NATURAL GAS SERVICES GROUP, INC.
We cordially invite you to attend the meeting. To ensure your representation at the meeting, please vote promptly even if you plan to attend the meeting. Voting now will not prevent you from voting in person at the meeting if you are a shareholder of record and wish to do so.
NATURAL GAS SERVICES GROUP, INC.
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| TABLE OF CONTENTS | |
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| Questions and Answers About the Proxy Materials and the Meeting | |
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| Householding of Proxy Materials | |
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Proposal 1- Election of DirectorDirectors | |
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| The Board of Directors and its Committees | |
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Shareholder Engagement | 13 |
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| Code of Ethics | |
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| Shareholder Engagement | |
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| Environmental, Social and Governance | |
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| Executive Officers | 15 |
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| Executive Compensation | 16 |
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| Principal Shareholders and Security Ownership of Management | 45 |
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| Proposal 2 - Consideration of an Advisory Vote on Executive Compensation of our Named Executive Officers | |
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| Proposal 3 - Approve an Amendment to the 2019 Equity Incentive Plan to Increase the Number of Shares of Common Stock Reserved for Issuance under the Plan by 650,000 Shares | |
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| Report of the Audit Committee | 48 |
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Proposal 2- Consideration of an Advisory Vote on Compensation Programs for its Named Executive Officers | 49 |
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Proposal 3- Approval of the Amendment and Restatement of the 1998 Stock Option Plan | 50 |
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Proposal 4-4 - Ratification of Appointment of Independent Registered Public Accounting Firm | |
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Proposal 5- Consideration of an Amendment to the Company’s Bylaws to Implement a Majority Voting Standard in Uncontested Elections of Directors | 56 |
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| Shareholder Proposals | 58 |
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| Communications with the Board of Directors | 59 |
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| Other Matters | 59 |
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| 2022 Proxy Card | |
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QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS
AND THE MEETING
Q: Why am I receiving these materials?
A:Our Board is providing these proxy materials to you in connection with our 20162022 Annual Meeting of Shareholders, which will take place on Thursday, June 16, 2016.2022. As a shareholder on the record dateRecord Date for the meeting, you are invited to attend the meeting. We also encourage you to vote on the matters described in this proxy statement.
Q: What information is contained in these materials?
A:This proxy statement includes information about the nominee for directorDirector and the other matters to be voted on at the meeting. The proxy statement also includes information about the voting process and requirements, the compensation of directorsour Directors and some of our executive officers, and certain other required information.
Q: What can I vote on at the meeting?
A:There are fivefour matters to be voted on at the meeting:
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1. 1 | To elect one Director to serve until the Annual Meeting of Shareholders to be held in 2019,2025, or until his successor is elected and qualified; |
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2. 2 | To consider an advisory vote on the Company'sexecutive compensation programs for itsof our named executive officers; |
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3. 3 | To approve the amendment and restatement ofto the Company's 1998 Stock Option2019 Equity Incentive Plan for another ten year term andto increase the number of shares reserved for issuance under the plan by 250,000 shares of common stock;650,000; |
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4. 4 | To ratify the appointment of BDO USA,Moss Adams LLP as the Company’s independent registered public accounting firm for 2016;2022; and |
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5. | To consider an amendment to the Company’s Bylaws to implement a majority voting standard in uncontested election of Directors; and
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6.5 | To transact such other business as may properly be presented at the meeting, or at any adjournment(s) of the meeting. |
Q: How does the Board recommend that I vote on each of the matters?
A: Our Board recommends that you vote FOR the directorDirector nominee (Proposal #1); FOR the amendment to increase the number of shares reserved for issuance under the 2019 Equity Incentive Plan by 650,000 shares (Proposal #3) and restatement of the 1998 Stock Option Plan, FOR the ratification of the appointment of BDO USA,Moss Adams LLP as our independent registered public accounting firm for 2016, and FOR the amendment to our Bylaws to implement majority voting in the uncontested election of Directors.2022 (Proposal #4). With respect to Proposal 2,#2, the Board of Directors recommends that you vote FOR approval, on an advisory basis, of the compensation programs of our named executive officers as disclosed in the Compensation Discussion and Analysis, the compensation tables, and the related disclosure contained in the proxy statement set forth under the caption “Executive Compensation” of this proxy statement.
Q: Why did I receive a two-page notice in the mail regarding the Internet availability of proxy materials this year instead of a full set of proxy materials?
A: We are taking advantage of SEC rules that allow us to deliver proxy materials to our shareholders on the Internet. Under these rules, we are sending most of our shareholders a two-page notice regarding the Internet availability of proxy materials instead of a full set of proxy materials. If you receive this two-page notice, you will not receive printed copies of the proxy materials unless you specifically request them. Instead, this notice tells you how to access and review on the Internet all of the important information contained in the proxy materials. This notice also tells you how to submit your proxy card on the Internet and how to request to receive a printed copy of our proxy materials. Shareholders may also request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.
Q: Can I receive next year’s proxy materials by email?
A:Yes. All shareholders who have active email accounts and Internet access may sign up for email delivery of shareholder materials. To sign up, go towww.proxyvote.com and click on “Electronic Enrollment.” If you have multiple registered or beneficial accounts, you need to enroll for each account. If you elect to receive proxy materials by email, we will not mail you any proxy-related materials next year. Your enrollment in the email program will remain in effect as long as your account remains active or until you cancel it.
Q: Who is entitled to vote at our annual meeting of shareholders?
A:Holders of our outstanding common stock on April 18, 2016,14, 2022, are entitled to one vote per share on each of the items being voted on at the meeting. We refer to this date as the Record Date. On the Record Date, we had 12,864,22612,561,408 shares of common stock outstanding. We have no other classes of stock outstanding.
Q: What shares can I vote?
A:You can vote all shares you owned on the Record Date. These shares include (1) shares held directly in your name as the shareholder of record and (2) shares held for you as the beneficial owner through a stockbroker, bank or other nominee.
Q: How do I vote my shares?
A: Shareholders of record may vote using one of the following four methods:
•over the Internet, which you are encouraged to do so if you have access to the Internet;
•by telephone;
•by completing, signing and returning the included proxy card, for those who requested to receive printed proxy materials in the mail; or
•by attending the Annual Meeting and voting in person.
The Notice provides instructions on how to access your proxy, which contains instructions on how to vote via the Internet or by telephone. Alternatively, you may vote by marking the proxy card you received in the mail and return it to the address set forth in the instructions contained in the proxy card. Due to timing issues in connection with mail delivery, we recommend that you vote your shares over the Internet or by telephone.
If you hold shares in street name, the organization holding your account is considered the shareholder of record for purposes of voting at the Annual Meeting. The shareholder of record will provide you with instructions on how to vote your shares. Internet and telephone voting will be offered to shareholders owning shares through most brokerage firms and banks. Additionally, if you would like to vote in person at the Annual Meeting, contact the brokerage firm, bank or other nominee who holds your shares to obtain a proxy from them and bring it with you to the Annual Meeting. You will not be able to vote at the Annual Meeting unless you have a proxy from your brokerage firm, bank or other nominee.
Q: What is the difference between holding shares as a shareholder of record and as a beneficial owner?
A:Most of our shareholders hold their shares through a stockbroker, bank or other nominee rather than directly in their own name. There are some important distinctions between shares held of record and those owned beneficially.
Shareholder of Record
If your shares are registered in your name with our transfer agent, Computershare, you are the shareholder of record for those shares and are receiving proxy-related materialsMeeting Materials directly from us. As the shareholder of record, you have the right to grant your voting proxy directly to us or to vote in person at the meeting.
Beneficial Owner
If your shares are held in a stock brokerage account, by a bank or other nominee (commonly referred to as being held in “street name”), you are the beneficial owner of those shares. Your broker, bank or nominee is the shareholder of record and therefore has forwarded proxy-related materialsMeeting Materials to you as beneficial owner. As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote your shares and are also invited to attend the meeting. However, since you are not the shareholder of record, you may not vote your shares in person at the meeting unless you obtain a signed proxy from your broker, bank or nominee giving you the right to vote the shares.
Q: How do I vote if I am a shareholder of record (as described in the question and answer above)?
A: You can vote on the Internet or by telephone by following the instructions you received in the mail or by email. If you received a full printed set of our proxy materials in the mail, you can also vote by mail by signing and returning the proxy card provided with those materials. Finally, you can vote in person at the meeting.
Q: How do I vote if I am a beneficial owner (as described in the question and answer above)?
A: You can vote on the Internet or by telephone by following the instructions you received in the mail or by email. If you received a full printed set of our proxy materials in the mail, you can also vote by mail. You can vote in person at the meeting only if you obtain a signed proxy from your broker, bank or nominee giving you this right.
Q: Can I change my vote or revoke my proxy?
A:Yes. You can change your vote or revoke your proxy at any time before the final vote at the meeting. You can do this by casting a later proxy through any of the available methods described in the questions and answers above. If you are a shareholder of record, you can also revoke your proxy by delivering a written notice of your revocation to our Corporate Secretary at our principal executive office at 508 West Wall Street,404 Veterans Airpark Lane, Suite 550,300, Midland, Texas 79701.79705. If you are a beneficial owner, you can revoke your proxy by following the instructions sent to you by your broker, bank or other nominee.
Q: What does it mean if I get more than one set of proxy-related materials?Meeting Materials?
A:It means you hold shares registered in more than one account. Follow the instructions in each set of proxy-related materialsMeeting Materials to ensure that all of your shares are voted.
Q: What is the quorum requirement for the meeting?
A:For a “quorum” to exist at the meeting, shareholders holding a majority of the votes entitled to be cast by the shareholders entitled to vote must be present in person or represented by proxy at the meeting. There must be a quorum for any action to be taken at the meeting (other than adjournment or postponement of the meeting). If you submit a properly completed proxy, even if you abstain from voting, then your shares will be counted for purposes of determining the presence of a quorum.
If a broker indicates on a proxy that it lacks discretionary authority as to certain shares to vote on a particular matter, commonly referred to as “broker non-votes,” those shares will still be counted for purposes of determining the presence of a quorum at the meeting. Please see the next question and answer for further information about "broker non-votes."
Q: What are broker non-votes and how are broker non-votes and abstentions counted?
A: If you are a beneficial owner and hold your shares in street name and do not provide your broker or other nominee with voting instructions, the broker, bank, or other nominee will determine if it has the discretionary authority to vote on the particular matter. The New York Stock Exchange permits brokers to vote their customers' shares on routine matters when the brokers have not received voting instructions from the customers. The ratification of independent public accountants is an example of a routine matter on which brokers may vote. Brokers may not vote their customers' shares on non-routine matters unless they have received instructions from the customers. Non-voted shares on non-routine matters are referred to as broker non-votes. The ratification of the appointment of BDO USA,Moss Adams LLP as our independent public accountants for 20162022 (Proposal 4) is a matter considered "routine" under applicationapplicable rules. The election of one directora Director (Proposal 1), the advisory vote to approve the named executive officersofficers' compensation programs (Proposal 2), and the approval ofvote to approve the amendment and restatement of the 1998 Stock Optionincrease in shares issuable under our 2019 Equity Incentive Plan (Proposal 3) and the amendment to the Company’s Bylaws to implement a majority voting standard in uncontested election of Directors (Proposal 5)are matters considered "non-routine" under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters. AbstentionsFor purposes of the election of a Director and all of the proposals set forth in this proxy statement, abstentions and broker non-votes, if any, will not be counted as votes cast and will have no effect on Proposal 1, as the electionresult of the vote, although they will be considered present for the purpose of determining the presence of a Director is determined by counting the votes actually cast where abstentions and broker non-votes are not treated as votes cast. With respect to the advisory vote to approve the named executive officers compensation programs (Proposal 2), the approval of the 1998 Stock Option Plan amendment and restatement (Proposal 3) and the amendment to the Bylaws (Proposal 5) where the vote required is a majority of votes present and entitled to vote, abstentions will be equivalent to a vote cast against the proposals and broker non-votes will have no effect.quorum.
Q: What is the voting requirement to approve each of the matters?
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| Proposals | Board Recommendation | Votes Required | Effect of Abstentions | Effect of Broker Non-Votes |
| Election of a Director | FOR the nominee | Majority of votes cast | None | None |
| Advisory Vote to Approve Executive Compensation ("Say on Pay" Vote) | FOR | Majority of votes cast | None | None |
| Increase of Reserved Shares under the 2019 Equity Incentive Plan | FOR | Majority of votes cast | None | None |
| Ratification of Independent Registered Public Accounting Firm | FOR | Majority of votes cast | None | No Broker Non-Votes (Routine Matter) |
A:
Directors are elected by a plurality of
We also will consider any other business that properly comes before the votes cast at the Annual Meeting. This means that the nominee for election as Director who receives the greatest number of votes cast in favor of his or her election will be elected to the Board of Directors. The advisory vote on the compensation programs of our named executive officers, the amendment and restatement of the 1998 Stock Option Plan, ratification of the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm, and the amendment to the Bylaws to implement a majority voting standard in the uncontested election of Directors are approved if the votes cast in favor of the matter exceed the votes cast against the matter. If you are a beneficial owner and do not provide the shareholder of record with voting instructions, your shares may constitute broker non-votes for certain matters (as described in the question and answer immediately above). In tabulating the voting result for a proposal, shares that constitute broker non-votes are not considered as being entitled to vote on that proposal.annual meeting.
Q: How can I vote on each of the matters and how will the votes be counted?
A: In the election of directors,Directors, you may vote “FOR,” “AGAINST,” or “ABSTAIN” with respect to the nominee. If you elect to abstain from the election of directors, the abstention will not have any effect on the election of directors. In tabulating the voting results for the election of directors, only “FOR” and “AGAINST” votes are counted.
For the (i) advisory vote on compensation of our named executive officers, (ii) approval of an amendment to the amendment2019 Equity Incentive Plan to increase the number of shares of Company common stock that may be issued thereunder by 650,000 shares and restatement of(iii) the 1998 Stock Option Plan, (iii) ratification of the appointment of BDO USA,Moss Adams LLP as our independent auditors and (iv) the amendment to the Bylaws to implement a majority voting standard in the uncontested election of Directors, you may vote “FOR,” “AGAINST,”
or “ABSTAIN” with respect to these fourtwo proposals. If you electUnder Colorado law (under which the Company is incorporated), abstentions are counted as shares present and entitled to abstain from votingvote at the Annual Meeting, and therefore counted as present for the purpose of determining whether a quorum is present, but they are not counted as shares cast and will therefore have no effect on anythe outcome of these proposals, the abstention will have the same effect as an “AGAINST” vote with respect to such proposal.vote.
If you sign and return your proxy card or voting instruction form without giving specific voting instructions, your shares will be voted as recommended by our Board. If you are a beneficial holder and do not return a voting instruction form, your broker may only vote on the ratification of the appointment of BDO USA, LLPMoss Adams (Proposal 4).
Q: Who will count the votes?
A:Broadridge, an international investor relations company, is assisting us with the voting of proxies for our meeting. Prior to the meeting, Broadridge will provide us with a tabulation of the votes cast prior to the meeting. We believe that Broadridge will use procedures that are consistent with Colorado law concerning the voting of shares, the determination of the presence of a quorum and the determination of the outcome of each matter submitted for a vote. In addition, we will appoint a voting inspector at the meeting to count and tabulate any votes cast at the meeting.
Q: Who may attend the meeting?
A:All shareholders as of the Record Date may attend. Please bring to the meeting:
•proof of ownership such as: a copy of your proxy or voting instruction card; the two-page notice regarding the internet availability of proxy materials you received in the mail; or a copy of a brokerage or bank statement showing your share ownership as of the Record Date; and
•proofof identification such as a valid driver’s license or passport.
Q: How will voting on any other business be conducted?
A:We do not expect any matters to be presented for a vote at the meeting other than the fivefour matters described in this proxy statement. If you grant a proxy, either of the officers named as proxy holders, Stephen C. Taylor and G. Larry Lawrence,Micah C. Foster, or their nominees or substitutes, will have the discretion to vote your shares on any additional matters that are properly presented for a vote at the meeting and at any adjournment or postponement that may take place. If, for any unforeseen reason, our nominee is not available as a candidate for director,Director, the persons named as the proxy holder will vote your proxy for another candidate or other candidates nominated by our Board.
Q: May I propose actions for consideration at next year’s meeting of shareholders?
A:Yes. For your proposal to be considered for inclusionPlease see the section entitled "Shareholder Proposals" in ourthis proxy statement for next year’s meeting, we must receive your written proposal no later than December 19, 2016. If we change the date of next year’s meeting by more than 30 days from the date of this year’s meeting, then the deadline is a reasonable time before we begin to printinformation concerning making shareholder proposals and send our proxy materials. You should also be aware that your proposal must comply with SEC regulations regarding shareholder proposals.director nominations.
Similarly, for you to raise a proposal (including a director nomination) from the floor at next year’s meeting, we must receive a written notice of the proposal no later than March 9, 2017. If we change the date of next year’s meeting by more than 30 days from the date of this year’s meeting, then we must receive your written proposal at least 150 days before the date of next year’s meeting for the proposal to be timely.
Q: Who is paying for this proxy solicitation?
A:We will pay the cost of soliciting the proxies. In addition, our officers, directorsDirectors and employees may solicit proxies or votes in person, by telephone or by email. These people will not be paid any additional compensation for these activities. We will send copies of proxy-related materials or additional solicitation materials to brokers, fiduciaries and custodians who will forward these materials to the beneficial owners of our shares. On request, we will reimburse brokers and other persons representing beneficial owners of shares for their reasonable expenses in forwarding these materials to beneficial owners.
Q: How can I find out the results of the voting at the Annual Meeting?
A: Preliminary voting results will be announced at the Annual Meeting. Final voting results will be published in a current report on Form 8-K that we expect to file with the SEC no later than four business days after the conclusion of the Annual Meeting. If final voting results are not available to us in time to file a Form 8-K on or before the fourth business day after the Annual Meeting, we intend to file a Form 8-K to publish preliminary results and, within four business days after the final results are known to us, file an additional Form 8-K to publish the final results.
HOUSEHOLDING OF PROXY MATERIALS
In an effort to reduce printing costs and postage fees, we have adopted a practice called “householding.” Under this practice, shareholders who have the same address and last name and do not participate in email delivery of proxy-related materials will receive only one set of our proxy statement, annual report or notice of internet availability of proxy-related materials unless one or more of these people notifies us that he or she wishes to continue to receive individual copies.
If you share an address with another shareholder and receive only one set of proxy-related materials and would like to request a separate copy for this year’s annual meeting or for any future meetings, please: (1) call our Investor Relations contact at (432) 262-2700; (2) send an email message to alicia.dada@ngsgi.com; or (3) mail your request to Natural Gas Services Group, Inc., 508 West Wall Street,404 Veterans Airpark Lane, Suite 550,300, Midland, Texas 79701,79705, Attn: Investor Relations. Similarly, you may also contact us through any of these methods if you receive multiple copies of the materials and would prefer to receive a single copy in the future.
PROPOSAL 1 - ELECTION OF DIRECTORS
Our Board of Directors is divided into three classes, (commonly known as a “staggered” Board), each class to be as nearly equal in number as possible. At each annual meeting of shareholders, members of one of the classes, on a rotating basis, are elected for a three-year term. The authorized number of Directors is currently set at nine. We currently have five directorsDirectors serving on our Board. Our Board of Directors may fill the vacancies if a qualified candidate is vetted. The following table sets forth, by class, the members of our Board of Directors as of the date of this proxy statement:
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TermsTerm Expiring at the 20162022 Annual Meeting | Terms Expiring at the
2017 2023 Annual Meeting | Terms Expiring at the
20182024 Annual Meeting |
| John W. Chisholm | Charles G. CurtisLeslie A. Beyer | David L. Bradshaw |
| Stephen C. Taylor | William F. HughesNigel J. Jenvey |
Shareholders will be electing one Director at the meeting. The Board is recommending the re-election of Mr. John W. Chisholm for re-election to the Board of Directors to serve a three yearthree-year term expiring at the annual meeting of shareholders in 2019.2025.
The personsperson named in the enclosedour form of proxy will vote the shares represented by such proxy for the election of the nominee for Director named above unless other instructions are shown on the proxy card. If, at the time of the meeting, the nominee becomes unavailable for any reason, which is not expected, the persons entitled to vote the proxy will vote for such substitute nominee, if any, as they determine in their sole discretion, or we may reduce the size of the Board.
Biographical information and qualifications for the person nominated as a Director, and for each person whose term of office as a Director will continue after the 20162022 Annual Meeting, is set forth below.
Nominee for Director for Term to Expire in 20192025
John W. Chisholm
John W. Chisholm, 61,67, was appointed as a Director of Natural Gas Services Group in December 2006 to fill a vacancy created by expanding the size2006. On May 17, 2022, Mr. Chisholm was appointed Interim Chief Executive Officer of the Board from seven to eight Directors andCompany in connection with the retirement of Stephen C. Taylor. Mr. Chisholm was first electedappointed as aLead Independent Director of Natural Gas Services Group at the annual meeting of shareholders held in June 2007.2020, although he will no longer act as Lead Independent Director while he remains Interim Chief Executive Officer. Mr. Chisholm is the founder of Wellogix, an oil and gas software company that develops software aimed at expediting the exchange of enterprise data and communication of complex engineered services. Prior to founding Wellogix, Mr. Chisholm co-founded and served as President of ProTechnics Company from 1985 until its sale to Core Laboratories in December of 1996. Mr. Chisholm served as Senior Vice President of Global Sales and Marketing of Core Laboratories until 1998, when he started Chisholm Energy Partners, an investment fund focused on mid-size energy service companies. From 2002 to 2009, Mr. Chisholm served on the Board of Directors of Flotek Industries, Inc. ("Flotek"), and became its interim President in August 2009. In August 2010 Mr. Chisholm became President of the company andFlotek in August 2010, was appointed as its Chief Executive Officer in March 2012.2012, and served in those roles until January 2020. Flotek Industries, Inc. is a public company which files reports under the Securities Exchange Act of 1934. Mr. Chisholm is presently CEO of The John Chisholm Group. Mr. Chisholm holds a Business Administration degree from Fort Lewis College in Colorado. He currently serves on the Editorial Advisory Board on Middle East Technology of the Oil & Gas Journal.
Mr. Chisholm brings significant natural resources experience to our Board, in connection with his background in supplying drilling and production related products and services to the oil, gas and mining industries, and his investment fund experience with mid-size energy service companies is an invaluable resource as the Company assesses its capital and liquidity needs.
In addition, Mr. Chisholm's experience as a board member and executive officer of a public company provides us with a wealth of leadership and management skills.
Required Vote for This Proposal
The election of the Director nominee requires the affirmative vote of a majority of the votes cast at the Annual Meeting with respect to the nominee. The number of shares voted "for" the Director nominee must exceed the number of votes cast "against" that nominee for the nominee to be elected as a Director to serve until his term expires or until his successor has been duly elected and qualified. Abstentions and broker non-votes are not counted as votes cast in the election of directors and therefore will not have any effect on the outcome of the vote.
Pursuant to the resignation policy adopted by our Board and further described in our Corporate Governance
Guidelines, any nominee for Director who is not elected shall promptly tender his or her resignation to our Board following certification of the stockholder vote. The Environmental, Social and Governance and Personnel Development ("ESG") Committee will consider the resignation offer and recommend to our Board the action to be taken with respect to the offered resignation. In determining its recommendation, the ESG Committee shall consider all factors it deems relevant. Our Board will act on the ESG Committee's recommendation within 90 days following certification of the stockholder vote and will publicly disclose its decision with respect to the Director's resignation offer (and the reasons for rejecting the resignation offer if applicable).
Any Director who tenders his or her resignation pursuant to the resignation policy shall not participate in the ESG Committee's recommendation or Board action regarding whether to accept the resignation offer. If each member of the ESG Committee is required to tender his or her resignation pursuant to the resignation policy in the same election then the independent Directors of our Board of Directors who are not required to tender a resignation pursuant to the resignation policy shall consider the resignation offers and make a recommendation to our Board.
To the extent that one or more Directors' resignations are accepted, our Board, in its discretion, may determine either to fill such vacancy or vacancies or to reduce the size of the Board within the authorized range.
Continuing Directors Whose Terms ExpireTerm Expires in 20172023
Leslie A. Beyer
Charles G. Curtis
Charles G. Curtis, 83, has served as a Director of Natural Gas Services Group since April 2001. Since 2002, substantially all of Mr. Curtis’ business activities have been devoted to managing personal investments. From 1992 until 2002, Mr. Curtis wasLeslie A. Beyer, 46, joined our Board in June 2020. Ms. Beyer is the President and Chief Executive Officer of Curtis One, Inc.,the Energy Workforce and Technology Council (“EWTC”) formed through the merger of the Petroleum Equipment & Services Association (“PESA”) and the Association of Energy Service Companies, a manufacturer of aluminumposition she has held since the merger in February, 2021. EWTC represents more than 600 member companies in energy services, supply, manufacturing and steel mobile stoolsdrilling with a focus on enabling its members to safely, profitably and mobile ladders. From 1988sustainably produce the energy needed to 1992, Mr. Curtismeet rising demand around the world. Prior to leading EWTC, Ms. Beyer was the President and Chief Executive Officer of Cramer, Inc.,PESA. Prior to joining PESA, Ms. Beyer served as Director, Member and Board Relations for the National Association of Manufacturers from 2012 to 2014. Previously, Ms. Beyer served in leadership roles at Burson-Marsteller Public Affairs and at a manufacturerboutique public relations firm for more than six years. Prior to her time in public affairs, Ms. Beyer served in media relations capacities in The White House, Executive Office of office furniture. Mr. Curtis hasthe President and on the Bush 2000 Presidential Campaign. She began her career in legislative policy roles in the U.S. Senate, U.S. Department of State and U.S. Department of Housing. Ms. Beyer holds a Bachelor of Science degree from the United States Naval AcademyArts in Latin American Studies and a Master of Science degree in Aeronautical EngineeringSpanish from the University of Southern California.Texas at Austin.
Mr. Curtis has beenAs a long-standing member ofstrong advocate for the oilfield services and equipment sector, Ms. Beyer provides the Board since prior to the Company's initial public offering in 2002 and as such he bringswith a wealth of knowledge regardingand insight about the Company's history, growthstrategic and tactical matters impacting our business and industry. Through his manufacturing careerIn addition, Ms. Beyer's public affairs, policy and engineering educational background, Mr. Curtis assists the Board and the Company in connection with its compressor manufacturing business. As a past U.S. Naval Officer and U.S. Naval Academy graduate, Mr. Curtis also brings leadership skillsexperience significantly adds to the Board and Company.our Board's capabilities.
Stephen C. Taylor
Stephen C. Taylor, 62, has been68, was President and Chief Executive Officer of Natural Gas Services Group sincefrom January 2005.2005 until his retirement from the positions effective May 17, 2022. He was elected as a Director of Natural Gas Services Group at the annual meeting of shareholders in June 2005. Effective January 1, 2006, Mr. Taylor was appointed Chairman of the Board and he will continue in that role notwithstanding his retirement as an officer and employee of Directors.the Company. Immediately prior to joining Natural Gas Services Group, Mr. Taylor held the position of General Manager − US Operations for Trican Production Services, Inc. from 2002 through 2004. Mr. Taylor joined Halliburton Resource Management in 1976, becoming its Vice President − Operations in 1989. Beginning in 1993, he held multiple senior level management positions with Halliburton Energy Services until 2000 when he was elected Senior Vice President/Chief Operating Officer of Enventure Global Technology, LLC, a joint-venture deep water drilling technology company owned by Halliburton Company and Shell Oil Company. Mr. Taylor elected early retirement from Halliburton Company in 2002 to join Trican Production Services, Inc. Mr. Taylor holds a Bachelor of Science degree in Mechanical Engineering from Texas Tech University and a Master of Business Administration degree from the University of Texas at Austin.
Mr. Taylor’s senior management experience in the natural resources industry provides the Board and our company with significant insight into our business. Mr. Taylor’s engineering and advanced business training (MBA) uniquely suitsqualifies him to provide leadership, technical expertise and financial acumen to our Board and to the operations of our companyBoard.
Continuing Director Whose Term Expires in connection with his position as our chief executive officer.
2024
Continuing Directors Whose Terms Expire in 2018
David L. Bradshaw
David L. Bradshaw, 61,67, joined our board in December of 2011. On May 17, 2022, Mr. Bradshaw was appointed as the Lead Independent Director at the time John W. Chisholm was appointed as Interim Chief Executive Officer. Since 2005, Mr. Bradshaw has acted as a consultant in the oil and gas exploration and production sector and has overseen his investments in this area. From August 2007 through November 2009, Mr. Bradshaw served as a Director and Audit Committee Chairman for Triangle Petroleum, a publicly traded company listed on the American Stock Exchange. From November 2007 through November 2008, Mr. Bradshaw served as a Director for Comet Ridge Limited, an Australian company listed on the Australian Securities Exchange. From 1986 to 2005, Mr. Bradshaw worked for Tipperary Corporation, a U.S. public company listed on the American Stock Exchange. During his tenure at Tipperary, the company was involved in oil and gas exploration and production, and natural gas processing and transportation. He held the positions of Chief Executive Officer from 1996 to 2005, Chairman of the Board from 1997 to 2005, Chief Financial Officer from 1990 to 1996 and Chief Operating Officer from 1993 to 1996. From 1999 to 2005, Mr. Bradshaw also served as Chief Executive Officer and Chairman of Tipperary Oil & Gas (Australia) Pty Ltd, from 1999 to 2005, a subsidiary of Tipperary, which explored for and produced natural gas in Queensland, Australia. From 1983 to 1986, Mr. Bradshaw was an owner and officer of Bradcorp, Inc., a private exploration and production company. Prior to this, Mr. Bradshaw spent six years in public accounting serving predominantly oil and gas clients. Mr. Bradshaw graduated from Texas A&M University with a BBA in Accounting in 1976 and a MBA in 1977, and is also a Certified Public Accountant.
Mr. Bradshaw's educational and professional training and achievements as a Certified Public Accountant and MBA, along with his past experience as both a Chief Financial Officer and Chief Executive Officer of a public company involved in the natural resources industry, provides us with considerable accounting and corporate finance skills. In addition, Mr. Bradshaw's career spanninghas spanned over thirtyforty years in the oil and gas industry and as a public accountant adds to his value in his position on our Audit Committee.accountant. His executive management positions in both private and public companies bring us significant leadership, planning and management skills and background.
Nigel J. Jenvey
William F. Hughes, Jr.
William F. Hughes Jr., 63, has servedNigel. J. Jenvey, 49, was appointed as a Director since December 2003.of Natural Gas Services Group in April 2021. Mr. Jenvey is currently Executive - Strategy & Growth Initiatives at Baker Hughes has over 30and serves as a board member for their interests in a hydrogen production technology company called Ekona Power and the Long Duration Energy Storage Council, and previously held the position of Global Head of Carbon Management at their consultancy Gaffney, Cline & Associates. Prior to joining Baker Hughes, Mr. Jenvey spent eight years at BP as the company’s head of experienceCarbon, Capture, Use and Storage (CCUS) and carbon solutions manager. He also led similar efforts at Maersk Oil as Technical Director of carbon & climate, and served in various managerial and project leadership roles at Royal Dutch Shell, including Shell’s global Enhanced Oil Recovery (EOR) Center of Expertise and European operating business. He began his career as a petroleum engineer at Texaco in 1995 supervising offshore oil and gas production operations in the engineeringNorth Sea. Mr. Jenvey is an industry leader in Carbon Management and constructionexpert in CCUS having been involved in leading projects across the world since 2004. These have included providing study leadership to the National Petroleum Council, industry as a Registered Civil Engineer and licensed building contractor. From 1974 to 1979, he served as an officercapability development in the United States Air Force. From 1979Society of Petroleum Engineers, and provision of advise to 1986, he was a project design engineer for Cushman & Associates. From 1986 to 1996, he served as a Project Manager on a varietyvarious major energy companies in the US and Canada. Mr. Jenvey is the Editor of public worksthe annual Decarbonization feature in the SPE Journal of Petroleum Technology and industrial construction projects. Since 1983, Mr. Hughes has been co-owner of The Whole Wheatery, LLC, a natural foods store located in Lancaster, California.peer reviewer to the International Energy Agency. Mr. HughesJenvey has also provided testimony to Congress on CO2 Capture technologies. Mr. Jenvey holds a Bachelor of Science degree (Hons.) in CivilMining Engineering from the United States Air Force AcademyUniversity of Leeds and both a Diploma and a Master of Science degree in Petroleum Engineering from the University of California at Los Angeles.Imperial College in London.
