. |
| | | | | | | | | | | | | | | | Restricted | TSR Peer | TSR Index | | | Stock | Group Units | Group Units | Total(5) | John W. Gibson, Jr.(1) | $ | — | | $ | — | | $ | — | | $ | — | | John W. Chisholm(2) | $ | — | | $ | — | | $ | — | | $ | — | | Michael E. Borton(3) | $ | — | | $ | — | | $ | — | | $ | — | | | | | | | | | | | | | | | | | Elizabeth T. Wilkinson(4) | $ | 189,000 | | $ | 141,750 | | $ | 141,750 | | $ | 472,500 | | | Denise Allen | $ | 162,001 | | $ | 121,500 | | $ | 121,500 | | $ | 405,001 | |
Item 2: Advisory Vote on Executive Compensation (1)Mr. Gibson does not participate in the long-term incentive programs of the Company, but instead was granted certain options and rights to purchase stock of the Company pursuant to his employment agreement for his long-term incentives. For more detail, please see the description of Mr. Gibson’s employment agreement below. (2)Mr. Chisholm ceased to be a director, officer and employee effective January 5, 2020, which was prior to the implementation of the 2020 long-term incentive program. As a result, Mr. Chisholm was not included in the program. (3)Mr. Borton joined the Company after the implementation of the 2020 long-term incentive program and was not included in that program. In lieu of inclusion in the 2020 long-term incentive program, Mr. Borton was granted certain stock options pursuant to his employment agreement. For more detail, please see the description of Mr. Borton’s employment agreement below. (4)Ms. Wilkinson ceased to be an officer and employee effective June 15, 2020, at which time all restricted stock, TSR Peer Group Units and TSR Index Units granted under the 2020 long-term incentive program were forfeited. (5)Amounts assume that the TSR Peer Group Units and the TSR Index Group Units convert at 100% and are valued as of the date of award.
Employment Agreements
A brief summary of the employment agreements of our 20192020 named executive officers is as follows: John W. Gibson, Jr. - Employment Agreement
Mr. Gibson entered into an employment agreement with the Company on December 21, 2019. Under the terms of the agreement, Mr. Gibson is paid a base salary of $500,000 annually and is eligible for an annual bonus with a target amount of 100% of base salary. Mr. Gibson was also granted 570,000 shares of restricted stock that vest ratably in five installments beginning on December 22, 2020 and each of the next four anniversaries thereafter. In lieu of participation in the Company’s long-term incentive programs, Mr. Gibson also received options to purchase up to 2,000,000 shares of common stock of the Company based on the performance of the Company through December 31, 2024. 33% of the options vest at a share price of $3.60, an additional 33% will vest at a share price of $5.40, and all options vest at a share price of $7.20. Mr. Gibson was also granted options to purchase up to 1,000,000 shares of common stock of the Company, which vest ratably over five years. In each case the exercise price of the options is the closing price of the Company’s common stock on December 21, 2019.
The term of Mr. Gibson’s employment agreement is until December 31, 2024. In the event that Mr. Gibson’s employment agreement is terminated, the Company will pay to Mr. Gibson the amount of salary earned but unpaid through the date of termination, together with any other earned but unpaid compensation. In addition, if Mr. Gibson’s employment is terminated as a result of his death, disability, without “cause” or for “good reason”, upon execution and delivery of a suitable release agreement, all of Mr. Gibson’s time-based equity awards will vest and all performance-based equity awards will vest to the extent the performance goals have been reached, and in the case of termination without “cause” or for “good reason,” Mr. Gibson shall have an exercise period of the earlier of approximately 36 months and the 10th anniversary of grant for any vested stock options. Further, if Mr. Gibson’s employment is terminated without “cause” or for “good reason” within 24 months following a change of control, subject to execution and delivery of a suitable release agreement, Mr. Gibson shall be entitled to receive severance equal to his base salary plus target annual bonus, and all unvested equity awards will vest other than performance-based equity awards, which will vest only if the performance criteria have been met.
A full description of Mr. Gibson’s employment agreement is available on the Company’s Current Report on Form 8-K filed with the SEC on December 27, 2019.
John W. Chisholm - Employment Agreement
Mr. Chisholm entered into an employment agreement with the Company on May 20, 2019 which was amended on October 18, 2019. Under the terms of the employment agreement, Mr. Chisholm was paid a base salary of $550,000 annually and was eligible to participate in the short-term incentive program with a target of 110% and the long-term incentive program with a factor of 2.25.
Item 2: Advisory Vote on Executive Compensation Upon execution of the employment agreement, Mr. Chisholm was granted 85,000 shares of restricted stock that vest on the earlier of Mr. Chisholm’s termination of employment or March 31, 2020.
The employment agreement was effective from April 1, 2019 until March 31, 2020. Upon resignation of employment by Mr. Chisholm for certain material reductions in salary, duties or certain relocations (“Good Reason”), Mr. Chisholm was entitled to (a) $3,612,000, paid over 24 equal monthly
installments, (b) reimbursement for COBRA premiums for up to one year, (c) 123,750 shares of stock, matching his time-vesting restricted stock portion of the 2019 long-term incentive planprogram and (d) any bonuses earned but not yet paid under the 2019 short-term incentive plan.program. Upon resignation other than for Good Reason, Mr. Chisholm was to be paid only base salary through the date of termination. Until May 20, 2019, Mr. Chisholm was primarily compensated as an independent contractor through two entities controlled by Mr. Chisholm (the “Chisholm Entities”). The Chisholm entities indemnified the Company for all liabilities for taxes, income tax withholding and other similar liabilities that might arise related to the arrangement, and Mr. Chisholm personally guaranteed the Chisholm Entities’ indemnification.
Mr. Chisholm resigned from the Company as of January 5, 2020. The Company considers Mr. Chisholm’s resignation to be for Good Reason. The Company is entitled to withhold and/or apply a right of offset against Mr. Chisholm’s severance to amounts that would be due under the guarantee, bonus or salary that was previously overpaid, or taxes underwithheld from Mr. Chisholm, including taxes relating to the paymentpayments to the Chisholm Entities. In September 2020, the Company informed Mr. Chisholm that it would be suspending further severance payments.
Michael E. Borton - Employment Agreement
Mr. Borton entered into an employment agreement with the Company on July 29, 2020. Under the terms of the Agreement, Mr. Borton is paid a base salary of $340,000 annually and is eligible for an annual bonus with a target amount of 80% of base salary. In lieu of participation of in the Company’s 2020 long-term incentive program, Mr. Borton also received 240,000 shares of restricted stock and 360,000 options to purchase shares of Company stock, with a strike price equal to the price of the Company’s stock on the option grant date. In the event that, within 12 months of a “change of control,” Mr. Borton’s employment is terminated other than for “cause”, or Mr. Borton terminates his employment for “good reason,” all unvested equity awards shall become fully vested immediately prior to termination. In addition, if Mr. Borton’s employment is terminated without “cause” or for “good reason,” Mr. Borton, upon execution and delivery of a suitable release agreement, shall be eligible to receive severance equal to 12 months of Mr. Borton’s base salary, plus 100% of the annual bonus for the year of termination (determined and paid in the normal bonus cycle), and COBRA payments for up to 18 months. Mr. Borton’s employment agreement expires on December 31, 2022 (with automatic 12 month extensions unless written notice of non-renewal is timely given).
For a full description of Mr. Borton’s employment agreement, please see the Company’s Current Report on Form 8-K filed with the SEC on July 29, 2020. Elizabeth T. Wilkinson - Employment Agreement Ms. Wilkinson entered into an amended and restated employment agreement with the Company on May 20, 2019. Under the terms of the employment agreement, Ms. Wilkinson iswas paid a base salary of $350,000 annually and is eligible to participate in the short-term incentive program with a target of 75% and the long-term incentive program with a factor of 1.35.
The employment agreement iswas effective from April 1, 2019 until December 31, 2020. Upon termination of Ms. Wilkinson’s employment other than for cause,“cause,” or resignation of employment by Ms. Wilkinson for certain material reductions in salary, duties or certain relocations Ms. Wilkinson iswas entitled to 150% of
Item 2: Advisory Vote on Executive Compensation Ms. Wilkinson’s base salary and target bonus, payable in nine monthly installments, and reimbursement for COBRA premiums for up to one year. James A. Silas
Ms. Wilkinson departed the Company on June 15, 2020. The Company considers Ms. Wilkinson’s departure as a termination without “cause.”
Denise Allen - Employment Agreement Mr. SilasMs. Allen’s prior employment agreement expired on December 31, 2020. On January 1, 2021, Ms. Allen entered into ana new employment agreement with the Company on January 8, 2018. Under the terms ofCompany. Pursuant to the employment agreement, Mr. SilasMs. Allen is paid an initiala base salary of $285,000$300,000 annually and is eligible for an annual bonus with a target amount of 100% of base salary. Ms. Allen is also eligible to participate in the long-term incentive programs of the Company.
In the event that Ms. Allen’s employment is terminated without “cause” or for “good reason,” upon execution and delivery of a suitable release agreement, Ms. Allen is eligible for severance equal to 12 months of her base salary plus a prorated annual bonus, determined and paid in the ordinary bonus cycle, and will be eligible for COBRA premium reimbursement for up to 12 months. In addition, if a termination without “cause” or for “good reason” occurs within 18 months of a “change of control,” all outstanding equity awards become fully vested immediately prior to termination.
Item 2: Advisory Vote on Executive Compensation 2021 Outlook For 2021, the Company has instituted a number of changes in response to the evolving and transitional nature of both the Company and the macroeconomic environment as a whole. Both the short-term and long-term incentive program have been revised to properly reflect the goal of the Company to reach break-even results and to align the overall goals of the compensation program with those of the Company’s current shareholders. In addition, each of the Company’s executive officers, other than Mr. Gibson, have been assigned an individual director of the Board to work with as a mentor on a one-on-one basis. Mentors have been designated to assist with existing skillsets or to help develop new abilities. Through the mentorship program, the Company aims to further develop the Company’s executive team and increase effective communications between individual executives and directors. The Company expects that mentorships will change in response to the growing needs of the Company. 2021 Executive Officers
The following are biographies of each of our executive officers as of April 19, 2021. | | | | | | | | | | John W. Gibson, Jr. | Chairman, Chief Executive Officer and President | | Age: 63 | | EXPERIENCE & QUALIFICATIONS •Director of Orocobre Limited (ASX: ORE)* •Director of BluWare, Inc.* •Senior Advisor, Tudor, Pickering, Holt & Company* •Member of the Strategic Board of Advisors of Houston Mechatronics, Inc.* •Chairman, Energy Technology of Tudor, Pickering, Holt & Company from May 2016 to December 2019. •President and CEO of Tervita Corporation •Director of Tervita Corporation •Director of I-Pulse Inc. •President and CEO of Paradigm B.V. •Honorary Consul to Texas of Kazakhstan* | EDUCATION •Master of Science in Geology, University of Houston •Bachelor of Science in Geology, Auburn University
COMPANY ROLES •Chairman, Chief Executive Officer and President since January 2020 •Member of Risk and Sustainability Committee since February 2021 | | | | | |
*Current Role
Item 2: Advisory Vote on Executive Compensation | | | | | | | | | | Denise Allen | Senior Vice President, Chief of Staff | | Age: 46 | | Board Mentor: Ted Brown | | EXPERIENCE & QUALIFICATIONS •Executive Vice President at Edelman from April 2005 to April 2017 •Communications Director and Whip Assistant for U.S. Congressman Max Sandlin •Completed a Leadership and Business Development program at the University of Chicago Booth School of Business •Graduate and on the Board of Directors of Leadership Houston •Member of the Emerging Leaders at Rice University’s Baker Institute for Public Policy •Holds a certificate from the Institute for Crisis Management | EDUCATION •Bachelor of Arts in Journalism, University of Texas
COMPANY ROLES •Senior Vice President, Chief of Staff since April 2020 •Senior Vice President, Global Communications & Technology Commercialization from April 2017 to April 2020 | | | | | |
| | | | | | | | | | Nicholas J. Bigney | Senior Vice President, General Counsel & Chief Compliance Officer | | Age: 43 | | Board Mentor: TBD | | EXPERIENCE & QUALIFICATIONS •Vice President, General Counsel & Secretary of Oiltanking North America from April 2018 to January 2020 •Assistant General Counsel, Nabors Industries from August 2010 to March 2018 •Associate, Skadden Arps Slate Meagher & Flom, Energy & Infrastructure Group •Associate, Milbank Tweed Hadley & McCloy, Project Finance Group •Admitted to practice law in New York and Texas •Fluent in Japanese | EDUCATION •Juris Doctorate, Columbia Law School •Bachelor of Arts in Japanese, Brigham Young University
COMPANY ROLES •Senior Vice President, General Counsel & Chief Compliance Officer since January 2021 •Senior Vice President, General Counsel & Corporate Secretary from February 2020 to December 2020 | | | | | |
Item 2: Advisory Vote on Executive Compensation | | | | | | | | | | Michael E. Borton | Chief Financial Officer | | Age: 61 | | Board Mentor: Harsha Agadi | | EXPERIENCE & QUALIFICATIONS •Chief Financial Officer of Dynasty Sports and Entertainment from April 2019 to July 2020 •Chief Financial Officer of Wombat Security Technologies from February 2015 to August 2018 •Chief Financial Officer of Harmony Information Systems •Certified Management Accountant •Earned Certificate of Distinguished Performance from the Institute of Management Accounting | EDUCATION •Masters of Business Administration in Finance, Indiana University, Bloomington •Bachelor of Science, Business Administration, Major in Accounting, Valparaiso University
COMPANY ROLES •Chief Financial Officer since August 2020 | | | | | |
| | | | | | | | | | Dr. Ryan Ezell | President, Chemistry Technologies | | Age: 42 | | Board Mentor: Michael Fucci | | EXPERIENCE & QUALIFICATIONS •Vice President, Baroid Drilling Fluids, Halliburton from May 2006 to July 2019 •Published scientist •Author on more than 26 patents
| EDUCATION •Ph. D in Polymer Science, University of Southern Mississippi •Bachelor of Science in Chemistry, Millsaps College
COMPANY ROLES •President, Chemistry Technologies since August 2020 •Senior Vice President, Operations from March 2020 to August 2020 •Vice President, Operations from August 2019 to March 2020 | | | | | |
Item 2: Advisory Vote on Executive Compensation | | | | | | | | | | TengBeng Koid | President, Global Business | | Age: 57 | | Board Mentor: David Nierenberg | | EXPERIENCE & QUALIFICATIONS •President of Energy Solutions from December 2011 to June 2020 •CEO of Energy Solutions International, Inc. •Vice President of IHS Markit •President, International of SMT, Inc. •Executive Vice President and Chief Operating Officer of ION Geophysical •Vice President, Halliburton Company •Vice President, Landmark Graphics •Board member of irth Solutions, LLC •Board member of LMK Resources •Board member of Energy Solutions International, Inc.
| EDUCATION •Master of Business Administration, Bath University •Bachelor of Science in Computer Science, University Science Malaysia
COMPANY ROLES •President, Global Business since June 2020 •President of JP3 Measurement, LLC since November 2020 | | | | | |
| | | | | | | | | | Dr. James A. Silas | Senior Vice President, Research & Innovation | | Age: 46 | | Board Mentor: Paul Hobby | | EXPERIENCE & QUALIFICATIONS •Assistant Professor of Chemical Engineering, Texas A&M University | EDUCATION •Ph. D. in Chemical Engineering, University of Delaware •B.S.E. in Chemical Engineering, Princeton University •Postdoctoral Fellow in Bioengineering at the University of Pennsylvania
COMPANY ROLES •Senior Vice President, Research & Innovation since May 2016 •Vice President, Research & Innovation from May 2015 to May 2016 •Research Scientist from June 2013 to May 2015 | | | | | |
As previously announced, John Chisholm ceased to be a director, officer and employee effective January 5, 2020, and Elizabeth Wilkinson ceased to be an officer and employee effective June 15, 2020. Changes to Compensation Programs For 2021, the Company redesigned its compensation programs to further align with shareholder interests. as follows: Short-Term Incentive Program The short-term incentive program withfor 2021 includes both financial and individual performance metrics. All executives have a target of 75% and the long-term incentive program with a factor of 1.35. Upon termination of Mr. Silas’ employment other than for cause, Mr. Silas is entitledbonus equal to 100% of Mr. Silas’ base salary and target bonus, payable in nine monthly installments.salary. Actual payouts are based on meeting
Joshua A. Snively, Sr. - Employment Agreement
Item 2: Advisory Vote on Executive Compensation Mr. Snively entered into an employment agreement withfinancial, personal, individual and ESG goals approved by the Compensation Committee. Payout under the 2021 short-term incentive program is also subject to a liquidity test; if the Company on March 16, 2018. Underdoes not meet the termsliquidity test, no amounts are paid in respect of the employment agreement, Mr. Snively was paid an initial annual base salary of $490,000 and was eligible to participate in the short-term incentive program, with a targetregardless of 75% andwhether or not the goals were achieved.
Long-Term Incentive Program The long-term incentive program for 2021 has been redesigned to include equity awards that incentivize long-term performance and to be more heavily weighted towards performance-based metrics. Under the 2021 long-term incentive program, executives other than Mr. Gibson are granted equity-based awards based on a multiplier to their base salary, with amount of shares determined by reference to a factordeemed share price of 2.00.
The employment agreement$1.44 (the closing price of the Company’s stock on the date of grant). As discussed above, Mr. Gibson was originally effective from March 16, 2018 to December 31, 2020. Mr. Snively’s employment as Executive Vice President, Operations was terminated on February 28, 2019 in connection with the sale of Florida Chemical Company to Archer-Daniels-Midland. As outlined in his employment agreement, Mr. Snively received severance equal to nine monthly installments of $159,250 beginning in April 2019. In connection with Mr. Snively’s departure, 50,000 shares of commongranted certain options and restricted stock previously granted under his employment agreement and 49,000 sharesin lieu of common stock granted underparticipation in the 2018Company’s long-term incentive plan fully vested on February 28, 2019. All unvestedprograms.
40% of the equity awards are restricted stock units were forfeitedthat vest ratably over 4 years. This element of the program is designed to ensure that executives have a sufficient overall equity interest in the Company to align with shareholders generally. 30% of the equity awards are performance-based options with a strike price equal to the Company’s stock price on the award date. These options vest 1/4 each at share prices of $3, $4, $5 and $7 if those prices are achieved (based on a 90-day VWAP) on or before December 31, 2024. These options expire in 10 years. If the target share price is not reached before December 31, 2024, the options are forfeited. This element of the program is designed to incentivize executives to reach meaningful share price targets, with the 90-day VWAP measurement implemented to eliminate awards as the result of temporary spikes. The remaining 30% of the equity awards are performance-based options with a strike price equal to the Company’s stock price as of February 28, 2019.the grant date, and vest based on the achievement of a percentage of revenue from newly-developed products measured over a three year period. Options vest 1/3 each at new product revenue percentages of 15%, 20% and 25%; otherwise they are forfeited. This element of the program is designed to encourage innovation and new products to ensure that the Company can remain competitive in the markets in which it competes. Changes to Peer Group The Company adjusted its Peer Group for 2021 to take into account change in the market and changes in the Company. The Peer Group for 2021 is as follows:
| | | | | | | | | | Advanced Emission Solutions, Inc. | | Intrepid Potash, Inc. | | Aspen Aerogels, Inc. | | ION Geophysical Corporation | | Energy Recovery, Inc. | | Natural Gas Services Group, Inc. | | FutureFuel Corp. | | NCS Multistage Holdings, Inc. | | Geospace Technologies Corporation | | Nuverra Environmental Solutions, Inc. | | Graham Corporation | | Solaris Oilfield Infrastructure, Inc. | | Gulf Island Fabrication, Inc. | | Trecora Resources |
Item 2: Advisory Vote on Executive Compensation Other Policies, Guidelines and Practices Related to Executive Compensation Stock Ownership Guidelines The Company has stock ownership guidelines for its executive officers to help further align compensation incentives with shareholders. Each executive has five years from the date appointed to his or her position (or within five years of the adoption of the guidelines, if the guidelines were adopted after the executive was appointed) to achieve the stock ownership ratio for his or her position. | | | | | | | | | | Role | | Ratio | | Chief Executive Officer | | 6 times base salary | | Other executive officers | | 2 times base salary |
Executives that do not meet the above ownership ratio must retain 25% of the net shares acquired from exercising stock options or vesting of shares until they reach the applicable stock ownership ratio. At December 31, 2019,2020, all current executives have met or exceeded the guidelines. Hedging and Pledging of Company StockSecurities The Company’sDirectors, officers and employees are prohibited by our Insider Trading Policy prohibits the Company’s directors, officers, and employees from hedging transactions related to Company securities, includingour securities. This include prohibitions on short-selling, options (other than those granted as compensation), puts or calls, swaps, collars, forwards, futures and futures. Company directorsother similar derivative transactions. Directors, officers and executive officersemployees are also prohibited from pledging Companyour securities to secure indebtedness, includingor engaging in margin transactions related to Companyour securities.
None of the Company’s current executive officers or directors have pledged or hedged any Common Stock.common stock of the Company.
Claw-back Policy Each executive that participates in the short-term incentive plan and long-term incentive plan agrees to abide by any compensation recovery, recoupment or other similar plan as may be approved by the Board or a committee thereof, or as may be required by applicable law. In addition, our executive contracts allow the Company to enact clawback policies with retroactive effect (applicable to all forms of compensation) and are subject to any clawback policies enacted by applicable law or a securities exchange. Tax Gross-Ups on Severance There are no tax gross-ups on any payments to executives, including severance payments. Tax and Accounting Implications
Accounting for Stock-Based Compensation The Company accounts for stock-based payments in accordance with the requirements of Accounting Standards Codification (ASC) Topic 718, “Stock Compensation.” Equity basedEquity-based compensation is expensed over the requisite service period pursuant to the grant award terms. The Company considers the expense associated with stock-based incentive awards when granting such awards. Section 409A To the extent we permit executives to defer compensation or we commit to deliver compensation at a later date than when earned and vested, we make every attempt to meet the requirements of Section 409A of the Internal Revenue Code.Code (the “Code”). Failure to satisfy the Section 409A requirements could subject the executives receiving deferred compensation to a 20% excise tax.
Changes for 2020
For 2020, there are several changes to both the executive officers at the Company and the executive compensation program.
2020 Executive Officers
The following are biographies of each of our executive officers as of April 3, 2020.
John W. Gibson Jr., 62, is the Company’s Chairman, President and Chief Executive Officer. Mr. Gibson’s biography is available under “Nominees” in Proposal 1 above.
Elizabeth T. Wilkinson, 62, has served as Chief Financial Officer since December 2018. From January 2012 through December 2018, Ms. Wilkinson served as a managing consultant at RGP, a publicly traded, global consulting firm, leading financial advisory projects for Fortune 100, Fortune 500, and private-equity-controlled clients. In this capacity, she served as interim CFO, interim treasurer, and in key financial reporting roles, leading companies through significant accounting and finance transitions. Prior to her role at RGP, from March 2009 through March 2011, Ms. Wilkinson was CFO of Xtreme Drilling and Coil Services, and previously also served as Vice President and Treasurer of Kerr-McGee Corporation. Ms. Wilkinson is a Certified Public Accountant and received a Bachelor of Science in Business Administration, as well as a Master of Business Administration, from the University of Florida.
Danielle Allen, 45, has served as Senior Vice President, Global Communications & Technology Commercialization since April 2017. Ms. Allen was Executive Vice President at Edelman, a public relations company, from April 2005 to April 2017. Prior to her time at Edelman, Ms. Allen spent six years as communications director and whip assistant for U.S. Congressman Max Sandlin, where she was responsible
for communications strategy, media relations, grassroots communications and coalition building. Ms. Allen earned a Bachelor of Arts in Journalism, with a concentration in public relations, from the University of Texas. She has completed a Leadership and Business Development program at the University of Chicago Booth School of Business, and is a graduate of Leadership Houston, as well as a member of the Emerging Leaders at Rice University’s Baker Institute for Public Policy. Ms. Allen also holds a certificate from the Institute for Crisis Management and serves on the board of directors of Leadership Houston.
Nicholas J. Bigney, 42,has served as Senior Vice President, General Counsel & Corporate Secretary since February 2020. From April 2018 to January 2020, Mr. Bigney was the Vice President, General Counsel & Secretary of Oiltanking North America, a midstream storage and logistics company. From August 2010 to April 2018, Mr. Bigney worked at Nabors Industries, a leading drilling contractor, in positions of increasing seniority. Prior to his time at Nabors, Mr. Bigney spent time at Milbank in New York and Skadden, Arps, Slate, Meagher & Flom in New York and Houston. Mr. Bigney has over 15 years of experience providing legal advice for companies in the oil and gas, chemicals and energy sectors. Mr. Bigney has a Bachelor of Arts in Japanese from Brigham Young University and a Juris Doctorate from Columbia Law School.
Ryan Ezell, 41,has served as Senior Vice President, Operations since March 2020. Previously, Dr. Ezell served as Vice President,Operations since August 2019. Prior to joining Flotek, Dr. Ezell was a global leader at Halliburton from May 2006 to July 2019, most recently serving as Vice President of Baroid Drilling Fluids. He has over 20 years of experience in the oil and gas services industry, including 10 years international of expatriate experience in Africa and the Middle East, Europe and Eurasia regions. Dr. Ezell earned39
a Bachelor of Science degree in Chemistry from Millsaps College and a Ph. D in Polymer Science from the University of Southern Mississippi. He is a published scientist and an authorItem 2: Advisory Vote on more than 26 patents.
Mark Lewis, 59, has served as the Senior Vice President of Global Sales & Business Development since April 2019 and as an executive officer since August 2019. From January 2014 to April 2019, Mr. Lewis worked at Baker Hughes in many leadership roles, including Vice President of Global Accounts, Managing Director for North Arabia, and Vice President for Upstream Chemicals. Prior to his tenure at Baker Hughes, he served in a variety of sales and leadership roles at Petrolite. Mr. Lewis has over 35 years of experience leading business units, strategic accounts and teams developing strategies to provide technology-drive products and services to upstream and downstream oil and gas operators. Mr. Lewis earned a Bachelor’s degree in Chemical Engineering from the University of Birmingham and a Masters of Business Administration from the University of Leeds.
James A. Silas, 45, has served as the Senior Vice President of Research and Innovation since May 2016. Dr. Silas became an executive officer in this role in May 2019. Previously, he served as the Vice President of Research and Innovation beginning in May 2015 and as a research scientist beginning in June 2013. Dr. Silas was an assistant professor of Chemical Engineering at Texas A&M University prior to joining the Company. He has over 15 years of research experience investigating the physics and chemistry of surfactants and polymers in the areas of personal care products, bioengineering, and the oil industry. He earned a B.S.E in Chemical Engineering from Princeton University, a Ph.D. in Chemical Engineering from the University of Delaware, and was a NIH Ruth L Kirschstein Postdoctoral Fellow at the University of Pennsylvania in Bioengineering.
As previously announced, John Chisholm ceased to be a director, officer and employee effective January 5, 2020, and Joshua A. Snively, Sr. ceased to be an officer and employee effective February 28, 2019.
Changes to Peer Group
The Compensation Committee adjusted the Peer Group in January 2020 to ensure it was appropriate for the size and line of business and for the current industry environment.
The companies in our Peer Group for 2020 are as follows:
| | | | Advanced Emission Solutions, Inc. | | Hornbeck Offshore Services, Inc. | Aspen Aerogels, Inc. | | Intrepid Potash, Inc. | CARBO Ceramics, Inc. | | ION Geophysical Corporation | Energy Recovery, Inc. | | Natural Gas Services Group, Inc. | Era Group Inc. | | NCS Multistage Holdings, Inc. | Graham Corporation | | Nuverra Environmental Solutions, Inc. | Gulf Island Fabrication, Inc. | | RigNet, Inc. |
The Compensation Committee intends to monitor the composition of the Peer Group to assure that it provides a useful representation of the market for leadership talent in which the Company competes.
Changes to Short-Term IncentiveExecutive Compensation
For 2020, the Company’s short-term incentive compensation plan has added a mechanism to provide for funding of a “pool” for executive bonuses. The pool is funded based on significant improvements to the adjusted EBITDA of the Company on a year-over-year basis.
Bonuses are paid out of the funded pool, with 70% attributable to the achieved adjusted EBITDA of the Company, and 30% attributable to the individual executive’s goals. If the adjusted EBITDA targets of the Company are not reached, there will be no bonus pool from which to pay bonuses.
Regardless of whether or not the pool is funded, Mr. Gibson will receive no bonus for 2020 if the adjusted EBITDA of the Company for 2020 is less than break-even.
Changes to Long-Term Incentive Compensation
For 2020, the Company’s long-term incentive compensation plan is based on the revised 2020 Peer Group. The plan has also been changed to grant the restricted stock based on the closing price of the Company’s common stock on February 28, 2020, which was $1.58. A conversion rate of 50% has also been set for both TSR Peer Group Units and TSR Index Group Units at 30th percentile performance, following recommendations from our compensation consultant. The plan otherwise remains substantially as it was in 2019.
Compensation of CEO
Mr. Gibson does not participate in the Company’s long-term incentive compensation plan as his long-term compensation incentives are otherwise agreed to in his employment contract with the Company. Pursuant to Mr. Gibson’s employment contract, Mr. Gibson receives an annual salary of $500,000. Mr Gibson also receives options to purchase up to 2,000,000 shares of common stock of the Company based on the performance of the Company through December 31, 2024.
33% of the options vest at a share price of $3.60, an additional 33% will vest at a share price of $5.40, and all options vest at a share price of $7.20. Mr. Gibson is also granted options to purchase up to $1,000,000 shares of common stock of the
Company, which vest ratably over five years. In each case the exercise price of the options is the closing price of the Company’s common stock on December 21, 2019.
Summary Compensation Table The following table provides information concerning compensation earned in our fiscal years 20192020 and 20182019 by our named executive officers.officers: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | Year | Salary(6) | Bonus(5) | Stock Awards(6)(7) | | Option Awards(7) | Non-Equity Incentive Plan Compensation | All Other
Compensation | Total | John W. Gibson, Jr. - Chairman, President and Chief Executive Officer(1) | 2020 | $ | 435,385 | | $ | — | | $ | 74,074 | | | $ | — | | $ | — | | $ | 3,544 | | $ | 513,003 | | | 2019 | $ | — | | $ | — | | $ | 1,100,100 | | | $ | 3,660,000 | | $ | — | | $ | — | | $ | 4,760,100 | | John W. Chisholm – President, Chief Executive Officer and Chairman of the Board(2) | 2020 | $ | 33,357 | | $ | — | | $ | — | | | $ | — | | $ | — | | $ | 711,673 | | $ | 745,030 | | | 2019 | $ | 626,238 | | $ | — | | $ | 668,013 | | | $ | — | | $ | 116,161 | | $ | — | | $ | 1,410,412 | | Michael E. Borton - Chief Financial Officer(3) | 2020 | $ | 137,308 | | $ | 24,500 | | $ | 247,701 | | | $ | 385,200 | | $ | — | | $ | — | | $ | 794,709 | | Elizabeth T. Wilkinson - Chief Financial Officer(4) | 2020 | $ | 180,693 | | $ | — | | $ | 483,053 | | | $ | — | | $ | — | | $ | 510,417 | | $ | 1,174,163 | | | 2019 | $ | 337,671 | | $ | — | | $ | 277,998 | | | $ | — | | $ | 92,728 | | $ | — | | $ | 708,397 | | | Denise Allen - Senior Vice President, Chief of Staff | 2020 | $ | 289,269 | | $ | 41,250 | | $ | 455,298 | | | $ | — | | $ | — | | $ | — | | $ | 785,817 | | | 2019 | $ | 337,524 | | $ | 33,750 | | $ | 270,855 | | | $ | — | | $ | 79,480 | | $ | — | | $ | 721,609 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)Mr. Gibson began service as Chairman, President & Chief Executive Officer on January 6, 2020. Mr. Gibson’s inducement equity grants pursuant to his contract took place in 2019 and are included in the 2019 compensation. These inducement grants consisted of 570,000 restricted shares, with pro-rata vesting over five years, and 3,000,000 options, with 1,000,000 of these options vesting ratably over five years and with the remaining 2,000,000 vesting based on achievement of certain share price targets. The strike price of the options is equal to the Company’s share price on the date of grant. Due to the inducement grants, Mr. Gibson does not participate in the other long-term incentive programs of the Company. For a more thorough discussion of Mr. Gibson’s inducement awards, please see the description of Mr. Gibson’s employment contract above. Amounts in “All Other Compensation” for Mr. Gibson includes the reimbursement of rent and utilities for an apartment near the Company’s home office, as approved by the Compensation Committee of the Board. (2)Mr. Chisholm ceased to be a director, officer and employee effective January 5, 2020. Amounts in “All Other Compensation” includes severance paid to Mr. Chisholm. Pursuant to the employment agreement with Mr. Chisholm, the Company offset Mr. Chisholm’s severance payments in amounts that may become owed by the Company for which Mr. Chisholm has agreed to indemnify the Company. In September 2020, the Company suspended all severance payments to Mr. Chisholm. (3)Mr. Borton began service as Chief Financial Officer on August 3, 2020. Pursuant to his employment contract, Mr. Borton was granted 240,000 shares of restricted stock that vest ratably over three years on the anniversary of his employment. Mr. Borton was also granted 360,000 options with a strike price equal to the Company’s share price on the date of grant. 180,000 of these options vest based on the achievement of certain share price targets, and 180,000 of these options vest based on the Company’s total shareholder return relative to its peer group as defined by the 2020 long-term incentive program. (4)Ms. Wilkinson ceased to be an officer and employee effective June 15, 2020. Amounts in “All Other Compensation” includes severance paid to Ms. Wilkinson. (5)Bonus amounts for Mr. Borton and Ms. Allen for 2020 only reflects cash portion of the discretionary bonus for the short-term incentive program. Restricted stock portion of the bonus is included in the Stock Awards figure for those years and individuals. (6)Stock Awards amounts for 2020 include the fair market value of TSR Peer Group Units and TSR Index Group Units awarded during 2020. Stock Award amounts for 2020 for Mr. Gibson, Ms. Wilkinson and Ms. Allen include restricted shares in exchange for reduction in salary taken on April 1, 2020 as described in the Company’s Current Report on Form 8-K filed with the SEC on April 3, 2020. Mr. Gibson took a 20% reduction in salary and Ms. Wilkinson and Ms. Allen took a 10% reduction in salary. For a discussion of the valuation methodology used for restricted stock, option and other equity grants, please see Note 18 in the Company’s Annual Report on Form 10-K filed with the SEC on March 16, 2021. (7)The amounts shown in the Stock Awards and the Option Awards columns reflect the full grant date fair value of restricted stock, options and other equity awarded calculated pursuant to FASB ASC Topic 718.