Mr. Hughes’ careerJenvey brings significant carbon management, sustainability and ESG experience in the engineering and construction industry brings us invaluable skills which are applicable to our manufacturing processes. In addition, Mr. HughesBoard. His experience of working with companies, investors, governments, academia, and non-governmental organizations provides leadership skills arising from his service as an officer withus a wealth of knowledge and insight regarding the U.S. Air Forcechallenges and U.S. Air Force Academy graduate.solutions that exist for the oil and gas industry, and adds to our Board’s capabilities to successfully guide the Company through these matters that are impacting our business and industry.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Natural Gas Services Group’s Board of Directors held foursix meetings in 2015.2021. Each Director attended at least 75% of the total number of Board meetings held while such person was a Director. Each Director also attended at least 75% of all of the meetings held by all committees of the Board of Directors for which he served (during the periods that he served). The Board of Directors acts from time to time by unanimous written consent in lieu of holding a meeting.
Our non-management directorsDirectors hold regularly scheduled executive sessions in which those directorsDirectors meet without management participation. The Chairman of the Governance and Personnel Development Committee has presidedGenerally, our Lead Director, John W. Chisholm, presides over these sessions. In April 2016, the board established a Lead Director role, and assigned those duties to the Lead Director. Charles G. Curtis is currently the Lead Director.
We typically schedule a Board meeting in conjunction with our annual meeting of shareholders. Although we do not have a formal policy on the matter, weWe expect our Directors to attend each annual meeting, absent a valid reason, such as illness or an unavoidable schedule conflict. Last year, all of the individuals then serving as Directors attended our 20152021 Annual Meeting of Shareholders.
To assist it in carrying out its duties, the Board has delegated certain authority to four separately designated standing committees. These committees are described below.
Audit Committee
The primary functions of our Audit Committee include:
•assisting the Board in fulfilling its oversight responsibilities as they relate to our accounting policies, internal controls, financial reporting practices and legal and regulatory compliance;
•discussing with management policies with respect to risk assessment and risk management;
•hiring our independent registered public accounting firm;
•monitoring the independence and performance of our independent registered public accounting firm;
•maintaining, through regularly scheduled meetings, a line of communication between the Board, our financial management and independent registered public accounting firm; and
•overseeing compliance with our policies for conducting business, including ethical business standards.
The members of the Audit Committee are David L. Bradshaw (Chairman), Charles G. Curtis,Leslie A. Beyer, and William F. Hughes, Jr.Nigel J. Jenvey. Our common stock is listed for trading on the New York Stock Exchange, or “NYSE”. Under rules of the NYSE, the Audit Committee is to be comprised of three or more Directors, each of whom must be independent. Our Board has determined that all of the members of the Audit Committee are independent, as defined under the applicable NYSE rules and listing standards. In addition, our Board of Directors has determined that David L. Bradshaw is qualified as an “audit committee financial expert” as that term is defined in the rules of the United States Securities and Exchange Commission. The Audit Committee met nineeight times during the last fiscal year. The audit committee has also received from, and discussed with, BDOMoss Adams the matters required to be discussed by Public Accounting Oversight Board Auditing Standard No. 16.1301 (AS 1301) (Communications with Audit Committees).
Any shareholder may obtain free of charge a printed copy of our Audit Committee Charter by sending a written request to Investor Relations, Natural Gas Services Group, Inc., 508 West Wall Street,404 Veterans Airpark Lane, Suite 550,300, Midland, Texas 79701. You can also view and print a copy of our Audit Committee Charter79705 or by clicking onvisiting the “Governance” tab aton the Investor Relationsinvestor relations page of our website atwww.ngsgi.com.
Compensation Committee
The primary functions of our Compensation Committee include:
•assisting the Board in overseeing the management of our human resources;
•evaluating our Chief Executive Officer’s performance and compensation;
•formulating and administering our overall compensation principles and plans; and
•evaluating management.
The Compensation Committee’s policy is to offer the executive officers competitive compensation packages that will
permit us to attract and retain individuals with superior abilities and to motivate and reward such individuals in an appropriate fashion in the long-term interests of Natural Gas Services Group Inc., and its shareholders. Currently, executive compensation is comprised of salary and cash bonuses and awards of long-term incentive opportunities in the form of restricted stock or restricted stock unit awards under the 2009 Restricted Stock/Unit Plan.2019 Equity Incentive Plan, as well as other long-term incentives payable in cash.
The members of the Compensation Committee are William F. Hughes, Jr. (Chairman)Leslie A. Beyer. (Chairperson since April 2021), John W. Chisholm, and David L. Bradshaw. However, due to Mr. Chisholm's appointment as our Interim Chief Executive Officer and pursuant to NYSE rules, his membership on this committee will be suspended while he acts as our Interim Chief Executive Officer. Our Board has determined that all of the members of the Compensation Committee are independent, as defined under the applicable NYSE rules and listing standards. During the last fiscal year there were six meetings of the Compensation Committee.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee members are not officers or employees of our company, and there is not, nor was there during fiscal 2015,2021, any compensation committee interlock (in other words, no executive of our company serves as a Director or on the compensation committee of a company that has one or more executives serving on our Board of Directors or our Compensation Committee).
Any shareholder may obtain free of charge a printed copy of our Compensation Committee Charter by sending a written request to Investor Relations, Natural Gas Services Group, Inc., 508 West Wall Street,404 Veterans Airpark Lane, Suite 550,300, Midland, Texas 79701. You can also view and print a copy of our Compensation Committee Charter79705 or by clicking onvisiting the “Governance” tab aton the Investor Relationsinvestor relations page of our website atwww.ngsgi.com.
Environmental, Social and Governance and Personnel Development Committee
OurThe primary functions of our Environmental, Social and Governance ("ESG") and Personnel Development Committee primarily focuses on:include:
generally •overseeing the governance of the Board and its committees;
•interpreting the Governance Guidelines, the Code of Business Conduct and Ethics and other similar governance documents adopted by the Board; and
•overseeing the evaluation of the Board and its committees.committees; and
•developing, with input from executive leadership, the principles guiding our Environmental, Social and Governance efforts and monitoring our progress in meeting such principles
The members of the ESG and Governance and Personnel Development Committee are Charles G. CurtisNigel J. Jenvey (Chairman), David L. Bradshaw, and John W. ChisholmChisholm. However, due to Mr. Chisholm's appointment as our Interim Chief Executive Officer and William F. Hughes, Jr.pursuant to NYSE rules, his membership on this committee will be suspended while he acts as our Interim Chief Executive Officer. Our Board has determined that each of the GovernanceESG and Personnel Development Committee members isare independent, as defined under the applicable NYSE rules and listing standards. During the last fiscal year there were four meetings of the GovernanceESG and Personnel Development Committee.
Any shareholder may obtain free of charge a printed copy of our Environmental, Social and Governance and Personnel Development Committee Charter by sending a written request to Investor Relations, Natural Gas Services Group, Inc., 508 West Wall Street,404 Veterans Airpark Lane, Suite 550,300, Midland, Texas 79701. You can also view and print a copy of our Governance Committee Charter79705 or by clicking onvisiting the “Governance” tab aton the Investor Relationsinvestor relations page of our website atwww.ngsgi.com.
Nominating Committee
The primary functions of our Nominating Committee include:
•identifying individuals qualified to become board members, consistent with the criteria approved by the Board;
•recommending Director nominees and individuals to fill vacant positions; and
•overseeing executive development and succession and diversity efforts.
The members of the Nominating Committee are John W.C. Chisholm (Chairman), David L. Bradshaw,Leslie A. Beyer, and Charles G. Curtis.Nigel J. Jenvey. However, due to Mr. Chisholm's appointment as our Interim Chief Executive Officer and pursuant to NYSE rules, his
membership on this committee will be suspended while he acts as our Interim Chief Executive Officer. Our Board of Directors has determined that each of the Nominating Committee members is independent as defined under the applicable NYSE rules and listing standards. During the last fiscal year there were foursix meetings of the Nominating Committee.
Any shareholder may obtain free of charge a printed copy of our Nominating Committee Charter by sending a written request to Investor Relations, Natural Gas Services Group, Inc., 508 West Wall Street,404 Veterans Airpark Lane, Suite 550,300, Midland, Texas 79701. You can also view and print a copy of our Nominating Committee Charter79705 or by clicking onvisiting the “Governance” tab aton the Investor Relationsinvestor relations page of our website atwww.ngsgi.com. Our Nominating Committee does not have a diversity policy; however, as discussed below, theThe Committee’s goal is to nominate candidates who possess a range of experiences and backgrounds which will contribute to the board’s overall effectiveness in meeting its duties and forwarding the goals of our company.
OurThe Board is responsible for identifying individuals qualified to become Directors, and nominees are selected by the Board. The Board takes into account many factors, including being highly qualified in terms of business experience, finance and other disciplines relevant to the success of a publicly traded company in today’s business environment; understanding of the Company’s business on a technical level and the industry in which it competes; and educational and professional background. The Board evaluates each individual in the context of the Board as a whole, with the objective of recommending a group that can best support the success of the business and, based on its diversity of experience and backgrounds, represent stockholder interests through the exercise of sound judgment.
The Nominating Committee will consider a Director candidate recommended by a shareholder. A candidate must be highly qualified in terms of business experiencebased on the factors noted above and be both willing and expressly interested in serving on the Board. A shareholder wishing to recommend a candidate for the Committee’s consideration should forward the candidate’s namemust follow Securities and information about the candidate’s qualifications to Natural Gas Services Group, Inc., Nominating Committee, 508 West Wall Street, Suite 550, Midland, Texas 79701, Attn.: John W. Chisholm. Submissions must include sufficient biographical information concerning the recommended individual, including age, employment history for at least the past five years indicating employers' names and descriptionExchange Commission Rule 14a-8 or our advance notice provisions contained in our Bylaws. Please see "Shareholder Proposals" on page 55 of the employer’s business, educational background and any other biographical information that would assist the Committee in determining the qualifications of the individual. The Committee will consider recommendations received by a date not later than 120 calendar days before the date ourthis proxy statement was released to shareholders in connection with the prior year’s annual meeting for nomination at that annual meeting. The Committee will consider nominations received after that date at the annual meeting subsequent to the next annual meeting.further information.
The Committee evaluates nominees for Directors recommended by shareholders in the same manner in which it evaluates other nominees for Directors. Minimum qualifications include the factors discussed above.
Director Independence
The Board has determined that each of the following four members of the Board is “independent” within the meaning of applicable listing standards of the NYSE and under the standards, set forth in Exhibit A to our Environmental Social and Governance and Personnel Development Charter (“Governance Charter”) which are consistent with the NYSE listing standards: Leslie A. Beyer, Nigel J. Jenvey and David L. Bradshaw,Bradshaw. John W. Chisholm Charles G. Curtis,was independent up until May 17, 2022, when he was appointed to act as our Interim Chief Executive Officer in connection with the retirement of Stephen C. Taylor. We anticipate that Mr. Chisholm will return as an independent director of the Board upon the conclusion of his term as Interim Chief Executive Officer, subject to NYSE regulations and William F. Hughes, Jr. A copy of Exhibit A to our Governance Charter is available at our website, www.ngsgi.com, under the heading “Investor Relations—Governance.”applicable law. The Board has made an affirmative determination that each of the four directorsDirectors named above satisfies these categorical standards. In making its determination, the Board examined relationships between directorsDirectors or their affiliates with us and our affiliates and determined that each such relationship, if any, did not impair the director’sDirector’s independence. A copy of Exhibit A to our Governance Charter is available at our website,www.ngsgi.com, under the heading “Investor Relations-Governance.”
Board of Directors Diversity
The Company values diversity and the benefits that a diverse workforce can bring to the Company and to the Board of Directors. Diversity can promote the inclusion of different perspectives and ideas which can lead to more robust discussion regarding strategic and governance policy alternatives and, ultimately, result in better corporate governance and decision making.
The Company seeks to maintain a Board comprised of talented and dedicated Directors with a diverse mix of expertise, experience, skills and backgrounds. The skills and backgrounds collectively represented on the Board should reflect the diverse nature of the business environment in which the Company operates. As new members of the Board are considered, diversity considerations should include - but not be limited to - business expertise, geography, age, gender and ethnicity.
The Company is committed to a merit-based system for Board composition within a diverse and inclusive culture which solicits multiple perspectives and views and is free of conscious or unconscious bias. When assessing Board composition or identifying suitable candidates for appointment to the Board, the Company will consider candidates on merit with due consideration to the benefits of diversity and the needs of the Board. The Board and its Nominating Committee are especially cognizant of the benefits of gender and ethnic diversity and will continue to focus on important diversity metrics in future searches.
The Board’s Leadership Structure
Under our Corporate Governance Guidelines, our Chief Executive Officer also serves as our Chairman of the Board, and that person is responsible to the Board for the overall management and functioning of the company. Stephen C. Taylor serves as both Chairman of the Board and served as our President and Chief Executive Officer (“CEO”). up until his retirement on May 17, 2022. The Board believesbelieved this iswas the most effective Board leadership structure at the present time and believesbelieved that Mr. Taylor, in his role as Chairman/Chairman and CEO, hashad the ability to execute on both our short-term and long-term strategies necessary for the challenging marketplace in which we compete. The independent directors believeDirectors believed that Mr. Taylor's detailed and in-depth knowledge of the issues, opportunities and challenges facing us and our business make him the best qualified directorDirector to develop agendas that ensure that the Board’s time and attention are focused on the most critical matters. Further, as the individual with primary responsibility for managing day-to-day operations, Mr. Taylor iswas best positioned to chair regular Board meetings and ensure that key business issues and risks are brought to the attention of our Board and/or Audit Committee. Notwithstanding his retirement as an officer and employee of the Company, Mr. Taylor will continue his position as Chairman of the Board.
EachThrough May 17, 2022, each of our directors,Directors, other than Mr. Taylor, iswas independent, and the Board believes that the independent directorsDirectors provide effective oversight of management. In connection with Mr. Chisholm's appointment as Interim Chief Executive Officer, under NYSE rules he will no longer be deemed independent while he acts in this capacity. The Board may subsequently decide, however, to change that leadership structure which would require a revision to our Corporate Governance Guidelines. The Board believes that it has in place safeguards to ensure that we maintain the highest standards of corporate governance and continued accountability of the CEO to the Board. These safeguards include:
•All members of the Board arewere independent directorsDirectors except for Mr. Taylor.
•The establishment of the Lead Director position, described below, which assumes the role of ensuring fair, open and independent discussions and decisions amongst the Board. John W. Chisholm served as Lead Director until he was appointed as our Interim Chief Executive Officer. David Bradshaw will serve as our Lead Director during this transition period.
•Each of the Board’s standing committees, including the Audit, Compensation, GovernanceESG and Nominating Committees, are comprised of and chaired solely by non-employee directorsDirectors who meet the independence requirements under the NYSE listing standards and other governing laws and regulations. As noted above, these committees meet frequently.
•Review and determination of Mr. Taylor’s compensation and performance remains within the purview of the Compensation Committee.
•The independent directorsDirectors continue to meet in executive sessions without management present to discuss the effectiveness of the company’s management, the quality of the Board meetings and any other issues and concerns.
Lead Director
To promote the independence of the Board and appropriate oversight of management and to demonstrate our commitment to strong corporate governance, the independent directorsDirectors designate an independent, non-employee directorDirector to serve as our Lead Director. The Lead Director helps to facilitate free and open discussion and communication among the independent, nonemployee directors.non-employee Directors. The responsibilities of the Lead Director are set forth in our Corporate Governance Guidelines, which is available under “Investor Relations - Governance Documents” on our website at www.ngsgi.com. Charles G. Curtiswww.ngsgi.com. John W. Chisholm was appointed Lead Director in April 2016.June 2020 but while he acts as our Interim Chief Executive Officer, David Bradshaw will serve as our Lead Director during his transition period.
Role in Risk Oversight
Our Board of Directors oversees the management of risks inherent in the operation of our business and the implementation of our strategic plan. Our executive management is responsible for the day-to-day management of risks we face. The Board is periodically advised by management on the status of various factors that could impact our business and operating results, including oil and gas industry issues, operational issues (such as compressor manufacturing issues, and backlog for compressor equipment)equipment etc.), legal and regulatory risks. The full Board is also responsible for reviewing our strategy, business plan, and capital expenditure budget.
Our Board committees assist the Board in fulfilling its oversight responsibilities in certain areas of risk. Our Audit Committee serves an important role in providing risk oversight, as further detailed in its charter. One of the Audit Committee’s
primary duties and responsibilities is to monitor the integrity of our financial statements, financial reporting processes, systems of internal controls regarding finance,accounting, and disclosure controls and procedures. The Compensation Committee assists the Board with risk management relating to our compensation policies and programs, and the Governance and Nominating Committee assists with risk management relating to Board organization, membership and structure, succession planning for our directorsDirectors and executive officers, and corporate governance.
CODE OF ETHICS
Our Board of Directors has adopted a Code of Business Conduct and Ethics (“Code”), whichis posted on our website at www.ngsgi.com. You may also obtain a copy of our Code by requesting a copy in writing at 404 Veterans Airpark Lane, Suite 300, Midland, Texas 79705 or by calling us at (432) 262-2700.
Our Code provides general statements of our expectations regarding ethical standards that we expect our Directors, officers and employees, including our Chief Executive Officer and Chief Financial Officer, to adhere to while acting on our behalf. Among other things, the Code provides that:
•we will comply with all laws, rules and regulations;
•our Directors, officers and employees are to avoid conflicts of interest and are prohibited from competing with us or personally exploiting our corporate opportunities;
•our Directors, officers and employees are to protect our assets and maintain our confidentiality;
•we are committed to promoting values of integrity and fair dealing; and that
•we are committed to accurately maintaining our accounting records under generally accepted accounting principles and timely filing our periodic reports.
Our Code also contains procedures for our employees to report, anonymously or otherwise, violations of the Code.
SHAREHOLDER ENGAGEMENT
The Natural Gas Service'sCompany's Board of Directors and executive management believes that building long-term relationships with all Company stakeholders is vital to meeting our strategy for corporate governance.governance goals, and to stand in support of our commercial success. Our shareholders, who invest in our company and elect the board of directors,Board, are entitled to important information about the company's business, policies and practices so they can make informed decisions and knowledgeably participate in the governance process.
The Company’s executive management has directly engaged shareholders throughout the year in many diverse ways including quarterly conference calls, investor and industry conferences and individual meetings initiated by both the Company and shareholders. It is our policy to actively engage our shareholders in dialogue about our business condition,financial and operational trends, the structure of our business, and certain governance issues, including executive compensation. The
As our engagement efforts relate to executive compensation and our annual advisory vote on executive compensation, in late 2021 and early 2022, the Natural Gas Services Group Compensation Committee, considerscomprised exclusively of independent directors, solicited meetings with shareholders representing approximately 65% of the annual stockholders advisory vote,Company's outstanding common shares. Of this group, the Compensation Committee held meetings with investors representing approximately 20% of shares outstanding. The Chairperson of the Compensation Committee and our lead independent director (and member of the committee) attended all meetings to understand the investor concerns. You will find more on these meetings and the outcome in the Executive Compensation section of this Proxy.
During 2021, due to the COVID-19 pandemic, direct person-to-person meetings with shareholders were limited. However, through virtual road shows, conference calls, and video meetings, we were able to meet with nearly all of our largest institutional shareholders, including multiple touch points with many. In addition, we held virtual road shows, conference calls and video meetings with other current and prospective shareholders. These meetings not only allowed the Company to communicate about its current business operations with shareholders, the Company used these meetings to actively solicit shareholders’ views on key corporate governance issues including executive compensation as well as other stockholder input, when reviewingthe Company’s Environmental, Social and Governance (“ESG”) initiatives. We have incorporated this feedback into both our compensation and ESG programs.
Overall, the Company engages our shareholders on a regular basis. In addition to periodic reports filed with the U.S. Securities and Exchange Commission, the Company holds quarterly conference calls to discuss interim financial and operational results with its stakeholders, participates in several industry conferences which are available to Company stakeholders in person (temporarily suspended due to the COVID-19 pandemic) or via various public online platforms and meets with shareholders in person throughout the year (also temporarily suspended due to the COVID-19 pandemic and public health considerations). The Company believes that its consistent and continuous shareholder engagement strategy has created an environment in which shareholders are comfortable in providing candid feedback and critique of the Company’s operations, governance and executive compensation programs, principlespolicies.
Additionally, independent Directors have taken a proactive approach in participating in shareholder engagement efforts resulting from feedback received from shareholders and policies.
As a result of critiques of our executive compensation plan and the resultingproxy advisory vote on our executive compensation structure, we directly engaged key institutional shareholders in a number of ways including supplemental proxy materials providing additional descriptive information on our overall executive compensation structure. In addition, since our last Annual Meeting,services. Independent Directors continue to regularly review the Company’s executive management has directly engaged manyshareholder outreach and communication programs and participate as appropriate. The Company anticipates continuing to increase the role of our institutional shareholdersindependent Directors in discussions about our executive compensation program. Specifically, we have discussed our executive compensation program with a number of our top twenty actively managed holders andappropriate stakeholder outreach programs.
During 2021, the Company estimates it met with approximately 75 institutional65 unique shareholders sinceand prospective shareholders in various meetings across North America. These engagements provided detailed information about the Company’s financial and operational performance as well as key information of certain corporate governance matters, including executive compensation. Such information is publicly disseminated in the form of periodic filings with the U.S. Securities and Exchange Commission, press releases and information on the Company’s website, including the investor relations section.
CORPORATE RESPONSIBILITY
Natural Gas Services Group believes that effective corporate governance is a combination of oversight, responsiveness and positioning of our last annual meeting. Asbusiness operations on a resultday-to-day basis with a focus on mitigation of those conversations, the Board has consideredour environmental impact, accountability in corporate governance and adopted certain adjustments toprogress in our executive compensation process andsocial policies. See "Executive Compensation" beginning on page 16.
CODE OF ETHICS
Our Board of Directors believes that integrating these values into our everyday business practices creates a holistic approach to good governance and best aligns the interests of our leadership team, our employees and the Company’s other stakeholders. Moreover, as a smaller company, our holistic approach and consistent focus on these important tenets allows us to focus on continuous improvement without an untenable financial impact, providing a mechanism to optimize the interests of all stakeholders.
Further demonstrating our commitment to ESG matters, the Board of Directors has adoptedchartered the Environmental, Social and Governance and Personnel Development Committee to proactively engage with management and other NGS stakeholders on key ESG issues. The Committee, chaired by director Nigel J. Jenvey – a Codeleader in environmental issues in the energy industry – will focus on continuous improvement of Business Conductthe Company’s ESG programs and Ethics,policies.
Our Environmental Initiatives
We continuously work to eliminate or “Code”, whichmitigate our impact on the environment through our innovative product designs, focus on reducing our environmental footprint across all operations, and remediation of our impact through control mechanisms and technologies in all aspects of our business. In addition, our innovation in product design and service delivery systems is postedintended to support the sustainability goals and initiatives of our customers.
The design and construction of our corporate headquarters in Midland is an example of our commitment to environmental stewardship. Our state-of-the art headquarters include the use of “daylight harvesting” technologies; “smart lighting” that use artificial intelligence to determine office occupancy times and adjust light accordingly; and advanced mechanical systems including variable refrigerant flow systems and energy recovery systems; and high-performance glass and advanced solar shades that reduce glare and heat gain. These are significant capital investments for a company our size that will have a long-term impact on our website at environmental footprint.
www.ngsgi.com. You may also obtain a copy
In addition, we strive to continuously improve the environmental footprint of our Code by requestingcore compression equipment and services with new technology and innovations that focus on best-in-class emissions and impact on the environment. Recent innovations include:
• We have and continue to pursue the most energy efficient and emissions-controlled engine systems available for our compression equipment. All of our engines have the latest catalytic technology and air-fuel ratio (AFR) controllers to provide the cleanest fuel burn available, well exceeding EPA standards. These advanced systems continuously monitor multiple engine and compressor parameters to ensure optimum engine emissions efficiencies and adjust to varying fuel quality available from wellhead production.
• To ensure consistent efficient engine performance, we have invested in state-of-the-art emissions detection equipment to ensure our engines exceed all state and federal air emissions regulations. Additionally, we perform preventative maintenance on all engine systems twice per quarter and comprehensive emissions tests to ensure optimum performance. The company is acutely focused on reducing our environment impact on noise, emissions and carbon footprint.
•Our compressor units are equipped with advanced safety and containment features that provide for safe containment and disposal of used oils, antifreeze and other fluids. Skid containment rails and fluid dumps are manifolded together to mitigate the risk of fluid spills and environmental leaks as a copyresult of operating error or system failures. Active monitoring systems provide further assurance of safe and optimal operations.
•In our mechanical compression packages, we have meaningfully reduced our oil consumption and associated disposal issues with a unique engine and compressor lubricating system.
•In our flaring business, we have designed and exclusively sell “Quad O” flare systems which meet the most stringent federal standards, allowing our customers to exceed all emission standards when natural gas flaring is necessary.
•In our Michigan service location, we have installed two oil burner systems which allows us to efficiently recycle waste oil into energy and heat capacity for our service facility.
•We also work with our customers and suppliers toward policies and processes that reduce the environmental impact of our work. We continuously engage with our top customers to share best practices, new technologies and operating innovations that can be implemented to improve our collective environmental footprint.
•We completed construction of our corporate headquarters in writing at 508 West Wall Street, Suite 550, Midland, Texas 79701 or by calling us at (432) 262-2700.where we incorporated the latest energy-efficient technologies designed for commercial buildings. Innovations include the use of “daylight harvesting” technologies; “smart lighting” that use artificial intelligence to determine office occupancy times and adjust light accordingly; and advanced mechanical systems including variable refrigerant flow systems and energy recovery systems; and high-performance glass and advanced solar shades that reduce glare and heat gain.
•The Board of Directors regularly considers new technologies to further reduce the Company’s environmental footprint and has directed Company leadership to evaluate further opportunities for reducing the impact on the environment.
Our Code provides general statementsSocial Initiatives
In response to the COVID-19 pandemic, we implemented a sweeping work-from-home policy for the majority of our expectations regarding ethical standardsoffice employees and we committed to minimize employment disruption to the best of our ability. For our service employees who provide critical services on customer locations, we invested in important personal protective equipment and developed additional safety protocols to ensure appropriate distancing and other COVID-19 safety measures. In 2020 and 2021, we also invested in significant employee training and development. While the COVID-19 pandemic created unique challenges related to employment and hiring, the Company remains committed to a diverse and inclusive workforce with both executive management and the Board of Directors focused on ensuring equality of opportunity in all our human resources practices.
The Company also believes that workplace and workforce safety is a hallmark of our social responsibility initiatives. As a result, we expectalso incorporate our Directors, officersHealth, Safety, Environment and employees, including our Chief Executive OfficerQuality (“HSEQ”) initiatives into these programs and principal financial officer,policies. In addition to adhere to while acting on our behalf. Among other things, the Code provides that:
we will comply with all laws, rules and regulations;
our Directors, officers and employees are to avoid conflictsprotection of interest and are prohibited from competing with us or personally exploiting our corporate opportunities;
our Directors, officers and employees are to protect our assets and maintain our confidentiality;
the environment, we are steadfastly committed to promoting valuesthe safety of integrityour employees and fair dealing;other stakeholders as well as the physical and thatmental well-being of all members of the NGS family. Our commitment centers on mitigating risks to employees and those with whom they interact and maintaining safe work environments and procedures. Our focus on regular, required safety and procedure training helps ensure a consistent and safe work environment. Our strong safety program has allowed us to consistently post one of the lowest Total Recordable Incident Rates (“TRIR”) in the industry.
we are
Our Governance Initiatives
The recent creation of the Environmental, Social and Governance and Personnel Development Committee of the Board of Directors is an important step and indication of the Company’s commitment to continuous improvement in corporate governance and responsibility.
This committee was chartered to be proactive in assisting the Board and Company leadership in its oversight of ESG-related policies and issues affecting Natural Gas Services Group, its stockholders, employees, customers and the communities in which the Company operates. We believe that the integration of our environmental and social initiatives with our governance responsibilities is the best way to optimize our commitment to being an industry leader in corporate responsibility.
In addition to the Board ESG Committee, our audit committee is engaged in independently reviewing the Company’s financial governance practices for accuracy and transparency as well as ensuring they provide the Company stakeholders with a consistent method by which to evaluate performance.
While qualifying as a smaller reporting company with fewer disclosure requirements, the Board of Directors and leadership of the Company nonetheless have continued to provide an array of disclosures and reports as it remains committed to accurately maintaining our accounting records under generally accepted accounting principles and timely filing our periodic reports.
Our Code also contains procedures for our employees to report, anonymously or otherwise, violationsa high level of transparency, a practice it believes is in the best interests of the Code.Company’s shareholders and other stakeholders.
EXECUTIVE OFFICERS
Biographical information for the executive officers of Natural Gas Services Group who are not Directors is set forth below. There are no family relationships between any Director or executive officer and any other Director or executive officer. Executive officers serve at the discretion of the Board of Directors and until their successors have been duly elected and qualified, unless sooner removed by the Board of Directors. Officers are elected by the Board of Directors annually at its first meeting following the annual meeting of shareholders.
James R. Hazlett, 67, has served as Vice President-Technical Services since June 2005. He also served as Vice President of Sales of Screw Compression Systems, Inc. from 1997 until June 2007 when Screw Compression Systems, Inc. was merged into Natural Gas Services Group. After the merger in June 2007, Mr. Hazlett continues to remain employed by Natural Gas Services Group as Vice President-Technical Services. From 1982 to 1996, Mr. Hazlett served in management roles for Ingersoll Rand/Dresser Rand, working with compression of all types in several different departments from sales and service to engineering. From 1978 to 1982, Mr. Hazlett was employed by the down-hole tool division of Hughes Tool, designing and installing gas lift and plunger systems. Mr. Hazlett holds a Bachelor of Science degree from the College of Engineering at Texas A&M University and has over 40 years of industry experience.
G. Larry Lawrence,
65, became
Micah C. Foster, 42, has served as our Vice President, Chief Financial Officer, Principal Accounting Officer, and Corporate Secretary since his appointment on May 11, 2021. Mr. Foster has over 17 years of professional experience in the energy industry and public accounting. Prior to joining the Company, Mr. Foster served as the Chief Accounting Officer of Legacy Reserves Inc. and its predecessor Legacy Reserves LP, a publicly traded oil and natural gas production company from April 2012 to April 2020. Legacy Reserves Inc. filed for protection under Chapter 11 of the federal bankruptcy code in July, 2019 and emerged from bankruptcy in December, 2019. Prior to his appointment as Chief Accounting Officer in 2012, Mr. Foster served in various roles for Legacy ranging from Financial Accountant to Corporate Controller. Prior to joining Legacy, Mr. Foster worked as a staff auditor and senior auditor for Ernst&Young, LLP from July 2003 to January 2006. Mr. Foster holds a BBA in Accounting and Finance from Abilene Christian University and is a Certified Public Accountant.
G. Larry Lawrence (a former officer), 70, served as our interim Vice President, Chief Financial Officer, and Corporate Secretary from January 5, 2021 to May 11, 2021. Mr. Lawrence also served as Vice President, Chief Financial Officer and Corporate Secretary prior to his retirement from the Company on November 15, 2019. Mr. Lawrence was originally appointed to those positions on July 1, 2011. Previously, Mr. Lawrence was our Controller since September 2010. From June 2006 to August 2010, Mr. Lawrence was self-employed as a management consultant doing business as Crescent Consulting. Overlapping this time, from September 2006 to August 2009, he also served as the CFO of Lynx Operating Company. Lynx is a private company engaged in oil and gas production and gas processing activities. From May 2004 through April 2006, Mr. Lawrence served as Controller of Pure Resources, an exploration and production company and wholly owned subsidiary of Unocal Corporation which was acquired by Chevron Corporation. From June 2000 through May 2004, Mr. Lawrence was a practice manager of the Parson Group, LLC, a financial management consulting firm whose services included Sarbanes Oxley engagements with oil and natural gas industry clients. From 1973 through May 2000, Mr. Lawrence was employed by Atlantic Richfield Company, where he most recently (from 1993 through 2000) served as Controller of ARCO Permian. SinceFrom May 2006 to December 2019, Mr. Lawrence servesserved as a director of Legacy Reserves Inc. and its predecessor, Legacy Reserves LP. Mr. Lawrence currently serves as a Director of ProPetro Holding Corporation. Mr. Lawrence has a Bachelor of Arts in Accounting, with honors, from Dillard University.
James R. Hazlett, 60, has served
EXECUTIVE COMPENSATION
Note From the Compensation Committee Chairperson
Fellow Shareholders:
As you consider your vote on Executive Compensation, we encourage you to review the information provided in this discussion of our Executive Compensation program. My colleagues on the Compensation Committee - in response to your concerns and suggestions - have worked diligently over the past year to improve our disclosures, respond to your concerns and recraft portions of our compensation program to better address your expectations.
As our Committee and the independent directors of the Company engage in a dialogue regarding the goals of our compensation program, we have focused on three tenets: encourage long-term accountability, reward outstanding performance and promote retention of highly-qualified leaders. Based on our discussions with many of you, we believe these core values should drive our compensation decisions.
As a relative newcomer to the Board of Directors and Chair of the Compensation Committee I am committed to making sure we maintain an open dialogue with all our stakeholders on issues related to compensation and governance. Throughout 2021, our committee and independent directors -as well as Vice President-Technical Services since June 2005. He also servedsenior management - engaged with shareholders representing well over half of our institutional base to discuss Company operations, strategy and compensation matters. On behalf of the Compensation Committee, we appreciate the time and effort expended by each of you and your honesty and candor regarding our Company, our compensation program and, especially, the constructive suggestions made that will assist us in our continuing quest to improve all aspects of our business, especially our compensation program and communication with you.
While we believe this year’s discussion of Executive Compensation and changes made to our program are meaningful improvements in the Company’s policies, we will continue to evolve and adjust our program to ensure alignment with our core values as Vice Presidentwell as the best ideas from our stakeholders.
In addition to changes to our Executive Compensation program, we are asking shareholders to approve a modest addition of Salescommon shares to our 2019 Equity Incentive Plan. We believe this plan – which provides equity ownership to our executive leadership team and other associates – aligns the interests of Screw Compression Systems, Inc. from 1997 until June 2007 when Screw Compression Systems, Inc. was merged into Natural Gas Services Group. Afterour employees with our shareholders and serves as an excellent tool for retention of today’s – as well as tomorrow’s – highly qualified leaders.
On behalf of the merger in June 2007, Mr. Hazlett continues to remain employed byCompensation Committee, I appreciate your support of Natural Gas Services Group as Vice President-Technical Services. From 1982 to 1996, Mr. Hazlett servedand hope you will vote “FOR” Items 2 and 3 in management roles for Ingersoll Rand/Dresser Rand working with compression of all types in several different departments from sales and service to engineering. From 1978 to 1982, Mr. Hazlett was employed by the down-hole tool division of Hughes Tool designing and installing gas lift and plunger systems.this year’s proxy.
Mr. Hazlett holds a Bachelor of Science degree from the College of Engineering at Texas A&M University and has over 38 years of industry experience.
Leslie Beyer
Chair, Compensation Committee
Natural Gas Services Group, Inc.
Overview
This Compensation Discussion and Analysis
Compensation Discussion and Analysis
This compensation discussion and analysis provides information regarding our (“CD&A”) is intended to assist shareholders in understanding the executive compensation program in 2015 forrelating to the followingnamed executive officers herein. The CD&A is a supplement to and should be used in conjunction with the compensation tables and related narratives of this Proxy Statement as well as Part III of our annual report on Form 10-K filed with the Company (collectively, the "namedUnited States Securities and Exchange Commission. For 2021 our named executive officers").officers are:
•Stephen C. Taylor, our Chairman of the Board, President and Chief Executive Officer;Officer
•Micah C. Foster, Vice President and Chief Financial Officer
•James R. Hazlett, Vice President of Technical Services
•G. Larry Lawrence, our former interim Chief Financial Officer;Officer
Summary of Business Highlights for 2021
While we discuss our operational and financial performance in more detail elsewhere in this Proxy as well as in our annual report on Form 10-K filed with the U.S. Securities and Exchange Commission, the Compensation Committee considered these factors to complete our compensation program for 2021 and setting the compensation program for 2022.
James R. Hazlett,
Operational Highlights of 2021
•We continued to adjust our Vice President-Technical Services.approach to work in response to the COVID-19 pandemic. We continued our stay-at-home work policies for much of our office personnel and added additional health and safety measures to protect our field personnel. That said, we were able to maintain high operational standards while preserving the health and welfare of our team.
•We continued our penetration into the high horsepower market through the addition of 65 new rental fleet units that totaled 18,035 HP with 38% of this being classified as larger horsepower. We also increased our average rental fleet horsepower to 207 horsepower per unit. This is an increase of 43% per unit since 2017.
Introduction•NGS recorded a TRIR (Total Recordable Incident Rate) of 0.63 in 2021. This is an OSHA approved calculation that conveys the number of recordable injuries for every 200,000 man-hours worked in the year.
•Through the creation of the Environmental, Social and OverviewGovernance Committee of the Board of Directors, we elevated both action and visibility on our efforts on key ESG initiatives.
Financial Highlights of 2021
•While the overall compression industry remained anemic, NGS delivered 5% higher rental revenue than the prior year and 6% higher overall revenue.
•In a market that continued to pressure margins, we generated cash flow from operations of $28.5 million in 2021. We provided conversion of revenue to operating cash flow of 39%; for every dollar of revenue collected, over one-third was available as cash to the Company.
•NGS ended 2021 with $22.9 million in cash on the balance sheet and no debt while repurchasing 737,405 shares of our outstanding common stock for approximately $7.9 million.
The Compensation Committee
The Compensation Committee or, the “Committee,” of the Board of Directors is responsible for determining the types and amounts of compensation we paypaid to our executives.named executive officers. The Compensation Committee operates under a written charter that you can viewmay be viewed on our website at www.ngsgi.com. The Board of Directors has determined that each member of the Compensation Committee meets the independence and financial literacy requirements of the NYSE.New York Stock Exchange ("NYSE"). The Board determines, in its business judgment, whether a particular Director satisfies the requirements for membership on the Compensation Committee set forth in the Compensation Committee’s charter. None of the members of the Compensation Committee are current or former employees of Natural Gas Services Group.Group or any of its subsidiaries.
As of April 30, 2022, the members of the Compensation Committee are:
•Leslie Beyer, Committee Chairperson
•David L. Bradshaw, Independent Director and Committee Member
•John W. Chisholm, Lead Independent Director and Committee Member
The Compensation Committee is responsible for formulating and administering our overall compensation principles and plans. This includes establishing the compensation paid to our CEO,Chief Executive Officer, meeting and consulting with our CEOChief Executive Officer to establish the compensation paid to our other named executive officers, counseling our CEOChief Executive Officer as to different compensation approaches, administering our stock equity plans, monitoring adherence to our compensation philosophy and conducting an annual, and sometimes more frequent, reviewinterim, reviews of our compensation programs and philosophy regarding executive compensation.
The Compensation Committee periodically meets in executive session without members of management or management Directors present and reports to the Board of Directors on its actions and recommendations. The Compensation Committee, from time-to-time, engages compensation consultants and other experts to provide data and guidance on appropriate compensation practices, industry standards, peer selection and other items relevant to the responsibilities and deliberations of the Compensation Committee. For 2021, the Compensation Committee engaged Korn Ferry to provide certain services related to compensation analysis and program development.
The Compensation Committee is also responsible for shareholder outreach and engagement to ascertain shareholder feedback on the Company’s compensation program and philosophy. Over the course of the past year, the Compensation Committee contacted shareholders representing over 60% of the Company’s outstanding shares and directly engaged with shareholders representing nearly 20% of the outstanding common shares. We detail our outreach program, the input from shareholders and our responsiveness in this CD&A under Response to 2021 Shareholder Say-on-Pay Advisory Vote.
Compensation Philosophy and Objectives
Our compensation philosophy is to provide an executive compensation program that:
rewards performance and skills necessary to advance our objectives and further the interestsAs part of our shareholders;
is fair and reasonable and appropriately applied to each executive officer;
is competitive with compensation programs offered by our competitors; and
serves as an adequate retention tool in a competitive market.
The overall objectivesannual review of our compensation philosophyprogram, the Compensation Committee has reviewed the tenets of our compensation philosophy. After review and considering the input from Company stakeholders, the Compensation Committee has established three core values for our executive compensation program:
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| Tenet Number One: |
| The Natural Gas Services Group Executive Compensation Program should encourage long-term accountability. |
The Company’s primary objective is to create long-term value for our shareholders. While we are to:engaged in a cyclical industry, our compensation program should encourage executives to create opportunities for durable value through innovation, strategic vision and with a keen sense of trends that impact the future of our industry. The Compensation Committee is taking a more proactive role in developing annual and multi-year goals and plans that will be used to assess performance and award future compensation.
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| Tenet Number Two: |
| The Natural Gas Services Group Executive Compensation Program should reward superior performance. |
Performance is the foundation of the Company’s compensation program design. The development and achievement of pre-established goals – based on both near- and longer-term time horizons – is a competitive levelkey factor in committee deliberations on executive pay. For example, the Compensation Committee, in conjunction with other independent directors responsible for developing the Company’s nascent ESG strategy, will assign higher weighting to ESG performance beginning in 2022. Going forward, individual performance evaluation will directly impact base salary and short-term incentives as well have a role in long-term share incentives.
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| Tenet Number Three: |
| The Natural Gas Services Group Executive Compensation Program should promote retention of highly-qualified leaders. |
Exceptional leadership, continuity of current annual incomeleadership and the development of high-potential leaders are all critical aspects of corporate success. As such, the Compensation Committee is committed to a compensation program that promotes retention of today’s high-performance leaders and incentivizes tomorrow’s exceptional leaders to join and remain a part of the Natural Gas Services Group team. The Committee’s goal is to design a compensation program that attracts and retains qualified executives at a reasonable cost to us;talent across the career lifecycle through remuneration which is market competitive, differentiated by individual performance and with award vesting periods that promote retention.
retain and motivate executives to accomplish our company goals;
provide long-term incentive compensation opportunities at levels appropriate for the respective responsibilities and performance of each executive;
align compensation and benefits with our business strategies and goals;
encourage the application of a decision making process that takes into account both short-term and long-term risks and the sometimes volatile nature of our industry; and
align the financial interests of our executives with those of our shareholders through the potential grant of equity based rewards.
Our Committee supports these objectives by emphasizing compensation arrangements that we believe are reasonable and will attract and retain qualified executives and reward them for their efforts to further our long-term growth and success. At the same time, we remain cognizant of and aim to balance our executive compensation arrangements with the interests and concerns of our shareholders.
The following summary highlights our commitmentCompensation Committee believes these tenets to executivebe fundamental to the development of an equitable, attractive and lasting compensation practicesprogram that alignbalances the interests of our executives and stockholders:
all Natural Gas Services Group stakeholders. The
implementation of these tenets in the compensation program may, from time-to-time, be adjusted and adapted based on market conditions, competitive needs and new and emerging trends in and around our industry. Through our program of intra-year reviews, shareholder engagement, counsel from our compensation consultants and other resources available, it is the intent of the Compensation Committee to remain true to these tenets while remaining a leader in an equitable and responsive compensation program.
Response to the 2021 Shareholder Advisory Vote on Executive Compensation (“Say on Pay”)
At the Company’s 2021 Annual Meeting of Shareholders held on June 17, 2021, only approximately 26% of the Company’s shareholders cast votes in support of the agenda item related to Named Executive Officer compensation as disclosed in the Company’s 2021 proxy statement. Members of the Compensation Committee were disappointed with this level of support and, as a result, were proactive in engaging shareholders to understand the reasons for the unacceptably low support for the Company’s executive compensation program.
In late 2021 and early 2022, Natural Gas Services Group solicited meetings with shareholders representing approximately 65% of the Company’s outstanding common shares. Of this group, the Compensation Committee held meetings with investors representing approximately 20% of shares outstanding. The Chairperson of the Compensation Committee and our lead independent director (and member of the committee) attended all meetings to understand the investor concerns.
While comments from our shareholders varied significantly, the following key, universal themes emerged from these engagements:
•Incentive targets were not viewed as sufficiently challenging in some cases, and the Compensation Discussion and Analysis did not sufficiently explain and detail the goal setting.
•Shareholders would like a greater commitment to pay for performance.
•Shareholders expressed concern around the lack of clear disclosure of several compensation decisions, such as incentive goal setting as well as the creation and use of the peer group.
•Targeted CEO pay was too high relative to the company’s selected peer group.
As a result of our outreach efforts and the valuable feedback received, the Compensation Committee sought to address these key themes as well as make other improvements to the compensation program.
Following the shareholder engagement process and consideration of the feedback provided, the Committee made several modifications to the Chief Executive Officer’s incentive programs:
•In the Long-Term Incentive Program, the Compensation Committee has adjusted the administration of the Relative Total Shareholder Return (R-TSR”) awards.
◦ The R-TSR component of the program will require performance at the 60th percentile to earn target awards. (The target award was previously granted at the 50th percentile).
◦Awards will be capped at target if TSR is negative over the performance period, regardless of relative performance. (Previously, no “negative performance cap” existed.)
•The Committee commits to not making discretionary awards outside of the short- and long-term incentive programs for a period of three years, with the exception of new-hire awards that are consistent with industry practice.
•The Committee will adjust the short-term incentive program metrics to reduce the weighting on revenue and increase weighting more closely tied to profitability.
•CD&A disclosure will be enhanced to explain the Company’s decisions more thoroughly, particularly as they relate to peer groups and goal setting.
•Beginning in 2023, the Committee will work to better align the Chief Executive Officer’s compensation with the median of the selected peer group.
The Compensation Committee is grateful for the time and candor of the Company’s shareholders in assisting with the evolution and improvements in the Company’s executive compensation program. While the committee is confident that these changes provide for significant improvement in our overall compensation program, the committee will continue to reach out to and engage shareholders in the future as we endeavor to continuously review and improve our compensation programs.
Peer Group Philosophy, Development and Selection Process
In the fourth quarter, 2021 the Compensation Committee – in conjunction with our consultants and other independent directors – undertook a detailed review of our peer group. We identified companies with qualities similar to Natural Gas
Services Group. We looked across the energy and industrial spectrum for companies with similar qualities and characteristics as Natural Gas Services Group. We considered a number of variables including: (1) the industry in which a company operates and the business lines it offers, looking at companies in and around the Global Industry Classification (GICS) codes in which Natural Gas Services operates; (2) the size of a company relative to Natural Gas Services Group, understanding size can be measured in many ways including revenue, market capitalization and asset base; and (3) the human capital and talent pool of a company, while subjective, is an important consideration in that companies with which we compete for talent provide important insights into competitive compensation practices. Although secondary, we also considered the operating regions of potential peers, understanding that cost-of-living differences can impact compensation. While our focus was on companies in the oil and gas services business, we did not limit our search to just those companies, rather expanding our search to a broader energy and industrial universe.
Specifically, the Compensation Committee considered the following strategic criteria in selection of the 2022 peer group:
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EVALUATE the 2021 peer group for relevance and to ensure each peer is a fit for the criteria identified above. |
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IDENTIFY and REMOVE 2021 peers that are no longer appropriate. Key Energy Services was removed due to bankruptcy; RigNet was removed due to acquisition; Mammoth Energy Services was removed due to revenue mismatch. |
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SEARCH and IDENTIFY potential new peer group members based on criteria of industry/functional fit, size based primarily on revenue and market capitalization and strategic competitors for compensation relevance. Secondary considerations include location and other strategic fit. |
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SELECT most relevant peers from pool of candidates by focusing on our GICS code, Oil & Gas Equipment & Services; expanding to Energy Equipment and Services; Oil, Gas & Consumable Fuels and the broader industry code of Energy. |
The Compensation Committee’s process resulted in a peer group of fourteen (14) companies, inclusive of Natural Gas Services Group.
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| Peer Group Member | Company Description |
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| CSI Compressco, LP | CSI Compressco, LP provides compression services and equipment for natural gas and oil production, gathering, transportation, processing and storage. The company is a strategic competitor with which NGS competes for talent. |
| Dawson Geophysical Company | Dawson Geophysical Company provides onshore seismic data acquisition and processing services in the United States. |
| DMC Global, Inc.* | DMC Global, Inc. operates a portfolio of differentiated businesses that lead niche segments of the energy, industrial infrastructure and building products industries. |
| Geospace Technology Corporation | Geospace Technology Corporation designs and manufactures instruments and equipment used in the acquisition and processing of seismic data and markets its instruments primarily in the global oil and gas industry. |
| Independence Contract Drilling, Inc. | Independence Contract Drilling, Inc. provides land-based contract drilling services for oil and natural gas producers in the United States. |
| ION Geophysical Corporation | ION Geophysical Corporation provides geophysical technology, services and solutions for the global oil and gas industry. |
| NCS Multistage Holdings, Inc. | NCS Multistage Holdings, Inc. provides engineered products and support services that facilitate the optimization of oil and natural gas well completions and field development strategies for the onshore oil and gas exploration and production industry. |
| Nuverra Environmental Solutions, Inc. | Nuverra Environmental Solutions, Inc. provides environmental solutions and oilfield support services including removal, treatment, recycling, transportation, and disposal of restricted solids, fluids, and hydrocarbons for exploration and production companies. |
| PrimeEnergy Resources Corp.* | PrimeEnergy Resources Corporation acquires, explores, develops, and produces crude oil and natural gas. The Company offers site preparation, construction and oil and gas drilling services. |
| Ranger Energy Services, Inc. | Ranger Energy Services, Inc. provides well site services and associated equipment, including well rigs, water transfer, plug and abandonment, wireline, fluid management and handling, snubbing, transportation, and equipment renting services. |
| Smart Sand, Inc | Smart Sand, Inc. provides industrial sand. The Company offers proppants, sand products and renders logistics services to oil and gas companies in North America. |
| Solaris Oilfield Infrastructure, Inc. | Solaris Oilfield Infrastructure, Inc. provides mobile sand silo and rail-to-truck transload systems to enhance drilling, completions, and safety in shale plays in the United States. |
| US Well Services, Inc.* | US Well Services, Inc. provides hydraulic fracturing services, including natural gas powered electric frac, for customers in the oil and gas industry in the United States. |
* New peers for 2022; not utilized in establishing 2021 awards.
Shareholder Alignment Through Compensation Practices
In 2021 we continued to adhere to core principles and practices that, the Compensation Committee believes, strengthen the alignment between the compensation of our named executive officers, Company performance and shareholder returns. Important principles related to our compensation program include:
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| WHAT WE DO | | WHAT WE DON’T DO |
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ü+ | FullyIndependent Compensation Committee: Only independent directors set our compensation committee - permits the establishment of competitive compensationpolicies, practices and the measurement of actualprograms as well as measure performance, in a conflict-of-interest free environmentallowing for objective, conflict-free compensation programs.
| | û_ | No gross-upsRepricing or Exchange: - executive officersWe do not allow for the repricing or exchange of outstanding equity units or options without shareholder approval. |
| + | Independent Compensation Consultant: The Committee engages independent consultants to assist with compensation reviews. | | _ | No gross-ups: Executive Officers are not eligible to receive any tax reimbursement payments or “gross-ups”“gross ups” in connection with any severance or change-in-control payments or benefitsbenefits. |
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ü+ | Broad-based retirement programsShare ownership requirements: -Our executive officers as well as all of our retirement plansDirectors are broad-basedsubject to minimum holding levels, providing for alignment between Company leadership and are provided to all full-time employees in addition to our executive officersshareholders.
| | û_ | Limited perquisitesNo Pledging of Shares: -We do not permit pledging of NGS common shares as collateral for a loan. We also strongly discourage our executives and Directors from entering into hedging or similar monetization transactions with respect to our common stock. Any exceptions to our hedging policy must be approved in advance by the Compensation Committee and Chief Executive Officer.
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| + | Annual Compensation Review & Annual Shareholder Advisory “Say-on-Pay” Vote: The Committee conducts a comprehensive review of all executive compensation matters on an annual – or more frequent – basis. The Company has chosen to ask Shareholders to opine on its Executive Compensation program on an annual basis. | | _ | No Excessive Perquisites: With the exception of a car allowance for our officers and certain nominal expense reimbursements as detailedwhich stand in support of key business strategies and are fully disclosed in the Summary Compensation Table that follows this CD&A,Tables herein, we do not provide any perquisites
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ü | Independent compensation consultant - the Committee annually engages its own independent compensation consultant to assist with its compensation reviews
| | û | Prohibition of hedging and pledging shares - we do not permit hedging or pledging as collateral for a loan nor do we permit our executives or non-employee directors to engage in any derivatives trading with respect to our common stockperquisites.
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ü+ | Annual reviewTotal Shareholder Return Governor: -New in 2022, the Committee conducted its annual review and approvalLong-Term Equity Compensation program caps awards at the target level if TSR is negative, regardless of relative performance with the Company’s compensation strategy, including a review of our compensation peer group used for comparative purposes and a review of our compensation related risk profile to ensure that such risks are not reasonably likely to have a material adverse effect on the Companygroup.
| | û_ | No stock option exchanges or repricingunlimited/subjective incentives:New in 2022 - we do not allow for stock option exchanges or, both our short-term and long-term incentive programs are capped at maximum payout levels. In addition, the repricing of outstanding stock options without stockholder approvalCommittee has determined that discretionary awards outside our established incentive plans will be restricted to new hires. |
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ü+ | Risk mitigationMore Stringent Performance Guidelines: New in 2022, the Long-Term Equity Compensation program requires Total Shareholder Return relative to the peer group reach the 60th - we have certain controls in place (signature authority, governance policies, SOX processes, etc.) and an analysis is conducted on a quarterly basis
| | û | No related party transactions - we do not have any related party transactions
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ü | Double-trigger employment - our change-in-control payments and benefits with our Chief Executive Officer are based on a “double-trigger” provisionpercentile before the plan pays out at the target level.
| | _ | No Related Party Transactions: There are no related party transactions. |
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ü+ | Stock ownership guidelinesShareholder Engagement Program: - stringent ownership policies for DirectorsImproved in 2022,the Committee and CEOindependent directors proactively engage with shareholders to receive feedback and consider improvements to the executive compensation program.
| | _ | No Excessive Employee Equity Grants: We have consistently operated our stock-based incentive compensation programs within expected industry burn rates. |
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ü+ | Clawback policyShareholder Alignment: - applicableAlign pay with financial and operational performance using relative and absolute metrics; moving greater levels of executive pay to NEO's ("named executive officers") and other executive officers“performance based”/”at risk” standards.”
| | _ | No Future Gross-Ups: There will be no tax gross-ups in future executive officer agreements. |
| + | Longer-Term Equity Awards: Vesting of Executive Officer Long-Term Incentive Awards occurs over three years. | | | |
Other Participants in the Compensation Policy Process
In addition to implement a relatively streamlined compensation framework for our executives. We feel that our compensation philosophies and practices are appropriate given our relatively small size as a public company. By continuing a relatively streamlined compensation framework for our executives, we believe that we are able to establish a higher degreeCompensation Committee, members of transparency, understanding and certainty for our executives as well as the investing public, while at the same time avoiding complex benefit packages and agreements that can be, in some ways, difficult to understand and require significant time and cost to properly administer. In the end, we believe our compensation arrangements provide the desired results: fair and reasonable pay for achievements beneficial to Natural Gas Services Group Inc.leadership team and its shareholders.
Advisory Vote on Compensation; Shareholder Engagement
At our 2015 Annual Meeting, less than 50% ofcompensation consultants play an important role in the votes cast on the annual advisory “Say-on-Pay” proposal were cast in support of the compensationdetermination of our named executive officers. This was significantly lower than the support levels of previous years. The results were disappointing since we believe the vote was the result of the influence of recommendations of certain proxy advisory firms, both of which advise institutional investors on voting on annual proxy matters. We believe that their reports contained factual errors and assumptions that resulted in questionable conclusions and recommendations. Our specific objections to their reports were detailed in supplementary proxy materials that were distributed last year. It is important to note that while the proxy advisory firms felt that our general compensation structure was lacking in some areas there was no lack of alignment in their ‘pay for performance’ metric and, in fact, they complimented the compensation committee for their continued rigor in setting financial targets.
Although this was a non-binding advisory vote, the Company’s Board of Directors takes the results of this vote seriously, and during 2015 the Company’s Board of Directors and executive management deliberated extensively over the results of last year's "Say-on-Pay" vote and engaged in meaningful review of its corporate governance and executive compensation matters with advisors as well as other stakeholders.program.
While
Role of Executive Leadership Team
As noted in this CD&A, the Compensation Committee and full Board believes that our executive compensation program and corporate governance policies are strong and have served us well, it recognizes the changing compensation and governance landscape.
Below is a summary of what we heard and the actions we took in response:
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Compensation and Governance Concerns | | Responses to the Concerns |
Insufficient Risk Mitigators (i.e., lack of clawback policy and stock ownership guidelines) | | We have adopted both a Clawback Policy covering our executive officers and Stock Ownership Guidelines covering our executive officers and members of our Board of Directors. We do note that our company has never had a financial restatement and that each officer and director presently maintains their stock holdings in excess of the minimum guidelines.
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One Year Vesting of Restricted Stock Grants to Executive Officers | | The Compensation Committee approved a new frameworkresponsible for our long-term equity compensation. With respect to our recent restricted stock awards to our executive officers for fiscal 2015 (granted in early 2016), such awards vest over two years and future awards will vest in one-third increments over three years.
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Excessive Cash Severance | | We do not feel that the cash severance benefits for our Chief Executive Officer are excessive. Any change of control severance requires a ‘double-trigger’ to be payable and the triggers are limited to the standard "good reason" events (see page 43). We believe the severance benefits are within the norms of companies in our industry that exhibit a similar performance profile that we do, i.e., industry leading total shareholder returns in each of the past one, three and five year periods. Please see the charts on page 23 and the 2015 performance achievements below. The cash severance due to our CEO in connection with "good reason" events (typically be an involuntary occurrence) equates to approximately three years of total compensation based upon a year of good performance, which the Company has consistently demonstrated.
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Lack of Lead Independent Director | | We have had an appointed lead director for years, but have amended our Corporate Governance Guidelines to include the public identification and acknowledgment of a lead independent director. Charles G. Curtis, our longest tenured independent director, has been formally appointed as our lead director. |
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Targeting 75th percentile for CEO's total compensation | | Our CEO's total compensation (base pay and short and long term incentives) has been between the 50th and 75th percentile when compared to peer group companies with the final approved compensation being a combination of the CEO's and the Company's performance. Typically, although it can vary, base salary of our CEO has been in the 50th percentile range while long term incentives are employed to increase the compensation package to competitive levels. This allows the Compensation Committee to annually adjust the CEO's long term incentives in keeping with shareholder returns and Company performance. We think this is an appropriate alignment of pay relative to performance of the company and the competitive market. Supporting this practice is the fact that the Company has performed in the top 15% to 25% of peer group companies for Total Shareholder Return in the last one, three and five year periods (please see pages 22 and 23 for relevant data). Our Compensation Committee believes this performance has justified total compensation being awarded in the 75th percentile range in recent years. However, in the future, if the relative performance of the Company lags our peer group of companies, then the CEO’s total compensation will be evaluated under those circumstances.
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Awarding long-term equity awards on a purely discretionary basis with minimum awards guaranteed | | In the future, long-term equity awards will be based on a combination of the relative TSR (Total Shareholder Return) of the Company when compared to our peer group of companies and a discretionary component that shall be evaluated by the Compensation Committee. |
In addition to the foregoing, other concerns made by the proxy advisory firms are discussed elsewhere in this section.
Fiscal Year 2015 Performance
In 2015, our financial performance demonstrated extremely positive results and continued to demonstrate a financial condition that provided stability and excellent shareholder value in a very challenging time for a service company in the oil and gas industry. Some of our financial and operational highlights include:
Increasing cash and cash equivalents from $6.2 million to $35.5 million in 2015;
Maintained long-term debt at a continuing, very low level (less than $500,000);
Total revenue decreased only 1.1% in 2015 compared to 2014, a record revenue year. This made 2015 the second highest revenue year in the company’s history, a significant achievement considering the operating environment in 2015;
Decreasing capital expenditures from $53.3 million in 2014 to $12.5 million in 2015 demonstrating a timely and quick response to the deteriorating oil and gas industry environment;
The Company has self-funded growth capital expenditures in excess of $185 million since 2010;
Operating cash flow as a percentage of revenue was 43% in 2015, increasing from 35.6% in 2014, making the Company an industry leader in this category;
Free cash flow ( operating cash flow less capital expenditures) as a percentage of revenue was 30.3% in 2015 compared to (19.4%) in 2014, and compared to the S&P500 in reporting 9% in 2015 when compared to 2014;
Maintained adjusted EBITDA (as defined on page 24) at 44-45% of revenue in both years while limiting 2015 adjusted EBITDA deterioration to only 3% in 2015;
Increased average gross margins in our core rental business from 60% in 2014 to 62% in 2015, notwithstanding continuing pressures on revenue and pricing due to the significant fall-off in oil and gas industry;
Increased compressor sales revenues by 27% from 2014 to 2015;
Maintained SG&A expenses at 11% of total revenue in both 2014 and 2015 -- the lowest among our public peers;
Finalized development, and introduced two new gas compression products, a 500 horsepower CiP compressor frame/package and a 50HP-100Hp Vapor Recovery Unit (VRU) product line; and
For 2015, the Company's common stock price slipped only 3%, while identified public peers were down 43.5%, the OSX index (oil service sector) was off 25.2%, West Texas Intermediate (WTI) fell 30.5% and the U.S. land rig count decreased by 61.5%.
Elements of Our Compensation Program
In order to achieve the objectives set forth above in our compensation philosophy and objectives, we have structured an executive compensation program that provides our named executive officers with the following:
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Element | | Characteristics | | Primary Objective |
Base Salary | | Cash | | Attract and retain highly talented individuals |
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Short-Term Incentives | | Cash-based performance awards | | Reward for corporate and individual performance |
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Long-Term Incentives | | Restricted stock with vesting period | | Align the interests of our employees and shareholders by providing employees with incentive to perform technically and financially in a manner that promotes share price appreciation |
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Other Benefits | | 401(k) matching plans and employee health benefit plans | | Provide benefits that promote employee health and support employees in attaining financial security |
We do not presently and have not in the past used any of the following types of executive compensation:
defined benefit pension plans;
employee stock purchase/ownership plans; or
supplemental executive retirement plans/benefits.