Item 2: Advisory Vote on Executive Compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | | Year | | Salary | | Bonus | | Stock Awards | | Option Awards | | Non-Equity Incentive Plan Compensation | | All Other Compensation | | Total | | | | | | | | | | | | | | | | | | | John W. Chisholm – President, Chief
Executive Officer and Chairman of
the Board (1) | | 2019 | | $ | 626,238 |
| | $ | — |
| | $ | 668,013 |
| | $ | — |
| | $ | 116,161 |
| | $ | — |
| | $ | 1,410,412 |
| | | 2018 | | $ | 50,000 |
| | $ | — |
| | $ | 934,367 |
| | $ | — |
| | $ | — |
| | $ | 810,000 |
| | $ | 1,794,367 |
| | | | | | | | | | | | | | | | | |
|
| | Elizabeth T. Wilkinson - Chief Financial Officer | | 2019 | | $ | 337,671 |
| | $ | — |
| | $ | 277,998 |
| | $ | — |
| | $ | 92,728 |
| | $ | — |
| | $ | 708,397 |
| | | 2018 | | $ | — |
| | $ | 25,000 |
| | $ | 63,600 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 88,600 |
| | | | | | | | | | | | | | | | | |
| | James A. Silas - Senior Vice President, Research and Innovation | | 2019 | | $ | 285,000 |
| | $ | — |
| | $ | 157,752 |
| | $ | — |
| | $ | 69,094 |
| | $ | — |
| | $ | 511,846 |
| | | 2018 | | $ | 278,654 |
| | $ | — |
| | $ | 55,396 |
| | $ | — |
| | $ | 94,900 |
| | $ | — |
| | $ | 428,950 |
| | | | | | | | | | | | | | | | | |
|
| Joshua A. Snively, Sr. - Executive Vice President, Operations (2) | | 2019 | | $ | 101,769 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1,433,250 |
| | $ | 1,535,019 |
| | | 2018 | | $ | 499,166 |
| | $ | — |
| | $ | 932,968 |
| | $ | — |
| | $ | — |
| | $ | 30,771 |
| | $ | 1,462,905 |
|
| | (1) | Mr. Chisholm ceased to be a director, officer and employee effective January 5, 2020. |
| | (2) | Mr. Snively ceased to be an officer and employee effective February 28, 2019. Amounts in “All Other Compensation” includes severance payable to Mr. Snively. |
The following table provides information relating to outstanding equity-based awards held by each named executive officer as of December 31, 2020: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | Stock Awards | | Name | Year of Grant | Number of underlying unexercised securities exercisable | Number of securities underlying unexercised options unexercisable | Equity incentive plan awards: Number of securities underlying unexercised unearned options | Option Exercise Price | Option Expiration Date | Number of shares or units of stock that have not vested | Market value of shares of unites of stock that have not vested | Equity Incentive plan awards: Number of shares, units or other rights that have not vested | Equity Incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested | | | | | | | | | | | | | John W. Gibson, Jr. | 2020(1) | — | | — | | — | | — | | — | | 92,593 | | $ | 195,371 | | — | | $ | — | | 2019(2) | — | | 2,000,000 | | — | | $1.93 | 12/31/26 | — | | $ | — | | — | | $ | — | | 2019(3) | 200,000 | | 800,000 | | — | | $1.93 | 1/21/29 | — | | $ | — | | — | | $ | — | | 2019(4) | — | | — | | | — | | — | | 456,000 | | $ | 962,160 | | — | | $ | — | | John W. Chisholm(5) | — | | — | | — | | — | | — | | — | | — | | $ | — | | — | | $ | — | | | | Michael E. Borton | 2020(6) | — | | — | | — | | — | | — | | 240,000 | | $ | 506,400 | | — | | $ | — | | 2020(7) | 60,000 | | 120,000 | | — | | $1.42 | 12/31/22 | — | | $ | — | | — | | $ | — | | 2020(8) | — | | 180,000 | | — | | $1.42 | 12/31/22 | — | | $ | — | | — | | $ | — | | Elizabeth T. Wilkinson(9) | — | | — | | — | | — | | — | | — | | — | | $ | — | | — | | $ | — | | | | Denise Allen | 2020(10) | — | | — | | — | | — | | — | | 27,778 | | $ | 58,612 | | — | | $ | — | | 2020(11) | — | | — | | — | | — | | — | | 102,532 | | $ | 216,343 | | — | | $ | — | | 2020(12) | — | | — | | — | | — | | — | | — | | $ | — | | 76,899 | | $ | 162,257 | | 2020(13) | — | | — | | — | | — | | — | | — | | $ | — | | 76,899 | | $ | 162,257 | | 2019(14) | — | | — | | — | | — | | — | | 27,000 | | $ | 56,970 | | — | | $ | — | | 2019(15) | — | | — | | — | | — | | — | | — | | $ | — | | 30,375 | | $ | 64,091 | | 2019(16) | — | | — | | — | | — | | — | | — | | $ | — | | 30,375 | | $ | 64,091 | |
(1)Vested on April 1, 2021. (2)Vests ratably at share prices of $3.60, $5.40 and $7.20. (3)Vests ratably over a five year period on each anniversary of the grant date of December 22, 2019. (4)Vests ratably over a five year period on each anniversary of the grant date of December 22, 2019. (5)Mr. Chisholm ceased to be a director, officer and employee effective January 5, 2020, at which time all time-vesting Restricted Stock, TSR Peer Group Units and TSR Index Group Units were forfeited by Mr. Chisholm. (6)Vests ratably over a three year period on each anniversary of the grant date of August 3, 2020. (7)Vests ratably at share prices of $2.00, $5.00 and $7.00. (8)Vest based on the “total shareholder return” as compared to the Company’s 2020 peer group in the same manner as described in the 2020 long-term incentive program described above. (9)Ms. Wilkinson ceased to be an officer and employee effective June 15, 2020, at which time all time-vesting Restricted Stock, TSR Peer Group Units and TSR Index Group Units were forfeited by Ms. Wilkinson, other than 32,407 shares of Restricted Stock granted to Ms. Wilkinson in return for taking a salary reduction, and 40,000 shares of Restricted Stock granted to Ms. Wilkinson at the time of her employment, for which vesting was accelerated. (10)Vested on April 1, 2021. (11)Vests ratably over a three year period on each anniversary of the grant date of March 3, 2020. (12)Awards to be granted based on the “total shareholder return” based on the Company’s peer group under the 2020 long-term incentive program described above. (13)Awards to be granted based on the “total shareholder return” based on the Company’s index group under the 2020 long-term incentive program described above. (14)Vests in equal portions on May 24, 2021 and May 24, 2022.
Item 2: Advisory Vote on Executive Compensation | | | | | | | | | | | | | | | | | | | | | | | Name | | Year of Grant | | Number of Shares or Units of Stock That Have Not Vested | | | | Market Value of Shares or Units of Stock That Have Not Vested (1) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (4) | John W. Chisholm (2) | | 2019 | | 208,750 |
| | | | $ | 417,500 |
| | 185,626 |
| | | | $ | 371,252 |
| | | | 2018 | | 32,250 |
| | | | $ | 64,500 |
| | — |
| | | | $ | — |
| | Elizabeth T. Wilkinson | | 2019 | | 87,250 |
| | | | $ | 174,500 |
| | 70,876 |
| |
| | $ | 141,752 |
| | | | 2018 | | 30,000 |
| | | | $ | 60,000 |
| | — |
| |
| | $ | — |
| | James A. Silas | | 2019 | | 48,475 |
| | | | $ | 96,950 |
| | 57,714 |
| |
| | $ | 115,428 |
| | | | 2018 | | 14,750 |
| | | | $ | 29,500 |
| | — |
| | | | $ | — |
| Joshua A. Snively (3) | | 2019 | | — |
| | | | $ | — |
| | — |
| | | | $ | — |
| | | | 2018 | | — |
| | | | $ | — |
| | — |
| | | | $ | — |
|
(16)Awards to be granted based on the “total shareholder return” based on the Company’s index group under the 2019 long-term incentive program as described in the Company’s proxy statement filed with the SEC on April 3, 2020.
ITEM 3: APPROVAL OF AN AMENDMENT TO THE FLOTEK INDUSTRIES, INC. 2018 LONG-TERM INCENTIVE PLAN | | | | | | | | | | | | | | | (1) | The dollar value of unvested shares of restricted stock reported are valued at the closing price of Flotek’s Common Stock at December 31, 2019. |
| | (2) | Mr. Chisholm ceased to be a director, officer and employee effective January 5, 2020, at which time all time-vesting Restricted Stock, TSR Peer Group Units and TSR Index Group Units were forfeited by Mr. Chisholm, other than (a) 85,000 shares of Restricted Stock granted in respect of the sale of Florida Chemical Company to Archer-Daniels-Midland, and (b) 123,750 shares of Restricted Stock granted pursuant to the 2019 long-term incentive program, which was settled in cash at the time of Mr. Chisholm’s departure for $257,400. |
| | (3) | Mr. Snively ceased to be an officer and employee effective February 28, 2019. |
| | (4) | The dollar value of the unvested unearned shares, units or other rights are valued at the closing price of Flotek’s Common Stock at December 31, 2019. |
PROPOSAL 3: APPROVAL OF AMENDMENT TO AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCKOn April 19, 2021, our Board adopted an amendment to the Flotek Industries, Inc. 2018 Long-Term Incentive Plan (the “2018 Plan” or the “Plan”), subject to shareholder approval.
Stockholder Vote
We are asking you to approve an amendment to the 2018 Plan to increase the number of shares of our common stock available for the granting of awards under the 2018 Plan from 5,700,000 to 8,500,000, or an increase of 2,800,000 shares. Based on our projected usage, the Compensation Committee estimates that the shares available under the 2018 Plan after this amendment will be sufficient to provide grants until 2023. However, we cannot predict these factors with certainty, and the share reserve under the 2018 Plan could last for a shorter or longer time. Only the number of available shares is amended by this amendment. The other terms and conditions of the 2018 Plan remain unchanged. A copy of the proposed amended 2018 Plan is attached to this Proxy Statement as Annex A. As mentioned above, we have changed our executive compensation program beginning in 2021 in order to place a greater portion of our executives’ compensation at risk by providing it in the form of equity and making a significant portion of the equity awards performance-based options. Purpose of the Plan The purpose of the 2018 Plan is to assist us in (i) attracting and retaining the best available personnel for positions of substantial responsibility, (ii) motivating personnel by providing additional incentives to employees, non-employee directors, and individual consultants, including providing financial incentives for individual performance, and (iii) promoting the success of the Company’s business interests. Equity Compensation Plan Information The following table summarizes equity compensation plan information regarding equity securities authorized for issuance under the 2018 Plan, the 2019 Non-Executive Director Incentive Plan (the “2019 Plan), and the 2020 inducement equity plan (the “2020 Plan” and, together with the 2018 Plan and the 2019 Plan, the “Plans”) as of April 19, 2020: | | | | | | | | | | | | Plan category(1) | Outstanding Options(4) | Full Value Awards Outstanding | Number of Shares Available | Equity compensation plans approved by security holders(2) | 1,448,963 | | 2,805,990 | | 753,228 | | Equity compensation plans not approved by security holders(3) | 660,000 | | 752,167 | | 137,354 | | | Total | 2,108,963 | | 3,558,157 | | 890,582 | |
(1)Mr. Gibson was granted certain options and restricted stock pursuant to his employment contract. These awards were granted in 2019, and were not pursuant to any of the Plans. These long-term options and restricted stock awards, which vest ratably over five years or in connection with performance targets, were a material part of the inducement for Mr. Gibson to join the Company as CEO, and are in lieu of Mr. Gibson’s participation of any of the long-term incentive plans of the Company. Mr. Gibson’s inducement awards are accordingly not included in these calculations. For a more thorough description of the inducement grants to Mr. Gibson, please see the description of Mr. Gibson’s employment agreement above. (2)Comprised of shares under the 2018 Plan and the 2019 Plan.
Item 3: Amendment to 2018 Long-Term Incentive Plan (3)Comprised of shares under the 2020 Plan instituted in connection with the acquisition of JP3 Measurement, LLC pursuant to the rules of the NYSE. Shares may only be used for inducement of new employees and cannot be granted to existing employees. For more detail on the 2020 Plan please see the Form S-8 Registration Statement filed with the SEC on June 18, 2020. (4)The Company’s current amendedOutstanding Options have a weighted average exercise price of $1.26 and restated certificatea weighted average remaining term of incorporation (the “Certificate”) authorizes4.08. Usage of Shares for Awards During 2018, 2019 and 2020, the issuancegrants of up to 80,100,000 shares under the Plans and the “run rate,” a measure of annual equity compensation as a percentage of total equity, are shown in the Company,table below. The three-year average run rate for 2018, 2019 and 2020 was 3.26%, when not taking into account forfeitures of which 80,000,000 are common stockawards. | | | | | | | | | | | | | | | | | | | | | | | | | Grant Year | Options(1) | Time-Based Restricted Stock | Performance-Based Awards | Earned Performance-Based Awards | Total Full-Value Awards | Weighted-Average Common Shares | Run Rate(2) | | 2018 | — | | 984,238 | | 407,698 | | — | | 1,391,936 | | 57,995,000 | | 1.70 | % | | 2019 | — | | 924,022 | | 501,530 | | — | | 1,425,552 | | 58,750,000 | | 1.57 | % | | 2020 | 1,327,796 | | 3,113,978 | | 922,786 | | — | | 4,036,764 | | 68,312,000 | | 6.50 | % |
(1)Amounts do not include the inducement awards granted to Mr. Gibson at his employment, as discussed above. (2)Calculated as the sum of Options, Time-Based Restricted Stock and 100,000 are preferred stock. As of March 16,Earned Performance-Based Awards divided by Weighted-Average Common Shares.
The increase in awards during 2020 58,951,784 common shares and no preferred sharesreflects the transitional nature of the Company were outstanding.
As previously disclosed,during the year, and was largely due to one-time awards under the 2020 Plan in connection with inducement/retention awards granted to the employees of JP3 Measurement, LLC in connection with its acquisition by the Company, is evaluatingand to Mr. Borton and Mr. Koid, the useCompany’s new Chief Financial Officer and President, Global Business respectively, upon their hiring.
Due to the change in the management team and employees of the cash proceeds fromCompany during 2019 and 2020, as well as failure to achieve performance goals, a number of the saleawards for 2018, 2019 and 2020 have been forfeited. Forfeitures of Florida Chemical Companyawards made in 2018, 2019 and 2020 under the Plans, and associated run rate when taking into account the forfeitures, are shown in the table below. When taking into account forfeitures, the average three-year run rate was 2.37%.
| | | | | | | | | | | | | | | | Grant Year | Options Forfeited | Time-Based Restricted Stock Forfeited | Performance- Based Awards Forfeited | Run Rate | | 2018 | — | | 309,205 | | 407,698 | | 1.16 | % | | 2019 | — | | 302,941 | | 383,066 | | 1.06 | % | | 2020 | 556,498 | | 552,072 | | 340,918 | | 4.88 | % |
Item 3: Amendment to Archer-Daniels-Midlands. 2018 Long-Term Incentive Plan The Board believes thatrecipients of the abilitygrants under the Plans for 2018, 2019 and 2020 were as follows: | | | | | | | | | | | | | | | | | | | | | | 2018 | 2019 | 2020 | | Participant | Shares | % | Shares | % | | | | Named Executive Officers | 352,502 | | 25.3 | % | 698,752 | | 49.0 | % | 1,308,158 | | 24.4 | % | | Other Executive Officers | 370,646 | | 26.6 | % | 397,128 | | 27.9 | % | 2,581,229 | | 48.1 | % | | Non-employee Directors | 207,438 | | 14.9 | % | 251,172 | | 17.6 | % | 537,678 | | 10.0 | % | | Other Employees | 461,350 | | 33.2 | % | 78,500 | | 5.5 | % | 937,495 | | 17.5 | % | | Service Providers | — | | — | % | — | | — | % | — | | — | % | | Total | 1,391,936 | | 100.0 | % | 1,425,552 | | 100.0 | % | 5,364,560 | | 100.0 | % |
Future Issuances Under the 2018 Plan Under the 2018 Plan, shares are reserved in a number sufficient to use equity in combination with cash would allowsatisfy the Company to make stronger and more attractive proposals to potential acquisition targets, and that the remaining 21,048,216maximum shares that may be issued under an award. Shares awarded under the existing Certificate2018 Plan that terminate by expiration, forfeiture, cancellation, or otherwise shall again be available for awards under the 2018 Plan, but shares that are used to cover tax withholding or option exercise prices cannot be reused under the 2018 Plan. As of April 19, 2021, approximately 156 persons were eligible to receive awards under the 2018 Plan, including all of our executive officers and non-employee directors. Future grants under the 2018 Plan will be made at the discretion of our Board or the Compensation Committee, and, accordingly, future benefits under the 2018 Plan are not sufficientcurrently determinable. The 2020 Summary Compensation Table appearing elsewhere in this Proxy Statement shows the equity awards that were made under the 2018 Plan in 2019 and 2020 to bring maximum value. our named executive officers. On April 19, 2021, the last reported sale price of our common stock on the NYSE was $1.44. Description of the 2018 Plan The following summary of the material features of the Plan is qualified in its entirety by reference to the full text of the Plan, which is incorporated herein by reference to Annex A to this Proxy Statement.
Eligibility and Available Awards
The Plan provides for the grant of incentive stock options and non-qualified options (collectively, “stock options”), restricted stock, stock appreciation rights, performance shares and performance units, restricted stock units, and other stock-based awards (each, an “Award”). All employees and individual consultants of the Company or of any affiliate (as defined in the Plan) of the Company and non-employee directors of the Company are eligible to receive grants of Awards under the Plan. However, incentive stock options may be granted only to employees of the Company and certain of its affiliates. Further, non-qualified options and stock appreciation rights may only be granted to employees and consultants of the Company or entities in a chain of corporations in which the Company has a controlling interest and to non-employee directors of the Company. The selection of eligible individuals to whom Awards will be granted is within the discretion of the Administrator. It is currently expected that some of our employees will participate in the Plan, along with all non-employee directors who serve on the Company’s Board of Directors.
Administration
The Plan is administered by our Board of Directors and any of its committees (in such capacity, each the “Administrator”). Except as otherwise determined by the Board of Directors, the Compensation Committee
Item 3: Amendment to 2018 Long-Term Incentive Plan of the Board of Directors shall serve as the Administrator. No member of the Compensation Committee shall vote or act upon any matter relating solely to himself or herself. Grants of Awards to members of the Compensation Committee must be ratified by the Board of Directors.