Assistance Provided to the Committee
The Committee makes all compensation decisions regarding our named executive officers. Stephen C. Taylor, ourOur Chief Executive Officer annually reviews the performance of each of our executive officers (other than(with the exception of the Chief Executive Officer whose performancewhich is reviewed solely by the Compensation Committee) and presentsprovides important data and recommendations to the Committee with respect to salary and cash bonus percentage adjustmentsincentives under the Company’s short-term and restricted stock grantslong-term incentive programs. The Compensation Committee relies on these evaluations in establishing compensation for our executives (other than the Chief Executive Officer whose salary, cash bonus percentage adjustments and restricted stock grants are determined solely byother named executive officers, although the Committee). The Committee may exercise its discretion in modifying any recommendations maderecommendation provided by ourthe Chief Executive Officer.
The Committee may, from time-to-time, also seeksseek input from the Chief Executive Officer regarding other financial and operating performance, metrics and data that may be relevant in the evaluation and establishment of compensation policy. In addition, the Company may seek input from other members of the Company’s leadership team and insightassociates as they evaluate financial and operational data in support of Mr. Taylor concerning specific factors that Mr. Taylor believesexecutive compensation decisions.
Role of Compensation Consultants
The Compensation Committee has the sole authority to be appropriate forretain, obtain the advice of, and terminate, any compensation consultant, independent legal counsel, or other advisors to assist the Compensation Committee in the discharge of its duties and responsibilities, including the evaluation of director and executive compensation. In completing its duties, the Compensation Committee may rely on independent consultants and legal counsel to:
•Provide information and analysis on executive compensation trends and market developments;
•Advise on potential peer group members to evaluate our named executive officers compensation;
•Review and analyze peer group information to assist with developing our executive compensation program;
•Update the Compensation Committee periodically on legislative and regulatory developments impacting executive compensation;
•Provide assistance in developing and executing the Committee’s consideration and which the Committee may not be aware of, such as extraordinary efforts or accomplishments of our executive officers. Mr. Taylor also advises the Committee on general topics such as the morale of our executives.shareholder engagement program;
Natural Gas Services Group’s accounting and human resources departments assist•Provide assistance to the Committee in developing its narrative describing the Company’s executive compensation processprogram; and
•Provide additional assistance as requested by gathering and organizing data, which is then presented to the Committee by Mr. Taylor for the Committee’s review.Compensation Committee.
In late 2012, our2021 and into 2022, the Compensation Committee hiredengaged Korn Ferry to provide independent compensation consulting services. In addition to other assistance, Korn Ferry assisted the Company with its shareholder outreach and engagement program as well as responding to shareholder concerns which arose as a result of such outreach. Korn Ferry also provided a review of the Company’s overall executive compensation program. The Company determined that Korn Ferry qualified as an independent compensation consultant Longnecker & Associates (“Longnecker”)under the standards established by the U.S. Securities and Exchange Commission and the New York Stock Exchange.
The Committee engaged additional legal counsel and data services during the term to assist in the analysis of potential peer group members and provide legal advice to the Committee.
Annual Base Salaries
The base salary of our named executive officers is the exclusive fixed component of our executive officers’ annual cash compensation. The Compensation Committee periodically reviews and makes its determination, taking into account various factors, including the Company’s performance, the executives experience and expertise in business and the industry (including, to a certain extent, the tenure and cumulative performance of the executive), to obtain objective, expert adviceindustry conditions, and assist with compensation matters concerning our Chief Executive Officer and Directors. Longnecker advisedshareholder feedback.
In addition, the Compensation Committee on a varietymay take into account certain competitive factors which can include:
•Compensation levels of similarly-situated executives of other compression companies, oilfield service concerns and other relevant comparable companies in our peer group;
•Levels of compensation related issues in 2015 with respectnecessary to attract and retain highly talented executives, both within and outside our Chief Executive Officer, including:industry;
competitive pay analysis on executive compensation;
pay levels of Chief Executive Officers; and
our executive compensation program design, including short-term incentive plan design, long-term incentive plan design, and pay mix.
In the course of conducting its activities, Longnecker communicated with the Compensation Committee and presented its findings and recommendations•Comparable starting base salaries at comparable companies for discussion. During 2015, Longnecker also met with our Chief Executive Officer to review its compensation report.
In 2014 and 2015, Longnecker did not provide any services to the Company, or receive any payments from the Company, other than in its capacity as a consultant to the Compensation Committee. The Compensation Committee has assessed whether
the services provided by Longnecker raised any conflicts of interest pursuant to the SEC rules, and has concluded that no such conflicts of interest existed during 2014 or 2015.
Competitive Pay Analysis
To evaluate the competitiveness of our Chief Executive Officer's base salary, target total cash compensation (i.e., base salary plus target short-term cash incentive award), long-term incentive awards, and total direct compensation (i.e. base salary, target short-term cash incentive award, and long-term incentive awards), Longnecker annually provides the Committee competitive pay information derived from a custom peer group that is reviewed each year (the “Custom Peer Group”) and referred to a variety of published compensation surveys. The companies comprising the Custom Peer Group in Longnecker’s compensation report used in connection with 2015 included:
new hires.
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NGS Custom Peer Group | |
Company Name | Company Description |
| |
Gulfmark Offshore, Inc. | GulfMark Offshore, Inc. provides offshore marine support and transportation services primarily to companies involved in the offshore exploration and production of oil and natural gas. |
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Archrock Partners, LP | Archrock Partners, L.P. provides natural gas contract operations services to customers in the United States (In November 2015, Exterran Partners, L.P. spun off their US compression into a new entity named "Archrock Partners"). |
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Dawson Geophysical Co. | Dawson Geophysical Company provides onshore seismic data acquisition and processing services in the United States. |
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Callon Petroleum | Callon Petroleum is an independent energy company which is focused on growing production and reserves from its oil-weighted, multi-play, multi-pay assets in the Permian Basin.
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Vaalco Energy, Inc. | VAALCO Energy, Inc., an independent energy company, together with its subsidiaries, engages in the acquisition, exploration, development, and production of crude oil and natural gas. |
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Team, Inc. | Team Inc. provides specialty industrial services in the United States, Canada, Europe, and internationally related to the construction, maintenance and monitoring of pressurized piping and associated systems in the refining, petrochemical, power, pipeline and other heavy industrial industries. |
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Tesco Corp. | Tesco Corporation, together with its subsidiaries, is engaged in the design, manufacture and service delivery of technology-based solutions for the upstream energy industry worldwide. |
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RigNet, Inc. | RigNet, Inc. provides remote communications services for the oil and gas industry. |
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Mitcham Industries, Inc. | Mitcham Industries, Inc., through its subsidiaries, engages in the leasing, sale, and service of geophysical and other equipment to the seismic industry worldwide. |
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USA Compression Partners, LP | USA Compression Partners provides natural gas compression services under term contracts with customers in the oil and gas industry in the U.S. |
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Warren Resources, Inc. | Warren Resources, Inc., an independent energy company, engages in the exploration, development, and production of onshore oil and natural gas reserves in the United States. |
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Flotek Industries Inc. | Flotek Industries develops and supplies drilling, completion and production technologies and related services to the energy and mining industries in the U.S. and internationally. |
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The Compensation Committee withreviews the assistancebase salaries of all named executive officers on an annual basis and makes adjustments based on the above criteria, the results of which can be found in the summary compensation tables. For 2022, the Compensation Committee chose not to change the salary of the compensation consultant, reviewedChief Executive Officer from the companies comprisingprevious year. The Committee did provide cost-of-living and merit increases to both the Custom Peer Group in order to maintain its appropriateness forChief Financial Officer and Vice President of Technical Services.
Annual Cash Incentive Program
The Company’s annual cash incentive awards are based on selected performance metrics. The annual cash incentive is only paid if certain threshold levels are reached. The annual cash incentive program sets targets that, if reached, provide a cash payment of 100% of the competitive pay analysis. These companies were generally selected since they are all companiesnamed executive officers base salary. Should certain “stretch targets” be met, the annual cash incentive payments could be paid at 125% of the named executive officers’ base salary. The hierarchy of payments under our Annual Cash Incentive Program is set forth in the energy and energy services industry and have various rental, leasing or manufacturing components in their business with all having an acceptable rangefollowing table:
| | |
| Below Minimum Threshold – No Cash Bonus Payment |
| Threshold Levels Reached – 75% of Base Salary |
| Target Levels Reached – 100% of Base Salary |
| Stretch Levels Reached – 125% of Base Salary |
A primary purpose of relatively similar annual revenues and market capitalization.the short-term incentive program is to create a collection of key objectives on which the entire enterprise can focus. The Compensation Committee believesexpects the Custom Peer Group reflects our current competitors for employee talentnamed executive officers to communicate the financial and that it provides an appropriate peer set foroperational goals to the purposesvarious business units and functions of evaluating our pay practicesthe Company to ensure all associates are focused on the same goals. Early in the year, following the plan year, the Compensation Committee determines whether the financial and operational goals have been attained and approves cash awards based on the Chief Executive Officer’s pay levels.level of achievement of the previously established annual performance goals.
In 2021, the Compensation Committee approved the following financial and operational metrics to be used in assessing and awarding awards on the Annual Cash Incentive Program: (1) Cash Flow from Operations (35%); (2) Revenues (25%); (3) Environmental, Social and Governance Objectives (20%); and (4) Strategic and Tactical Initiatives (20%).
The published compensation surveys consistedmeasurement metrics used in determining the awards as well as the actual awards made under the Annual Cash Incentive Program for 2021 can be found in the Summary Compensation Tables found on page 30.
As a result of the following:Compensation Committee’s shareholder outreach and engagement program and a comprehensive review by the Compensation Committee, the Committee has chosen to adjust the metrics to be used in the assessment and awards under the Annual Cash Incentive Program. For 2022, the Committee will use the following criteria for awards: (1) Cash Flow from Operations (30%); (2) Earnings Before Interest, Taxes, Depreciation and Amortization (30%); (3) Revenue (5%); (4) Environmental, Social and Governance Objectives (20%); and (5) Strategic and Tactical Initiatives (15%).
Economic Research Institute -- Executive Compensation Assessor
Tower Watson -- Top Management Compensation
Mercer, Inc. -- Executive General Benchmark Survey
Kenexa -- CompAnalyst Benchmark Survey
WorldatWork -- Total Salary Increase Budget Survey
The Compensation Committee will continue to review the metrics used in the Annual Cash Incentive Program on an annual basis with an emphasis on both input from our shareholders received through our outreach and engagement program as well as trends ascertained from a review of our peer group companies. The Committee believes this approach allows us to be responsive to the input of our shareholders as well as competitive pay informationwith practices among our peers and surveysthe compression and oilfield services industry.
Long-Term Equity Incentive Program
Our named executive officers are eligible to earn performance-based equity awards, based on the relative performance of the Company’s common shares relative to the performance of our peer group members, referred to as a “market check”“Relative Total Shareholder Return”.
The 2021 Long-Term Equity Incentive Program was governed by the following guidelines:
•Awards made on an annual basis with vesting occurring, in equal amounts, over the following three years.
•Relative Total Shareholder Return minimum threshold must be reached for awards to ensure, in its subjective judgment, thatbe granted.
•Target award (100% of base salary) is achieved when Relative Total Shareholder Returns falls at or above the Chief Executive Officer’s base salary, target total cash compensation, long-term incentive awards and total direct compensation remain competitive. The Compensation Committee does not target any individual pay component to fall within a specific range or50th percentile of the competitive pay information. Whileidentified peer group.
•Maximum award (200% of base salary) is achieved only if the competitive pay informationCompany’s relative TSR is importantat the 100th percentile (ranked first) of the identified peer group.
In 2021, our peer group included CSI Compressco, LP; Dawson Geophysical Corporation; Independence Contract Drilling, Inc.; ION Geophysical Company; Key Energy Services, Inc.; Mammoth Energy Services, Inc.; NCS Multistage Holdings, Inc.; Nuverra Environmental Solutions, Inc.; Ranger Energy Services, Inc.; RigNet, Inc.; Smart Sand, Inc.; and Solaris Oilfield Infrastructure, Inc.
Based on the Company's share performance from January 1 - December 31, 2021, the Company's relative Total Shareholder Return performance was 6th out of the 14-member peer group. Based on the 2021 compensation plan, that results in an award at 118% of the target award (100% of base salary). As noted below, in response to our shareholder engagement and outreach efforts, the Compensation Committee’s approval process, it is just one of several factors considered byaward metrics will be changed, creating more rigorous performance standards.
For 2022, in response to recommendations received in conjunction with the Compensation Committee in approving executive compensationCompany’s shareholder outreach and engagement program, the Compensation Committee has discretionmade the following changes to the Long-Term Equity Incentive Program:
•Target award (100% of base salary) will be achieved only when Relative Total Shareholder Return reaches the 60th percentile of the identified peer group, creating a more rigorous standard for achieving the target award level. In addition, the Committee made additional adjustments to the payout levels of the program, consistent with change in determining the naturetarget payout percentile.
•Awards will be capped at the target level if absolute Total Shareholder Return is negative over the performance period, regardless of relative performance. Previously, there was no “negative performance cap” on equity awards.
•The Compensation Committee adjusted the peer group for 2022 to be more relevant, to better reflect the Committee’s core tenets of peer group selection and extentthe remove and replace peers that were no longer appropriate given certain corporate actions.
Also, and in response to feedback received from the Committee’s shareholder outreach and engagement efforts, other than the performance-based equity awards described herein, the Compensation Committee did not grant any time-based or discretionary awards to the Chief Executive Officer in 2021 and is committed to not grating such awards in any of its use.the next three years.
Performance ComparisonThe Compensation Committee will continue to Peer Groupreview the metrics used in the Long-Term Equity Incentive Program on an annual basis with an emphasis on both input from our shareholders received through our outreach and engagement program as well as trends ascertained from a review of our peer group companies. The Committee believes this approach allows us to be responsive to the input of our shareholders as well as competitive with practices among our peers and the compression and oilfield services industry.
The table below shows the aggregate one, threeLong-Term Equity Incentive Award Payout Levels for both 2021 and five-year Total Shareholder Return (“TSR”) for2022, side-by-side, providing a comparison of the Company as well as the median TSR for the peer group utilizedchanges made by the Company.Compensation Committee as a result of its shareholder outreach and engagement program.
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| Aggregate Total Shareholder Return |
| Company/Peer Group | 1-year TSR | 3-year TSR | 5-year TSR |
| Natural Gas Services Group | (3.2)% | 35.8% | 17.9% |
| Median NGS Proxy Peer Group | (43.5)% | (37.9)% | (54.3)% |
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| Long-Term Equity Incentive Award Payouts |
| 2021 | | 2022 |
| Relative TSR Rank | Payout vs. Target | Payout Level | Percentile | Relative TSR Rank | Payout vs. Target | Payout Level |
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| 1 | 200% | Maximum | 100% | 1 | 200% | Maximum |
| 2 | 190% | | 93% | 2 | 180% | |
| 3 | 172% | | 86% | 3 | 160% | |
| 4 | 154% | | 79% | 4 | 140% | |
| 5 | 136% | | 71% | 5 | 120% | |
| 6 | 118% | | 64% | 6 | 100% | Target |
| 7 | 100% | Target | 57% | 7 | 80% | |
| 8 | 75% | | 50% | 8 | 60% | |
| 9 | 50% | | 43% | 9 | 40% | |
| 10 | 25% | Threshold | 36% | 10 | 25% | Threshold |
| 11 | 0% | Below Threshold | 29% | 11 | 0% | Below Threshold |
| 12 | 0% | | 21% | 12 | 0% | |
| 13 | 0% | | 14% | 13 | 0% | |
| 14 | 0% | | 7% | 14 | 0% | |
AsThe awards made under the foregoing table indicates,Long-Term Equity Incentive Program for 2021 can be found in the Company has significantly outperformed its peers in both 2015 and over the past five years. Moreover, as the table below indicates, on an annualized basis, the Company has also outpaced its peer group over the same time period.
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| Annualized Total Shareholder Return |
| Company/Peer Group | 1-year Ann. TSR | 3-year Ann. TSR | 5-year Ann. TSR |
| Natural Gas Services Group | (3.2)% | 10.7% | 3.4% |
| Median NGS Proxy Peer Group | (43.5)% | (14.7)% | (14.5)% |
Individual and Company Performance - Base Salary and Equity Awards
Summary Compensation Tables. The Compensation Committee also evaluates compensation, particularly base salary levels andonly granted equity awards (restricted stock awards), through an analysis of each executive officer’s individual performance and the overall performance of Natural Gas Services Group, our goal being to strengthen the link between what we pay our executives and the performance of Natural Gas Services Group. Factors the Committee considers in our analysis include:
the individual performance, leadership, business knowledge and level of responsibility of our officers;
the particular skill-set and longevity of service of the officer;
the effectiveness of the officer in implementing our overall strategy; and
the general financial performance and health of the Company.
Our CEO is additionally evaluated on his specific ability and effectiveness with respect to shareholder and customer engagement.
Specific Company Financial Metrics - Cash Bonuses
With respect to compensation we pay in the form of cash bonuses, the Committee sets performance levels for three specific company financial metrics. The Committee relies on whether these levels are achieved and the individual performance of our executive officers to determine whether cash bonuses are awarded and the amounts of such bonuses. The three financial metrics the Committee considers are:
total revenues;
adjusted EBITDA; and
adjusted net income before taxes.
Adjusted EBITDA is calculated from our audited financial statements by adding to net income, or loss, (1) amortization and depreciation expense, (2) interest expense (3) provision for income tax expense and (4) loss on retirement of rental equipment.
We believe that our core executive compensation mix of base salary, cash bonuses and equity awards, while fairly limited, presently provides enough diversity for us to link executive compensation to our short-term and long-term objectives. For instance, base salary and cash bonuses generally relate to short-term achievements and objectives while equity awards are more closely linked to the long-term objectives of earnings per shareChief Executive Officer in 2021 based on performance goals and increased market value ofdid not make any additional discretionary awards based on tenure or otherwise.
The table below sets forth the compensation earned by our common stock or maintenance of market value in periods of depressed industry performance, such as during the past two years.
Base Salary
We provideCEO, Stephen C. Taylor, and our other named executive officers and other employees with base salary to compensate them for services rendered duringto us for the fiscal year. Each year the Committee receives base salary recommendations from our Chief Executive Officer for all of our executive officers (other than our Chief Executive Officer whose base salary is evaluated by the Committee on an annual basis).
years ended December 31, 2021, 2020 and 2019.
In January 2015, the
Summary Compensation Committee reviewed the 2014 performance of our Chief Executive Officer, Stephen C. Taylor, along with the competitive pay information provided in Longnecker’s report, in setting Mr. Taylor's base salary for 2015. Before the increase in salary for 2014, Mr. Taylor’s base salary fell to slightly less than the 50Table
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Name
and
Principal Position | Year | Salary(4) | Bonus (5) | Stock Awards(6) | Option Awards(7) | Non-Equity Incentive Plan Compensation(8) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(9) | All Other Compensation(10) | Total |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) |
| Stephen C. Taylor, Chairman, President & CEO* | 2021 | $ | 612,000 | | $ | — | | $ | 722,160 | | $ | — | | $ | 397,800 | | $ | — | | $ | 17,319 | | $ | 1,749,279 | |
| 2020 | 612,000 | | — | | 973,079 | | — | | 1,585,080 | | — | | 18,790 | | 3,188,949 | |
| 2019 | 607,181 | | — | | 530,910 | | — | | 1,289,513 | | — | | 15,733 | | 2,443,337 | |
| James R. Hazlett, Vice President-Technical Services | 2021 | 225,100 | | — | | 184,025 | | — | | 73,158 | | — | | 30,726 | | 513,009 | |
| 2020 | 225,100 | | — | | 178,200 | | — | | 112,550 | | — | | 23,619 | | 539,469 | |
| 2019 | 224,596 | | — | | 56,400 | | — | | 42,112 | | — | | 34,824 | | 357,932 | |
Micah C. Foster, VP & Chief Financial Officer(1) | 2021 | 153,863 | | — | | 196,300 | | — | | 78,000 | | — | | 16,312 | | 444,475 | |
| 2020 | — | | — | | — | | — | | — | | — | | — | | — | |
| 2019 | — | | — | | — | | — | | — | | — | | — | | — | |
G. Larry Lawrence, Former VP & Chief Financial Officer(2) | 2021 | — | | — | | — | | — | | — | | — | | — | | — | |
| 2020 | — | | — | | — | | — | | — | | — | | — | | — | |
| 2019 | 198,858 | | — | | — | | — | | 32,871 | | — | | 15,461 | | 247,190 | |
James R. Lawrence, VP & Chief Financial Officer(3) | 2021 | — | | — | | — | | — | | — | | — | | — | | — | |
| 2020 | 205,346 | | — | | — | | — | | — | | — | | 19,022 | | 224,368 | |
| 2019 | 45,385 | | — | | 61,300 | | — | | — | | — | | 4,381 | | 111,066 | |
th
percentile bracket in the Company’s peer group. In connection with that review, the Committee increased the base salary of
* Mr. Taylor from $505,175 in 2014 to $543,063 in 2015, which movedresigned his officer positions on May 17, 2022.
(1) Mr. Taylor’s base salary to approximately the 63rd percentile bracket. The increaseFoster was made in recognition of Mr. Taylor’s leadership and contributions to the Company's strong 2014 financial and operational results, which included: (i) increasing total gross margin, exclusive of depreciation and amortization, by 11.4% to $53.8 million for 2014 from $48.3 million for 2013; (ii) achieving in 2014 record high revenue of $97 million, a 9.0% increase in revenue from 2013; (iii) a 7% increase in EBITDA; generating $34.6 million from operations, while investing $53.1 million in capital for equipment; (iv) controlling SG&A expense to 10.6% of revenues; increasing rental revenue by 14.4%; internally funding over $175 million in growth capital since 2010 while maintaining a very low debt level when compared to competitors; (v) maintaining high margins and maintaining high ratios of operating income, net income and EBITDA when compared to gross revenues relative to competitors; (vi) aggressive expansion into new geographic areas; (vii) positioning our business to emphasize servicing oil and gas production
rather than drilling projects in order to offset drilling slowdownsappointed as witnessed in the latter half of 2014; and (viii) maintaining safety performance.
While the Compensation Committee reviewed the competitive pay information in connection with setting Mr. Taylor's base salary adjustments, together with his contributions toward our goals, the Compensation Committee did not target his base salary to fall within a specific range or percentile of the competitive pay information.
With respect to our other two named executive officers other than our CEO, James Hazlett, our Vice President of Technical Services, base salary for 2015 was $200,000 compared to $190,000 for 2014. The base salary of G. Larry Lawrence, our Vice President and Chief Financial Officer on May 11, 2021.
(2) Mr. G.L. Lawrence retired from the Company on November 15, 2019. Mr. G.L. Lawrence rejoined the Company in January 2021 and was appointed our interim Vice President and Chief Financial Officer until the appointment of Mr. Foster on May 11, 2021.
(3) Mr. J.R. Lawrence joined the Company on October 1, 2019 and was appointed as our Vice President and Chief Financial Officer on November 16, 2019. Mr. J.R. Lawrence gave notice of his resignation in December 2020.
(4) The amounts in column (c) includes amounts deferred under our Deferred Compensation Plan and 401(k) Plan. The Company has not made any contributions to the Deferred Compensation Plan.
(5) The amounts reflected in column (d) reflect discretionary bonus payments not covered under our Annual Incentive Bonus Plan.
(6) The amounts in column (e) reflect the grant date fair value of restricted stock/unit awards in accordance with FASB ASC Topic 718. The amounts shown for 2015, was $187,000 compared2021 reflect the grant date fair value of stock granted contingent upon the approval
by our shareholders of Proposal #3 to $170,000increase the number of shares of our common stock reserved for most of 2014. We continue, as we have inissuance under the past, to rely on the following factors in evaluating and determining the amount of compensation we pay these executives:
our general knowledge of executive compensation levels in the natural gas compression industry and similarly sized energy service companies;
each executive’s individual performance and the overall performance of Natural Gas Services Group;Group, Inc. 2019 Equity Incentive Plan (the "2019 Plan") by 650,000 shares. To the extent that we are unable to obtain shareholder approval to increase the reserved shares under the 2019 Plan, we intend to pay the value of the awards in cash as they vest.
(7) The amounts in column (f) reflect the dollar amounts recognized for financial statement reporting purposes for the fiscal years ended December 31, 2021, 2020 and 2019, in accordance with FASB ASC Topic 718, associated with stock option grants under our Stock Option Plan.
specific company financial metrics(8) The amounts in column (g) reflect the cash bonus awards to the named executive officers under our Annual Incentive Bonus Plan, including amounts deferred under our Deferred Compensation Plan. This is discussed in further detail on page 31 under the caption “Short-Term Incentives - Annual Incentive Bonus Plan.” The amount in column (g) for Mr. Taylor also includes a long-term incentive award of $973,080 and $1,061,820 (50% of his long-term incentive awards earned for each year), for 2020 and 2019, respectively, payable in either cash or a variable number of shares at the discretion of the Compensation Committee. These fixed value awards are subject to three-year vesting in equal, annual tranches.
(9) The Deferred Compensation Plan referred to column (h) does not pay above-market or preferential earnings.
(10) The amounts shown in column (i) include matching contributions made by Natural Gas Services Group to each named executive officer under our 401(k) plan and the applicationaggregate incremental cost to Natural Gas Services Group of specific weightsperquisites provided to such metrics.our named executive officers as shown in the table below.
All Other Compensation Table
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Name |
Year |
Automobile
Allowance | Personal Use of Company Provided Automobiles | Additional
Incremental Portion
of Health Insurance
Premiums Paid for Officers Only |
401(k)
Plan |
Total |
| Stephen C. Taylor | 2021 | $ | — | | $ | 1,800 | | $ | 7,698 | | $ | 7,821 | | $ | 17,319 | |
| 2020 | — | | 1,800 | | 8,440 | | 8,550 | | 18,790 | |
| 2019 | — | | 1,800 | | 8,103 | | 5,830 | | 15,733 | |
| James R. Hazlett | 2021 | 10,200 | | — | | 13,467 | | 7,059 | | 30,726 | |
| 2020 | 10,200 | | — | | 6,360 | | 7,059 | | 23,619 | |
| 2019 | 10,200 | | — | | 17,580 | | 7,044 | | 34,824 | |
| Micah C. Foster | 2021 | 5,538 | | — | | 8,619 | | 2,155 | | 16,312 | |
| 2020 | — | | — | | — | | — | | — | |
| 2019 | — | | — | | — | | — | | — | |
| G. Larry Lawrence | 2021 | — | | — | | — | | — | | — | |
| 2020 | — | | — | | — | | — | | — | |
| 2019 | 9,219 | | — | | — | | 6,242 | | 15,461 | |
| James R. Lawrence | 2021 | — | | — | | — | | — | | — | |
| 2020 | 9,000 | | — | | 3,567 | | 6,455 | | 19,022 | |
| 2019 | 2,008 | | | 1,650 | | 723 | | 4,381 | |
Grants of Plan-Based Awards
The applicabilitytable below sets forth the estimated future payouts under non-equity incentive plan awards and restricted stock/unit awards granted and the grant date fair value of such awards.
Grants of Plan-Based Awards for 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Estimated Future
Payouts Under Non-Equity
Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive
Plan Awards | | | | |
| Name | Grant Date | Threshold ($) | Target ($) | Maxi-mum
($) | Threshold (#) | Target | Maxi-mum ($) | All Other Stock
Awards: Number of Shares of Stock or Units (#) | All Other Option
Awards: Number of Securities Underlying Option (#) | Exercise or Base
Price of Option Awards ($/Sh) | Grant Date Fair
Value of Stock and Option Awards ($) |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (l) |
| Stephen C. Taylor | 4/25/2022(1) | $ | — | | $ | — | | $ | — | | — | | — | | $ | — | | 60,839 | | — | | $ | — | | $ | 722,160 | |
3/29/2021(2) | $ | 474,300 | | $ | 612,000 | | $ | 749,700 | | — | | — | | — | | — | | — | | — | | — | |
| James R. Hazlett | 4/25/2022(1) | — | | — | | — | | — | | — | | — | | 15,503 | | — | | — | | 184,025 | |
3/29/2021(3) | $ | 87,188 | | $ | 112,500 | | $ | 137,813 | | — | | — | | — | | — | | — | | — | | — | |
| Micah C. Foster | 4/25/2022(1) | — | | — | | — | | — | | — | | — | | 16,537 | | — | | — | | 196,300 | |
3/29/2021(3) | $ | 93,000 | | $ | 120,000 | | $ | 147,000 | | — | | — | | — | | — | | — | | — | | — | |
(1) The amounts shown on these factors varies dependingrows reflects the awards of restricted stock or units earned in 2021 to be issued in 2022, contingent upon the approval by our shareholders of Proposal #3 to increase the number of shares of common stock reserved for issuance under the 2019 Plan by 650,000 shares. To the extent we are unable to obtain shareholder approval to increase the reserved shares under the 2019 plan, we intend to pay the value of the award in cash as they vest.
(2) The amounts on these rows assume, under the typestructure of compensation being evaluated and determined. For instance, we do not rely on weighted company financial metrics to evaluate and determine base salary levels (which are competitively set toour Annual Incentive Bonus Plan, that each of the market), but the achievement of pre-set financial metrics are the primary means through which we evaluateachieved under threshold (75% payout), target (100% payout), and determine the amount of the cash bonuses we award to our executives. Below is a more detailed discussion of how these factors apply to the different types of compensation we utilize.maximum/stretch (125% payout) levels. The actual payouts in April 2022 that were earned in 2021 were as follows: Mr. Taylor - $397,800, Mr. Hazlett - 73,158 and Mr. Foster - $78,000.
Short-Term Incentives - Annual Incentive Bonus Plan
In 2006, the Committee adopted an Annual Incentive Bonus Plan or, the “IBP,” that provides guidelines for the calculation of annual non-equity incentive based compensation in the form of cash bonuses to our executives, subject to Committee oversight and modification. The bonuses awarded under the IBP are short-term awards in recognition of the overall performance and efforts made by certain of our executives during a particular year. Each year, the Committee approves the group of executives eligible to participate in the IBP and establishes target award opportunities for such executives. For 2015,2021, the Committee maintained Mr. Taylor’s target award opportunity to up toat 100% of his base salary. Target award opportunity was 50% of average base salary for Messrs. LawrenceMr. Hazlett and Hazlett.Mr. Foster.
In 2015, 90%For 2021, 100% of an executive officer’s IBP award was based on achievement of company financial and other objectives relating to:
total•Cash flow from operations;
•Total revenues;
adjusted EBITDA;•ESG objectives; and
adjusted net income before taxes.•Strategic and tactical initiatives.
Each of these three componentsCash flow from operations accounts for 30%35% of the IBP, total company financial objective portionrevenues accounts for 25% of the IBP. TheIBP, ESG objectives accounts for 20% of the IBP and strategic and tactical initiatives accounts for the remaining 10% of an executive officer’s IBP award is based upon individual performance as evaluated by our CEO (except with respect to our CEO whose individual performance is evaluated by the Committee)20%.
Each year, the Committee sets athe performance levellevels for each component of the company financial objective portion of the IBP. The payment of awards under the IBP is based upon whether these performance levels are achieved for the year. Payout on each of the three financial objectives is as follows:
•75% of the bonus amount attributable to a financial component will be paid if we achieve at the "threshold" amount;
•100% of the bonus amount attributable to a financial component will be paid if we achieve the "target" amount; and
•125% of the bonus amount attributable to a financial component will be paid if we achieve the "stretch" amount.