Subject to the provisions of the Plan, the Administrator will, among other things, (i) determine who are service providers; (ii) determine the fair market value of Awards; (iii) select the service providers to whom Awards may be granted; (iv) determine the number of shares to be covered by each Award; (v) determine when Awards are to be granted and the applicable date of grant; (vi) approve forms of Award agreements; (vii) determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award, including but not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance goals), any acceleration of vesting or waiver of forfeiture or repurchase restrictions (subject to any minimum vesting requirements), and any restriction or limitation regarding any Award or the shares relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine; (viii) construe and interpret the terms of the Plan, Award agreements and Awards; (ix) prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to the creation and administration of sub-plans; (x) amend the terms of any outstanding Award Agreement or Award, including the discretionary authority to extend the post termination exercise period of Awards and accelerate the satisfaction of any vesting criteria or waiver of forfeiture or repurchase restrictions, provided that any amendment that would adversely affect a participant’s rights under an outstanding Award shall not be made without the participant’s written consent; (xi) allow participants to satisfy withholding tax obligations by electing to have the Company withhold from the shares or cash to be issued upon exercise or vesting of an Award; (xii) authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator; (xiii) allow a participant to defer the receipt of the payment of cash or the delivery of shares that would otherwise be due to the participant under an Award; (xiv) determine whether Awards shall be settled in shares, cash or in a combination thereof; (xv) determine whether Awards shall be adjusted for dividends or dividend equivalents; (xvi) create other stock-based awards for issuance under the Plan; (xvii) impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by a participant or other subsequent transfers by the participant of any shares issued as a result of or under an Award, including without limitation, (A) restrictions under an insider trading policy, and (B) restrictions as to the use of a specified brokerage firm for such resales or other transfers; (xviii) establish one or more programs under the Plan to permit selected participants the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance goals, or other event that absent the election, would entitle the participant to payment or receipt of shares or other consideration under an Award; (xix) interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan, any Award agreement and any other instrument or agreement relating to an Award; and (xx) make all other determinations that the Administrator deems necessary or advisable for administering this Plan. The express grant in the Plan of any specific power to the Administrator shall not be construed as limiting any power or authority of the Administrator. However, the Administrator may not exercise any right or power reserved to the Board. Any action taken or determination made by the Administrator pursuant to the Plan will be binding on all parties. No member of the Board of Directors or one of its committees, in its capacity as Administrator, will be liable for any action or determination made in good faith with respect to the Plan or an Award granted thereunder.
The Board is therefore recommending thatmay amend, alter, suspend, or terminate the CertificatePlan at any time without prior notice to or consent of any person; provided, however, except as specifically permitted under the Plan in connection with a change of control, no amendment (other than any amendment the Board deems necessary in order to permit Awards to meet the requirements of the Code, or other applicable laws, or to prevent adverse tax consequences to the participants), suspension or termination of the Plan may, without the consent of the holder of an Award, terminate such Award or adversely affect such person’s rights with respect to such Award in any material respect unless or to the extent specified in the Award itself. However, no amendment shall be amendedeffective prior to allowits approval by the stockholders, to the extent such approval is
Item 3: Amendment to 2018 Long-Term Incentive Plan required by (i) applicable legal requirements or (ii) the requirements of any securities exchange on which the Company’s stock may be listed.
Stock Available for Issuance
Upon stockholder approval of the issuancePlan and subject to adjustment as provided in the Plan, the maximum number of up to 140,000,000 shares of common stock inthat may be issued under the Company,Plan will be 8,500,000 shares, all of which may be issued pursuant to incentive stock options. Each share of common stock that is the subject of an increase of 60,000,000 shares.
The additionalAward granted under the Plan may be made available from authorized but unissued shares, treasury stock, or shares of common stock willacquired in the open market. No fractional shares shall be available fromissued under the Plan. Each share of common stock that is the subject of an Award, including each share underlying an Award that is measured by shares but that is intended to be settled in cash, shall be charged against the maximum share limitations at the time the Award is granted and generally may not again be made subject to time for corporate purposes, including acquisitionsAwards under the Plan pursuant to such limitations; provided, however, a share underlying an award may be made subject to Awards again under the Plan in certain limited circumstances, such as if the Award terminates by expiration, forfeiture, cancellation or otherwise without the issuance of other companies, products, technologies or businesses. We do not have any current intention or plan to issuethe Shares.
Award Limits
The maximum number of shares of common stock forsubject to stock options and stock appreciation rights (combined) awarded to any purpose.
Authorized but unissued sharesone participant pursuant to the Plan in any calendar year shall not exceed 1,000,000 shares. The maximum number of our common stock may be issued from time to time upon authorization by the Board, at such times, to such persons and for such consideration as the Board may determine in its discretion, except as may be required for a particular transaction by applicable law, regulation or the rules of the NYSE. When and if such shares are issued, they would have the same voting and other rights and privileges as the currently issued and outstanding shares of common stock which may be subject to Awards of restricted stock made to any one participant pursuant to the Company.
Plan in any calendar year shall be 1,000,000 shares. The authorizationmaximum amount of compensation which may be paid to any participant in any calendar year pursuant to Awards of restricted stock units shall not exceed $10,000,000. The maximum amount of compensation that may be paid to any participant in any calendar year pursuant to other stock-based awards under the additional sharesPlan, (i) if the compensation under the other stock-based awards is denominated under the award agreement only in terms of common stock would not, by itself, have any effect on the rights of stockholders. However, holders of common stock have no preemptive rights to acquire additional shares of common stock, so the issuance of additional shares could have a dilutive effect on earnings per share and the voting power of existing stockholders at the time of issuance. The issuance of additional shares of common stock or a multiple of the perception that additionalfair market value per share of common stock, shall not exceed the fair market value (determined as of the date of vesting) of 1,000,000 shares may be issued, may also adversely affectof common stock; or (ii) in all other cases, shall not exceed $10,000,000. The foregoing limitations on the market pricenumbers of our common stock.
The Board does not believe that an increase in the number of authorized shares would significantly affect the ability of a third party to attempt to gain control of us. However, it is possible that an increase in authorized shares of common stock could render such an acquisition more difficult under certain circumstancesthat may be issued and that may be subject to Awards are subject to adjustment, as provided in the Plan.
Adjustments Upon Changes in Capitalization or discourage an attempt by a third party to obtain control of us by making possibleReorganization
In the issuance of shares that would dilute the share ownership of a person attempting to obtain control or otherwise make it difficult to obtain any required shareholder approval for a proposed transaction for control. The Board has no current intention to authorize the issuance of additional shares for such purpose and is not awareevent of any present attempt to obtain control of us or otherwise accumulate our common stock.
A copy of the proposed amendment to the Certificate is attached as Exhibit A.
The affirmative vote of the holders of at least a majority ofchange in the outstanding shares of common stock by reason of any stock split, stock dividend or other non‑recurring dividends or distributions, recapitalization, merger, consolidation, spin‑off, combination, repurchase or exchange of stock, reorganization, liquidation, dissolution or other similar corporate transaction that affects the common stock, an adjustment shall be made, as the Administrator deems necessary or appropriate, in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. Such adjustment may include an adjustment to the number and class of shares which may be delivered under this Plan, the number, class and price of shares subject to outstanding Awards, the number and class of Shares issuable pursuant to Options, and the numerical limits contained in the Plan. Notwithstanding the preceding, the number of Shares subject to any Award always shall be a whole number. The Plan does not permit the re-pricing of stock options or stock appreciation rights without stockholder approval.
Minimum Vesting
Awards shall be subject to a minimum vesting requirement of at least one year from the date the Award was granted, and no portion of any such Award may vest or become exercisable earlier than the first anniversary of the date such Award was granted; provided, however, that for purposes of Awards granted to non-employee directors, “one year” may mean the approximately one-year period from one regular
Item 3: Amendment to 2018 Long-Term Incentive Plan annual stockholder meeting to the immediately following regular annual stockholder meeting, as long as the period is not less than 50 weeks. The foregoing minimum vesting requirement shall not apply: (i) with respect to 5% of the share reserve of 8,500,000 shares (such amount set forth above) or (ii) to the vesting of an Award that is accelerated as a result of a change of control or termination of the participant due to his or her death or disability, in all cases under terms consistent with the Plan.
Types of Awards
Stock Options. Stock options entitle the holder to purchase a specified number of shares of common stock at an exercise price per share specified on the date of grant. The Administrator has the authority to grant stock options, specifying the terms and conditions of each stock option (including the time or times at which and the circumstances under which the stock option is exercisable), subject to the terms of the Plan. The Administrator will also have the authority to determine whether stock options granted to employees will be incentive stock options or non-qualified options.
The exercise price at which shares of common stock may be purchased upon the exercise of a stock option will not presentbe less than 100% of the fair market value of our common stock on the date that the stock option is granted. In the case of incentive stock options granted to an employee owning more than ten percent (10%) of the total combined voting power of us and certain of our affiliates, the exercise price at which shares of common stock may be purchased upon the exercise of such incentive stock option shall not be less than 110% of the fair market value of our common stock on the date of grant. The aggregate fair market value of shares of common stock granted pursuant to stock options (determined as of the date the stock option is granted under the Plan (or any other stock option plan of ours or representedcertain of our affiliates)) that become exercisable with respect to an employee for the first time as incentive stock options during any one calendar year cannot exceed $100,000.
Except for grants of incentive stock options to employees owning more than ten percent (10%) of the total combined voting power of us and certain of our affiliates (which stock options may not be exercised later than five years after the date of grant), no stock option may be exercised later than the date which is ten years after the date of grant. To exercise a stock option granted under the Plan, the person entitled to exercise the stock option must provide written notice to us, setting forth the number of shares of common stock with respect to which the stock option is to be exercised, accompanied by proxyfull payment for the shares being purchased and any required withholding taxes, unless other arrangements have been made with the Administrator. The payment must be in cash, check acceptable to the Company, by the Company withholding shares otherwise issuable from the exercise of the stock option, or other method of payment at the Administrator’s discretion.
Restricted Stock. Restricted stock is common stock that is subject to forfeiture and such other restrictions as the Administrator may impose, including performance criteria, transfer, and repurchase restrictions. The Administrator has authority and discretion to determine what restrictions apply to the restricted stock and when and how the restrictions of one Award of restricted stock may differ from those of any other Award of restricted stock.
Unless otherwise provided in the Award agreement, holders of restricted stock have the right to vote and the right to receive dividends or other distributions paid or made with respect to such shares. All such dividends and distributions shall be held back by the Company and shall be subject to the same restrictions on transferability, vesting and forfeit-ability as the shares of restricted stock with respect to which they were paid. If for any reason the restrictions imposed by the Administrator are not met on the date set forth in the Award Agreement, the restricted stock for which restrictions have not lapsed shall automatically be forfeited by the participant and shall again be available for grant under this Plan.
Stock Appreciation Rights. A stock appreciation right entitles a participant to receive (either in cash, common stock, or a combination thereof), upon exercise of the stock appreciation right, the excess, if any, of (i) the fair market value per share of common stock on the date of exercise over (ii) the fair market
Item 3: Amendment to 2018 Long-Term Incentive Plan value per share of common stock on the date of grant. The Administrator may provide that the excess may not exceed a specified amount. Stock appreciation rights may be payable in cash, shares of common stock, or a combination thereof. The Administrator shall determine, at the date of grant, the number of shares of common stock to which the stock appreciation right applies, the time or times at which and the circumstances under which a stock appreciation right may vest and be exercised, the term of the stock appreciation right, subject to a ten year maximum term, and such other terms and conditions as the Administrator may determine. To exercise a stock appreciation right, the person entitled to exercise the stock appreciation right must provide written notice to us, setting forth the number of shares of common stock with respect to which the stock appreciation right is to be exercised, accompanied by full payment of any required withholding taxes, unless other arrangements have been made with the Administrator.
Performance Shares and Performance Units. Performance shares and performance units may be granted pursuant to performance share Award or performance unit Award at any time and shall be determined by the Administrator in its sole discretion. In the case of a performance share, a share will be issued pursuant to the award agreement. A performance unit is an unfunded and unsecured promise to deliver shares, cash or other securities equal to the value set forth in the award agreement. Each performance unit and performance share shall have an initial value established by the Administrator on or before the date of grant. Performance shares shall have an initial value equal to the fair market value of a share on the date of grant. The applicable award agreement will set forth performance goals and the extent to which those goals were met at the end of the performance period shall generally determine the payout or removal of restrictions. Performance units may be paid in cash, shares of common stock, or a combination of cash and stock. On a date set forth in the applicable award agreement, all unearned or unvested performance units and performance shares shall automatically be forfeited to the Company, and the shares subject to such awards (if any) shall again be available for grant under the Plan.
Performance goals may include, but are not limited to, the following: (i) stock price; (ii) earnings per share; (iii) increase in revenues; (iv) increase in cash flow; (v) cash flow per share; (vi) increase in cash flow return; (vii) return on net assets; (viii) return on assets; (ix) return on tangible assets; (x) return on investment; (xi) return on capital; (xii) return on equity; (xiii) return on invested capital; (xiv) return on capital employed; (xv) economic value added; (xvi) gross margin; (xvii) net income; (xviii) pretax earnings; (xix) pretax earnings before interest; (xx) pretax earnings before interest, taxes, depreciation and amortization; (xxi) pretax operating earnings after interest expense and before incentives, service fees and extraordinary or special items; (xxii) operating income; (xxiii) total stockholder return; (xxiv) debt reduction; (xxv) successful completion of an acquisition, initial public offering, private placement of equity or debt; (xxvi) reduction of expenses; or (xxvii) any combination or of a specified increase, decrease or change, as applicable, in any of the foregoing. The Administrator may set performance goals based upon the achievement of Company‑wide, divisional, or individual goals (including solely continued service) or any other basis determined by the Administrator in its sole discretion.
Restricted Stock Units. An award of a restricted stock unit is a right, subject to satisfaction of terms and conditions as imposed by the Administrator, to receive upon vesting, the value of the number of notional shares vested. The right to receive payment of an award of restricted stock units may be conditioned upon continued employment or achievement of performance goals. The holder of a restricted stock unit Award shall have no rights of a stockholder and shall have no voting rights with respect to any restricted stock unit Award. Restricted stock unit awards may be payable in cash, shares of common stock, or a combination thereof. The Administrator has the authority to determine the periods of restriction, the amount payable under the award, and any other terms and conditions consistent with the Plan.
Other Stock-Based Awards. Other stock-based awards may be granted either alone, in addition to, or in tandem with, other awards granted under the Plan and/or cash awards made outside of the Plan. At the Administrator’s discretion, other stock-based awards may be payable in cash. The Administrator has the authority and discretion to determine the terms and conditions, if any, of other stock-based awards, including any dividend or voting rights.
Item 3: Amendment to 2018 Long-Term Incentive Plan Withholding
We are generally required to withhold tax on the amount of income recognized by a participant with respect to an Award. The Administrator may make such provision for the withholding of taxes as it deems necessary. Withholding requirements may be satisfied by, among other ways, (a) tender of a cash payment to us or (b) withholding of cash payable or of shares of common stock otherwise issuable under an Award.
Amendment of Awards
The Administrator may amend an Award; provided, however, except in the case of a change of control, no amendment of an Award may, without the consent of the participant, adversely affect the participant’s rights with respect to such Award in any material respect.
Clawback
All compensation and Awards payable or paid under the Plan and any sub-plans shall be subject to the Company’s ability to recover incentive-based compensation from executive officers, as is or may be required by the provisions of any clawback policy implemented by the Company, the Dodd-Frank Wall Street Reform and Consumer Protection Act, any regulations or rules promulgated thereunder, or any other “clawback” provision required by applicable law or the listing standards of any applicable stock exchange or national market system.
Term of the Plan
The Board originally approved the Plan to be effective on March 16, 2018 (the “Effective Date”), subject to the Company’s stockholders approving the Plan not more than one year after the date of the Plan’s adoption by the Board. The Company’s stockholders approved the Plan on April 27, 2018. The Plan was further amended effective as of May 24, 2019. The Plan shall continue in effect for a term of 10 years from the Effective Date unless terminated earlier pursuant to the terms of the Plan.
Term of Awards
The term of each Award shall be for such period as may be determined by the Administrator; provided, however, that in no event shall the term of any such Award exceed a period of ten years (or such shorter terms as may be required in respect of an Incentive Stock Option under Section 422 of the Code).
Change of Control
Unless otherwise provided in an Award, upon the occurrence of a change of control (defined generally as certain reorganizations, mergers, consolidations, sales of all or substantially all of our assets, or liquidations), the Board may, but is not required to, take any one or more of the following actions with respect to Awards: (i) accelerate vesting and the time at which all stock options and stock appreciation rights then outstanding may be exercised; (ii) waive, alter, and/or amend the performance criteria and other restrictions and conditions of Awards then outstanding, with the result that the affected Awards may be deemed vested, and any applicable restricted period or other limitations on payment in full with respect thereto shall be deemed to have expired, as of the date of the change of control or such other date as may be determined by the Board; (iii) cause any acquirer to assume the Plan and the Awards or exchange the Awards for the acquirer’s stock; (iv) terminate the Plan; and (v) terminate and cancel all outstanding unvested or unexercised Awards as of the date of the change of control on such terms and conditions as it deems appropriate.
The Board will, in connection with a change of control, have the right to require all participants to transfer and deliver to us all Awards previously granted to the participants in exchange for an amount equal to the
Item 3: Amendment to 2018 Long-Term Incentive Plan cash value of the Awards. The cash value of an Award will equal the sum of (i) the cash value of all benefits to which the participant would be entitled upon settlement or exercise of any Award that is not a stock option or restricted stock, and (ii) in the case of a stock option, stock appreciation right or restricted stock, the excess of the market value per share (as defined in the Plan) over the option price (in the case of an option), strike price (in the case of a stock appreciation right) or the market value per share of restricted stock, as applicable, multiplied by the number of shares as to which such Award is vested. If an Award is a stock option or stock appreciation right and no cash value exists with respect thereto, then such cash-out shall be effectuated with no cash (or other) payment to the party holding such Award.
Summary of Certain Federal Income Tax Considerations
The following summary is based on certain applicable provisions of the Code, as currently in effect, and the income tax regulations and proposed income tax regulations issued thereunder. This summary does not purport to cover all federal income tax consequences or any federal employment tax or other federal tax consequences that may be associated with the Plan, nor does it cover state, local, employment, foreign or other taxes.