2021 Annual Incentive Bonus Plan
For | | | | | | | | |
| 2021 Executive Bonus Criteria | Cash Flow from Operations (1) | Revenue |
| Threshold achievement pays 75% of bonus | $ | 22,398,000 | | $ | 69,672,000 | |
| Target achievement pays 100% of bonus | 22,973,000 | | 71,458,000 | |
| Stretch achievement pays 125% of bonus | 23,547,000 | | 73,245,000 | |
(1) Cash flow from operations is an indicator of operating performance achievement betweenand is defined as the set financial objectives,Company's rental and service and maintenance gross margins, before depreciation, less selling, general and administrative expenses adjusted to exclude (i) non-cash charges related to the board has discretion to prorate the amount of the award.Company's Non-qualified Deferred Compensation Plan, (ii) non-cash stock compensation expenses and (iii) director and officer cash long-term incentive compensation expenses.
The following table sets forth the bonus financial criteria and performance levels set by the Committee and compares such performance levels to actual performance achieved and the resulting bonus payout percentages earned in 2015:
2015 Annual Incentive Bonus Plan
|
| | | | |
Performance Level (1) | Payout % | Revenue | Adjusted Net Inc. before Taxes(1) | Adjusted EBITDA(1) |
| Threshold | 75% | $ 83,232,489 | $ 11,547,015 | $33,912,884 |
| Target | 100% | $ 88,073,937 | $ 15,876,422 | $38,242,292 |
| Stretch | 125% | $ 94,628,733 | $ 17,060,040 | $39,425,910 |
| |
(1) | The three financial performance levels were based on operating performance without giving effect to a loss on a non-recurring retirement of rental equipment and allowances taken in second quarter of 2015. |
The following table sets forth the actual results achieved and the resulting bonus payout percentages earned in 2015:
|
| | | | | | | | | | | | |
| Criteria | 2015 Performance | Stretch Metric(1) | Eligible Bonus Percentage | Bonus Component | Payable Bonus |
| Revenue | $ | 95,918,835 |
| $ | 94,628,733 |
| 125 | % | 30 | % | 37.5 | % |
Adjusted Net Income before Taxes* | $ | 19,789,785 |
| $ | 17,060,040 |
| 125 | % | 30 | % | 37.5 | % |
| Adjusted EBITDA** | $ | 42,406,476 |
| $ | 39,425,910 |
| 125 | % | 30 | % | 37.5 | % |
| Personal Performance | | | 100 | % | 10 | % | 10.0 | % |
| Total | | | | | 122.5 | % |
(1)The three financial levels and 2015 performance were based on operating performance without giving effect to a special loss on retirement of rental equipment write-down taken in 2015.
* Adjusted Net Income before Taxes is adjusted for loss on retirement of rental equipment and second quarter 2015 increase in allowances. See fourth quarter 2015 8-K.
** Adjusted EBITDA is defined as the Company's earnings before interest, income taxes, depreciation, amortization, and loss on a non-recurring retirement of rental equipment, and is an indicator of operating performance.
The following table sets forth themaximum bonus eligibility set by the Committee for
20152021 for each of our named executive officers, and based upon the payout percentages noted in the table above, the bonus payout amount earned by each named executive for
20152021 under our Annual Incentive Bonus Plan:
| | | | | | | | | | | | | | | | | | | | | | | | |
| Criteria | | Actual 2021 Performance | | Target Metric | | Stretch Metric | Eligible Bonus Payment
Percentage | Bonus Component | | Payable Bonus |
Cash flow from operations (1) | | $ | 20,344,000 | | | $ | 22,973,000 | | | $ | 23,547,000 | | — | % | 35 | % | | — | % |
| Revenue | | 72,420,000 | | | 71,458,000 | | | 73,245,000 | | 100 | % | 25 | % | | 25.0 | % |
| ESG objectives | | | | | | | 100 | % | 20 | % | | 20.0 | % |
| Strategic and tactical initiatives | | | | | | | 100 | % | 20 | % | | 20.0 | % |
| Total | | | | | | | | | | 65.0 | % |
(1)Cash flow from operations is an indicator of operating performance and is defined as the Company's rental and service and maintenance gross margins, before depreciation, less selling, general and administrative expenses adjusted to exclude (i) non-cash charges related to the Company's Non-qualified Deferred Compensation Plan, (ii) non-cash stock compensation expenses and (iii) director and officer cash long-term incentive compensation expenses. |
| | | | | | | | | | | | | | |
| Name | Title | Base Salary | Max Bonus Eligibility | Bonus Base | Bonus Payout % | Bonus Payouts |
| Stephen C. Taylor | President & CEO | $ | 543,063 |
| 100 | % | $ | 543,063 |
| 122.5 | % | $ | 665,252 |
|
| G. Larry Lawrence | Chief Financial Officer | $ | 187,000 |
| 50 | % | $ | 93,500 |
| 122.5 | % | $ | 114,538 |
|
| James R. Hazlett | VP- Technical Services | $ | 200,000 |
| 50 | % | $ | 100,000 |
| 122.5 | % | $ | 122,500 |
|
In 2021, the Compensation Committee determined the following metrics justified the annual incentives paid to our named executives officers:
•No payout was justified on the Cash Flow From Operations ("CFFO") metric as the $20.3 million in CFFO for the 2021 measurement year fell short of the threshold level of $22.4 million.
•Revenue of $72.4 million for the 2021 measurement year exceeded the target of $71.5 million but was less than the stretch level of $73.2 million. As a result, the revenue metric justified payout at the target level.
•As noted in the tables above, actual financial performance for 2015 exceeded the "stretch" level in each of the three financial metrics set for 2015, thereby entitling each of the named executive officers to 125% of the maximum bonus payout for each of the three financial metrics.
With respect to the personal performance criteria, the Committee awarded Messrs. Taylor, Lawrence and Hazlett the maximum amount payable under this component, or 10% of the maximum bonus amount that could have been earned in 2015. In addition to the Committee's non-quantitative evaluation of each executive's performance, with respect to all of the named executives, the Committee made this award in recognition of the Company's 2015 financial and operational performance.
With respect to Mr. Taylor’s personal performance criteria, the Committee based its full award on (i) quickly reacting to the deteriorating market by cutting capital expenditures by 77% in 2015 versus 2014; (ii) utilizing a combination of aggressive (new product introductions and expanded sales coverage) and defensive (cost cutting and strategic pricing) measures to guide the Company through the worst downturn in decades; and (iii) his continued ability to maintain superior cost control, industry leading margins in operating income, adjusted EBITDA and cash flow.
With respect to Mr. Lawrence’s personal performance criteria, the Committee also based its full award on his success in (i) initiating and managing the R&D tax credit process that resulted in appreciable tax credits; (ii) leading implementation of our SEC-mandated conflict mineral reporting and tracking process; and (iii) initiating EDI with our major customers for more efficient and timely processing of invoices.
With respect to Mr. Hazlett’s personal performance criteria, the Committee also based its full award on his (i) efficiently managed the severe contraction in our compressor fabrication throughput; (ii) leading the final engineering design and development of our new 500 horsepower compressor frame and VRU (Vapor Recovery Unit) product offerings; and (iii) maintaining an efficient level of engineering staffing that enabled the Company to consistently respond to customer bid requests and ‘win’ the work.
With respect to the rigor if the IBP financial targets, in 2014 the company’s officers were awarded only 77.5% of their target bonus in spite of 2014 being a record year for the company.
Long-Term Incentives - Restricted Stock Awards
We consider restricted stock to be a type of long-term incentive compensation that motivates our executive officers to work toward our long-term growth and allows them to participate in the growth and profitability of Natural Gas Services Group. We believe that restricted stock aligns the interests of our executive officers with our shareholders in that our executive officers will benefit from the restricted stock only to the extent that the value of our common stock increases. With the exception of Mr. Taylor, our Chief Executive Officer, the number of shares of restricted stock granted to an executive officer is based on a subjective determination of an officer’s individual performance and his current contributions and potential for future contributions to the overall performance of Natural Gas Services Group. In Mr. Taylor’s employment agreement we have agreed to award Mr. Taylor a restricted stock award or equivalent equity awards in January of each year with an aggregate minimum value equal to at least 175% of his Base Salary, subject to current vesting terms and other standard terms which shall be established by the Compensation Committee taking into account the performance of the Company, Mr. Taylor and industry norms. Our compensation consultant concurred with our approach relating to long-term incentives and recommended that we continue the practice.
In 2009, we adopted the 2009 Restricted Stock/Unit Plan (the “Plan”) and it went into effect upon its approval by our shareholders at our 2009 annual meeting. We typically grant awards under the Plan to our executive officers and Directors during the first quarter of each year after reviewing the Company's operational and financial results from the previous year.
During the first and second quarters of 2016, the Company granted the following restricted stock awards in connection with our 2015 financial and operational results and personal accomplishments of our named executive officers:
|
| | | | | |
| Name | Dollar Value of the Award | Number of Restricted Shares Awarded |
| Stephen C. Taylor, CEO and President | $ | 1,679,999 |
| 75,915 |
|
| James R. Hazlett, Vice President - Technical Services | $ | 407,800 |
| 20,000 |
|
| G. Larry Lawrence, Chief Financial Officer | $ | 407,800 |
| 20,000 |
|
Pursuant to Mr. Taylor's employment agreement, we are required to grant a restricted stock award or equivalent equity awards in January of each year with an aggregate minimum value equal to at least 175% of his Base Salary. See “Compensation Agreements with Management” beginning on page 41 of this Proxy Statement for information concerning Mr. Taylor’s employment agreement.
The Committee also reviewed Mr. Taylor's total compensation level along with Company's performance and Mr. Taylor's personal performance in connection with determining the value of the 2015 restricted stock award. As a result of the Committee's review, the Committee awarded Mr. Taylor (i) 44,284 shares of restricted common stock pursuant to the terms of his employment agreement and (ii) an additional 31,631 shares of restricted common stock in recognition of our 2015 financial and operational results and performance, for a total award of 75,915 shares of restricted common stock. The restricted shares are subject to a two year vesting period (half of the shares vest on the first anniversary date and the remaining half on the second anniversary date), although such vesting is subject to acceleration and will immediately vest in the case of (i) death, disability or retirement of the recipient employee, or (ii) a change of control in the Company, as set forth in the Plan.
On April 6, 2016, the Compensation Committee awarded 20,000 shares of restricted common stock to each of G. Larry Lawrence, our Chief Financial Officer and James R. Hazlett, our Vice President-Technical Services. The restricted shares are subject to a two year vesting period (half of the shares vest on the first anniversary date and the remaining half on the second anniversary date). All of the restricted shares are subject to acceleration and will immediately vest in the case of (i) death, disability or retirement of the recipient employee, or (ii) a change of control in the Company, as set forth in the Plan.
The additional restricted shares which were issued to Mr. Taylor in excess of the 175% of his Base Salary obligation under the terms of his employment agreement, and the restricted stock awards to our other two named executive officers were made in recognition of their personal performance and of the Company's 2015 financial and operational performance as set forth under "Fiscal Year 2015 Performance"highlights found on page 20 of this Proxy, Statement.
Further information concerning these awards is set forth in column (i)the named executive officers achieved strong safety performance as well as provided support for the development of the "SummaryBoard's newly-formed ESG Committee. In addition, the named executive officers were instrumental in the early development of new metrics to assist the Company in assessing various environmental measures. Finally, the Board recognized the extraordinary efforts needed to maintain appropriate governance controls in a remote work environment. As such, the Compensation Table"Committee believes a target payout on ESG objectives is justified.
•As noted in the operational highlights found on page 32 and column (i) of the "Grants of Plan-Based Awards for Fiscal 2015" on page 34.
Other Compensation
We maintain a 401(k) retirement plan in which all of our executives and employees are eligible to participate. We match executive and employee contributions to our 401(k) plan, on an equal percentage basis, with cash contributions. The Company matching portion is equal to one-half of the employee’s annual contribution up to a maximum of 3% of the employee’s salary. Our matching amounts for our executive officers are included in column (i) of the “Summary Compensation Table” on page 32.
Total Direct Compensation
In determining the extent to which our chief executive officer compensation program meets the Committee’s compensation philosophy and objectives, the Committee considers the competitiveness of total compensation (the aggregate of base salary, annual cash bonus incentive payment, and the grant value of long-term incentive plan award). Using the Custom Peer Group data from Longnecker’s study and discussing with Longnecker the pay practices of our peers, the total compensation for Mr. Taylor, our Chief Executive Officer, was at approximately the 75th percentile bracket which the Committee believed to be warranted considering our relatively strong (i) 2015 financial and operational results during a difficult time for companies in the oil and gas industry and (ii) total shareholder return when compared to our peer group.
Employment Agreements
We employed Stephen C. Taylor, our President and Chief Executive Officer, in January 2005. On October 23, 2013, we entered into a new written employment agreement with Mr. Taylor. We do not have written employment agreements with any of our other executive officers. On April 24, 2015, we entered into an amendment with Mr. Taylor to his Employment Agreement pursuant to which the "modified single trigger" change of control provision was changed to a "double trigger" change of control. Under the "modified single trigger provision", Mr. Taylor could voluntarily terminate the Employment Agreement for any reason immediately upon a change in control and collect severance benefits. Under the new "double trigger" change of control provision, a change of control must occur followed by the Company or its successor terminating Mr. Taylor's employment other than for cause, death, or disability, or by Mr. Taylor terminating his employment for Good Reason. See “Compensation Agreements with
Management” beginning on page 4120 of this Proxy, Statement for detailed information concerning Mr. Taylor’s employment agreement, as amended.the named executive officers were instrumental in continuing the growth of the Company's large horespower deployment during 2021, adding to the Company's revenue and earnings growth potential in future years. The named executive officers also provided leadership necessary to continue uninterrupted operations while under social distancing guidelines related to the
COVID-19 pandemic. The Compensation Committee also recognizes the strategic benefits of Amounts and Types of Compensation
Other thanmaintaining a strong balance sheet during the restricted stock awards we grant to our executives from time to time and the determinations made by the Committee as to specific target award opportunities under our IBP, the allocation of different amounts and types of compensation has not been a consideration for us, except with respect to our Chief Executive Officer whose employment agreement currently requires an annual restricted stock award or similar equity award with a value of at least 175% of his base salary. However, the Committee isrecent uncertainty in the processenergy markets, largely a result of revising its long-term equity compensation program tothe global pandemic. As such, the Compensation Committee believes a hybridtarget payout on strategic and tactical objectives is justified.
Additional information on operational and financial objectives and performance and discretionary methodology. See "Chief Executive Officer Equity Compensation"can be found on page 39. 20 of this Proxy as well as in the Company's annual report filed on Form 10-K and quarterly reports filed on Form 10-Q with the U.S. Securities and Exchange Commission.
The Committee has not adopted a specific policy or targetfollowing table summarizes the bonuses awarded under the IBP for the allocation between amounts or types of compensation. We believe that the use of stock awards in our compensation package will align the interests of our management and employees with our stockholders. Notwithstanding moderately increasing the use of stock-based compensation, we intend to maintain and continue our practice of having a simplified, but effective and competitive, compensation package.2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | Title | Base Salary | Max Bonus Eligibility | Bonus Base | Bonus Payout % | Bonus Payouts |
| Stephen C. Taylor | President & CEO | $ | 612,000 | | | 100.0 | % | | $ | 612,000 | | | 65 | % | | $ | 397,800 | | |
| Micah C. Foster | VP & CFO | | 153,863 | | | 50.0 | % | | | 240,000 | | | 65 | % | | | 78,000 | | |
| James R. Hazlett | VP- Technical Services | | 225,100 | | | 50.0 | % | | | 225,100 | | | 65 | % | | | 73,158 | | |
Change of Control and Severance Arrangements1998 Stock Option Plan
Our 1998 Stock Option Plan, as amended and our 2009 Restricted Stock/Unit Plan contains change of control provisions. In addition, Mr. Taylor’s employment agreement contains change of control and severance provisions. Information regarding these provisions is provided under the caption “Potential Payments Upon Termination or Change of Control” on page 38.
Perquisites
We provide limited perquisites to our executives. The primary perquisites include allowing our executives a choice of receiving an automobile allowance or personal use of a company-provided automobile and matching contributions made by Natural Gas Services Group under our 401(k) plan. Although we provide Mr. Taylor with one club membership, since his use of the club is limited solely for business entertainment, we have not considered it to be a perquisite and have not valued it as such for inclusion in column (i) of the "Summary Compensation Table" on page 32.
Our executives also participate in the same medical, dental and life insurance plans as other employees. However, we pay a greater percentage of the premiums for health insurance for our executives than we do for our other employees.
Limit on Deductibility of Certain Compensation
Provisions of the Internal Revenue Code that restrict the deductibility of certain compensation over $1 million dollars per year have not been a factor in our considerations or recommendations. Section 162(m) of the Code currently imposes a $1 million limitation on the deductibility of certain compensation paid to specified executives. Excluded from the limitation is compensation that is “performance based.” For compensation to be performance based, it must meet certain criteria, including being based on predetermined objective standards approved by shareholders. The Committee has not taken the requirements of Section 162(m) into account in designing executive compensation.
Say-on-Pay
At our 2015 Annual Meeting of shareholders held in June 2015, we submitted a proposal to our stockholders regarding our executive compensation practices. The proposal was an advisory vote on the 2014 compensation awarded to our named executive officers (commonly known as a “Say-on-Pay” vote). Excluding broker non-votes, our shareholders disapproved our 2014 compensation with less than half (48.6%) of the shares that voted on the proposal voting in favor of our 2014 executive compensation practices.
As noted at the beginning of this section, the results were disappointing since we believe the vote was the result of the influence from recommendations from proxy advisory firms, of which advise institutional investors on voting on annual proxy matters. We believe that their reports contained factual errors and assumptions that resulted in questionable conclusions and recommendations, and in June 2015 we sent a letter to the proxy advisory firms which detailed our issues with their reports. We
also sent our shareholders a copy of these letters and filed our correspondence with the Securities and Exchange Commission on June 15, 2015. You can access this filing free of charge on the Investor Relations section of our website (www.ngsgi.com). A paper copy is also available, without charge upon written request, at Natural Gas Services Group, Inc., 508 West Wall Street, Suite 550, Midland, Texas 79701.
Notwithstanding, we took numerous remedial measures, including:
adopting a clawback policy the covers all executive officers;
adopting executive and director stock ownership guidelines;
extending the vesting terms on restricted stock awards made to our executive officers;
amending our Corporate Governance Guidelines to include a lead independent director. Charles Curtis, our longest tenured independent director, has been appointed as our lead director; and
amending our Bylaws to require a majority vote standard in connection with the uncontested election of Directors subject to shareholder approval.
Corporate Governance Policies
To ensure our compensation programs are aligned with the long-term interest of our shareholders, we have adopted several governance policies that we expect our executive officers to comply with, including meaningful stock ownership guidelines, a pledging and hedging policy and a recapture or “clawback” policy that provides for the recoupment of any performance-based payouts made based on financial results that are not in compliance with any financial reporting requirement that requires restatement of the Company’s financial statements. In addition, to provide our shareholders with a meaningful role in the election of Directors and to enhance our corporate governance standards, we have adopted a "majority vote" requirement in the election of Directors, subject to the approval of our Shareholders at the annual meeting (see Proposal 5). Below are summaries of these new policies.
Compensation Clawback Policy
The Company has adopted a compensation recoupment, or “clawback” policy intended to be consistent with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). This policy provides that, in the event we are required to restate our financial statements as a result of “material noncompliance” with financial reporting requirements under the securities laws, we will recover from our current and former executive officers any incentive-based compensation (including equity awards) that is (i) based on material erroneous data, (ii) received during the three-year period preceding the date on which the Company becomes required to prepare an accounting restatement, and (iii) in excess of what would have been paid if calculated under the restatement. In addition, the Dodd-Frank Act requires the SEC to issue regulations requiring issuers to seek recovery from executive officers in certain circumstances involving financial restatements. The SEC has issued proposed regulations implementing this portion of the Dodd-Frank Act. Once the SEC finalizes its regulations regarding the required form of a clawback policy under the Dodd-Frank Act, we expect to amend our clawback policy accordingly.
Pledging and Hedging Policy
The Company considers it improper and inappropriate for any director, executive officer or associate to engage in short-term or speculative transactions involving our Common Stock. We therefore prohibit directors, executive officers and other associates from engaging in pledging, short sales or other short position transactions in our Common Stock. We also strongly discourage directors, executive officers and other associates from engaging in certain forms of hedging or monetization transactions.
Director and Executive Officer Stock Ownership Guidelines
The Company has stock ownership requirements for its directors and executive officers. The purpose of the ownership requirements is to further our goal of increasing shareholder value and to further align the interests of our directors and key executives with the interests of our shareholders. Satisfaction of the policy requires that individuals attain and retain holdings of our common stock with a market value equal to the following multiple of the individual’s compensation, defined as either a director’s cash retainer fee or an officer’s base salary. The table below indicates the stock ownership guidelines for our executive officers and Board members:
Stock Ownership Guidelines
|
| |
Executive Officer/Director | (as a multiple of base salary/annual cash retainer) |
CEO | 3 times Base Salary |
All other executive officers | 2 times Base Salary |
Non-employee Directors | 1 times Base Annual Cash Retainer |
Each person’s stock ownership requirement will be adjusted annually each January 1 to reflect any changes in his or her retainer or base salary. Generally, individuals have a five-year period to attain their stock ownership requirements. At any time at which the individual’s stock ownership requirement has not been met, including during the initial five-year period to attain compliance, the individual will be required to retain at least 50% of “Net Shares” received upon vesting of restricted stock, restricted stock units and performance units. “Net Shares” are defined to include shares of common stock that are owned by the individual after shares are sold, swapped or traded to pay applicable withholding taxes. Subsequent to achieving the initial stock ownership requirement, all directors and executives are required to continuously maintain stock ownership at their specified levels.
If an individual does not meet the applicable ownership requirements, then he or she is subject to certain restrictions upon the vesting of equity awards, and may only dispose of shares for particular reasons set forth in the policy. The policy provides a hardship exemption, for which an individual must submit a request to the corporate governance committee. Presently, all of our directors and our executive officers have attained or exceeded their ownership requirements.
Majority Vote Standard in Uncontested Director Elections
In April 2016, the Board amended our Bylaws to implement a majority vote standard in uncontested elections of Directors. Prior to this amendment, Directors were elected by plurality vote, meaning that nominees for the election of Directors who received the greatest number of votes cast in favor of his or her election would be elected to the Board even if such number of favorable votes was less than a majority of votes cast in the election. Under our revised Bylaws, in uncontested elections each Director must be elected by an affirmative majority of the votes cast. Under our new Bylaw provisions in connection with uncontested elections, abstentions and broker non-votes will not be counted and will have no effect in determining whether the required majority vote has been obtained. With respect to contested elections (those where the number of nominees exceeds the number of directors to be elected), a plurality vote standard will continue to apply. This amendment to our Bylaws requires Shareholder approval at the annual meeting (see Proposal 5).
The Compensation Committee will continue to consider the outcome of Say-on-Pay votes when making future compensation decisions for our named executive officers.
Compensation Committee Report
The Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on its review and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in our proxy statement for the 2016 Annual Meeting of Shareholders.
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Members of the Compensation Committee |
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| William F. Hughes, Jr. (Chairman) |
| John W. Chisholm |
| David L. Bradshaw |
Executive Compensation
The table below sets forth the compensation earned by, and paid to our CEO, Stephen C. Taylor, and our other named executive officers for services rendered to us for the fiscal years ended December 31, 2015, 2014 and 2013.
Summary Compensation Table
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Name and Principal Position | Year | Salary | Bonus (1) | Stock Awards(2) | Option Awards(3) | Non-Equity Incentive Plan Compensation(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation(5) | Total |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) |
| Stephen C. Taylor, Chairman, President & CEO | 2015 | $ | 561,036 |
| $ | 6,646 |
| 1,679,999 |
| $ | — |
| $ | 665,252 |
| $ | — |
| $ | 14,264 |
| $ | 2,927,197 |
|
| 2014 | 540,949 |
| 7,267 |
| 1,629,169 |
| $ | — |
| 391,511 |
| — |
| 14,444 |
| 2,583,340 |
|
| 2013 | 444,798 |
| 8,405 |
| 1,389,196 |
| 86,860(6) |
| 444,324 |
| — |
| 15,752 |
| 2,389,335 |
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| G. Larry Lawrence, Chief Financial Officer | 2015 | 193,754 |
| 2,289 |
| 407,800 |
| — |
| 114,538 |
| — |
| 16,722 |
| 735,103 |
|
| 2014 | 180,708 |
| 2,445 |
| 375,000 |
| 16,910(7) |
| 59,288 |
| — |
| 12,645 |
| 646,996 |
|
| 2013 | 152,308 |
| 3,020 |
| 456,150 |
| 16,899(8) |
| 66,854 |
| — |
| 13,573 |
| 708,804 |
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| James R. Hazlett, Vice President, Technical Services | 2015 | 207,539 |
| 2,448 |
| 407,800 |
| — |
| 122,500 |
| — |
| 31,619 |
| 771,906 |
|
| 2014 | 200,228 |
| 3,574 |
| 375,000 |
| 33,809(9) |
| 66,263 |
| — |
| 29,259 |
| 708,133 |
|
| 2013 | 180,989 |
| 3,574 |
| 456,150 |
| 33,819(10) |
| 76,325 |
| — |
| 30,119 |
| 780,976 |
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(1) | The amounts reflected in column (d) reflect payments under the company's profit sharing program administered to all employees. |
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(2) | The amounts in column (e) reflect the grant date fair value of stock granted under our 2009 Restricted Stock/Unit Plan. |
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(3) | The amounts in column (f) reflect the dollar amounts recognized for financial statement reporting purposes for the fiscal years ended December 31, 2015, 2014 and 2013, in accordance with FASB ASC Topic 718, associated with stock option grants under our 1998 Stock Option Plan. Assumptions used to calculate these amounts are included in footnote 9 for our audited financial statements for the fiscal year ended December 31, 2015; footnote 8 for our audited financial statement for fiscal year ended December 31, 2014; and footnote 8 for our audited financial statement for fiscal year ended December 31, 2013. |
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(4) | The amounts in column (g) reflect the cash bonus awards to the named executive officers under our Annual Incentive Bonus Plan, which is discussed in further detail on page 25 under the caption “Short-Term Incentives - Annual Incentive Bonus Plan.” |
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(5) | The amounts shown in column (i) include matching contributions made by Natural Gas Services Group to each named executive officer under our 401(k) plan and the aggregate incremental cost to Natural Gas Services Group of perquisites provided to our named executive officers as follows: |
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Name | Year | Automobile Allowance | Personal Use of Company Provided Automobiles | Additional Incremental Portion of Health Insurance Premiums Paid for Officers Only | 401(k) Plan | Total(a) |
| Stephen C. Taylor | 2015 | $ | — |
| $ | 1,800 |
| $ | 6,912 |
| $ | 5,552 |
| $ | 14,264 |
|
| | 2014 | — |
| 1,800 |
| 7,285 |
| 5,359 |
| 14,444 |
|
| | 2013 | — |
| 1,800 |
| 6,715 |
| 7,237 |
| 15,752 |
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| G. Larry Lawrence | 2015 | 10,592 |
| — |
| — |
| 6,130 |
| 16,722 |
|
| | 2014 | 10,200 |
| — |
| — |
| 2,445 |
| 12,645 |
|
| | 2013 | 10,200 |
| — |
| — |
| 3,373 |
| 13,573 |
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| James R. Hazlett | 2015 | 10,592 |
| — |
| 17,400 |
| 3,627 |
| 31,619 |
|
| | 2014 | 10,200 |
| — |
| 16,463 |
| 2,596 |
| 29,259 |
|
| | 2013 | 10,200 |
| — |
| 15,828 |
| 4,091 |
| 30,119 |
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| Total | 2015 | 21,184 |
| 1,800 |
| 24,312 |
| 15,309 |
| 62,605 |
|
| | 2014 | 20,400 |
| 1,800 |
| 23,748 |
| 10,400 |
| 56,348 |
|
| | 2013 | 20,400 |
| 1,800 |
| 22,543 |
| 14,701 |
| 59,444 |
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(6) | This amount reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2013, in accordance with FASB ASC Topic 718, for 10,000 shares of common stock that vested on January 18, 2013 under the stock option granted to Mr. Taylor on January 18, 2010. |
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(7) | This amount reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2014, in accordance with FASB ASC Topic 718, for 1,667 shares of common stock that vested on January 24, 2014 under the stock option granted to Mr. Lawrence on January 24, 2011. |
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(8) | This amount reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2013, in accordance with FASB ASC Topic 718, for 1,666 shares of common stock that vested on January 24, 2013 under the stock option granted to Mr. Lawrence on January 24, 2011. |
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(9) | This amount reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2014, in accordance with FASB ASC Topic 718, for 3,333 shares of common stock that vested on January 24, 2014 under the stock option granted to Mr. Hazlett on January 24, 2011. |
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(10) | This amount reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2013, in accordance with FASB ASC Topic 718, for 3,334 shares of common stock that vested on January 24, 2013 under the stock option granted to Mr. Hazlett on January 24, 2011.
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Grants of Plan Based Awards
The table below sets forth the estimated future payouts under non-equity incentive plan awards and restricted stock awards granted and the grant date fair value of such awards.
Grants of Plan-Based Awards for Fiscal 2015 |
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| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards | | | | |
| Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target | Maxi-mum ($) | All Other Stock Awards: Number of Shares of Stock or Units (#)(2) | All Other Option Awards: Number of Securities Underlying Option (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (l) |
| Stephen C. Taylor | 1/6/2016 | — |
| — |
| — |
| — |
| — |
| — |
| 75,915 |
| — |
| $ | 22.13 |
| $ | 1,679,999 |
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| G. Larry Lawrence | 4/6/2016 | — |
| — |
| — |
| — |
| — |
| — |
| 20,000 |
| — |
| 20.39 |
| 407,800 |
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| James R. Hazlett | 4/6/2016 | — |
| — |
| — |
| — |
| — |
| — |
| 20,000 |
| — |
| 20.39 |
| 407,800 |
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(1) | No awards were made under the non-equity Incentive Plan for 2015 except as described of the performance goals under our Annual Incentive Bonus Plan, or the "IBP." More information regarding the IBP and the calculation of awards is provided below and under the caption “Short-Term Incentives - Annual Incentive Bonus Plan” on page 25. |
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(2) | The information shown in this column reflects awards of restricted stock earned in 2015 (but issued in early 2016) our named executive officers pursuant to our 2009 Restricted Stock/Unit Plan. |
Annual Incentive Bonus Plan
Our Annual Incentive Bonus Plan or, the “IBP,” provides for annual non-equity incentive based compensation in the form of cash bonuses to our executive officers. Our Compensation Committee administers and determines from year to year the executives that are eligible to participate in the IBP. The Committee establishes target award opportunities for the executives eligible to participate in the plan. These target award opportunities are expressed as a percentage of an executive’s base salary. An executive’s target award opportunity is the maximum cash bonus an executive is eligible to receive in any one year under the IBP.
The Committee establishes annual performance levels for Natural Gas Services Group’s total revenues, adjusted EBITDA and adjusted net income before taxes and assigns a weight of 30% to each of these components. The executive’s individual performance is assigned a weight of 10%. Detailed information regarding the IBP and the calculation of awards is provided under the caption “Short-Term Incentives – Annual Incentive Bonus Plan” on page 25.
1998 Stock Option Plan
Our 1998 Stock Option Planrestated, provides for the issuance of stock options to purchase up to 750,0001,000,000 shares of our common stock. The purpose of this plan is to attract and retain the best available personnel for positions of substantial responsibility and to provide long-term incentives to employees and consultants and to promote the long-term growth and success of our business. The plan is administered by the Compensation Committee of the Board of Directors. At its discretion, the Compensation Committee determines the persons to whom stock options may be granted and the terms upon which options will be granted. In addition, the Compensation Committee may interpret the plan and may adopt, amend and rescind rules and regulations for its administration. Option awards are generally granted with an exercise price equal to the closing price of our common stock at the date of grant and generally vest based on three years of continuous service and have ten-year contractual terms. On April 5, 2016, subject to shareholder approval, the Board of Directors voted to amend and restate the 1998 Plan to extend the 1998 Plan until February 28, 2026 and increase the number of shares of common stock issuable under the Plan from 750,000 to 1,000,000. See "Proposal 3" on page 50.
As of December 31, 2015,2021, stock options to purchase a total of 414,769200,834 shares of our common stock were outstanding under the 1998 Stock Option Plan. There were no shares included that relate to our non-employee directors under the compensation arrangements described under the caption “Compensation of Directors” on page 40.
APlan, as amended and restated, and a total of 93,419345,003 shares of common stock were available at December 31, 20152021 for future grants of stock options under the 1998 Stock Option Plan.
2009 Restricted Stock/Unit Plan
The purposeplan. Since the beginning of our 2009 Restricted Stock/Unit Plan (the “2009 Plan”) is2022, we have issued 2,500 stock options to retain our employees and directors having experience and ability, to attract new employees and directors whose services are considered valuable, to encourage the sense of proprietorship, and to stimulate the active interest of such persons in our development and financial success. We believe that grants of restricted stock and restricted stock units are an increasingly important means to retain and compensate employees and directors.
General Description
Shares Reserved for Issuance under the 2009 Plan. A total of 800,000purchase shares of our common stock are reserved for issuance under the 2009 Plan. The number ofwith an additional 12,500 stock options that were either forfeited or expired,, leaving 355,003 shares of our common stock available under the 20091998 Stock Option Plan as of April 29, 2022.
2019 Equity Incentive Plan
On June 20, 2019, the Company's shareholders approved our 2019 Equity Incentive Plan ("2019 Plan"). Except with respect to awards then outstanding, unless sooner terminated by the Board, the Plan will be subject to adjustment inexpire on the event of a stock split, stock or other extraordinary dividend, or other similar change in our common stock or capital structure.
Administration. The Plan is administered by the plan administrator, defined as one or more committees the Company designates consisting of independent directors. The drafttenth anniversary of the Plan appoints our Compensation Committee as the administrator (the “Committee”).
Generally, the Committee has the authority, in its discretion, (a) to select officers, directorsdate it was approved by shareholders (June 20, 2029) and employees to whomno further awards may be granted from timeafter such date. The purposes of the 2019 Plan are to time, (b)enable the Company to determine whetherattract and to what extent, awards are granted, (c) to determineretain the numbertypes of shares of our common stock, or the amount of other consideration to be covered by each award, (d) to approve award agreements for use under the Plan, (e) to determine the termsemployees, consultants and conditions of any award (including the vesting schedule applicableDirectors who will contribute to the award), (f) to amendCompany’s long range success; provide incentives that align the termsinterests of any outstanding award granted underemployees, consultants and Directors with those of the Plan, (g) to construeshareholders of the Company; and interpretpromote the success of the Company’s business.
The following summary of the material terms of the 2019 Plan and awards granted, and (h) to take such other action not inconsistent withis qualified in its entirety by the termsfull text of the 2019 Plan, asa copy of which was filed with our proxy statement for 2019 and may be obtained, free of charge, by writing to the Committee deems appropriate.
Company, Attention: Alicia Dada, Investors Relations, 404 Veterans Airpark Lane, Suite 300, Midland, Texas 79705.
Types
Shares Available for Awards and Limits on Awards. The Company has reserved an aggregate of Awards; Eligibility. Awards500,000 shares of restrictedcommon stock and restrictedto be awarded under the 2019 Plan. Up to 250,000 of these shares may be issued under the 2019 Plan, in the aggregate, through the exercise of incentive stock units (RSUs)options. No non-employee Director may be granted under the Plan. Awards of restricted stock are shares of our common stock that are awarded subject to such restrictions on transfer as the Committee may establish. Awards of RSUs are units valued by referenceawards, during any fiscal year, with respect to shares of common stock that, entitletogether with any cash fees paid to the Director during the fiscal year, have a participanttotal value that exceeds $250,000 (calculating the value of any awards based on the grant date fair value for financial reporting purposes).
As of March 31, 2022, we have issued 456,198 shares under the 2019 Plan. Of these shares, 287,011 have vested and are no longer subject to receive,any restrictions or possible forfeiture and 3,333 shares were forfeited and returned to the pool. Vested shares include shares that were withheld for taxes and, under the terms of the 2019 Plan, cannot be re-issued. 165,854 unvested shares of common stock remain reserved for potential issuance under outstanding awards and may be issued if the vesting terms
of such outstanding awards are met. Accordingly, 47,135 shares are available to be issued under the 2019 Plan as of March 31, 2022.
If any outstanding award expires or is canceled, forfeited, or terminated without issuance of the full number of shares of common stock to which the award related, then the number of shares available under the 2019 Plan will be increased by the portion of the award that expired, or was canceled, forfeited or terminated. Shares tendered in payment of the option exercise price, shares delivered or withheld by the Company to satisfy any tax withholding obligation, or shares covered by a stock-settled stock appreciation right or other awards that were not issued upon the settlement of the unit, one share of our common stockaward will not again become available for each unit. future grants under the 2019 Plan.
Awards may be granted to our officers, directors and employees and our related entities, if any. Each award granted under the 2019 Plan shall be designated in assumption of, or in substitution for, outstanding awards previously granted by an award agreement.entity acquired by the Company or with which the Company combines. The Committee (as defined below) will make appropriate adjustments to these limits to prevent dilution or enlargement of the rights of participants under the 2019 Plan.
TermsAdministration and Vesting of Awards.Amendment. As noted above,The 2019 Plan will be administered by the one or more Directors appointed by the Board (the "Committee"), or, in the Board’s discretion, by the Board. The Committee determineswill have the authority to, among other things, interpret the 2019 Plan; determine who will be granted awards under the 2019 Plan; prescribe the terms and conditions of each award; interpret, administer, reconcile any inconsistency in, correct any defect in, and supply any omission in the 2019 Plan; and exercise discretion to make any and all other determinations which it determines to be necessary or advisable for the administration of the 2019 Plan.
The Committee may also amend the terms of any one or more awards. However, the Committee may not affect any amendment which would otherwise constitute an impairment of the rights under any award unless the Company requests the consent of the participant and the participant consents in writing.
The Board may amend the 2019 Plan. However, except in the case of adjustments upon changes in common stock, no amendment will be effective unless approved by the shareholders of the Company to the extent shareholder approval is necessary to satisfy any applicable laws.
Eligibility. The Board selects participants from among the key employees, consultants and Directors of the Company and its affiliates. Only employees are eligible to receive incentive stock options.
Available Awards. Awards that may be granted under the 2019 Plan include restricted stock, restricted stock units (RSUs), performance awards, stock options (including both incentive stock options (ISOs) and nonqualified stock options), stock appreciation rights (SARs), and other stock-based awards. The terms of each award will be set forth in a written agreement.
Restricted Stock. A restricted stock award is an award of actual shares of common stock which are subject to certain restrictions for a period of time determined by the Committee. Restricted stock may be held by the Company in escrow or delivered to the participant pending the release of the restrictions. The participant generally has the rights and privileges of a shareholder as to such restricted stock during the restricted period, including the restrictions applicableright to shares underlying awards ofvote the restricted stock and the dates theseright to receive dividends
Restricted Stock Units. An RSU is an award of hypothetical common stock units having a value equal to the fair market value of an identical number of shares of common stock, which are subject to certain restrictions lapsefor a period of time determined by the Committee. No shares of common stock are issued at the time an RSU is granted, and the Company is not required to set aside any funds for the payment of any RSU award. Prior to settlement of an RSU award vests,and the receipt of shares, the participant does not have any rights as well asa shareholder with respect to such shares. The Committee may grant RSUs with a deferral feature (deferred stock units or DSUs), whereby settlement of the RSU is deferred beyond the vesting and settlement terms applicabledate until a future payment date or event set out in the participant’s award agreement. The Committee has the discretion to RSUs. Whencredit RSUs or DSUs with dividend equivalents.
Performance Share Awards. A performance share award is an award vests, we deliverof shares of common stock that are only earned if certain conditions are met. The Committee has the discretion to determine the participant a certificate forfollowing: the number of shares withoutof common stock or stock-denominated units subject to a performance share award; the applicable performance period; the conditions that must be satisfied for a participant to earn an award; and the other terms, conditions and restrictions of the award. The number of performance shares earned by a participant depends on the extent to which the performance goals established by the Committee
are attained within the applicable performance period. No payout is made with respect to any legendperformance share award except upon written certification by the Committee that the minimum threshold performance goal(s) have been achieved.
Stock Options. A stock option is the right to purchase shares of common stock at a future date at a specified price per share called the exercise price. An option may be either an ISO or restrictions (except as necessarya nonqualified stock option. ISOs and nonqualified stock options are taxed differently. Except in the case of options granted pursuant to complyan assumption or substitution for another option, the exercise price of a stock option may not be less than the fair market value (or in the case of an ISO granted to a ten percent shareholder, 110% of the fair market value) of a share of common stock on the grant date. As of the record date, the closing price of our common stock was $9.05. Full payment of the exercise price must be made at the time of such exercise either in cash or bank check or in another manner approved by the Committee.
Stock Appreciation Rights. A SAR is the right to receive payment of an amount equal to the excess of the fair market value of a share of common stock on the date of exercise of the SAR over the exercise price. The exercise price of a SAR may not be less than the fair market value of a share of common stock on the grant date. SARs may be granted alone ("freestanding rights”) or in tandem with applicable state and federal securities laws)options ("related rights”).
In additionOther Equity-Based Awards. The Committee may grant other equity-based awards, either alone or in tandem with other awards, in amounts and subject to conditions as determined by the Committee as set out in an award agreement.
Vesting. The 2019 Plan allows for awards subject to either time-based vesting or performance-based vesting, or both. All awards granted under the 2019 Plan must have a minimum vesting period of at least one year. The Committee has the authority to determine the vesting schedule of each award (subject to the minimum one-year requirement), and to accelerate the vesting and ability to exercise any award. The Company’s practice over the last several years has been to grant restricted stock/unit awards to its executive officers and independent Directors, and stock options to selected non-executive employees. Restricted stock/unit awards to our (i) executive officers have been subject to time-based vesting requirements,in equal one-third installments over a three-year period from the Committee is also authorizedgrant date and (ii) independent Directors have been subject to establish quantitative and qualitative performance goalstime-based vesting in order forequal quarterly installments beginning in the year following the year in which they are granted. Starting in 2020, the awards to vest. For instance, quantitative performance standards, including, but not limitedindependent Directors are subject to financial measurements such as (a) increaseone-year cliff vesting. Stock options granted to our non-executive employees typically vest in share price, (b) earnings per share, (c) total shareholder return, (d) operating margin, (e) gross margin, (f) return on equity, (g) return on assets, (h) net operating income, (i) pre-tax profit, (j) cash flow, (k) revenue, (l) expenses, and (m) EBITDA, or other performance goalequal, one-third tranches over a three-year period. Past vesting requirements may not be adoptedindicative of future vesting requirements set by the Committee, which may be less or more onerous than in prior years.
Clawback and set forthRecoupment. The Company may cancel any award or require the participant to reimburse any previously paid compensation provided under the 2019 Plan or an award agreement in accordance with the particular restricted stock or RSU agreement which must be met in order for shares to vest.Company’s clawback policy.
Termination of Service. Unless otherwise set forth in an individual award agreement or in an employment agreement approved by the PlanCommittee, any unvested restricted shares, performance shares, RSUs, PSUs and formsother equity-based awards will immediately be forfeited upon termination of continuous service under the 2019 Plan. Under the Company's restricted stock and RSU award agreements, provide that inif the event a participant’sgrantee's continuous service with us terminates as a result of the grantee's death, disabilityDisability (as defined in the 2019 Plan), termination without Cause (as defined in the 2019 Plan and below) or retirement (an “Acceleration Event”)termination for Good Reason (as defined), 100% of the grantee's unvested shares or RSUs at the time of termination due to an Acceleration Event will immediately become vested, but only to the extent that such unvested shares or RSUs would have vested within the 12 months following the Acceleration Event. However, the Committee may revise this default provision onvest.
Unless otherwise set forth in an individual basis, as it deems advisable. For example, the Committee could elect to accelerate vesting for all unvested shares and/award agreement or RSUs upon the occurrence ofin an Acceleration
Event, or conversely provide that all unvested shares and/or RSUs are forfeited upon the occurrence of an Acceleration Event. In the case of a termination of service other than by an Acceleration Event, any unvested shares of RSUs will immediately become null and void, except that with respect to Restricted Stock awards, the Board of Directors may vest any or all unvested shares in its discretion in the case of any termination of service.
In addition, subject to revision by the Committee, the default provisions of the Plan and form of award agreements provide that a Change of Control triggers accelerated vesting of all shares or units. Under the 2009 Plan, a Change in Control Event is generally defined as:
a complete liquidation or dissolution;
acquisition of 50% or more of our stock by any individual or entity including by tender offer or a reverse merger;
a merger or consolidation in which we are not the surviving entity; or
during any period not longer than 12 consecutive months, members of the Board who at the beginning of such period cease to constitute at least a majority of the Board, unless the election, or the nomination for election of each new Board member, wasemployment agreement approved by a vote of at least 3/4 of the Board members then still in office who were Board members at the beginning of such period.
Restricted Stock. Under an award of restricted stock, we issue shares of our common stock in the participant’s name; however, the participant’s rights in the stock are restricted until the shares vest. If the vesting requirements are not met prior to the end of the vesting period, the shares are forfeited. In connection with an award of restricted stock, since actual shares are issued and outstanding, the participant is legally entitled to vote the shares and receive any dividends declared and paid on our common stock prior to the satisfaction of the vesting requirements. However, as discussed above, participants who hold unvested restricted stock may not sell, assign or transfer such shares until they have vested.
Restricted Stock Units. Like a restricted stock award, a restricted stock unit is a grant valued in terms of our common stock. Unlike a restricted stock award, none of our common stock is issued at the time the RSU award is granted. Instead, the award is a mere promise to deliver shares of our common stock upon satisfaction of the vesting requirements. Upon satisfaction of the vesting requirements of the award, we then issue and deliver the number of shares subject to the award. If the vesting requirements are not satisfied prior to the end of the vesting period, the units expire and no shares are issued. Since shares of our common stock are not issued in connection with RSUs until such time as the vesting conditions have been satisfied, participants in the Plan who receive awards of RSUs will not have any voting rights and will not be entitled to dividends until such time as the units vest and shares of our common stock are issued.
Amendment, Suspension or Termination of the Plan. We may at any time amend, suspend or terminate the Plan. The Plan will be for a term of ten (10) years unless sooner terminated. Awards may be granted under the Plan upon it becoming effective, but awards granted prior to obtaining shareholder approval will be rescinded if the shareholders do not approve the Plan. We may amend the Plan subject to compliance with applicable provisions of federal securities laws, state corporate and securities laws, the Internal Revenue Code, and the rules of the NYSE (or such other stock exchange as our common stock may be traded upon at the time).
Change in Capitalization. Subject to any required action by our shareholders, the number of shares of common stock covered by outstanding awards, the number of shares of common stock that have been authorized for issuance under the 2009 Plan, the exercise or purchase price of each outstanding award, the maximum number of shares of common stock that may be granted subject to awards to any participant in a calendar year, and the like, shall be proportionally adjusted by the Committee, in the event of: (i) any increasean option holder's continuous service terminates, an option holder may exercise his or decreaseher option (to the extent the option holder was entitled to exercise such option at the date of termination) within the earlier of three months following the date of termination or the expiration of the option term. Unless otherwise set forth in an individual award agreement, in the numberevent an option holder's continuous service terminates upon his or her death or Disability (as defined), an option holder or his or her estate may exercise his or her option (to the extent the option holder was entitled to exercise such option at the date of issued sharestermination), within the earlier of common stock resulting from12 months following the date of termination or the expiration of the option term.
In regard to the definition of Cause under the 2019 Plan, if a stock split, stock dividend, combinationparticipant is under an employment or reclassificationservice agreement with the Company and such agreement provides for a definition of Cause, that definition should be used. If no such agreement exists, or similar event affecting our common stock; (ii)if such agreement does not define Cause, then Cause is defined as (i) the conviction of, or plea of guilty or no contest to, a felony or a crime involving moral turpitude or the commission of any other increaseact involving willful malfeasance or decrease in the number of issued shares of common stock effected without receipt of consideration by us; or (iii) any other transaction with respect to common stock including a corporate merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete), distribution of cash or other assets to shareholders other than a normal cash dividend, or any similar transaction; provided, however, that conversion of any of our convertible securities shall not be deemed to have been “effected without receipt of consideration.” Except as the Committee determines, no issuance by us of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason hereof shall be madematerial fiduciary breach with respect to the numberCompany or an Affiliate; (ii) conduct that results in or is reasonably likely to result in harm to the reputation or business of sharesthe Company or any of its Affiliates; (iii) gross negligence or willful misconduct with respect to the Company or an Affiliate; or (iv) material violation of state or federal securities laws.
In regard to the definition of Good Reason under the 2019 Plan, if a participant is under an employment or service agreement with the Company and such agreement provides for a definition of Good Reason, that definition should be used. If no such agreement exists, or if such agreement does not define Good Reason, Good Reason is defined as the occurrence of one or more of the following without the participant’s express written consent, which circumstances are not remedied by the Company within thirty (30) days of its receipt of a written notice from the participant describing the applicable circumstances (which notice must be provided by the participant within ninety (90) days of the participant's knowledge of the applicable circumstances): (i) any material, adverse change in the participant's duties, responsibilities, authority, title, status or reporting structure; (ii) a material reduction in the participant’s base salary or bonus opportunity; or (iii) a geographical relocation of the participant's principal office location by more than fifty (50) miles.
Change in Control. A Change in Control is defined as (a) the acquisition by one person or more than one person acting as a group, of Company stock representing more than 50% of the total fair market value or total voting power of the Company’s stock; (b) a merger, consolidation or other reorganization in which the Company is not the surviving entity unless the Company’s shareholders immediately prior to the merger, consolidation or other reorganization maintain at least 50% of the voting power; (c) a majority of the incumbent members of the Board are replaced by Directors whose appointment or election is not endorsed by at least two-thirds of the Board; or (d) the acquisition by one person or more than one person acting as a group, of all or substantially all of the Company’s assets.
Unless otherwise provided in an award agreement, in the event of a participant’s termination of service without Cause or for Good Reason during the 18-month period following a Change in Control, the vesting of all awards will fully accelerate and all outstanding options and SARs will become immediately exercisable as of the date of the participant’s termination of service.
In the case of performance awards, in the event of a participant’s termination of service without Cause or for Good Reason, in either case, within 18 months following a Change in Control, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels and all other terms and conditions will be deemed met as of the date of the participant’s termination of service.
In the event of a Change in Control, the Committee may in its discretion and upon at least 10 days’ advance notice to the affected persons, cancel any outstanding awards and pay to the holders the value of the awards based upon the price per share of common stock subjectreceived or to be received by other shareholders of the Company in the event. In the case of any option or SAR with an award.exercise price that equals or exceeds the price paid for a share of common stock in connection with the change in control, the Committee may cancel the option or SAR without the payment of any consideration.
As of April 12, 2016, we had issued 611,292 shares of restricted stock under the 2009 Plan, of which 454,634 have vested and become unrestricted.
Outstanding Equity Awards at Fiscal Year-End
The following table shows certain information about unvested restricted stock/units and unexercised stock options outstanding as of December 31, 20152021 and held by our Chief Executive Officer, Stephen C. Taylor, and each other named executive officer.
Outstanding Equity Awards at 20152021 Fiscal Year-End
|
| | | | | | | | | | | | | | | | | | | | |
| | Option Awards | Stock Awards |
Name |
Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Options
(#) |
Option Exercise Price
($) |
Option Expiration Date |
Number of Shares of Stock That Have Not Vested
(#) |
Market Value of Shares of Stock that Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares or Other Rights that Have
Not Vested (#) | Equity
Incentive Plan Awards:
Market or Payout Value
of Unearned
Shares or
Other Rights
that Have
Not Vested ($) |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) |
| Stephen C. Taylor | 15,000 |
| — |
| — |
| $ | 14.22 |
| 11/21/2016 |
| — |
| — |
| — |
| — |
|
| 40,000 |
| — |
| — |
| $ | 20.06 |
| 1/15/2018 |
| — |
| — |
| — |
| — |
|
| 25,000 |
| — |
| — |
| $ | 17.51 |
| 9/10/2018 |
| — |
| — |
| — |
| — |
|
| 30,000 |
| — |
| — |
| $ | 9.95 |
| 1/28/2019 |
| — |
| — |
| — |
| — |
|
| 23,852 |
| — |
| — |
| $ | 7.84 |
| 3/17/2019 |
| — |
| — |
| — |
| — |
|
| 30,000 |
| — |
| — |
| $ | 19.90 |
| 1/18/2020 |
| — |
| — |
| — |
| — |
|
| | — |
| — |
| — |
| — |
| — |
| 83,590 |
| $ | 1,629,169 |
| — |
| — |
|
| G. Larry Lawrence | 5,000 |
| — |
| — |
| $ | 17.81 |
| 1/24/2021 |
| — |
| — |
| — |
| — |
|
| | — |
| — |
| — |
| — |
| — |
| 20,000 |
| $ | 375,000 |
| — |
| — |
|
| James R. Hazlett | 5,000 |
| — |
| | $ | 17.51 |
| 9/10/2018 |
| — |
| — |
| — |
| — |
|
| 10,000 |
| — |
| — |
| $ | 17.74 |
| 12/9/2019 |
| — |
| — |
| — |
| — |
|
| | 10,000 |
| — |
| — |
| $ | 17.81 |
| 1/24/2021 |
| — |
| — |
| — |
| — |
|
| | — |
| — |
| — |
| — |
| — |
| 20,000 |
| $ | 375,000 |
| — |
| — |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | Stock Awards | |
Name |
Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Options
(#) |
Option Exercise Price
($) |
Option Expiration Date |
Number of Shares of Stock That Have Not Vested
(#) |
Market Value of Shares of Stock that Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares or Other Rights that Have
Not Vested (#) | Equity
Incentive Plan Awards:
Market or Payout Value
of Unearned
Shares or
Other Rights
that Have
Not Vested ($) | |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |
| Stephen C. Taylor | — | | — | | — | | — | | — | | 43,891 | | $ | 459,539 | | — | | — | | |
| — | | — | | — | | — | | — | | 62,755 | | 657,045 | | — | | — | | |
| — | | — | | — | | — | | — | | 109,212 | | 1,143,450 | | — | | — | | |
| James R. Hazlett | — | | — | | — | | — | | — | | 6,667 | | 69,803 | | — | | — | | |
| — | | — | | — | | — | | — | | 6,667 | | 69,803 | | — | | — | | |
| — | | — | | — | | — | | — | | 20,000 | | 209,400 | | — | | — | | |
| Micah C. Foster | — | | — | | — | | — | | — | | 5,000 | | 52,350 | | — | | — | | |
| | | | | | | | | | |
Option Exercises and Stock Vested in 20152021
In the table below, we show certain information about (i) the number of shares of common stock acquired upon exercise of stock options by each of the named executive officers in 20152021 and the value realized on exercise of the stock options and (ii) stock awards.
| | | | | | | | | | | | | | |
| | Option Awards | Stock Awards |
| Name | Number of Shares Acquired
on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting(1) | Value Realized on Vesting(1) |
| (a) | (b) | (c) | (d) | (e) |
| Stephen C. Taylor | — | $— | 80,075 | | $ | 744,316 | |
| James R. Hazlett | — | — | 15,332 | | 143,601 | |
|
| | | | | | | |
| | Option Awards | Stock Awards |
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting | Value Realized on Vesting |
| (a) | (b) | (c) | (d) | (e) |
| Stephen C. Taylor | 45,000 | $404,500 | 49,420 |
| $ | 1,087,240 |
|
| G. Larry Lawrence | — | — | 18,333 |
| 368,859 |
|
| James R. Hazlett | — | — | 18,333 |
| 368,859 |
|
(1) Excludes the following shares that vested (with values upon vesting) and were contributed to the Company's nonqualified deferred compensation plan as follows: Mr. Taylor - 23,428 shares for $220,208; and Mr. Hazlett - 1,333 shares for $12,983.
Potential Payments Upon Termination Nonqualified Deferred Compensation
We adopted a Deferred Compensation Plan in December 2015, which permits eligible employees, including our NEOs, and our Directors to annually elect to defer a portion of their salary, commissions, cash bonus, Director fees and/or Changestock awards they would otherwise have received when earned. Under this plan, participants can defer up to 90% of Controltheir salary, commissions, cash bonus, Director fees and stock awards. Cash amounts deferred under the Deferred Compensation Plan are deemed invested in the investment funds selected by the participant with similar options as available under the Company’s 401(k) Plan. We have option to contribute but do not currently contribute to the Deferred Compensation Plan on behalf of its participants or match the deferrals made by participants.
Our 1998 Stock Option Plan and 2009 Restricted Stock/Unit Plan contains “changeAt the time of control” provisions. These provisions are designeddeferral, a participant must indicate whether he or she wishes to provide some assurance that wereceive the amount deferred while in-service or upon separation of service. In either case, the payment will be ablein either a lump sum or in substantially equal annual installments. In-service installments cannot exceed five years, while installments elected to relystart upon each executive’s services and advice asseparation of service cannot exceed ten years. If separation is due to the best interests of Natural Gas Services Group and our shareholders without concern that the executive might be distracted by the personal uncertainties and risks created by any proposeda disability or threatened change of control and to promote continuity of our executive team.
Under our stock option plan, the Committee may adjust the stock options held by our executives upon the occurrence of a change of control. With this authority, the Committee may in its discretion elect to accelerate the vesting of any stock options that were not fully vested and allow for the exercise of such options as to all shares of stock subject thereto.
Likewise, under our 2009 Restricted Stock/Unit Plan, a change in control, deferrals will accelerate the vestingbe paid similar to deferrals paid upon separation of all awards under the plan unless the Committee has provided otherwiseservice, while deferrals related to death will be paid in a particular award underlump sum to the plan. In addition, upon death, disabilityparticipant’s beneficiary. If a
participant experiences an unforeseeable emergency during the deferral period, the participant may petition to receive a partial or retirement, any vesting or other restrictions onfull payout from the restricted stock awards will accelerate or lapse such that all shares underlying a restricted stock award will become unencumbered.
As notedDeferred Compensation Plan. All distributions are made in the tables above and summarized below, our named executive officers have stock options and restrictedcash, except for deferred stock awards which are subject to certain vesting requirements.
At December 31, 2015, our named executive officers had the following number of unvested restricted stock awards which were subject to forfeiture as of that date:
Stephen C. Taylor -- 83,590 shares
G. Larry Lawrence -- 20,000 shares
James R. Hazlett -- 20,000 sharessettled in Company stock.
Each of these restrictedDeferred Compensation Table | | | | | | | | | | | | | | | | | | | | | | | |
| Name | Beginning Aggregate Balance | Executive Contributions in Last FY ($) (1) | Registrant Contributions in Last FY ($) | | Aggregate Earnings in Last FY ($) | | Aggregate Withdrawals/Distributions ($) | | Aggregate Balance at Last Fiscal Year End ($) |
| Stephen C. Taylor | $ | 2,573,055 | | $ | 278,251 | | $ | — | | | $ | 551,250 | | | $ | — | | | $ | 3,402,556 | |
| G. Larry Lawrence | 157,550 | | — | | — | | | 18,651 | | | (65,865) | | | 110,336 | |
| James R. Hazlett | 339,004 | | 24,672 | | — | | | 63,469 | | | — | | | 427,145 | |
(1) All contributions were from salary, bonus and stock awards could have become vested and issued without restrictions on December 31, 2015 assuming a change of control were to have occurred on that date. In addition, the restricted stock awards would have been issued without restrictions on December 31, 2015, assuming the named executive officer had died, became disabled or retired.deferrals in 2021. The closing price of our common stock on December 31, 2015, was $22.30 per share. Accordingly, on December 31, 2015, had there been a change in control event or had the named executive officer died, became disabled or retired, the vesting terms of the restricted stock awards would have lapsed and the shares would have become unrestricted. As a result, there was a potential for Messrs. Taylor, Hazlett and Lawrence to realize immediate value upon the lapse of restrictions on restricted stock awards as follows: Mr. Taylor --$1,864,057; Mr. Lawrence --$446,000; and Mr. Hazlett --$446,000.
As described under “Compensation Agreements with Management” on page 41, we entered into a written employment agreement with Stephen C. Taylor, President, Chief Executive Officer and Chairman of the Board in October 2013. Under the employment agreement, Mr. Taylor is eligible for certain benefits in connection with a change in control. These provisions were included in Mr. Taylor’s initial employment agreement with us and were continued in his current agreement as part of our negotiations with Mr. Taylor asCompany has made no contributions to the terms of his employment and as an inducement for him to continue his employ with our company. The change of control and severance provisions were designed to promote stability and continuity with respect to Mr. Taylor’s employment as our Chief Executive Officer and President.Deferred Compensation Plan.
The following table summarizes the benefits in effect as of December 31, 2015 that Mr. Taylor would receive assuming that a qualifying termination (i.e., a termination described in footnote 2 below) in connection with a change in control, death or disability or a termination by the Company without cause, or a voluntary termination by Mr. Taylor with and without good reason, occurred on December 31, 2015. Those payments that are available generally to salaried employees that do not discriminate in scope, terms or operation in favor of executive officers are also not included in this table.
Chief Executive Officer Potential Payments Table
|
| | | | | | | | | | | | |
| Named Executive Officer Stephen C. Taylor | Qualifying Termination in Connection with a change in Control, Voluntary Resignation with Good Reason, or Termination by Company without Cause (1) ($) | Death or Disability(2) ($) | Termination by Company with Cause, Voluntary Termination without Good Reason ($) | Retirement(2) ($) |
| Acceleration of Unvested Restricted Stock Units (3) | $ | 1,864,057 |
| $ | 1,864,057 |
| $ | — |
| $ | 1,864,057 |
|
| Severance | 3,665,675 |
| — |
| — |
| — |
|
| Medical, Dental, and Vision Benefits | 32,220 |
| — |
| — |
| — |
|
| Life Insurance Premiums | 756 |
| — |
| — |
| — |
|
| TOTAL | $ | 5,562,708 |
| $ | 1,864,057 |
| $ | — |
| $ | 1,864,057 |
|
|
| |
(1) | See "Compensation Agreements with Management" beginning on page 41 for definitions and discussion of Mr. Taylor's severance package in connection with termination due to change of control, voluntary resignation with good reason or termination by the Company without cause.
|
|
| |
(2) | In the event of Mr. Taylor’s employment terminates on account of death, disability, or qualified retirement, 100% of unvested Restricted Stock awards will immediately vest.
|
|
| |
(3) | The value attributable to the acceleration of unvested Restricted Stock awards is based upon the number of awards multiplied by the closing price of our common stock ($22.30) on December 31, 2015.
|
Chief Executive Officer Equity Compensation
In an attempt to attract and retain critical leadership talent, which the Board of Directors believes is a central element of creating durable shareholder value, the Compensation Committee is in the process of restructuring the equity incentive program for our Chief Executive Officer.
Compensation awarded under the new equity compensation program will be primarily based on the Total Shareholder Return (TSR) of the Company relative to the TSR of each member of the Company’s peer group over a one-year period. In addition, the Compensation Committee will continue to exercise a degree of discretion in administering this equity compensation program given the inherent volatility in the oil and natural gas business environment as well as a number of other quantitative and qualitative factors.