Status of Stock Options. Stock options granted under the Plan may be either incentive stock options or non-qualified options. Under certain circumstances, an incentive stock option may be treated as a non-qualified option. The tax consequences, both to the option holder and to us, differ depending on whether a stock option is an incentive stock option or a non-qualified option.
Non-qualified Options. Generally, no federal income tax is imposed on the option holder upon the grant of a non-qualified stock option. If the shares of common stock received by an option holder upon the exercise of a non-qualified option are not subject to certain restrictions in the hands of the option holder, then the option holder will be treated as receiving compensation, taxable as ordinary income in the year of exercise. The amount recognized as ordinary income upon such an exercise is the excess of the fair market value of the shares of common stock at the time of exercise over the exercise price paid for such common stock.
Incentive Stock Options. No federal income tax is imposed on the option holder upon the grant or exercise of an incentive stock option. The option holder will recognize no ordinary income for federal income tax purposes upon disposition of stock acquired pursuant to the exercise of an incentive stock option, if the option holder (i) does not dispose of the shares of common stock acquired pursuant to the exercise of an incentive stock option within two years from the date the option was granted or within one year after the shares of common stock were transferred to the option holder (the “Holding Period”), and (ii) is an employee of either (a) the corporation granting the option, (b) the parent corporation or a subsidiary corporation of the granting corporation, or (c) a corporation (or the parent corporation or a subsidiary corporation of such corporation) that has assumed such option of another corporation as a result of a corporate reorganization, merger, or similar transaction. Such employment must continue for the entire time from the date the option was granted until three months before the date of exercise or twelve months before the date of exercise if employment ceases due to permanent and total disability (as defined in Section 22(e)(3) of the Code). If common stock received upon exercise of an incentive stock option is disposed of after completion of the Holding Period, any difference between the exercise price paid for such common stock and the amount realized on the disposition will be treated as a capital gain or loss. The gain, if any, realized upon such a disposition will be treated as a long-term capital gain. Any loss realized upon such a disposition will be treated as a long-term capital loss. In the case of disposition of shares of common stock following expiration of the Holding Period, we would not be entitled to any deduction in connection with the grant or exercise of the incentive stock option or the disposition of the shares of common stock so acquired.
If, however, an option holder disposes of shares of common stock acquired pursuant to the exercise of an incentive stock option before expiration of the Holding Period (a “Disqualifying Disposition”), the option holder would be treated as having received, at the time of disposition, compensation taxable as ordinary
Item 3: Amendment to 2018 Long-Term Incentive Plan income. The amount treated as compensation is the lesser of (i) the excess of the fair market value of the common stock at the time of exercise over the exercise price, or (ii) the excess of the amount realized on disposition over the exercise price. The balance of the gain, if any, realized upon such a disposition will be treated as a long-term or short-term capital gain depending on the holding period. If the amount realized at the time of the disposition is less than the exercise price, the option holder will not be required to treat any amount as ordinary income, provided that the disposition is of a type that would give rise to a recognizable loss. In such event, the loss will be treated as a long-term or short-term capital loss depending upon the holding period. A disposition generally includes a sale, exchange, gift or a transfer of legal title, but does not include certain other transfers, such as by reason of death or a pledge or an exchange of shares described in Section 424(c) of the Code.
Although the exercise of an incentive stock option does not result in current taxable income, there are implications with regard to the Alternative Minimum Tax (“AMT”). The excess of the fair market value of shares of common stock acquired upon exercise of an incentive stock option over the exercise price paid for such shares of common stock is an adjustment to AMT income for the option holder’s taxable year in which such exercise occurs (unless the shares of common stock are disposed of in the same taxable year and the amount realized is less than the fair market value of the shares on the date of exercise, in which event the amount included in AMT income will not exceed the amount realized on the disposition over the adjusted basis of the shares).
Stock Appreciation Rights. Upon the exercise of a stock appreciation right, if shares are received in settlement of the stock appreciation right, the fair market value of those shares received is recognized as income for federal income tax purposes at the time of exercise. If a participant receives cash upon the exercise of a stock appreciation right, the amount of cash received is recognized as income for federal income tax purposes at the time of exercise.
Restricted Stock. Generally, the grant of restricted stock will not be a taxable event to the participant, and we will not receive a deduction. Absent an 83(b) election (described below), the participant will be taxed at ordinary income rates when the stock vests (an amount equal to the difference between the fair market value of the stock on the vesting date and the consideration paid, if any, for the shares), and we will receive a corresponding deduction. However, the participant may elect to make an 83(b) election not later than 30 days after the grant of the restricted stock. An 83(b) election is an election permitted under Section 83(b) of the Code that allows the participant to recognize compensation income on the restricted stock at the time of the grant equal to the difference between the fair market value of the stock on the date of grant and the amount paid, if any, for the shares. If the participant makes an 83(b) election, we receive a corresponding deduction at the time of the grant, and the participant is not taxed, nor do we receive any deduction, upon vesting of the shares.
When the participant sells the shares following vesting, he or she may realize a capital gain if the sales price is greater than his or her basis in the shares. The participant’s basis for this purpose is the fair market value at the time of vesting (if no 83(b) election is made) or at the time of grant (if an 83(b) election is made). We do not receive a deduction upon disposition of the stock by the participant. If, following vesting, the participant sells the shares and the amount realized is more than the participant’s basis in the stock, the participant will recognize a capital gain. If, following vesting, the participant sells the shares and the amount realized is less than the participant’s basis in the stock, the participant will recognize a capital loss. The capital gain or loss will be either short-term or long-term, depending on the holding period of the shares. The holding period commences upon vesting (if no 83(b) election is made) or upon grant (if an 83(b) election is made).
Restricted Stock Units. In general, a participant who receives a restricted stock unit award will not be taxed on receipt of the Award; instead, upon vesting (or potentially settlement, depending upon how the restricted stock unit is structured), the amount paid to the participant (whether in cash, shares, or a combination thereof) denominated in cash will be taxable as compensation to the participant.
Item 3: Amendment to 2018 Long-Term Incentive Plan Other Tax Considerations
In the event of a change of control of the Company, certain payments in the nature of compensation to certain individuals, if contingent on the change of control, could be nondeductible to us and subject to an additional 20% tax to the participant. Awards under the Plan that are made, vest, or become payable in connection with a change of control may be required to be taken into account in determining whether these penalties apply.
Some Awards granted under the Plan may be considered non-qualified deferred compensation that is subject to special rules and an additional 20% tax to the participant if not compliant with Section 409A of the Code. The Administrator intends to design and administer such Awards either to be exempt from or to comply with Section 409A of the Code and avoid the imposition of any additional tax under Section 409A of the Code, but is not required to do so. There is no commitment or guarantee that any federal, state, local, or foreign tax treatment will (or will not) apply or be available to any participant with respect to any Award.
Inapplicability of ERISA
Based on current law and published interpretations, we do not believe that the Plan is subject to any of the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Notwithstanding the foregoing, the Plan expressly provides that there is no commitment or guarantee that any federal, state, or local tax treatment will (or will not) apply or be available to any person who participates or is eligible to participate in the Plan.
Vote Required and Recommendation of the Board of Directors
The affirmative vote of a majority of the total votes cast at the Meeting is required to approve thean amendment to the Company’s Certificate.
2018 Plan.
THE THE BOARD OF DIRECTORS RECOMMENDS ATHAT YOU VOTE “FOR” PROPOSALITEM NO. 3 APPROVINGTO APPROVE THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION.
FLOTEK INDUSTRIES, INC. 2018 LONG-TERM INCENTIVE PLAN.
OTHER MATTERS The Board is not aware of any other matters that may come before the Meeting. However, the proxies may be voted with discretionary authority with respect to any other matters that may properly come before the Meeting.Meeting. ANNUAL REPORTAnnual Report
An Annual Report to Stockholders of the Company for the fiscal year ended December 31, 20192020 is enclosed herewith. This report does not form any part of the material for solicitation of proxies. Stockholder Communications FUTURE STOCKHOLDER
PROPOSALS AND STOCKHOLDER COMMUNICATIONS
Stockholders are entitled to submit proposals on matters appropriate for stockholder action consistent with regulations of the SEC and the Company’s bylaws.
In order for a stockholder proposal or nomination to be properly brought before next year’s annual meeting, written notice of the proposal that complies with the Company’s bylaws must be received by the Company’s Corporate Secretary (at the address below) no earlier than 120 days and no later than 90 days prior to the one year anniversary of the preceding year’s annual meeting, which is expected to be held in May 2021. For the 2021 Annual Meeting, notice of such business or nominations must be received by the Company no earlier than January 5, 2021 and no later than February 4, 2021, as set forth more fully in the bylaws, and must comply with the other requirements as set forth in the bylaws.
In addition to the foregoing, should a stockholder wish to have a proposal appear in the Company’s proxy statement and form of proxy for next year’s annual meeting of stockholders, under regulations of the SEC, such proposal must be received by the Company’s Corporate Secretary at our principle executive offices, 10603 W. Sam Houston Parkway N., Suite 300, Houston, Texas 77064, on or before February 5, 2021.
Stockholders and interested parties who wish to communicate with the Board, or with any individual director, may do so by (1) calling Lighthouse Services Inc., a third party call center, at (800) 785-1003 or (2) correspondence addressed to the Board, or to an individual director, at the principal executive offices of the Company.Company at 8846 N. Sam Houston Parkway W., Houston, TX 77064. All such communications received from stockholders are sent directly to Board members. HOUSEHOLDING OF PROXY MATERIALSDelinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires certain officers, directors and persons who own more than 10% of our common stock to file reports of ownership and changes in ownership with the SEC and further requires us to identify in this Proxy Statement those officers, directors and persons who failed to timely file such a report. The Form 3 for Ryan Ezell was filed late due to administrative changes in the Company. Excepting the late filing disclosed above, and based solely on our review of these forms or written representations from such officers, directors and persons who own more than 10% of our common stock, we believe that all Section 16(a) filing requirements were met with respect to the 2020 fiscal year. Householding of Proxy Materials The SEC permits a single set of notices, annual reports, and proxy statements to be sent to any household at which two or more stockholders reside if they appear to be members of the same family. Each stockholder continues to receive a separate proxy card. This procedure, referred to as householding, reduces the volume of duplicate information stockholders receive and reduces mailing and printing expenses. A number of brokerage firms have instituted householding. As a result, if you hold your shares through a broker and you reside at an address at which two or more stockholders reside, you will likely be receiving only one notice, annual report, and proxy statement unless any stockholder at that address has given the broker contrary instructions. However, if any beneficial stockholder residing at an address of which two or more stockholders reside wishes to receive a separate notice, annual report, or proxy statement in the future, or if any beneficial stockholder that elected to continue to receive separate notice, annual reports, or proxy statements wishes to receive a single notice, annual report, or proxy statement in the future, that stockholder should contact his or her broker or send a request to our Corporate Secretary at our principal executive offices, 10603 W.8846 N. Sam Houston Parkway N.W., Suite 300, Houston, Texas 77064, telephone number (713) 849-9911. We will deliver, promptly upon written or oral request to our Corporate Secretary, a separate copy of the notice, 2019 annual report,2020 Annual Report, and this proxy statementProxy Statement to a beneficial stockholder at a shared address to which a single copy of the documents was delivered. Important Dates for 2022 Annual Meeting
Shareholder proposals submitted for inclusion under Rule 14a-8 of the Securities & Exchange Commission (the “SEC”) for inclusion in our 2022 proxy statement must be submitted in writing and
EXHIBITreceived by our corporate secretary no later than December 23, 2021. Shareholder proposals to be presented in person at the 2022 annual meeting must be submitted after February 3, 2022 but no later than March 5, 2022. Section 14–15 of Article II of the Second Amended and Restated Bylaws of the Company sets out a detailed procedure for stockholder proposed director candidates.
ANNEX A CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
FLOTEK INDUSTRIES, INC.
2018 LONG-TERM INCENTIVE PLAN
1. Purpose of this Plan. The purpose of this Plan is to: (i) attract and retain the best available personnel for positions of substantial responsibility, (ii) provide additional incentive to Employees, Non-Employee Directors and Consultants, and (iii) promote the success of the Company’s business interests. This Plan permits the grant of Incentive Stock Options, Non-Qualified Options, Restricted Stock, Stock Appreciation Rights, Performance Units, Performance Shares, Restricted Stock Units, and Other Stock‑Based Awards.
2. Definitions. As used in this Plan, the following definitions shall apply:
(a) “Administrator” means the Board or any of its Committees that shall be administering this Plan, in accordance with Section 4 of this Plan. Except as otherwise determined by the Board, the Compensation Committee shall be the Administrator.
(b) “Affiliate” means (i) any entity in which the Company, directly or indirectly, owns 50% or more of the combined voting power, as determined by the Administrator, (ii) any trades or businesses, whether or not incorporated, which are members of controlled group or are under common control (as defined in Sections 414(b) or (c) of the Code) with the Company, or (iii) any other entity, approved as an Affiliate by the Administrator, in which the Company or any of its other Affiliates has a material equity interest; provided, however, that with respect to Incentive Stock Options, the term “Affiliate” shall mean only a “parent corporation” of the Company or a “subsidiary corporation” of the Company or of any such parent corporation (as such terms are defined in Sections 424(e) and (f) of the Code and determined in accordance with Section 421 of the Code); and provided further, that with respect to Non-Qualified Options and Stock Appreciation Rights, the term “Affiliate” shall mean only a corporation or other entity in a chain of corporations and/or other entities in which the Company has a “controlling interest” within the meaning of Treas. Reg. §1.414(c)-2(b)(2)(i), but using the threshold of 50% ownership wherever 80% appears.
(c) “Applicable Laws” means the requirements relating to the administration of equity-based awards or equity compensation plans under U.S. federal and state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or shall be, granted under this Plan.
(d) “Award” means, individually or collectively, a grant under this Plan of Incentive Stock Options, Non-Qualified Options, Restricted Stock, Stock Appreciation Rights, Performance Units, Performance Shares, Restricted Stock Units, and Other Stock‑Based Awards.
(e) “Award Agreement” means the written or electronic agreement setting forth the terms and provisions applicable to each Award. An Award Agreement is subject to the terms and conditions of this Plan.
(f) “Awarded Stock” means the Common Stock subject to an Award.
(g) “Board” means the Board of Directors of the Company.
(h) “Cash Value” of an Award means the sum of (i) in the case of any Award which is not an Option, Stock Appreciation Right or an Award of Restricted Stock, the value of all benefits to which the Participant would be entitled as if the Award were vested and settled or exercised and (ii) (A) in the case of any Award that is an Option or Stock Appreciation Right, the excess, if any, of the Fair Market
Value per Share over the exercise price or strike price, respectively, or (B) in the case of an Award of Restricted Stock, the Fair Market Value per Share of Restricted Stock, multiplied by the number of Shares subject to such Award, all as determined by the Board as of the date of the Change of Control or such other date as may be determined by the Board.
(i) “Cause”, unless otherwise defined in the applicable Award Agreement, means, with respect to the termination of a Participant: (i) the Participant‘s continued failure to substantially perform one or more of his or her essential duties and obligations to the Company (other than any such failure resulting from a Disability) which, to the extent such failure is remediable, the Participant fails to remedy in a reasonable period of time (not to exceed 30 days) after receipt of written notice from the Company; (ii) the Participant’s refusal or failure to comply with the reasonable and legal directives of the Board after written notice from the Board describing the Participant’s failure to comply and, if such failure is remediable, the Participant’s failure to remedy same within 10 days of receiving written notice; (iii) any act of personal dishonesty, fraud or misrepresentation taken by the Participant which was intended to result in substantial gain or personal enrichment of the employee at the expense of the Company; (iv) the Participant’s violation of a federal or state law or regulation applicable to the Company’s business which violation was or is reasonably likely to be materially injurious to the Company; (v) the Participant’s conviction of, or plea of nolo contendere or guilty to, a felony under the laws of the United States or any State that is reasonably likely to be materially injurious to the Company; (vi) the Participant’s abuse of drugs, other narcotics or alcohol during working hours or where such abuse (whenever occurring) impacts on the Participant’s service to the Company; (vii) the Participant’s breach of any of his or her material obligations under any written agreement with the Company (including without limitation his or her employment agreement, if any, and any proprietary information and inventions assignment agreement with the Company); or (viii) the Participant’s violation of a material policy of the Company which, to the extent such failure is remediable, the Participant fails to remedy in a reasonable period of time (not to exceed 30 days) after receipt of written notice from the Company. The Administrator shall determine whether Cause exists and whether a termination is or was for Cause, and each Participant shall agree, by acceptance of the grant of an Award and the execution of an Award Agreement, that the Administrator’s determinations are conclusive and binding on all persons for all purposes of the Plan.
(j) “Change of Control” shall be deemed to have occurred upon any of the following events:
(i) any “person” or “persons” (as defined in Section 3(a)(9) of the Exchange Act, and as modified in Sections 13(d) and 14(d) of the Exchange Act) other than and excluding (1) the Company or any of its subsidiaries, (2) any employee benefit plan of the Company or any of its subsidiaries, (3) any Affiliate of the Company, (4) an entity owned, directly or indirectly, by stockholders of the Company in substantially the same proportions as their ownership of the Company, or (5) an underwriter temporarily holding securities pursuant to an offering of such securities, becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the shares of voting stock of the Company then outstanding;
(ii) the consummation of any merger, organization, business combination, or consolidation of the Company or one of its subsidiaries with or into any other entity, other than a merger, reorganization, business combination, or consolidation which would result in the holders of the voting securities of the Company outstanding immediately prior thereto and their respective Affiliates holding securities which represent immediately after such merger, reorganization, business combination, or consolidation more than 50% of the combined voting power of the voting securities of the Company or the surviving company or the parent of such surviving company;
(iii) the consummation of a sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition if the holders of the voting securities of the Company outstanding immediately prior thereto and their respective Affiliates hold
securities immediately thereafter which represent more than 50% of the combined voting power of the voting securities of the acquiror, or parent of the acquiror, of such assets;
(iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company; or
(v) the Incumbent Board ceases for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election by the Board was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an election contest with respect to the election or removal of directors or other solicitation of proxies or consents by or on behalf of a person other than the Board.
Further, in the case of any item of income under an Award to which the foregoing definition would otherwise apply with the effect that the income tax under Section 409A of the Code would apply or be imposed on income under that Award, but where such tax would not apply or be imposed if the meaning of the term “Change of Control” met the requirements of Section 409A(a)(2)(A)(v) of the Code, then the term “Change of Control” herein shall mean, but only with respect to the income so affected, a transaction, circumstance, or event that constitutes a “Change of Control” (as defined above) and that also constitutes a “change in control event” within the meaning of Treas. Reg. §1.409A-3(i)(5).
(k) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the U.S. Treasury regulations promulgated thereunder. Any reference to a section of the Code shall be deemed a reference to any successor or amended section of the Code.
(l) “Committee” means a committee of Directors or other individuals that satisfies Applicable Laws and was appointed by the Board in accordance with Section 4 of this Plan. Except as otherwise determined by the Board, “Committee” shall mean the Compensation Committee.
(m) “Common Stock” means the common stock, $0.0001 par value per Share, of the Company.
(n) “Company” means Flotek Industries, Inc., (the “Corporation”), a Delaware corporation, duly organized and validly existingany successor to thereto.
(o) “Compensation Committee” means the Compensation Committee of the Board; provided, however, if the Compensation Committee is not comprised of two or more members of the Board, each of whom qualifies as a “non-employee director” (within the meaning of Rule 16b-3 under the General Corporation LawExchange Act), then the Board shall appoint a committee (which shall constitute the “Compensation Committee”) of two or more members of the Board, each of whom qualifies as a “non-employee director” (within the meaning of Rule 16b-3 under the Exchange Act).
(p) “Consultant” means any natural person, including an advisor (but excluding a Director), engaged by the Company or an Affiliate thereof to render services to such entity as a consultant or independent contractor.
(q) “Director” means a member of the Board.
(r) “Disability” means the condition of being unable to perform the Employee’s or Non-Employee Director’s material services for the Company for a period of 90 consecutive days or a total of 180 days, during any 365-day period, in either case as a result of incapacity due to mental or physical illness, which is determined to be total and permanent. A determination of Disability shall be made by a
physician reasonably satisfactory to both the Participant (or his or her guardian) and the Company, provided that if the Employee or Non-Employee Director (or his or her guardian) and the Company do not agree on a physician, the Employee or Non-Employee Director (or his or her guardian) and the Company shall each select a physician and these two together shall select a third physician, whose determination as to Disability shall be final, binding, and conclusive with respect to all parties. Eligibility for disability benefits under any policy for long-term disability benefits provided to the Participant by the Company shall conclusively establish the Participant’s Disability. Notwithstanding the foregoing, (i) with respect to any item of income under an Award to which the foregoing definition would apply with the effect that the income tax under Section 409A of the Code would apply or be imposed on income under that Award, but where such tax would not apply or be imposed if the meaning of the term “Disability” included and met the requirements of a “disability” within the meaning of Treas. Reg. §1.409A-3(i)(4), then the term “Disability” shall mean, but only with respect to the income so affected, (a) the inability of the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve months or (b) the receipt of income replacements by the Participant, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve months, for a period of not less than three months under the Company’s accident and health plan; and (ii) with respect to an Incentive Stock Option, “Disability” shall mean the inability of the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months, determined in accordance with Sections 22(e)(3) and 422(c)(6) of the Code.
(s) “Disqualifying Disposition” means, with respect to shares of Common Stock acquired by the exercise of an Incentive Stock Option, a “disqualifying disposition” within the meaning of Section 422 of the Code.
(t) “Dividend Equivalent” means a notional credit, made at the sole discretion of the Administrator, to a bookkeeping account with respect to a Participant in an amount equal to the value of dividends paid on one Share for each Share subject to an Award held by such Participant. Under no circumstances shall the payment of a Dividend Equivalent be made contingent on the exercise of an Option or Stock Appreciation Right. Additionally, Dividend Equivalents shall be subject to the same restrictions on transferability, vesting and forfeitability as the Award with respect to which they are credited. Dividend Equivalents will be granted only if a grant thereof is explicitly made in the applicable Award Agreement.
(u) “Effective Date” means March 16, 2018, the date this Plan was adopted by the Board. The effectiveness of this Plan is contingent upon its approval by the Company’s stockholders not more than one year after the date of this Plan’s adoption by the Board.
(v) “Employee” means any natural person employed by the Company or any Affiliate thereof. Neither service as a Director only nor payment of a director’s fee by the Company or any Affiliate thereof shall be sufficient to constitute “employment” for purposes of the Plan.
(w) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(x) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a national market system, or if the Common Stock is regularly quoted by a recognized securities dealer, the Fair Market Value shall be the closing price of the Common Stock on such exchange or system for the Common Stock for the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or
(ii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator by a reasonable application of a reasonable valuation method.
Notwithstanding the foregoing to the contrary, for federal, state, and local income tax reporting purposes and for such other purposes as the Administrator deems appropriate, Fair Market Value shall be determined by the Administrator in accordance with uniform and nondiscriminatory standards adopted by it from time to time.
(y) “Forfeit” and variations thereof (whether or not capitalized) means to lose a Participant’s rights under an Award prior to its vesting (or, in the case of an Option or a Stock Appreciation Right, prior to its exercise, even if such Option or Stock Appreciation Right has vested) as a result of cancellation, revocation, lapse, or expiration of the Award in accordance with the Plan and the terms of the Award Agreement; and “forfeiture” means the loss of the rights that are so forfeited.
(z) “Incentive Stock Option” means an Option intended to qualify and receive favorable tax treatment as an incentive stock option within the meaning of Section 422 of the Code, as designated in the applicable Award Agreement.
(aa) “Incumbent Board” means individuals who, as of the Effective Date, constitute the Board.
(bb) “Non-Employee Director” means a Director who is neither an Employee nor a Consultant.
(cc) “Non-Qualified Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock
Option.
(dd) “Option” means an Incentive Stock Option or a Non-Qualified Option to purchase Common Stock granted pursuant to this Plan.
(ee) “Other Stock-Based Awards” means any other awards not specifically described in this Plan that are payable by delivery of Shares or valued in whole or in part by reference to, or are otherwise based on, Shares and are created by the Administrator pursuant to Section 12 of this Plan.
(ff) “Participant” means a Service Provider who has been granted and holds an outstanding Award under this Plan or, if applicable, such other person who holds an outstanding Award.
(gg) “Performance Goals” means goals which have been established by the Administrator in connection with an Award and are based on one or more criteria, including, but not limited to, the following: (i) stock price; (ii) earnings per share; (iii) increase in revenues; (iv) increase in cash flow; (v) cash flow per share; (vi) increase in cash flow return; (vii) return on net assets; (viii) return on assets; (ix) return on tangible assets; (x) return on investment; (xi) return on capital; (xii) return on equity; (xiii) return on invested capital; (xiv) return on capital employed; (xv) economic value added; (xvi) gross margin; (xvii) net income; (xviii) pretax earnings; (xix) pretax earnings before interest; (xx) pretax earnings before interest, taxes, depreciation and amortization; (xxi) pretax operating earnings after interest expense and before incentives, service fees and extraordinary or special items; (xxii) operating income; (xxiii) total stockholder return; (xiv) debt reduction; (xv) successful completion of an acquisition, initial public offering, private placement of equity or debt; (xvi) reduction of expenses; or (xvii) any combination or of a specified increase, decrease or change, as applicable, in any of the foregoing.
(hh) “Performance Period” means the time period during which the Performance Goals must be met.
(ii) “Performance Share” means Shares issued pursuant to a Performance Share Award under Section 10 of this Plan.
(jj) “Performance Unit” means, pursuant to Section 10 of this Plan, an unfunded and unsecured promise to deliver Shares, cash or other securities equal to the value set forth in the Award Agreement.
(kk) “Plan” means this Flotek Industries, Inc. 2018 Long-Term Incentive Plan. In accordance with Section 17, this Plan became effective on the Effective Date, subject to the Company’s stockholders approving this Plan not more than one year after the date of this Plan’s adoption by the Board.
(ll) “Restricted Stock” means Shares issued pursuant to a Restricted Stock Award under Section 8 of this Plan.
(mm) “Restricted Stock Unit” means, pursuant to Section 11 of this Plan, an unfunded and unsecured promise to deliver Shares, cash or other securities equal in value to the Fair Market Value of one Share in the Company on the date of vesting or settlement, as applicable, or as otherwise set forth in the Award Agreement.
(nn) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b‑3, as in effect when discretion is being exercised with respect to this Plan.
(oo) “Securities Act” means the Securities Act of 1933, as amended.
(pp) “Service Provider” means an Employee, Non-Employee Director or Consultant.
(qq) “Share” means a share of Common Stock, as adjusted in accordance with Section 15 of this Plan.
(rr) “Stock Appreciation Right” means, pursuant to Section 9 of this Plan, an unfunded and unsecured promise to deliver Shares, cash or other securities equal in value to the excess, if any, of the Fair Market Value of a Share as of the date such Stock Appreciation Right is exercised over the Fair Market Value of a Share as of the date such Stock Appreciation Right was granted, or as otherwise set forth in the Award Agreement.
(ss) “Termination” and variations thereof (whether or not capitalized) means, with respect to a Service Provider’s service to the Company or its Affiliates, the end of the Participant’s employment, status as a Non-Employee Director, or engagement or relationship as a Consultant, as the case may be, which is intended and reasonably anticipated by the Company to result in the permanent cessation of services by the Participant to the Company and its Affiliates in such capacity. Further, in the case of any item of income under an Award to which the foregoing definition would otherwise apply with the effect that the income tax under Section 409A of the Code would apply or be imposed on income under an Award, but where such tax would not apply or be imposed if the meaning of the term “termination” included and met the requirements of a “separation from service” within the meaning of Treas. Reg. §1.409A-1(h), then the term “termination” herein shall mean, but only with respect to the income so affected, an event, circumstance, or condition that constitutes both a “termination” as defined in the preceding sentence and a “separation from service” within the meaning of Treas. Reg. §1.409A-1(h). In the case of an Incentive Stock Option, “termination” shall mean the cessation of the requisite employment relationship determined in accordance with Section 421 of the Code.
(tt) “Vest,” “vesting”, and variations thereof (whether or not capitalized), means with respect to an Award, the lapsing or elimination of the Participant’s risk of forfeiture with respect to such Award.
3. Stock Subject to this Plan.
(a) Stock Subject to this Plan. Subject to the provisions of Section 15 of this Plan, the maximum aggregate number of Shares that may be issued pursuant to all Awards under this Plan is 8,500,000 Shares, all of which may be issued pursuant to Incentive Stock Options. The Shares to be delivered under the Plan shall be fully paid and nonassessable and may be made available from authorized but unissued Shares, treasury stock, or Shares acquired in the open market.
(b) Share Usage. In the event that an Award is granted that, pursuant to the terms of the Award Agreement, cannot be settled in Shares, the aggregate number of Shares that may be made the subject of Awards under the Plan shall not be reduced. Any Shares related to an Award granted under the Plan that terminates by expiration, forfeiture, cancellation or otherwise without the issuance of the Shares shall again be available for Awards under the Plan. Any Shares tendered or repurchased (i) to pay the exercise price of an Option granted under the Plan or (ii) to satisfy tax withholding obligations associated with an Award granted under the Plan, shall not become available again for grant under the Plan. The full number of Stock Appreciation Rights granted that are to be settled by the issuance of Shares shall be counted against the aggregate number of Shares that may be made subject to Awards under the Plan, regardless of the number of Shares actually issued upon settlement of such Stock Appreciation Rights.
(c) Share Reserve. The Company, during the term of this Plan, shall at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of this Plan.
(d) Certain Limitations on Awards. The maximum number of Shares subject to Options and Stock Appreciation Rights (combined) awarded to any one Participant pursuant to this Plan in any calendar year shall not exceed 1,000,000 shares. The maximum number of Shares which may be subject to Awards of Restricted Stock made to any one Participant pursuant to this Plan in any calendar year shall be 1,000,000 Shares. The maximum amount of compensation which may be paid to any Participant in any calendar year pursuant to Awards of Restricted Stock Units shall not exceed the Fair Market Value (determined as of the date of vesting) of 1,000,000 Shares. The maximum amount of compensation that may be paid to any Participant in any calendar year pursuant to Other Stock-Based Awards under this Plan, (i) if the compensation under the Other Stock-Based Awards is denominated under the Award Agreement only in terms of Shares or a multiple of the Fair Market Value per Share, shall not exceed the Fair Market Value (determined as of the date of vesting) of 1,000,000 Shares; or (ii) in all other cases, shall not exceed $10,000,000. The maximum number of Shares which may be subject to Awards of Performance Shares made to any one Participant pursuant to this Plan in any calendar year shall be 1,000,000 Shares. The maximum amount of compensation any Participant can be paid in any calendar year pursuant to Awards of Performance Units shall not exceed $10,000,000. The foregoing limitations on the number of shares of Common Stock that may be issued and that may be subject to Awards are subject to adjustment as provided in Section 15(a).
4. Administration of this Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. Different Committees with respect to different groups of Service Providers may administer this Plan.
(ii) Rule 16b-3. If a transaction is intended to be exempt under Rule 16b-3, then it shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(iii) Other Administration. Other than as provided herein, this Plan shall be administered by (A) the Board or (B) a Committee constituted to satisfy Applicable Laws. Except as otherwise determined by the Board, the Compensation Committee shall be the Administrator.
(b) Powers of the Administrator. Subject to the provisions of this Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion to:
(i) determine who are Service Providers;
(ii) determine the Fair Market Value of Awards;
(iii) select the Service Providers to whom Awards may be granted under this Plan;
(iv) determine the number of Shares to be covered by each Award granted under this Plan;
(v) determine when Awards are to be granted under this Plan and the applicable date of grant;
(vi) approve forms of Award Agreements for use under this Plan;
(vii) determine the terms and conditions, not inconsistent with the terms of this Plan, of any Award granted under this Plan, including but not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on Performance Goals), any acceleration of vesting or waiver of forfeiture or repurchase restrictions (subject to the provisions of Section 6), and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;
(viii) construe and interpret the terms of this Plan, Award Agreements and Awards granted pursuant to this Plan;
(ix) prescribe, amend and rescind rules and regulations relating to this Plan, including rules and regulations relating to the creation and administration of sub-plans;
(x) amend the terms of any outstanding Award Agreement or Award, including the discretionary authority to extend the post‑termination exercise period of Awards and accelerate the satisfaction of any vesting criteria or waiver of forfeiture or repurchase restrictions, provided that any amendment that would adversely affect the Participant’s rights under an outstanding Award shall not be made without the Participant’s written consent. Notwithstanding the foregoing, an amendment shall not be treated as adversely affecting the rights of the Participant if the amendment causes an Incentive Stock Option to become a Non-Qualified Option or if the amendment is made to the minimum extent necessary to avoid the adverse tax consequences of Section 409A of the Code;
(xi) allow Participants to satisfy withholding tax obligations by electing to have the Company withhold from the Shares or cash to be issued upon exercise or vesting of an Award up to the number of Shares or cash having a Fair Market Value equal to the amount required to be withheld based on any amount up to the minimum supplemental income tax rate in the applicable jurisdiction. The Fair Market Value of any Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined, and all elections by a Participant to have Shares or cash withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable;
(xii) authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;
(xiii) allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to the Participant under an Award;
(xiv) determine whether Awards shall be settled in Shares, cash or in a combination thereof;
(xv) determine whether Awards shall be adjusted for dividends or Dividend Equivalents, provided, however, that to the extent an Award is to be settled in Shares, any dividends or Dividend Equivalents shall not be issued or granted with respect to unvested Awards, and instead shall be held (or, in the case of Dividend Equivalents, credited to a notional bookkeeping account for the benefit of the Participant) by the Company and delivered to the Participant, if at all, only upon such Award becoming vested or settled, as applicable;
(xvi) create Other Stock-Based Awards for issuance under this Plan;
(xvii) impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by a Participant or other subsequent transfers by the Participant of any Shares issued as a result of or under an Award, including without limitation, (A) restrictions under an insider trading policy, and (B) restrictions as to the use of a specified brokerage firm for such resales or other transfers;
(xviii) establish one or more programs under this Plan to permit selected Participants the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of Performance Goals, or other event that absent the election, would entitle the Participant to payment or receipt of Shares or other consideration under an Award;
(xix) to interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in this Plan, any Award Agreement and any other instrument or agreement relating to an Award; and
(xx) make all other determinations that the Administrator deems necessary or advisable for administering this Plan.
The express grant in this Plan of any specific power to the Administrator shall not be construed as limiting any power or authority of the Administrator. However, the Administrator may not exercise any right or power reserved to the Board. To the extent the Compensation Committee serves as the Administrator with respect to grants of Awards, no member of the Compensation Committee shall vote or act upon any matter relating solely to himself/herself; grants of Awards to members of the Compensation Committee must be ratified by the Board.
(c) Prohibition on Repricing of Options and Stock Appreciation Rights. Notwithstanding anything in this Plan to the contrary, no repricing of Options or Stock Appreciation Rights may be effectuated without the prior approval of the Company’s stockholders; provided, however, that the foregoing prohibition shall not apply to the extent an adjustment is required under Section 15. The exercise price of Options may not be reduced and Options may not be cancelled in exchange for other awards, or cancelled in exchange for Options having a lower exercise price, or cancelled in exchange for cash, without stockholder approval.
(d) Effect of Administrator’s Decision. The Administrator’s decisions, determinations, actions and interpretations shall be final, conclusive and binding on all persons having an interest in this Plan.
(e) Indemnification. The Company shall, to the maximum extent permitted by law, defend and indemnify members of the Board, each Committee, the Administrator, officers and Employees of the Company or of an Affiliate thereof to whom authority to act for the Board, each Committee, the
Administrator or the Company is delegated (“Indemnitees”) against (i) all reasonable expenses, including reasonable attorneys’ fees incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein (collectively, a “Claim”), to which any of them is a party by reason of any action taken or failure to act in connection with this Plan, or in connection with any Award granted under this Plan; and (ii) all amounts required to be paid by them in settlement of a Claim (provided the settlement is approved by the Company) or required to be paid by them in satisfaction of a judgment in any Claim. However, no person shall be entitled to indemnification to the extent it is determined in such Claim that such person did not in good faith and in a manner reasonably believed to be in the best interests of the Company (or in the case of a criminal proceeding, had no reason to believe that the conduct complained of was unlawful). In addition, to be entitled to indemnification, the Indemnitee must, within 30 days after written notice of the Claim, offer the Company, in writing, the opportunity, at the Company’s expense, to defend the Claim. The right to indemnification shall be in addition to all other rights of indemnification available to the Indemnitee.
5. Eligibility. With the exception of Incentive Stock Options, Awards may be granted to Employees, Non-Employee Directors and Consultants. Incentive Stock Options may be granted only to Employees.
6. Minimum Vesting Requirement. Except as permitted under the Carve-Out Exception (defined below), all Awards shall be subject to a minimum vesting requirement of at least one year from the date the Award was granted, and no portion of any such Award may vest or become exercisable earlier than the first anniversary of the date such Award was granted; provided, however, that for purposes of Awards granted to Non-Employee Directors, “one year” may mean the approximately one-year period from one regular annual stockholder meeting to the immediately following regular annual stockholder meeting, as long as the period is not less than 50 weeks. The foregoing minimum vesting requirement shall not apply: (i) with respect to 5% of the Share reserve as initially set forth in Section 3(a) (such 5% being referred to herein as the “Carve-Out Exception”) or (ii) to the vesting of an Award that is accelerated as a result of a Change of Control or termination of the Participant due to his or her death or Disability, in all cases under terms consistent with this Plan. To the extent Section 3(a) is amended to increase the number of Shares reserved therein, then 5% of the Shares subject to such increase shall be added to, and increase, the number of Shares subject to the Carve-Out Exception.
7. Options.
(a) Grant of Options. Subject to the terms and provisions of this Plan, the Administrator, at any time and from time to time, may grant Options to Service Providers in such amounts as the Administrator, in its sole discretion, shall determine.
(b) Option Agreement. Each Award of an Option shall be evidenced by an Award Agreement that shall specify the exercise price, the term of the Option, the number of Shares subject to the Option, the exercise restrictions (if any) applicable to the Option, and such other terms and conditions as the Administrator, in its sole discretion, shall determine.
(c) Term of Option. The term of each Option shall be stated in the Award Agreement. In the case of an Incentive Stock Option, the maximum term shall be 10 years from the date of grant or such shorter term as may be provided in the Award Agreement. Moreover, in the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than 10% of the total combined voting power of all classes of stock of the Company or any Affiliate, the maximum term of the Incentive Stock Option shall be five years from the date of grant or such shorter term as may be provided in the Award Agreement. Unless set forth otherwise in the Award Agreement, a Non-Qualified Option shall have a maximum term of 10 years. In no event shall a Non-Qualified Option have a maximum term longer than 10 years.
(d) $100,000 Limitation for Incentive Stock Options. Each Option shall be designated in the Award Agreement as either an Incentive Stock Option or a Non-Qualified Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year (under all plans of the Company and any Affiliate) exceeds $100,000, such Options shall be treated as Non-Qualified Options. For purposes of this Section 7(d), Incentive Stock Options shall be taken into account in the order in which granted. The Fair Market Value of the Shares shall be determined as of the time the Options with respect to such Shares are granted.
(e) Option Exercise Price and Consideration.
(i) Exercise Price. The per Share exercise price for the Shares to be issued pursuant to the exercise of an Option shall be determined by the Administrator, subject to the following:
(1) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than 10% of the total combined voting power of all classes of stock of the Company or any Affiliate, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price shall be not less than 100% of the Fair Market Value per Share on the date of grant.
(2) In the case of a Non-Qualified Option, the per Share exercise price shall be determined by the Administrator, but shall not be less than the Fair Market Value per Share on the date of grant.
(3) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code.
(ii) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions that must be satisfied before the Option may be exercised. Subject to the provisions of Section 6, the Administrator may, in its sole discretion, accelerate the satisfaction of such conditions at any time.
(f) Form of Consideration. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of grant. Consideration, to the extent permitted by Applicable Laws, for exercising an Option may consist entirely of:
(i) cash;
(ii) check acceptable to the Company;
(iii) in the discretion of the Administrator, other Shares which meet the conditions established by the Administrator to avoid adverse accounting consequences;
(iv) in the discretion of the Administrator, consideration received by the Company under a cashless exercise or net exercise program implemented by the Company in connection with this Plan;
(v) in the discretion of the Administrator, any combination of the foregoing methods of payment; or
(vi) in the discretion of the Administrator, any other consideration and method of payment for the issuance of Shares permitted by Applicable Laws.
(g) Exercise of Option.
(i) Procedure for Exercise; Rights as a Stockholder. Any Option granted under this Plan shall be exercisable according to the terms of this Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. An Option shall be deemed exercised when the Company receives: (x) written or electronic notice of exercise (in accordance with the Award Agreement) from the person entitled to exercise the Option, and (y) full payment for the Shares with respect to which the Option is exercised (including provision for any applicable tax withholding). Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Award Agreement and this Plan. Shares issued upon exercise of an Option shall be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Awarded Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 15 of this Plan or the applicable Award Agreement. Exercising an Option in any manner shall decrease the number of Shares thereafter available for sale under the Option by the number of Shares as to which the Option is exercised.
(ii) Termination of Relationship as a Service Provider (Other Than Death or Disability). If a Participant ceases to be a Service Provider, other than upon the Participant’s death or Disability, the Participant may exercise the vested portion of his or her Option within the time period specified in the Award Agreement (but in no event later than the expiration of the maximum term of such Option as set forth in the Award Agreement). If the Award Agreement does not specify a time period within which the vested portion of such Option must be exercised following a Participant ceasing to be a Service Provider, the vested portion of such Option shall be exercisable for 3 months following his or her ceasing to be a Service Provider (other than upon the Participant’s death or Disability) (but in no event later than the expiration of the maximum term of such Option as set forth in the Award Agreement). Unless otherwise provided by the Administrator, if the Participant is not vested as to his or her entire Option on the date he or she ceases to be a Service Provider (other than upon the Participant’s death or Disability), then immediately thereafter, the Participant shall immediately forfeit the unvested portion or his or her Option and the Shares covered by the unvested portion of the Option shall again be available for grant under this Plan as set forth in Section 3. Additionally, if the Participant does not exercise his or her Option as to all of the vested Shares within the applicable time period, then immediately thereafter, the Option shall automatically terminate and the Shares covered by the unexercised portion of the Option shall again be available for grant under this Plan as set forth in Section 3.
(iii) Disability of Participant. If a Participant ceases to be a Service Provider as a result of his or her Disability, the Participant may exercise the vested portion of his or her Option within the time period specified in the Award Agreement (but in no event later than the expiration
of the maximum term of the Option as set forth in the Award Agreement). If the Award Agreement does not specify a time period within which the vested portion of such Option must be exercised following a Participant ceasing to be a Service Provider as a result of his or her Disability, the vested portion of such Option shall be exercisable for 12 months following the Participant ceasing to be a Service Provider as a result of his or her Disability (but in no event later than the expiration of the maximum term of such Option as set forth in the Award Agreement). Unless otherwise provided by the Administrator, if the Participant is not vested as to his or her entire Option on the date he or she ceases to be a Service Provider as a result of his or her Disability, then immediately thereafter, the Participant shall immediately forfeit the unvested portion or his or her Option and the Shares covered by the unvested portion of the Option shall again be available for grant under this Plan as set forth in Section 3. Additionally, if the Participant does not exercise his or her Option as to all of the vested Shares within the applicable time period, then immediately thereafter, the Option shall automatically terminate and the Shares covered by the unexercised portion of the Option shall again be available for grant under this Plan as set forth in Section 3.
(iv) Death of Participant. If a Participant dies while a Service Provider, the vested portion of the Option may be exercised within the time period specified in the Award Agreement (but in no event later than the expiration of the term of the Option as set forth in the Award Agreement), by the beneficiary designated by the Participant prior to his or her death; provided that such designation must be in a form acceptable to and accepted by the Administrator. If the Participant designates his or her spouse as the beneficiary for purposes of this Section 7(g)(iv) and the Participant ceases to be married to such individual, then such beneficiary designation shall be deemed revoked and of no force or effect as of the date of the termination of such marriage. If no beneficiary has been designated by the Participant (or no proper beneficiary designation is in place), then the vested portion of the Option may be exercised, as applicable, by the personal representative of the Participant’s estate or by the persons to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. If the Award Agreement does not specify a time period within which the vested portion of such Option must be exercised following a Participant’s death, the vested portion of such Option shall be exercisable for 12 months following his or her death (but in no event later than the expiration of the maximum term of such Option as set forth in the Award Agreement). Unless otherwise provided by the Administrator, if the Participant is not vested as to his or her entire Option on the date he or she ceases to be a Service Provider as a result of his or her death, then immediately thereafter, the Participant shall immediately forfeit the unvested portion or his or her Option and the Shares covered by the unvested portion of the Option shall again be available for grant under this Plan as set forth in Section 3. Additionally, if the Participant’s beneficiary, personal representative or permitted transferee does not exercise the Option as to all of the vested Shares within the applicable time period, then immediately thereafter, the Option shall automatically terminate and the Shares covered by the unexercised portion of the Option shall again be available for grant under this Plan as set forth in Section 3.
(h) Notification of Disqualifying Disposition. Any Employee who receives an Incentive Stock Option shall be required to notify the Administrator in writing, within ten days of a Disqualifying Disposition, of such Disqualifying Disposition of any Shares issued pursuant to the exercise of the Incentive Stock Option.
8. Restricted Stock.
(a) Grant of Restricted Stock. Subject to the terms and provisions of this Plan, the Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, shall determine.
(b) Restricted Stock Agreement. Each Award of Restricted Stock shall be evidenced by an Award Agreement that shall specify the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, shall determine.
(c) Removal of Restrictions. Subject to the provisions of Section 6, the Administrator may, in its sole discretion, accelerate the time at which any restrictions shall lapse or be removed.
(d) Voting Rights. Service Providers holding Shares of Restricted Stock may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise.
(e) Dividends and Other Distributions. Shares of Restricted Stock shall be entitled to receive all dividends and other distributions paid with respect to such Shares. All such dividends and distributions shall be held back by the Company and shall be subject to the same restrictions on transferability, vesting and forfeitability as the Shares of Restricted Stock with respect to which they were paid.
(f) Return of Restricted Stock to Company. If Shares of Restricted Stock do not vest in accordance with the Plan and the Award Agreement, then such Restricted Stock shall automatically be forfeited by the Participant and shall again be available for grant under this Plan as set forth in Section 3.
9. Stock Appreciation Rights.
(a) Grant of Stock Appreciation Rights. Subject to the terms and conditions of this Plan, a Stock Appreciation Right may be granted to a Service Provider at any time and from time to time as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion to determine the number of Stock Appreciation Rights granted to any Service Provider. Subject to the provisions of Section 6, the Administrator shall have complete discretion to determine the terms and conditions of Stock Appreciation Rights granted under this Plan, including the sole discretion to accelerate exercisability at any time, provided, however, that the per Share strike price that will determine the amount of the payment the Company receives upon exercise of a Stock Appreciation Right shall not be less than the Fair Market Value per Share on the date of grant.
(b) Stock Appreciation Right Agreement. Each Stock Appreciation Right grant shall be evidenced by an Award Agreement that shall specify the strike price, the term, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, shall determine.
(c) Expiration of Stock Appreciation Rights. A Stock Appreciation Right granted under this Plan shall expire upon the date determined by the Administrator, in its sole discretion, as set forth in the Award Agreement; provided, however, no Stock Appreciation Right shall be exercisable later than 10 years after the date of grant. Notwithstanding the foregoing, the rules of Sections 7(g)(i), to the extent applicable, 7(g)(ii), 7(g)(iii) and 7(g)(iv) shall also apply to Stock Appreciation Rights.
(d) Payment of Stock Appreciation Right Amount. Upon exercise of a Stock Appreciation Right, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:
(i) The excess, if any, of the Fair Market Value of a Share on the date of exercise over the strike price; times
(ii) The number of Shares with respect to which the Stock Appreciation Right is exercised.
At the sole discretion of the Administrator, the payment upon the exercise of a Stock Appreciation Right may be in cash, in Shares of equivalent value, or in some combination thereof.
10. Performance Units and Performance Shares.
(a) Grant of Performance Units and Performance Shares. Subject to the terms and conditions of this Plan, Performance Units and Performance Shares may be granted to Service Providers at any time and from time to time, as shall be determined by the Administrator in its sole discretion. The Administrator shall have complete discretion in determining the number of Performance Units and Performance Shares granted to each Service Provider.
(b) Value of Performance Units and Performance Shares. Each Performance Unit and Performance Share shall have an initial value established by the Administrator on or before the date of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant.
(c) Performance Goals and Other Terms. The Administrator shall set Performance Goals in its sole discretion which, depending on the extent to which they are met, shall determine the number or value of Performance Units and Performance Shares that shall be paid out to the Participant. Each award of Performance Units or Performance Shares shall be evidenced by an Award Agreement that shall specify the Performance Period and such other terms and conditions as the Administrator in its sole discretion shall determine. The Administrator may set Performance Goals based upon the achievement of Company‑wide, divisional, or individual goals (including solely continued service) or any other basis determined by the Administrator in its sole discretion.
(d) Earning of Performance Units and Performance Shares. After the applicable Performance Period has ended, the holder of Performance Units or Performance Shares shall be entitled to receive settlement or removal of restrictions, as applicable, with respect to the number of Performance Units or Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Goals have been achieved.
(e) Form and Timing of Payment of Performance Units and Performance Shares. Payment or removal of restrictions, as applicable, of earned Performance Units and earned Performance Shares, if any, shall be made after the expiration of the applicable Performance Period at the time determined by the Administrator. The Administrator, in its sole discretion, may
pay earned Performance Units in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Units, as applicable, at the close of the applicable Performance Period) or in a combination of cash and Shares.
(f) Cancellation of Performance Units or Performance Shares. If Performance Units or Performance Shares do not vest in accordance with the Plan and the Award Agreement, then such Performance Units or Performance Shares shall automatically be forfeited, and the Shares subject to such Awards shall again be available for grant under this Plan as set forth in Section 3.
11. Restricted Stock Units.
(a) Grant of Restricted Stock Units. Subject to the terms and conditions of this Plan, Restricted Stock Units may be granted to Service Providers at any time and from time to time, as shall be determined by the Administrator in its sole discretion.
(b) Restricted Stock Unit Agreement. Each Award of Restricted Stock Units shall be evidenced by an Award Agreement that shall specify the number of Restricted Stock Units granted, and such other terms and conditions as the Administrator, in its sole discretion, shall determine.
(c) Holder’s Rights as Stockholder. The holder of a Restricted Stock Unit Award shall have no rights of a stockholder with respect to the Restricted Stock Unit Award. A holder shall have no voting rights with respect to any Restricted Stock Unit Award.
(d) Form and Timing of Payment of Restricted Stock Units. Payment of earned Restricted Stock Units shall be made upon vesting (or as soon as practicable thereafter) or on the settlement date set forth in the Award Agreement, as applicable. The Administrator, in its sole discretion, may pay earned Restricted Stock Units in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Restricted Stock Units) or in a combination of cash and Shares.
(e) Cancellation of Restricted Stock Units. If Restricted Stock Units do not vest in accordance with the Plan and the Award Agreement, then such Restricted Stock Units shall automatically be forfeited, and the Shares subject to such Awards shall again be available for grant under this Plan as set forth in Section 3.
12. Other Stock-Based Awards. Other Stock-Based Awards may be granted either alone, in addition to, or in tandem with, other Awards granted under this Plan and/or cash awards made outside of this Plan. The Administrator shall have authority to determine the Service Providers to whom and the time or times at which Other Stock-Based Awards shall be made, the amount of such Other Stock-Based Awards, and all other conditions of the Other Stock-Based Awards, including any dividend or voting rights and whether the Award shall be paid in cash.
13. Leaves of Absence. Unless the Administrator provides otherwise, vesting of Awards granted under this Plan shall be suspended during any unpaid leave of absence and shall resume on the date the Participant returns to work on a regular schedule as determined by the Company; provided, however, that no vesting credit shall be awarded for the time vesting has been suspended during such leave of absence. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company or any Affiliate thereof. For purposes of Incentive Stock Options, no leave of absence may exceed 90 days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not guaranteed by statute or contract, then at the end of three months following the expiration of the leave of absence, any Incentive Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Non-Qualified Option.
14. Non-Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. If the Administrator makes an Award transferable, such Award shall contain such additional terms and conditions as the Administrator deems appropriate.
15. Adjustments; Change of Control.
(a) Adjustments. In the event of any change in the outstanding Shares of Common Stock by reason of any stock split, stock dividend or other non‑recurring dividends or distributions, recapitalization, merger, consolidation, spin‑off, combination, repurchase or exchange of stock, reorganization, liquidation, dissolution or other similar corporate transaction that affects the Common Stock, an adjustment shall be made, as the Administrator deems necessary or appropriate, in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan. Such adjustment may include an adjustment to the number and class of Shares which may be delivered under this Plan, the number, class and price of Shares subject to outstanding Awards, the number and class of Shares issuable pursuant to Options, and the numerical limits contained in Sections 3 and 6 of this Plan. Notwithstanding the preceding, the number of Shares subject to any Award always shall be a whole number.
(b) Change of Control.
(i) In General. Unless otherwise provided in the Award, in connection with a Change of Control, the Board shall have the authority in its sole discretion to take any one or more of the following actions with respect to the Awards:
(1) the Board may accelerate vesting and the time at which all Options and Stock Appreciation Rights then outstanding may be exercised so that those types of Awards may be exercised in full for a limited period of time on or before a specified date fixed by the Board, after which specified date all unexercised Options and Stock Appreciation Rights and all rights of Participants thereunder shall terminate, or the Board may accelerate vesting and the time at which Options and Stock Appreciation Rights may be exercised so that those types of Awards may be exercised in full for their then remaining term;
(2) the Board may waive, alter, and/or amend the Performance Goals and other restrictions and conditions of Awards then outstanding, with the result that the affected Awards may be deemed vested, and the period during which the Award is subject to forfeiture and/or is not exercisable or other limitations on payment in full with respect thereto shall be deemed to have expired, as of the date of the Change of Control or such other date as may be determined by the Board;
(3) the Board may cause the acquirer to assume the Plan and the Awards or exchange the Awards for awards for the acquiror’s stock;
(4) the Board may terminate the Plan; and
(5) the Board may terminate and cancel all outstanding unvested or unexercised Awards as of the date of the Change of Control on such terms and conditions as it deems appropriate.
Notwithstanding the above provisions of this Section 15(b), the Board shall not be required to take any action described in the preceding provisions of this Section 15(b), and any decision made by the Board, in its sole discretion, not to take some or all of the actions described in the preceding provisions of this Section 15(b) shall be final, binding and conclusive with respect to the Company and all other interested persons.
(ii) Right to Cash-Out. The Board shall, in connection with a Change of Control, have the right to require all, but not less than all, Participants to transfer and deliver to the Company all Awards previously granted to the Participants in exchange for an amount equal to the Cash Value of the Awards. Such right shall be exercised by written notice to all affected Participants. The amount payable to each Participant by the Company pursuant to this Section 15(b)(ii) shall be in cash or by certified check paid within five (5) days following the transfer and delivery of such Award (but in no event later than fifty (50) days following the date of the Change of Control) and shall be reduced by any taxes required to be withheld. If an Award is an Option or Stock Appreciation Right and no Cash Value exists with respect thereto, then such cash-out shall be effectuated with no cash (or other) payment to the Participant holding such Award.
(c) Company Rights Regarding Transactions. The existence of outstanding Awards shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of bonds, debentures, preferred or prior preference shares ahead of or affecting Shares or Share rights, the dissolution or liquidation of the
Company, any sale or transfer of all or any part of its assets or business or any other corporate act or proceeding, whether of a similar character or otherwise.
16. Date of Grant. The date of grant of an Award shall be, for all purposes, the date on which the Administrator makes the determination granting such Award, or a later date as is determined by the Administrator. Notice of the determination shall be provided to each Participant within a reasonable time after the date of such grant.
17. Board and Stockholder Approval; Term of Plan. The Board approved this Plan to be effective on the Effective Date, subject to the Company’s stockholders approving this Plan not more than one year after the date of this Plan’s adoption by the Board. This Plan shall continue in effect for a term of 10 years from the Effective Date unless terminated earlier under Section 19 of this Plan. No Award shall be granted under the Plan prior to the date on which the Plan is so approved by the Company’s stockholders, unless its grant, vesting and settlement are conditioned upon the approval of the Plan by the Company’s stockholders not more than one year after the date of this Plan’s adoption by the Board. If the Plan is not approved by the Company’s stockholders not more than one year after the date of this Plan’s adoption by the Board, all Awards, if any, granted under the Plan shall be immediately and automatically cancelled and terminated without any action required by the Company, the Board or the Administrator and without any payment or consideration with respect thereto. If the Plan is timely approved by the Company’s stockholders and becomes effective, neither Awards properly granted under the Plan nor the authority of the Board or the Administrator to amend, alter, adjust, suspend, discontinue, or terminate any such Award or to waive any conditions or rights under such Award, shall terminate by reason of the expiration of the term of the Plan.
18. Term of Awards. The term of each Award shall be for such period as may be determined by the Administrator; provided, however, that in no event shall the term of any such Award exceed a period of ten years (or such shorter terms as may be required in respect of an Incentive Stock Option under Section 422 of the Code).
19. Amendment and Termination of this Plan; Amendment of Awards.
(a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate this Plan.
(b) Stockholder Approval. The Company shall obtain stockholder approval of any Plan amendment to the extent necessary to comply with Applicable Laws.
(c) Effect of Amendment or Termination. Except as provided in Section 15(b), no amendment, alteration, suspension, or termination of this Plan shall materially or adversely impair the rights of any Participant (other than any amendment the Board deems necessary in order to permit Awards to meet the requirements of the Code, or other Applicable Laws, or to prevent adverse tax consequences to the participants), unless otherwise mutually agreed upon by the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of this Plan shall not affect the Administrator’s ability to exercise the powers granted to it under this Plan with respect to Awards granted under this Plan prior to the date of termination.
(d) Amendment of Awards. The Administrator at any time, and from time to time, may amend the terms of any one or more Awards; provided that any amendment that would adversely affect the Participant’s rights under an outstanding Award shall not be made without the Participant’s written consent. Notwithstanding the foregoing, an amendment shall not be treated as adversely affecting the rights of the Participant if the amendment causes an Incentive Stock Option to become a Non-Qualified Option or if the amendment is made to the minimum extent necessary to avoid the adverse tax consequences of Section 409A of the Code.
(e) Conflict Between Plan and Award Agreements. In the event of a conflict or inconsistency between the terms of the Plan and the terms of any Award Agreement, the terms of the Plan shall control.
20. Conditions upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Award unless the exercise of the Award and the issuance and delivery of such Shares shall comply with Applicable Laws.
(b) Tax Withholding. No Shares or other remuneration shall be delivered under this Plan to any Participant or other person until the Participant or other person has made arrangements acceptable to the Administrator for the satisfaction of all applicable non-U.S., U.S.-federal, U.S.-state, and local income and employment tax withholding obligations, including, without limitation, obligations incident to the receipt of Shares. Upon exercise, vesting or settlement, as applicable, of an Award, the Company shall withhold or collect from the Participant an amount sufficient to satisfy such tax obligations, including, but not limited to, by surrender of up to the whole number of Shares covered by the Award sufficient to satisfy the withholding obligations incident to the exercise or vesting of an Award based on the minimum supplemental rate in the applicable jurisdiction.
21. Severability. Notwithstanding any contrary provision of this Plan or an Award to the contrary, if any one or more of the provisions (or any part thereof) of this Plan or any Award Agreement shall be held invalid, illegal, or unenforceable in any respect, such provision shall be modified so as to make it valid, legal, and enforceable, and the validity, legality, and enforceability of the remaining provisions (or any part thereof) of this Plan or Award Agreement, as applicable, shall not in any way be affected or impaired thereby.
22. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
23. No Rights to Awards. No eligible Service Provider or other person shall have any claim to be granted any Award pursuant to this Plan, and neither the Company nor the Administrator shall be obligated to treat Participants or any other person uniformly.
24. No Stockholder Rights. Except as otherwise provided in an Award Agreement, a Participant shall have none of the rights of a stockholder with respect to Shares covered by an Award until the Participant becomes the record owner of the Shares.
25. Fractional Shares. No fractional Shares shall be issued and the Administrator shall determine, in its sole discretion, whether cash shall be given in lieu of fractional Shares or whether such fractional Shares shall be eliminated by rounding up or down as appropriate.
26. Governing Law. This Plan, all Award Agreements, and all related matters, shall be governed by the laws of the State of Delaware, (the “DGCL”), hereby files this Certificatewithout regard to choice of Amendment (this “Amendment”) tolaw principles that direct the Amended and Restated Certificate of Incorporationapplication of the Corporation,laws of another state.
27. No Effect on Terms of Employment, Directorship or Consulting Relationship. This Plan shall not confer upon any Participant any right as a Service Provider, nor shall it interfere in any way with his or her right or the right of the Company or any Affiliate thereof to terminate the Participant’s service at any time, with or without cause, and certifies as follows:with or without notice.
| | 1. | The name of the Corporation is Flotek Industries, Inc. The original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on October 30, 2001, and an Amended and Restated Certificate of Incorporation of the Corporation was filed with the Secretary of State of Delaware on each of October 2, 2007 and November 9, 2009. |
| | 2. | The first paragraph of Article Fourth of the Corporation’s Amended and Restated Certificate of Incorporation, as amended, is hereby amended and restated in its entirety to read as follows: |
“The aggregate number of shares which the corporation28. Unfunded Obligation. This Section 28 shall only apply to Awards that are not settled in Shares. Participants shall have the authority status of general unsecured creditors of the Company. Any amounts payable
to issueParticipants pursuant to this Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974, as amended. Neither the Company nor any Affiliate thereof shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations under this Plan. Any investments or the creation or maintenance of any trust for any Participant account shall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Affiliate thereof and the Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s creditors in any assets of the Company or any Affiliate thereof. The Participants shall have no claim against the Company or any Affiliate thereof for any changes in the value of any assets that may be invested or reinvested by the Company with respect to this Plan.
29. Section 409A. Awards under the Plan are intended either to provide compensation that is 140,100,000exempt from Section 409A of the Code, or that satisfies the requirements of Section 409A of the Code, and the Plan and all Awards shall be construed and interpreted accordingly. If and to the extent any amount of compensation under an Award is determined by the Administrator to constitute deferred compensation that is not exempt from Section 409A of the Code and that is to be paid, settled or provided by reason of a Participant’s termination of employment, then (a) such compensation shall be paid, settled or provided by reason of a Participant’s termination of employment only if that termination also constitutes a “separation from service” within the meaning of that term under Section 409A of the Code, and (b) if the Participant is determined by the Administrator to be a “specified employee” within the meaning of Section 409A of Code, all payments or provisions compensation that would otherwise be paid, settled or provided before the first day of the seventh calendar month beginning after the date the Participant’s separation from service (or, if earlier, the Participant’s date of death) shall be withheld and accumulated and paid or provided without interest on or as soon as practicable after the first day of the seventh calendar month beginning after the date the Participant’s separation from service (or, if earlier, the Participant’s date of death). Each payment or provision of compensation under an Award shall be treated as a separate payment for purposes of Section 409A of the Code. References to termination of employment and similar concepts in the Plan and Awards Agreements shall be interpreted and applied in accordance with the foregoing provisions. In the case of any Award intended to be exempt from Section 409A of the Code, if the time of distribution or settlement thereof is not otherwise specified in this Plan or Award Agreement or other governing document, the distribution or settlement shall be made no later than March 15 of the calendar year following the calendar year in which such Award vested or the risk of forfeiture with respect thereto lapsed.
30. No Guarantee of Tax Consequences. The Participant shall be solely responsible for and liable for any and all tax consequences (including but not limited to any interest or penalties) as a result of participation in the Plan and the grant, vesting, payment or settlement of any Award hereunder. None of the Board, the Company or the Administrator makes any commitment or guarantee that any federal, state, local or other tax treatment will (or will not) apply or be available to any person participating or eligible to participate hereunder and assumes no responsibility or liability whatsoever for the tax consequences to the Participants.
31. Construction. Headings in this Plan are included for convenience and shall not be considered in the interpretation of this Plan. References to sections are to Sections of this Plan unless otherwise indicated. Pronouns shall be construed to include the masculine, feminine, neutral, singular or plural as the identity of the antecedent may require. This Plan shall be construed according to its fair meaning and shall not be strictly construed against the Company.
32. Compensation Recoupment. All compensation and Awards payable or paid under this Plan and any sub-plans shall be subject to the Company’s ability to recover incentive-based compensation from executive officers, as is or may be required by the provisions of any clawback policy implemented by the Company, the Dodd-Frank Wall Street Reform and Consumer Protection Act, any regulations or rules
promulgated thereunder, or any other clawback provision required by applicable law or the listing standards of any applicable stock exchange or national market system.
33. Lock-Up Agreement. In the event of any underwritten public offering of the Company’s securities made by the Company pursuant to an effective registration statement filed under the Securities Act, the Administrator shall have the right to impose market stand-off restrictions on each Award recipient whereby such Participant shall not offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any shares consisting of 140,000,000stock of the Company or any rights to acquire stock of the Company for such period of time from and after the effective date of such registration statement as may be established by the underwriter for such public offering; provided, however, that such period of time shall not exceed one hundred eighty (180) days from the effective date of the registration statement to be filed in connection with such public offering. The foregoing limitation shall not apply to shares registered in the public offering under the Securities Act.
34. Stockholder Agreements/Investment Representations. As a condition to the exercise of an Option or the issuance of Common Stock par valuehereunder, the Administrator may require the Participant to enter into such agreements (including but not limited to a buy/sell or voting trust agreement) with respect to the shares as may be required of $.0001 per share,other stockholders of the Company. In addition, the Administrator may require the Participant to represent and 100,000warrant at the time of Preferred Stock, par valueany such exercise or issuance that the shares are being purchased only for investment and without any present intention to sell or distribute such shares, if, in the opinion of $.0001 per share.”
| | 3. | This Amendment was duly adopted in accordance with the provisions of Section 242 of the DGCL. |
| | 4. | This Amendment shall become effective upon its filing in accordance with the provisions of Section 103(d) of the DGCL. |
IN WITNESSS WHEREOF,counsel for the Corporation has caused this Amendment to be executedCompany, such a representation is required by its duly authorized officer on May 5, 2020.
any relevant provisions of law.
FLOTEK INDUSTRIES, INC.
By: ___________________________
Name: John W. Gibson Jr.
Title: President and Chief Executive Officer
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Annual Report, and Notice of Meeting is/are available at www.proxyvote.com. ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
PROXY FLOTEK INDUSTRIES, INC. 20202021 ANNUAL MEETING OF STOCKHOLDERSSHAREHOLDERS
TO BE HELD ATTHURSDAY, JUNE 3, 2021 THE HILTON GARDEN INN, 14919 NORTHWEST FWY, HOUSTON, TX 77040
ON TUESDAY, MAY 5, 2020 AT 10:00 A.M. LOCAL TIME
THE UNDERSIGNED STOCKHOLDERSHAREHOLDER OF FLOTEK INDUSTRIES, INC. (the “Company”) HEREBY APPOINTS John W. Gibson Jr., President and Chief Executive Officer of the Company or failing this person,and Nicholas J. Bigney, Senior Vice President, General Counsel and Corporate SecretaryChief Compliance Officer of the Company, or in the placeand each of the foregoing, , (print the name),them, as proxyholderproxyholders and attorneys-in-fact for and on his, her or herits behalf, with full power of substitution, to attend, act and vote for and on behalf of the undersigned at the Annual Meeting of StockholdersShareholders of the Company (the “Meeting”) to be held on Tuesday, May 5, 2020,Thursday, June 3, 2021 via webcast at www.virtualshareholdermeeting.com/FTK2021, and at every adjournment or postponement thereof, to the same extent and with the same powers as if the undersigned were present at the Meeting, or any adjournment or postponement thereof. The stockholdershareholder hereby directs the proxyholder to vote the securities of the Company registered in the name of the undersigned it is entitled to vote as specified herein. This Proxy is being solicited by the Board of Directors. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations.recommendations and in the proxyholders discretion on any other matters that are properly presented at the Meeting or any adjournment or postponement thereof. (Continued and to be signed on the reverse side.)
| | | | | | FLOTEK INDUSTRIES, INC.
ATTN: NICHOLAS J. BIGNEY
10603 W
8846 N. SAM HOUSTON PKWY N, SUITE 300
PARKWAY W.
HOUSTON, TX 77064 | VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. ET on 05/04/2020June 2, 2021 for shares held directly and by 11:59 P.M. ET on 04/30/2020May 29, 2021 for shares held in a Plan. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. | | VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. ET on 05/04/2020June 2, 2021 for shares held directly and by 11:59 P.M ET on 05/30/2020May 29, 2021 for shares held in a Plan. Have your proxy card in hand when you call and then follow the instructions. | | VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. | | VOTE BY INTERNET DURING THE MEETING You may attend the meeting via the Internet and vote during the meeting by going to www.virtualshareholdermeeting.com/FTK2021. To join and vote at the meeting, you will need the control number printed in the notice sent to you with this proxy card. |
| | TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: ý | | THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The Board of Directors recommends you vote FOR the following: | | | | FOR | | AGAINST | | ABSTAIN | | | | | | | | | | | PROPOSALITEM 1: | Election of Directors | | | | | | | | | | Nominees | | | | | | | | | | 1a. | | | | | | | | | | Harsha V. Agadi | | | | ¨
| | ¨
| | ¨
| | Ted D. Brown | | | | ¨
| | ¨
| | ¨
| | Michael Fucci | | | | ¨
| | ¨
| | ¨
| | John W. Gibson, Jr. | | | | ¨
| | ¨
| | ¨
| | 1b. Michelle M. Adams | | | | ¨
| | ¨
| | ¨
| | 1c. Ted D. Brown | | | | ¨
| | ¨
| | ¨
| | 1d. Paul W. Hobby | | | | ¨
| | ¨
| | ¨
| | 1e. David Nierenberg | | | | ¨
| | ¨
| | ¨
| | | | | | | | | | | | | | | | | | | | | The Board of Directors recommends you vote FOR proposalsitems 2 and 3.3: | | | | FOR | | AGAINST | | ABSTAIN | | | | | | | | | | | PROPOSALITEM 2: | Advisory vote to approve named executive compensation.officer compensation | | | | ¨
| | ¨
| | ¨
| | | | | | | | | | | PROPOSALITEM 3: | Approval of amendmentAmendment to amended and restated certificate of incorporation to increase the number of shares of authorized common stock.2018 Long-Term Incentive Plan | | | | ¨
| | ¨
| | ¨
| | | | | | | | | | | Note: Such other business as may properly come before the meeting or any adjournment thereof. | | | | | | | | |
| | | | | | | | | | | | | | | | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | Date | | Signature (Joint Owners) | Date |
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