As a result of discussions with our stakeholders and CEO, the Compensation Committee intends to target quantitative-based incentive equity compensation at 175% of the CEO’s base salary.
Based on the Company’s relative one-year TSR, the Compensation Committee envisions target multiples of the base 175% level as follows:
|
| | | | |
| TSR Performance Percentile | < 25th | 25th | 50th | 75th |
| Number of Peers Outperformed | 0-2 | 3 | 6 | 9 |
| Multiplier | 0 | .75 | 1.5 | 2.0 |
In addition, as noted above, the Compensation Committee retains discretion to adjust the awards based on other relevant quantitative and qualitative performance measures and for both absolute and relative extraordinary achievement in line with the objective of attracting and retaining best in class leadership.
The Compensation Committee intends to formalize this program with the Company's CEO within the next few months so that the annual equity award to be granted in 2017 will be made under the new program outlined above. In addition, as noted elsewhere in this Proxy Statement, future awards will be subject to vesting requirements under which share awards will vest in equal one-third tranches on December 31 of the grant year and the subsequent two years.
Compensation of Directors
We use a combination of cash and equity-based incentive compensation to attract and retain qualified candidates to serve on our Board of Directors. In setting compensation for our Directors, we consider the substantial amount of time that Directors expend in fulfilling their duties to us and our shareholders, as well as the skill-sets required to fulfill these duties.
The following table discloses the cash, equity awards and other compensation earned, paid or awarded, as the case may be, to each of our non-employee Directors during the fiscal years ended December 31, 2015, 20142021, 2020 and 2013.2019:
| | | Name | Year | Fees Earned Or Paid ($)(1) | Stock Awards ($)(2) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation ($) | Total ($) | Name | Year | Fees Earned Or Paid ($)(1) | Stock Awards ($)(2) | Option Awards ($) | Non-Equity Incentive
Plan Compensation
($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All
Other
Compensation
($) | Total
($) |
| (a) | | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (a) | | (b) | (c) | (d) | (e) | (f) | (g) | (h) |
| Leslie A. Beyer | | Leslie A. Beyer | 2021 | $ | 66,250 | | $ | 50,003 | | $ | — | | $ | 50,000 | | $ | — | | $ | — | | $ | 166,253 | |
| 2020 | 27,500 | | 12,499 | | — | | 25,000 | | — | | — | | 64,999 | |
| 2019 | — | | — | | — | | — | | — | | — | | — | |
| David L. Bradshaw | | David L. Bradshaw | 2021 | 68,750 | | 50,003 | | — | | 50,000 | | — | | — | | 168,753 | |
| 2020 | 65,000 | | 24,996 | | — | | 50,000 | | — | | — | | 139,996 | |
| 2019 | 65,000 | | 100,005 | | — | | — | | — | | — | | 165,005 | |
| John Chisholm | | John Chisholm | 2021 | 68,750 | | 50,003 | | — | | 50,000 | | — | | — | | 168,753 | |
| 2020 | 60,000 | | 24,996 | | — | | 50,000 | | — | | — | | 134,996 | |
| 2019 | 55,000 | | 100,005 | | — | | — | | — | | — | | 155,005 | |
| Charles G. Curtis | 2015 | $ | 50,000 |
| $ | 102,975 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 152,975 |
| Charles G. Curtis | 2021 | — | | — | | — | | — | | — | | — | | — | |
| | 2014 | 50,000 |
| 99,988 |
| — |
| — |
| — |
| — |
| 149,988 |
| |
| | 2013 | 30,000 |
| 46,875 |
| — |
| — |
| — |
| — |
| 76,875 |
| |
| David L. Bradshaw | 2015 | 60,000 |
| 102,975 |
| — |
| — |
| — |
| — |
| 162,975 |
| |
| | 2014 | 60,000 |
| 99,988 |
| — |
| — |
| — |
| — |
| 159,988 |
| |
| | 2013 | 40,000 |
| 46,875 |
| — |
| — |
| — |
| — |
| 86,875 |
| |
| John Chisholm | 2015 | 50,000 |
| 102,975 |
| — |
| — |
| — |
| — |
| 152,975 |
| |
| | 2014 | 50,000 |
| 99,988 |
| — |
| — |
| — |
| — |
| 149,988 |
| |
| | 2013 | 30,000 |
| 46,875 |
| — |
| — |
| — |
| — |
| 76,875 |
| |
| William F. Hughes | 2015 | 60,000 |
| 102,975 |
| — |
| — |
| — |
| — |
| 162,975 |
| |
| | 2014 | 60,000 |
| 99,988 |
| — |
| — |
| — |
| — |
| 159,988 |
| |
| | 2013 | 40,000 |
| 46,875 |
| — |
| — |
| — |
| — |
| 86,875 |
| |
| Charles G. Curtis | | Charles G. Curtis | 2020 | 32,500 | | 24,996 | | — | | — | | — | | — | | 57,496 | |
| 2019 | 60,000 | | 100,005 | | — | | — | | — | | — | | 160,005 | |
| 2021 | 16,250 | | — | | — | | — | | — | | — | | 16,250 | |
| William F. Hughes, Jr. | | William F. Hughes, Jr. | 2020 | 65,000 | | 24,996 | | — | | 50,000 | | — | | — | | 139,996 | |
| 2019 | 65,000 | | 100,005 | | — | | — | | — | | — | | 165,005 | |
| 2021 | 52,500 | | 50,000 | | — | | 50,000 | | — | | — | | 152,500 | |
| Nigel J. Jenvey | | Nigel J. Jenvey | 2020 | — | | — | | — | | — | | — | | — | | — | |
| 2019 | — | | — | | — | | — | | — | | — | | — | |
| |
(1) | Our non-employee Directors are paid a quarterly cash fee for their attendance at each meeting of our Board of Directors. The cash fee payable to our non-employee Directors for 2015 and 2014 was $11,250 per quarter. In addition, (i) the Chairman of the Audit Committee, David L. Bradshaw and the Chairman of the Compensation Committee, William F. Hughes Jr., were entitled to an additional quarterly cash fee in the amount of $3,750 and (ii) the Chairman of the Nominating Committee John W. Chisholm, and the Chairman of the Governance and Personnel Development Committee, Charles G. Curtis, were entitled to an additional quarterly cash fee in the amount of $1,250. In 2013, our non-employee Directors were paid a quarterly cash fee for their attendance at each meeting of our Board of Directors. The cash fee payable to our non-employee Directors was $7,500 per quarter. Each of our non-employee Directors received a cash fee payment of $7,500 for the four quarters in 2013, totaling $30,000. In addition, the Chairman of the Audit Committee, David L. Bradshaw was entitled to an additional quarterly cash fee in the amount of $2,500; and the Chairman of the Compensation Committee, William F. Hughes Jr., was entitled the same additional quarterly cash fee of $2,500. |
| |
(2) | On March 19, 2015, each of our non-employee Directors were granted 5,492 restricted shares of common stock at an issue price of $18.75 per share; and on March 20, 2014, each of our non-employee Directors were granted 3,288 restricted shares of common stock at an issue price of $30.41 per share; and on March 21, 2013, each of our non-employee Directors were granted 2,500 restricted shares of common stock at an issue price of $18.75 per share. |
(1) Our non-employee Directors are paid a quarterly cash fee. The cash fee payable to our non-employee Directors was $13,750 per quarter for 2021 and $12,500 per quarter for 2020 and 2019. In addition, the Chairman of the Audit Committee, David L. Bradshaw, the Chairman of the Compensation Committee, Leslie A. Beyer, the Chairman of the ESG and Personnel Development Committee, Nigel J. Jenvey and the Chairman of the Nominating Committee and Lead Director, John Chisholm, were entitled to an additional quarterly cash fee in the amount of $3,750.
(2) On March 18, 2021, each of our non-employee Directors were granted 5,612 restricted shares at an issue price of $8.91 per share; on April 1, 2021, Mr. Jenvey was granted 5,291 restricted shares at an issue price of $9.45; on April 28, 2020, each of our non-employee Directors were granted 4,432 restricted shares at an issue price of $5.64 per share; on October 15, 2020, Ms. Beyer was granted 1,324 restricted shares at an issue price of $9.44; and on March 29, 2019, each of our non-employee Directors were granted 5,784 restricted shares/units at an issue price of $17.29 per share.
Cash Compensation Paid to Independent Directors
We pay our non-employee Directors a quarterly cash fee for their attendance at each meeting of our Board of Directors. The cash fee payable to our non-employee Directors for 20152021 was $11,250$13,750 per quarter.quarter and $12,500 per quarter for 2020 and 2019. In addition, the Chairmen of the Audit, Compensation, ESG and CompensationNominating Committees were entitled to an additional quarterly cash fee in the amount of $3,750; while$3,750.
For 2022, the ChairmenCompensation recommended and the Board of Directors approved no changes to the Nominating and Governance and Personnel Development committees were entitled to an additional quarterly cash feecurrent compensation structure of $1,250.our Directors.
Equity Based Compensation Paid to Independent Directors
In 2013, each independent Director received a static grant of 2,500 shares of restricted shares of Company common stock for each year. Beginning in 2014, our Board of Directors revised the Company'sOur compensation policy for independent directors so that in lieu of issuing a static 2,500 restricted shares of Company common stock as in past years, the independent directors now receiveDirectors is to grant an annual award of restricted shares based upon a review of equity award values paid by other public companies in the Company's peer group and the Company's market and financial performance in comparison to such peer group companies. For 2015,2021, based upon the Company's performance compared to its peer group, the Compensation Committee recommended and the Board approved an equity award value of approximately $103,000$100,000 in restricted stock. However, because of the depressed nature of the energy industry and dilutive nature of the Company's stock at then current market prices, the Board determined to modify the award into a 50/50 split of stock and cash. In connection therewith, on March 18, 2021, each of our fourthree independent directors wasDirectors were granted for 2015 the amountfollowing:
•An award of 5,492$50,000 in cash (50% of the total) that vests one year from the date of grant; and
•An award of 5,612 shares of restricted stock, pursuant to the Plan, based uponwhich was calculated by dividing $50,000 by the closing share price of $18.75 per share as$8.91 on that day. These awards of March 19, 2015,restricted stock vest one year from the date of the grant. The restricted shares are subject to vesting whereby no shares will vest during the first year,grant and then upon the first anniversary date of the award, one-fourth of the shares will vest every three months so that all restricted shares will have vested on the second anniversary date of the grant of the award. Notwithstanding the vesting schedule, all of the restricted shares are subject to acceleration in certain events.
On April 1, 2021, William F. Hughes retired and will immediately vest in the case of (i) death, disability, or retirementresigned from his position as a member of the recipient employee, or (ii)Board of Directors of the Company. In recognition of Mr. Hughes’ longstanding service, the Compensation Committee voted to accelerate the vesting of the following unvested shares, free of any further restrictions:
•3,989 restricted stock units
•443 restricted stock awards
On April 1, 2021, the Board appointed Nigel J. Jenvey as a changeDirector of controlthe Company. Consistent with the compensation of the other non-employee Directors, the Compensation Committee awarded Mr. Jenvey the following:
•An award of $50,000 in cash (50% of the Company, as set forthtotal) that vests one year from the date of grant; and
•An award of 5,291 shares of restricted stock, which was calculated by dividing $50,000 by the closing share price of $9.45 on that day. These awards of restricted stock vest one year from the date of grant and are subject to acceleration in certain events.
On April 25, 2022, the Restricted Stock Plan.Compensation Committee recommended and the Board approved the continuation of its annual equity award policy of $100,000 in value of restricted stock and cash, for 2022. In connection therewith, four independent Directors were granted the following:
•An award of $50,000 in cash (50% of the total) that vests one year from the date of grant; and
•An award of 4,212 shares of restricted stock, which was calculated by dividing $50,000 by a deemed share price of $11.87. These awards of restricted stock vest one year from the date of grant and are subject to acceleration in certain events.
Directors who are our employees do not receive any compensation for their services as Directors.
Other
All Directors are reimbursed for their expenses incurred in connection with attending meetings. We provide liability insurance for our Directors and officers. The cost of this coverage for 20152021 was $100,113.$221,723. We do not offer non-employee Directors travel accident insurance, life insurance, or a pension or retirement plan.
Compensation Agreements with Management
On October 23, 2013, weMay 17, 2022, the Company and Stephen C. Taylor, entered into a new employment agreement (the “Employment Agreement”), pursuant to which Mr. Taylor continues his employment as our President and Chief Executive Officer. The newOfficer, terminated his Employment Agreement became effective on the same date and Mr. Taylor’s previous employment agreement with us, which was set to expire on October 25, 2013, was terminated in connection therewith.
Ondated April 24, 2015, we entered into an amendment with Mr. Taylor to his Employment Agreement pursuant to which the "modified single trigger" change of control provision was changed to a "double trigger" change of control. Under the "modified single trigger provision", Mr. Taylor could voluntarily terminate the Employment Agreement and for any reason and collect severance benefits. Under the new "double trigger" change of control provision, a change of control must occur followed by the Company or its successor terminating Mr. Taylor's employment other than for cause, death, or disability, or by Mr. Taylor terminating his employment for Good Reason. We discuss the definitions of "Change of Control" and "Good Reason" below, alongin connection with Mr. Taylor's severance benefits in connection with these events.
The term of the Employment Agreement is for three years but the agreement contains an “evergreen” feature whereby the agreement is automatically extended on a monthly basis on the last day of each month so that the term of the agreement will always be three years unless written notice of nonrenewal is given by the Company. If a notice of nonrenewal is given, the term of employment then ends three years from the date of that written notice of nonrenewal unless terminated earlier as described below. The Employment Agreement provides for Mr. Taylor to receive a base salary, potential cash bonus, equity compensation, and certain other benefits, which are summarized below.
Base Salary. Mr. Taylor’s annual 2015 base salary of $543,063 (“Base Salary”) remained the same for the remainder of 2015. However, the Base Salary will be reviewed annually at the beginning of the year by, and may be increased at the discretion of, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”).
Bonus. Mr. Taylor will continue to be eligible for an annual cash bonus under the Company’s current Annual Incentive Bonus Plan. Mr. Taylor’s annual bonus opportunity payable upon achievement of “target” levels shall be at least a hundred percent (100%) of Base Salary for 2015 and at least one hundred percent (100%) thereafter. The performance metrics, weighting and thresholds for each annual bonus opportunity will be determined by the Company’s Board of Directors or Compensation Committee in good faith following consultation with Mr. Taylor.
Annual Equity Compensation. Mr. Taylor will be eligible for annual grants of equity-based incentive awards under the Company’s equity compensation plans. The Company has agreed to award Mr. Taylor a restricted stock award or equivalent equity awards in January of each year with an aggregate minimum value equal to at least 175% of the Executive's Base Salary, subject to vesting terms and other standard terms which shall be established by the Compensation Committee taking into account the performance of the Company, Mr. Taylor and industry norms.
Benefits.retirement. The Company will provide Mr. Taylor such retirement, and other benefits as are customarily providedbe providing further information in a Current Report on Form 8-K to similarly situated executives of the Company, including paid vacation, coverage under the Company’s medical, life, disability and other insurance plans, and reimbursement for all reasonable business expenses in accordancebe filed with the Company’s expense reimbursement policy.
Termination. The Company or Mr. Taylor may terminateSecurities and Exchange Commission regarding the agreement prior to the expiration of its Term at any time upon written notice.
Severance upon Early Termination. Mr. Taylor will be entitled to the following severance benefits during the first ten yearsterms of his employment:
(A) If (i) the Company terminates Mr. Taylor's agreement without Cause (ii) Mr. Taylor terminates the agreement for Good Reason or due to a Change of Control event (as defined below) followed by the Company or its successor terminating Mr. Taylor's agreement without cause or Mr. Taylor terminating the agreement for Good Reason or (iii) Mr. Taylor's employment is terminated due to death or disability, then he will receive (a) a lump sum payment equal to 300% of Base Salary and Annual Bonus; (b) vesting of all unvested equity awards or other long-term incentive compensation; (c) continuation of health insurance benefits and payment of any life insurance premiums for a period of 36 months after termination; and (d) receipt of any other vested benefits which had not yet been paid prior to the date of termination.
(B) If Mr. Taylor's employment is terminated for Cause or he voluntarily resigns, then he will be entitled to any unpaid compensation earned through the date of termination and receipt of any other vested benefits which had not yet been paid prior to the date of termination.
(C) If Mr. Taylor retires in compliance with the Company's retirement policy, then he will be entitled to (i) any unpaid compensation earned through the date of retirement; (ii) vesting of all unvested equity awards or other long-term incentive compensation; and (iii) receipt of any other vested benefits which had not yet been paid prior to the date of termination.
After the tenth anniversary date of Mr. Taylor's employment agreement, in the event the Company delivers to Mr. Taylor a Notice of Nonrenewal and:
(A) his employment is automatically terminated upon the expiration of the remaining three year term, Mr. Taylor shall be entitled to (i) any unpaid compensation earned through the date of retirement; (ii) vesting of all unvested equity awards or other long-term incentive compensation; and (iii) receipt of any other vested benefits which had not yet been paid prior to the date of; or
(B) his employment is terminated prior to the expiration of the remaining three year term, unless said termination is due to Cause, voluntary resignation or retirement, then Mr. Taylor shall be entitled to (i) lump sum payment of his Base Salary at the time of termination for the remainder of the three year term of the agreement; (ii) a lump sum cash payment equal to 100% of the Annual Bonus for each full year (if any) remaining in the three year term, plus a pro-rata portion of such Annul Bonus for any partial remaining year in the three year term; (iii) vesting of all unvested equity awards or other long-term incentive compensation; (iv) continuation of health insurance benefits and payment of any life insurance premiums for the remainder of the three year term of the agreement; and (v) receipt of any other vested benefits which had not yet been paid prior to the date of termination.
Under the Employment Agreement, a "Change of Control" event includes (i) the acquisition by a person, entity or group of related persons or entities of more than 30% of the total voting power in the Company (excluding sales to underwriters in a public offering); (ii) consummation of the sale of 50% or more of the Company's assets; (iii) consummation of a merger or
consolidation of the Company with or into an entity unless the voting securities of the Company immediately prior to the merger or consolidation continue to represent more the 70% of the voting power of the surviving entity after the merger or consolidation; and (iv) replacement of at least a majority of the incumbent members of the Company's Board of Directors, excluding directors whose election to the Board was approved by at least a majority of the then incumbent directors, subject to further limited exceptions as set forth in the "Change of Control" definition in Employment Agreement.
Under the Employment Agreement, a "Good Reason" event includes (i) a material diminution of Mr. Taylor's duties, control, authority or status or position or a requirement that the Executive report to a corporate officer or employee instead of reporting directly to the board of directors; (ii) a material reduction in Mr. Taylor's compensation; (iii) a material breach by the Company of the Employment Agreement; or (iv) a relocation of more than fifty miles of Mr. Taylor's principal office with the Company or its successor. And in connection with a termination due to Change of Control, the following provisions also constitute “Good Reason” events: (i) a material diminution of Mr. Taylor's duties, control, authority or status or position or a requirement that Mr. Taylor report to a corporate officer or employee instead of reporting directly to the Company's or successor’s board of directors depending on its composition after the change in control; (ii) the failure of the Company or successor to continue in effect any plan in which Mr. Taylor participates immediately prior to the Change in Control which is material to the Executive’s total compensation, unless an equitable arrangement has been made with respect to any such plan on a basis not less favorable, both in terms of the amount or timing of payment of benefits provided; and (iii) a material breach by the Company or its successor of the Employment Agreement or any other material agreement between Mr. Taylor and the Company or its successor.
retirement.
Non-Competition and Non-Solicitation.
In connection with the payment of the severance benefits described above, for a period of two years following Mr. Taylor’s separation from the Company, he may not compete with the Company in any geographic area within a 100 mile radius of a Company owned or leased facility which is Company staffed and actively engaging in business on behalf of the Company.
We do not have any written employment agreements with our other named executive officers.
Limitation on Directors’ and Officers’ Liability
Our Articles of Incorporation provide our Directors and Officers with certain limitations on liability to us or any of our shareholders for damages for breach of fiduciary duty as a Director or officer involving certain acts or omissions of any such Director or Officer.
This limitation on liability may have the effect of reducing the likelihood of derivative litigation against Directors and Officers, and may discourage or deter shareholders or management from bringing a lawsuit against Directors and Officers for breach of their duty of care even though such an action, if successful, might otherwise have benefited our shareholders and us.
Our Articles of Incorporation and bylaws provide certain indemnification privileges to our Directors, employees, agents and officers against liabilities incurred in legal proceedings. Also, our Directors, employees, agents or officers who are successful, on the merits or otherwise, in defense of any proceeding to which he or she was a party, are entitled to receive indemnification against expenses, including attorneys’ fees, incurred in connection with the proceeding.
We are not aware of any pending litigation or proceeding involving any of our Directors, Officers,officers, employees or agents as to which indemnification is being or may be sought, and we are not aware of any other pending or threatened litigation that may result in claims for indemnification by any of our Directors, officers, employees or agents.
Even though we maintain Directors’ and Officers’ liability insurance, the indemnification provisions contained in our Articles of Incorporation and bylaws remain in place.
Procedures for Reviewing Certain Transactions
On March 7, 2007, we adopted a written policy for the review, approval or ratification of related party transactions. All of our officers, Directors and employees are subject to the policy. Under this policy, the Audit Committee will review all related party transactions for potential conflict of interest situations. Generally, our policy defines a “related party transaction” as a transaction in which we are a participant and in which a related party has an interest. A “related party” is:
any of our Directors, Officers or employees or a nominee to become a Director;
an owner of more than 5% of our outstanding common stock;
certain family members of any of the above persons; and
any entity in which any of the above persons is employed or is a partner or principal or in which such person has a 5% or greater ownership interest.
Approval Procedures
Before entering into a related party transaction, the related party or our department responsible for the potential transaction must notify the CEO or the Audit Committee of the facts and circumstances of the proposed transaction. If the amount involved is equal to or less than $100,000, the proposed transaction will be submitted to the CEO. If the amount involved exceeds $100,000, the proposed transaction will be submitted to the Audit Committee. Matters to be submitted will include:
the related party’s relationship to us and interest in the transaction;
the material terms of the proposed transaction;
the benefits to us of the proposed transaction;
the availability of other sources of comparable properties or services; and
whether the proposed transaction is on terms comparable to terms available to an unrelated third party or to employees generally.
The CEO or the Audit Committee, as applicable, will then consider all of the relevant facts and circumstances available, including the matters described above and, if applicable, the impact on a director’s independence. Neither the CEO nor any member of the Audit Committee is permitted to participate in any review, consideration or approval of any related party transaction if such person or any of his or her immediate family members is the related party. After review, the CEO or the Audit Committee, as applicable, may approve, modify or disapprove the proposed transaction. Only those related party transactions that are in, or are not inconsistent with, our best interests and that of our shareholders will be approved.
Ratification Procedures
If one of our officers or Directors becomes aware of a related party transaction that has not been previously approved or ratified by the CEO or the Audit Committee then, if the transaction is pending or ongoing, the transaction must be submitted, based on the amount involved, to either the CEO or the Audit Committee and the CEO or the Audit Committee will consider the matters described above. Based on the conclusions reached, the CEO or the Audit Committee, as applicable, will evaluate all options, including ratification, amendment or termination of the related party transaction. If the transaction is completed, the CEO or the Audit Committee will evaluate the transaction, taking into account the same factors as described above, to determine if rescission of the transaction or any disciplinary action is appropriate, and will request that we evaluate our controls and procedures to determine the reason the transaction was not submitted to the CEO or the Audit Committee for prior approval and whether any changes to the procedures are recommended.
We did not have any related party transactions in 2015 with our Officers or Directors.
PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT
For purposes of the following tables, "beneficial ownership" is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, pursuant to which a person or group of persons is deemed to have "beneficial ownership" of any shares of Common Stock that such person has the right to acquire within 60 days.
The following table indicates the beneficial ownership of our Common Stock as of April 22, 2016May 18, 2022 by: (1) each of our current directorsDirectors and nominees for election; (2) our chief executive officer,Chief Executive Officer, principal accounting officer and our other named executive officers (as defined in Item 402(a) (3) of Regulation S-K) (together as a group, the "Named Executive Officers") "); and (3) all of our current directors,Directors, nominees and executive officers as a group, based on our records and data supplied by each of the current directors,Directors, nominees and executive officers.
Schedule of Beneficial Ownership | | | | | | | | |
| Name of Beneficial Owner and Position | Amount and Nature of Beneficial Ownership (1) | Percent of Class |
Directors & Nominees Who Are Not Named Executive Officers | | |
| | | |
| Leslie A. Beyer - Current Director | 11,148 | * |
| David L. Bradshaw - Current Director | 36,256 | * |
| John W. Chisholm - Director Nominee | 13,004 | * |
| Nigel J. Jenvey - Current Director | 9,503 | * |
| | | |
| Named Executive Officers | | |
| | | |
Stephen C. Taylor - Chief Executive Officer and Current Director(2) | 645,740 | 5.18% |
James R. Hazlett - Vice President - Technical Services(3) | 95,018 | * |
| Micah C. Foster - Vice President and Chief Financial Officer | 5,000 | * |
| All Directors (and nominees) and executive officers as a group (7 persons) | 815,669 | 6.54% |
|
| | |
Name of Beneficial Owner and Position | Amount and Nature of Beneficial Ownership
(1)
| Percent of Class |
Directors & Nominees Who Are Not Named Executive Officers
| | |
| | |
John W. Chisholm | 36,340(2)
| * |
Current Director & Director Nominee | | |
| | |
Charles G. Curtis | 85,021(3)
| * |
Current Director | | |
| | |
William F. Hughes, Jr. | 149,164(4)
| 1.16% |
Current Director | | |
| | |
David L. Bradshaw | 19,048 | * |
Current Director | | |
| | |
Named Executive Officers | | |
| | |
Stephen C. Taylor | 446,590(5)
| 3.47% |
Chief Executive Officer, Current Director
| | |
James R. Hazlett | 92,723(6)
| * |
Vice President – Technical Services | | |
G. Larry Lawrence | 56,221(7)
| * |
Chief Financial Officer | | |
All Directors (and nominees) and executive officers as a group (7 persons) | 885,107(8)
| 6.88% |
* Less than one percent.
(1) The number of shares listed includes all shares of common stock owned or indirectly owned by, or which may be acquiredvest within 60 days of April 22, 2016 upon exercise of warrants and options held by the shareholder (or group).May 18, 2022, under outstanding restricted stock units. Beneficial ownership is calculated in accordance with the rules of the Securities and Exchange Commission. Unless otherwise indicated, all shares of common stock are held directly with sole voting and investment powers. As of April 22, 2016,May 18, 2022, none of the shares of common stock owned by our officers and Directors had been pledged as collateral to secure repayment of loans.
(2) Includes 15,000130,563 shares of common stock that may be acquired upon exerciseheld indirectly by a “rabbi trust” the receipt of stock options granted under our 1998 Stock Optionwhich has been deferred by Mr. Taylor pursuant to the Company’s Nonqualified Deferred Compensation Plan.
(3) Includes 12,50019,000 shares of common stock that may be acquired upon exerciseheld indirectly by a “rabbi trust” the receipt of stock options granted under our 1998 Stock Option Plan.
(4) Includes 110,500 shares of common stock indirectly ownedwhich has been deferred by Mr. Hughes through the William and Cheryl Hughes Family Trust. Mr. and Mrs. Hughes are co-trustees of the William and Cheryl Hughes Family Trust and have shared voting and investment powers with respectHazlett pursuant to the shares held by the trust. Mr. and Mrs. Hughes are beneficiaries of the trust along with their two children.
(5) Includes 148,852 shares of common stock that may be acquired upon exercise of stock options granted to Mr. Taylor.
(6) Includes 25,000 shares of common stock that may be acquired upon exercise of stock options granted under our 1998 Stock OptionCompany’s Nonqualified Deferred Compensation Plan.
(7) Includes 5,000 shares of common stock that may be acquired upon exercise of stock options granted under our 1998 Stock Option Plan.
(8) Includes 206,352 shares of common stock that may be acquired upon exercise of stock options.42
The following table sets forth information as of April 22, 2016May 18, 2022 regarding the beneficial owners of more than five percent of the outstanding shares of our Common Stock. To our knowledge, there are no beneficial owners of more than five percent of the outstanding shares of our Common Stock as of April 22, 2016May 18, 2022 other than those set forth below.
| | | | | | | | |
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class |
| | | |
FMR LLC(1) | 1,315,540 | 10.54% |
| 245 Summer Street | | |
| Boston, Massachusetts 02210 | | |
| | |
Dimensional Fund Advisors LP(2) | 943,255 | 7.56 |
| Palisades West, Building One, 6300 Bee Cave Road | | |
| Austin, Texas 78746 | | |
| | |
Mill Road Capital III, LP(3) | 839,445 | 6.73% |
| 382 Greenwich Avenue, Suite One | | |
| Greenwich, CT 06830 | | |
| | |
Franklin Mutual Advisors, LLC(4) | 768,834 | 6.16% |
| 101 John F. Kennedy Parkway | | |
| Short Hills, New Jersey 07078 | | |
| | |
AWM Investment Company, Inc.(5) | 678,008 | 5.43% |
| c/o Special Situations Funds | | |
| 527 Madison Avenue, Suite 2600 | | |
| New York, New York 10022 | | |
|
| | |
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class |
| | |
Blackrock, Inc. | 796,871(1)
| 6.19% |
40 East 52nd Street
| | |
New York, New York 10022 | | |
| | |
Neuberger Berman Group LLC | 1,046,735(2)
| 8.14% |
605 Third Avenue | | |
New York, New York 10158 | | |
| | |
Dimensional Fund Advisors | 996,460(3)
| 7.73% |
Palisades West, Building One, 6300 Bee Cave Road | | |
Austin, Texas 78746 | | |
(1) As reported in Amendment No. 3 to Schedule 13G filed with the Securities and Exchange Commission on March 10, 2022. According to the filing, FMR LLC holds voting and/or investment power over the shares, but economic ownership is beneficially held by two investment companies. FMR LLC has sole dispositive and voting power over all of the shares reported in the table above. |
| |
(1) | As reported in Amendment No. 6 to Schedule 13G filed with the Securities and Exchange Commission on January 27, 2016. According to the filing, Blackrock, Inc.(2) As reported in Amendment No. 10 to Schedule 13G filed with the Securities and Exchange Commission on February 8, 2022. According to the filing, Dimensional Fund Advisors holds voting and/or investment power over the shares, but economic ownership is beneficially held by four investment companies. Dimensional Fund Advisors has the sole voting and dispositive power over all and sole voting power over 916,154 of the shares reported in the table above.
|
|
| |
(2) | As reported in Amendment No. 7 to Schedule 13G filed with the Securities and Exchange Commission on February 9, 2016. According to the filing, Neuberger Berman Group LLC and Neuberger Berman LLC beneficially own the shares.
|
(3) As reported in Schedule 13D filed with the Securities and Exchange Commission on January 4, 2021. |
| |
(3) | As reported in Amendment No. 3 to schedule 13G filed with the Securities and Exchange Commission in February 9, 2016. According to the filing, Dimensional Fund Advisors(4) As reported in Amendment No. 4 to Schedule 13G filed with the Securities and Exchange Commission on February 2, 2022. According to the filing, Franklin Advisory Services, LLC is an indirect wholly owned subsidiary of Franklin Resources, Inc., and it holds voting and/or investment power over the shares, but economic ownership is beneficially by four investment power over all the securities and sole voting power over 732,020 of the shares reported in the table above. However, economic ownership is held by one or more open-end investment companies or other managed accounts that are investment management clients of Franklin Advisory Services, LLC or affiliated companies.
|
(5) As reported in Schedule 13G filed with the Securities and Exchange Commission on February 11, 2022. According to the filing, AWM Investment Company Inc. holds voting and/or investment power over the shares, but economic ownership is beneficially held by three investment companies. AWM Investment Company Inc. has sole dispositive and voting power over all of the shares reported in the table above.
Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our Directors, officers and persons who beneficially own more than 10% of our Common Stock to file certain reports of beneficial ownership with the Securities and Exchange Commission. These reports show the Directors’, officers’ and greater than 10% shareholders' ownership and the changes in ownership of our common stock and other equity securities. The SEC regulations also require that a copy of all such
Section 16(a) forms filed must be furnished to us by the person or entity filing the report.
Based on a review of Section 16(a) filings furnished to us, To the Company’s knowledge, during the fiscal year ended December 31, 2021, all transactions in our equity securitiesreports required to be reported byfiled pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, were reportedfiled on a timely basis.
PROPOSAL 2 - CONSIDERATION OF AN ADVISORY VOTE ON EXECUTIVE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), gives the shareholders the right to endorse or not endorse the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with the SEC's rules. The proposal, commonly known as a “Say-on-Pay” proposal, gives our shareholders the opportunity to express their views on the Company's executive compensation.
At the Company's annual meeting of shareholders held in June 2017, our shareholders recommended that the advisory vote on the Say-on-Pay of our named executives in our proxy materials be submitted annually pursuant to the recommendation of our Board of Directors that the advisory vote be submitted annually. Thus we include the Say-on-Pay advisory vote in our proxy materials on an annual basis exceptuntil the next shareholder vote on the frequency of Say-on-Pay or our Board of Directors otherwise determines that a different frequency of Say-on-Pay vote is in the best interests of the shareholders.
We are asking our shareholders to indicate whether or not they support the compensation program as described in this proxy statement. This proposal is not intended to address any specific item of compensation, but rather the overall compensation of the named executive officers and the compensation policies, methodologies and practices described in this proxy statement. Accordingly, we ask our stockholders to vote “FOR” the following resolution at our annual meeting:
“RESOLVED, that the shareholders approve the compensation of the Company's named executive officers, as disclosed in the compensation section, the compensation tables, and the related disclosure contained in the proxy statement set forth under the caption “Executive Compensation” of this proxy statement.”
The Company believes its compensation philosophy and programs are strongly linked to performance and results and appropriately aligned with the interests of shareholders. Our compensation philosophy is to provide an executive compensation program that:
•rewards performance and skills necessary to advance our objectives and further the interests of our shareholders;
•is fair and reasonable and appropriately applied to each executive officer;
•is competitive with compensation programs offered by our competitors; and
•is appropriately focused on achieving annual financial and operational goals through the Company's cash bonus plan and on maximizing stockholder value over the long term, through grants of restricted shares and stock options.
The Board of Directors recommends that you vote FOR approval, on an advisory basis, of the compensation programs of our named executive officers as disclosed in the Compensation Discussion and Analysis, the compensation tables, and the related disclosure contained in the proxy statement set forth under the caption “Executive Compensation” of this proxy statement.
PROPOSAL 3 - APPROVAL OF AN AMENDMENT TO THE 2019 EQUITY INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE PLAN BY 650,000 SHARES
Introduction
The New York Stock Exchange requires shareholder approval for the following: establishment or material amendment of any equity compensation arrangement, with limited exceptions. We are seeking the approval of our shareholders of an amendment to our 2019 Equity Incentive Plan (the “2019 Plan”) to increase the number of shares reserved under the 2019 Plan by 650,000 shares. Our Board has approved the amendment to the 2019 Plan and recommends the approval of the amendment by our stockholders.
The 2019 Plan was originally adopted by our stockholders on June 20, 2019 and, at that time, we initially reserved 500,000 shares of our common stock under the 2019 Plan. As of March 31, 2022, we have issued a total of 456,198 shares of common stock under the 2019 Plan, of which 165,854 continue to be subject to vesting requirements.
Our Board has reviewed the 2019 Plan and the lack of available shares thereunder and determined that the 2019 Plan requires additional shares to provide the flexibility with respect to stock-based compensation that our Board believes is necessary to establish appropriate long-term incentives to achieve our objectives. The amount of available shares under the 2019 Plan has been negatively impacted due to the COVID-19 pandemic shut down which precipitated material decline in the market values of equity securities of companies in the oil and gas industry, including service providers such as Natural Gas Services. These unanticipated and unavoidable stock price declines, which were beyond the control of companies in our industry, have had drastic effects on equity incentive plans because more shares have been required to cover the value of customary long-term incentive grants. Thus, our Board believes that it is advisable to increase the share limit in the 2019 Plan in order to attract and compensate employees, officers, directors and others upon whose judgment, initiative and effort we depend. The issuance of common shares and stock options to eligible participants is designed to align the interests of such participants with those of our stockholders.
Proposal 3 increases the number of shares of common stock that may be issued under the 2019 Plan by 650,000 shares, or approximately 5.17% of the 12,561,408 shares of common stock outstanding on April 14, 2022. The closing price of our common stock on April 14, 2022 was $13.54. The major features of the 2019 Plan are summarized below. This summary is qualified in its entirety by reference to the full text of the 2019 Plan, a copy of which is attached to this Proxy Statement as APPENDIX A.
If shareholders do not approve this proposal, the current share limit under the 2019 Plan, which has been nearly exhausted, will continue in effect.
Board Recommendation
Our Board recommends a vote “for” an amendment to our 2019 Stock Incentive Plan to increase the number of shares of common stock reserved under the plan by 650,000 shares.
Material Terms of the Plan
The following summary of the material terms of the 2019 Plan is qualified in its entirety by the full text of the 2019 Plan, a copy of which is attached to this Proxy Statement as Annex 1. You also may obtain a copy of the 2019 Plan, free of charge, by writing to the Company, Attention Alicia Dada, Investors Relations, 404 Veterans Airpark Lane, Suite 300, Midland, Texas 79705.
Effective Date; Duration of the 2019 Plan
The 2019 Plan became effective upon approval by the Company’s shareholders at our June 2019 annual meeting. Except with respect to awards then outstanding, unless sooner terminated, the 2019 Plan will expire on June 20, 2029 and no further awards may be granted after such date.
Plan Administration
The 2019 Plan is administered by the Committee or, in the Board’s discretion, by the Board. The Committee has the authority to, among other things, interpret the 2019 Plan, determine who will be granted awards under the 2019 Plan, prescribe the terms and conditions of each award, interpret, administer, reconcile any inconsistency in, correct any defect in and supply any omission in the 2019 Plan, and exercise discretion to make any and all other determinations which it determines to be necessary or advisable for the administration of the 2019 Plan.
Eligibility
The Committee selects participants from among the key employees, consultants and directors of the Company and its affiliates. Only employees are eligible to receive incentive stock options.
Shares Available for Awards; Limits on Awards
The Company initially reserved an aggregate of 500,000 shares of common stock to be awarded under the 2019 Plan. If this proposal is approved by our shareholders at the Meeting, the aggregate shares that may awarded under the 2019 Plan will increase to 1,150,000 (the “Total Share Reserve”). We anticipate that, based on our recent historical awards, the amount of shares reserved would provide about 3 years of availability under the 2019 Plan, although since the number of shares granted under the 2019 Plan in any single year can fluctuate significantly due to fluctuations in the market price of our common stock. See “Overhang and Burn Rate” below for further information.
One of the requirements for the favorable tax treatment available to incentive stock options under the Internal Revenue Code of 1986, as amended (the “Code”), is that the 2019 Plan must specify, and our stockholders must approve, the maximum number of shares available for issuance pursuant to incentive stock options. As a result, in order to provide flexibility, the 2019 Plan will provide that up to 575,000 of the Total Share Reserve may be issued pursuant to incentive stock options.
No non-employee director may be granted awards, during any fiscal year, with respect to shares of common stock that, together with any cash fees paid to the director during the fiscal year, have a total value that exceeds $250,000 (calculating the value of any awards based on the grant date fair value for financial reporting purposes).
If any outstanding award expires or is canceled, forfeited, or terminated without issuance of the full number of shares of common stock to which the award related, then the number of shares available under the 2019 Plan will be increased by the portion of the award that expired, or was canceled, forfeited or terminated.
Shares tendered in payment of the option exercise price or delivered or withheld by the Company to satisfy any tax withholding obligation, or shares covered by a stock-settled stock appreciation right or other awards that were not issued upon the settlement of the award will not again become available for future grants under the 2019 Plan.
Awards may be granted under the 2019 Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity acquired by the Company or with which the Company combines. The Committee will make appropriate adjustments to these limits to prevent dilution or enlargement of the rights of participants under the 2019 Plan (see “Adjustments upon Changes in Stock” below for further information).
Available Awards
Awards that may be granted under the 2019 Plan include stock options (including both incentive stock options (ISOs) and nonqualified stock options), stock appreciation rights (SARs), restricted stock, restricted stock units (RSUs), performance awards, and other stock-based awards. The terms of each award will be set forth in a written agreement.
Stock Options
A stock option is the right to purchase shares of common stock at a future date at a specified price per share called the exercise price. An option may be either an ISO or a nonqualified stock option. ISOs and nonqualified stock options are taxed differently, as described under Federal Income Tax Treatment of Awards under the 2019 Plan. Except in the case of options granted pursuant to an assumption or substitution for another option, the exercise price of a stock option may not be less than the fair market value (or in the case of an ISO granted to a ten percent shareholder, 110% of the fair market value) of a share of common stock on the grant date. Full payment of the exercise price must be made at the time of such exercise either in cash or bank check or in another manner approved by the Committee.
Stock Appreciation Rights
A SAR is the right to receive payment of an amount equal to the excess of the fair market value of a share of common stock on the date of exercise of the SAR over the exercise price. The exercise price of a SAR may not be less than the fair market value of a share of common stock on the grant date. SARs may be granted alone (”freestanding rights”) or in tandem with options (”related rights”).
Restricted Stock
A restricted stock award is an award of actual shares of common stock which are subject to certain restrictions for a period of time determined by the Committee. Restricted stock may be held by the Company in escrow or delivered to the participant pending the release of the restrictions. The participant generally has the rights and privileges of a shareholder as to such restricted stock during the restricted period, including the right to vote the restricted stock and the right to receive dividends
Restricted Stock Units
An RSU is an award of hypothetical common stock units having a value equal to the fair market value of an identical number of shares of common stock, which are subject to certain restrictions for a period of time determined by the Committee. No shares of common stock are issued at the time an RSU is granted, and the Company is not required to set aside any funds for the payment of any RSU award. Prior to settlement of an RSU award and the receipt of shares, the participant does not have any rights as a shareholder with respect to such shares. The Committee may grant RSUs with a deferral feature (deferred stock units or DSUs), whereby settlement of the RSU is deferred beyond the vesting date until a future payment date or event set out in the participant’s award agreement. The Committee has the discretion to credit RSUs or DSUs with dividend equivalents.
Performance Share Awards
A performance share award is an award of shares of common stock that are only earned if certain conditions are met. The Committee has the discretion to determine: the number of shares of common stock or stock-denominated units subject to a performance share award; the applicable performance period; the conditions that must be satisfied for a participant to earn an award; and the other terms, conditions and restrictions of the award.
The number of performance shares earned by a participant depends on the extent to which the performance goals established by the Committee are attained within the applicable performance period. No payout is made with respect to any performance share award except upon written certification by the Committee that the minimum threshold performance goal(s) have been achieved.
Other Equity-Based Awards
The Committee may grant other equity-based awards, either alone or in tandem with other awards, in amounts and subject to conditions as determined by the Committee as set out in an award agreement.
Vesting
The 2019 Plan allows for awards subject to either time-based vesting or performance-based vesting, or both. The Committee has the authority to determine the vesting schedule of each award, and to accelerate the vesting and exercisability of any award. The Company’s practice over the last several years has been to grant restricted stock awards to its executive officers and independent directors, and stock options to selected non-executive employees. Restricted Stock awards to our (i) executive officers have been subject to time-based vesting in equal one-third installments over a three year period from the grant date and (ii) independent directors have been subject to time-based vesting in equal quarterly installments beginning in the year following the year in which they are granted. Stock options granted to our non-executive employees typically vest in equal one-third installments over a three year period. Past vesting requirements may not be indicative of future vesting requirements set by the Committee, which may be less or more onerous than in prior years.
Adjustments upon Changes in Stock
In Januarythe event of changes in the outstanding common stock or in the capital structure of the Company by reason of any stock or extraordinary cash dividend, stock split, reverse stock split, an extraordinary corporate transaction such as any recapitalization, reorganization, merger, consolidation, combination, exchange, or other relevant change in capitalization occurring after the grant date of any award, awards granted under the 2019 Plan and Marchany award agreements, the exercise price of 2015,options and SARs, the maximum number of shares of common stock subject to all awards will be equitably adjusted or substituted, as to the number, price or kind of a share of common stock or other consideration subject to such awards to the extent necessary to preserve the economic intent of the award.
Unless the Committee specifically determines that such adjustment is in the best interests of the Company or its affiliates, the Committee will, in the case of ISOs, ensure that any adjustments made will not constitute a modification, extension or renewal of the ISO within the meaning of Code Section 424(h)(3) and in the case of non-qualified stock options, ensure that any adjustments will not constitute a modification of such non-qualified stock options within the meaning of Code Section 409A. Any adjustments will be made in a manner which does not adversely affect the exemption provided under Rule 16b-3 under the Exchange Act. The Company will give participants notice of any adjustment.
Change in Control
Unless otherwise provided in an award agreement, in the event of a participant’s termination of service without cause or for good reason during the 18-month period following a change in control, the vesting of all awards will fully accelerate and all outstanding options and SARs will become immediately exercisable as of the date of the participant’s termination of service.
In the case of performance awards, in the event of a participant’s termination of service without cause or for good reason, in either case, within 18 months following a change in control, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels and all other terms and conditions will be deemed met as of the date of the participant’s termination of service.
In the event of a change in control, the Committee may in its discretion and upon at least 10 days’ advance notice to the affected persons, cancel any outstanding awards and pay to the holders the value of the awards based upon the price per share of common stock received or to be received by other shareholders of the Company in the event. In the case of any option or SAR with an exercise price that equals or exceeds the price paid for a share of common stock in connection with the change in control, the Committee may cancel the option or SAR without the payment of any consideration.
A change in control is defined as (a) the acquisition by one person or more than one person acting as a group, of Company stock representing more than 50% of the total fair market value or total voting power of the Company’s stock; (b) a merger, consolidation or other reorganization in which the Company is not the surviving entity unless the Company’s shareholders immediately prior to the merger, consolidation or other reorganization maintain at least 50% of the voting power; (c) a majority of the incumbent members of the Board are replaced by directors whose appointment or election is not endorsed by at least two-thirds of the Board; or (d) the acquisition by one person or more than one person acting as a group, of all or substantially all of the Company’s assets.
Amendment or Termination of the 2019 Plan
The Board may amend or terminate the 2019 Plan. However, except in the case of adjustments upon changes in common stock, no amendment will be effective unless approved by the shareholders of the Company to the extent shareholder approval is necessary to satisfy any applicable laws. The 2019 Plan shall terminate on June 20, 2029, unless previously terminated by the Board.
Amendment of Awards
The Committee may amend the terms of any one or more awards. However, the Committee may not affect any amendment which would otherwise constitute an impairment of the rights under any award unless the Company requests the consent of the participant and the participant consents in writing.
Clawback and Recoupment
The Company may cancel any award or require the participant to reimburse any previously paid compensation provided under the 2019 Plan or an award agreement in accordance with the Company’s clawback policy.
Federal Income Tax Consequences of Awards
The following is a summary of the U.S. federal income tax consequences of awards granted under the 2019 Plan. This summary is based on U.S. federal income tax laws and regulations in effect on the date of this Proxy Statement and is not a complete description of the U.S. federal income tax laws. This summary is not intended to be exhaustive and does not constitute legal or tax advice. This summary does not address municipal, state or foreign income tax consequences of awards, or federal employment taxes.
Nonqualified Stock Options
The grant of a nonqualified stock option will not result in taxable income to the participant. The participant will recognize ordinary income at the time of exercise equal to the excess of the fair market value of the shares on the date of exercise over the exercise price and the Company will be entitled to a corresponding deduction for tax purposes. Gains or losses realized by the participant upon the sale of the shares acquired on exercise will be treated as capital gains or losses.
Incentive Stock Options (ISOs)
The grant of an ISO will not result in taxable income to the participant. The exercise of an ISO will not result in taxable income to the participant if at the time of exercise the participant has been employed by the Company or its subsidiaries
at all times beginning on the date the ISO was granted and ending not more than 90 days before the date of exercise. However, the excess of the fair market value of the shares on the date of exercise over the exercise price is an adjustment that is included in the calculation of the participant’s alternative minimum tax liability for the year the shares are sold.
If the participant does not sell the shares acquired on exercise within two years from the date of grant and one year from the date of exercise then on the sale of the shares any amount realized in excess of the exercise price will be taxed as capital gain. If the amount realized in the sale is less than the exercise price, then the participant will recognize a capital loss.
If these holding requirements are not met, then the participant will generally recognize ordinary income at the time the shares are sold in an amount equal to the lesser of (a) the excess of the fair market value of the shares on the date of exercise over the exercise price, or (b) the excess, if any, of the amount realized on the sale of the shares over the exercise price, and the Company will be entitled to a corresponding deduction.
SARs
The grant of a SAR will not result in taxable income to the participant. The participant will recognize ordinary income at the time of exercise equal to the amount of cash received or the fair market value of the shares received and the Company will be entitled to a corresponding deduction for tax purposes. If the SARs are settled in shares, then when the shares are sold the participant will recognize capital gain or loss on the difference between the sale price and the amount recognized at exercise. Whether it is a long-term or short-term gain or loss depends on how long the shares are held.
Restricted Stock and Performance Shares
Unless a participant makes an election to accelerate the recognition of income to the grant date (as described below), the grant of restricted stock or performance shares awards will not result in taxable income to the participant. When the restrictions lapse, the participant will recognize ordinary income on the excess of the fair market value of the shares on the vesting date over the amount paid for the shares, if any, and the Company will be entitled to a corresponding deduction.
If the participant makes an election under Code Section 83(b) within thirty days after the grant date, the participant will recognize ordinary income as of the grant date equal to the fair market value of the shares on the grant date over the amount paid, if any, and the Company will be entitled to a corresponding deduction. Any future appreciation will be taxed at capital gains rates. However, if the shares are later forfeited, the participant will not be able to recover any taxes paid.
RSUs and PSUs
The grant of an RSU or Performance Share Units will not result in taxable income to the participant. When the RSU or PSU is settled, the participant will recognize ordinary income equal to the fair market value of the shares or the cash provided on settlement and the Company will be entitled to a corresponding deduction. Any future appreciation will be taxed at capital gains rates.
Section 409A
Code Section 409A imposes complex rules on nonqualified deferred compensation arrangements, including requirements with respect to elections to defer compensation and the timing of payment of deferred amounts. Depending on how they are structured, certain equity-based awards may be subject to Code Section 409A, while others are exempt. If an award is subject to Code Section 409A and a violation occurs, the compensation is includible in income when no longer subject to a substantial risk of forfeiture and the participant may be subject to a 20% penalty tax and, in some cases, interest penalties. The 2019 Plan and awards granted under the 2019 Plan are intended to be exempt from or conform to the requirements of Code Section 409A.
Section 162(m) and the Company’s Deduction
Generally, whenever a participant recognizes ordinary income under the 2019 Plan, a corresponding deduction is available to the Company provided that the Company complies with certain reporting requirements. However, under Code Section 162(m), the Company will be denied a deduction for compensation paid to certain senior executives that exceeds $1,000,000.
The foregoing is only a summary of the current effect of certain U.S. federal income taxation upon the participant and us with respect to the vestinggrant and exercise of certain restrictedawards or compensation granted under the Amended Plan. Participants are hereby notified that (i) any discussion of U.S. federal tax issues in this proxy statement is not intended to be written or used, and cannot be used, for the purpose of avoiding penalties that may be imposed under the Code, and (ii) participants should seek advice based on their particular circumstances from an independent tax advisor.
Equity Compensation Plan Information
The following table provides information related to our Voting Common Stock which may be issued under our two existing equity compensation plans as of March 31, 2022, including the 2019 Plan:
| | | | | | | | | | | | | | | | | | | | |
| | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted-average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a) |
| PLAN CATEGORY | | (a) | | (b) | | (c) |
Equity compensation plans approved by security holders:(1) | | 355,688 | | (2) | $ | 21.59 | | (3) | 402,138 | |
| Equity compensation plans not approved by security holders: | | — | | | — | | | — | |
| Total | | 355,688 | | | $ | 21.59 | | (3) | 402,138 | |
(1) We have two equity incentive plans approved by our shareholders: (a) our legacy 1998 Stock Option Plan, as amended and restated, which is of limited nature as only stock options may be granted under that plan and (b) the 2019 Plan, which is described above.
(2) Of this total (i) 189,834 shares represents the number of shares of common stock underlying outstanding stock options and (ii) 165,854 shares represent underlying outstanding time-vested restricted stock and restricted stock unit ("RSU") awards to our executive officers and independent directors and assumes a 100% issuance related to the followingRSUs.
(3) The outstanding restricted stock and RSU awards do not have an exercise price.
Overhang and Burn Rate.
As of March 31, 2022, 189,834 shares of the Company’s common stock were subject to outstanding stock options at a weighted average exercise price of $21.59 granted under our 1998 Stock Option Plan, as amended and restated. In addition, our 1998 Stock Option Plan, as amended and restated, has an additional 355,003 shares reserved for potential issuance pursuant to future awards that may be granted during the remaining term of that plan.
As of March 31, 2022, we have issued a total of 456,198 shares of common stock under the 2019 Plan, of which 165,854 continue to be subject to vesting requirements and 47,135 remain reserved for subsequent issuance. The total of these 212,989 shares represents 1.7% of our officers and directors inadvertently failedshares outstanding. We believe this "overhang" is reasonable compared to timely file Form 4's relatingthat of our peers.
“Burn rate” refers to the disposalnumber of shares that are subject to awards that we grant over a particular period of time. The total number of shares of the Company’s common stock subject to awards that the Company granted under the 2019 Plan in each of the last three calendar years, and to date (as of March 31, 2022), are as follows:
● 199,810 shares in 2019 (which was 1.5% of the number of shares listedof the Company’s common stock issued and outstanding at the end of 2019);
● 123,185 shares in 2020 (which was 0.9% of the number of shares of the Company’s common stock issued and outstanding at the end of 2020);
● 156,339 shares in 2021 (which was 1.2% of the number of shares of the Company’s common stock issued and outstanding at the end of 2021);
● No shares in 2022, although we intend to grant restricted stock awards totaling 92,879 shares if this proposal is approved by our shareholders at the Annual Meeting (see "New Plan Benefits" below);
Thus, the total number of shares of the Company’s common stock subject to awards granted under the 2019 Plan per year over the last three fiscal years (2019, 2020 and 2021) has been, on average, 1.3% of the weighted-average number of shares of the Company’s common stock issued and outstanding for the corresponding year.
We anticipate that the Total Share Reserve will provide us with flexibility to continue to grant equity awards under the 2019 Plan through approximately the end of 2025. However, this is only an estimate, in the Company’s judgment, based on current circumstances. The total number of shares that are subject to the Company’s award grants in any one year or from year-to-year may change based on a number of variables, including, without limitation, the value of the Company’s common stock (since higher stock prices generally require that fewer shares be issued to produce awards of the same grant date fair value), changes in competitors’ compensation practices or changes in compensation practices in the market generally, changes in the number of employees, changes in the number of directors and officers, whether and the extent to which vesting conditions applicable to equity-based awards are satisfied, acquisition activity and the need to grant awards to new employees in connection with
acquisitions, the need to attract, retain and incentivize key talent, the type of awards the Company grants, and how the Company chooses to balance total compensation between cash and equity-based awards.
their electionNew Plan Benefits
The following table sets forth the number of shares of common stock underlying awards that will be issued to withholdthe officers listed below under the 2019 Plan if this proposal to increase the reserved shares under the plan is approved by our shareholders at the Meeting.
| | | | | | | | |
| Name and Position | Dollar Value ($) | Number of Restricted Stock Shares/Units(1) |
| Stephen C. Taylor, CEO | $ | 722,160 | | 60,839 | |
| Micah C. Foster, CFO | 196,300 | | 16,537 | |
| James R. Hazlett, VP - Technical Services | 184,025 | | 15,503 | |
| Executive Group (three persons) | $ | 1,102,485 | | 92,879 | |
(1) The awards vest in payment of income tax obligations arising fromannual one-third increments. If this proposal is not approved by our shareholders at the vestingMeeting, the awards will be paid in cash as they vest to the extent the reserved shares under the 2019 Plan have been exhausted.
Except as set forth above, additional awards under the 2019 Plan are subject to the discretion of the awards: David Bradshaw - 206 shares; John Chisholm - 206 shares; James R. Hazlett - two transactionsCompensation Committee, and no determination has been made as to the types or amounts of 1,088awards that will be granted in the future to specific individuals pursuant to the 2019 Plan. Therefore, it is not possible to determine the future benefits that will be received by participants.
Required Vote
Approval of this Proposal #3 requires a majority of the votes cast at the meeting. Abstentions and 4,066 shares; G. Larry Lawrence - two transactionsbroker non-votes will have no effect on the outcome of 1,088 and 4,067 shares; and Stephen C. Taylor - 20,547 shares. Appropriate Form 4's were filed in June 2015 whenthis Proposal.
Board Recommendation
The Board recommends that the error was discovered.
In addition, in Decembershareholders vote ‘FOR” the approval of 2015 Charles G. Curtis inadvertently failedthe amendment to timely file a Form 4 in connection with the exercise2019 Plan to increase the number of a stock optionshares reserved for 2,500issuance under the plan by 650,000 shares of our common stock. Mr. Curtis filed a Form 4 reporting the missed transaction in January 2016.
All of the foregoing late filings related to exempt transactions under Section 16.52
REPORT OF THE AUDIT COMMITTEEEquity Compensation Plan Information
The following reporttable provides information related to our Voting Common Stock which may be issued under our two existing equity compensation plans as of March 31, 2022, including the Audit Committee of the Company shall not be deemed to be "soliciting material" or to be "filed" with the SEC, nor shall this report be incorporated by reference into any filing made by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates such information by reference in such filing.
Our Audit Committee, pursuant to its charter, is responsible for (i) overseeing the integrity of our financial statements; (ii) financial reporting processes; (iii) compliance with legal and regulatory requirements; (iv) the independent registered public accounting firm qualifications and independence; (v) annually reviewing and assessing the committee's performance and its charger; (vi) and the performance of our internal accounting functions and independent registered public accounting firm.
Our independent registered public accounting firm is responsible for performing an independent audit of our financial statements in accordance with the Standards of the Public Company Accounting Oversight Board (United States) and to issue a report thereon. The Audit Committee reviews with management our financial statements and management’s assessment of internal controls over financial reporting; reviews with the independent registered accounting firm their independent report on the condition of the Company's financial statements; and reviews the activities of the independent registered public accounting firm. The Audit Committee selects our independent registered public accounting firm each year. The Audit Committee also considers the adequacy of our internal controls and accounting policies. While the Audit Committee has the responsibilities and powers set forth in its charter, and the Company's management and the independent registered public accounting firm are accountable to the Audit Committee, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company's financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable laws, rules and regulations.The chairman and members of the Audit Committee are all independent Directors of our Board of Directors within the meaning of Section 303A of the New York Stock Exchange Listed Company Manual.
2019 Plan:
The Audit Committee has reviewed and discussed our audited financial statements with our management. The Audit Committee has also received from, and discussed with, BDO the matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard No. 16 (Communications with Audit Committees). In addition, the Audit Committee has received the written disclosures and the letter from our independent registered public accounting firm required by the Public Company Accounting Oversight Board in Rule 3200T. In addition, the Audit Committee has received the written disclosures and the letter from our independent registered public accounting firm matters pertaining to their independence. Based upon the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for 2015 for filing with the Securities and Exchange Commission. See “Proposal 4– Ratification of Appointment of Independent Registered Accounting Firm” on page 55.
| | | | | | | | | | | | | | | | | | | | |
| | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted-average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a) |
| PLAN CATEGORY | | (a) | | (b) | | (c) |
Equity compensation plans approved by security holders:(1) | | 355,688 | | (2) | $ | 21.59 | | (3) | 402,138 | |
| Equity compensation plans not approved by security holders: | | — | | | — | | | — | |
| Total | | 355,688 | | | $ | 21.59 | | (3) | 402,138 | |
Members of the Audit Committee rely, without independent verification, on the information provided to them and on the representations made by the Company's management and independent registered public accounting firm. Accordingly, the Audit Committee's oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations.
|
| |
| Respectfully submitted by the Audit Committee, |
| |
| David L. Bradshaw, Chairman |
| Charles G. Curtis |
| William F. Hughes, Jr. |
PROPOSAL 2 – CONSIDERATION OF AN ADVISORY VOTE ON COMPENSATION PROGRAMS FOR ITS NAMED EXECUTIVE OFFICERS
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), gives the stockholders the right to endorse or not endorse the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with the SEC's rules. The proposal, commonly known as a “Say-on-Pay” proposal, gives our shareholders the opportunity to express their views on the Company's executive compensation.
At the Company's annual meeting of shareholders held in June 2011, our shareholders recommended that the advisory vote on the Say-on-Pay of our named executives in our proxy materials be submitted annually, notwithstanding that our Board of Directors recommended that the advisory vote be submitted every third year. In light of the recommendation of the shareholders, we intend to include the Say-on-Pay advisory vote in our proxy materials on an annual basis until the next shareholder vote on the frequency of Say-on-Pay or our Board of Directors otherwise determines that a different frequency of Say-on-Pay vote is in the best interests of the shareholders.
(1) We are asking our stockholders to indicate whether or not they support the compensation program as described in this proxy statement. This proposal is not intended to address any specific item of compensation, but rather the overall compensation of the named executive officers and the compensation policies, methodologies and practices described in this proxy statement. Accordingly, we ask our shareholder to vote “FOR” the following resolution at our annual meeting:
“RESOLVED, that the shareholders approve the compensation of the Company's named executive officers, as disclosed in the Compensation Discussion and Analysis, the compensation tables, and the related disclosure contained in the proxy statement set forth under the caption “Executive Compensation” of this proxy statement.”
The Company believes its compensation philosophy and programs are strongly linked to performance and results and appropriately aligned with the interests of stockholders. Our compensation philosophy is to provide an executive compensation program that:
rewards performance and skills necessary to advance our objectives and further the interests of our shareholders;
is fair and reasonable and appropriately applied to each executive officer;
is competitive with compensation programs offeredhave two equity incentive plans approved by our competitors; and
is appropriately focused on achieving annual financial and operational goals through the Company's cash bonus plan and on maximizing stockholder value over the long term, through grants of restricted shares and stock options.
The Board of Directors recommends that you vote FOR approval, on an advisory basis, of the compensation programs ofshareholders: (a) our named executive officers as disclosed in the Compensation Discussion and Analysis, the compensation tables, and the related disclosure contained in the proxy statement set forth under the caption “Executive Compensation” of this proxy statement.
PROPOSAL 3 - APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE 1998 STOCK OPTION PLAN
Proposal
To consider and vote upon a proposal to amend and restate the Natural Gas Services Group, Inc. Stock Option Plan to (1) increase the number of shares authorized for issuance thereunder from 750,000 to 1,000,000 shares of common stock and (2) extend the term of the Plan for an additional ten years, until February 28, 2026.
History of the Plan and Description of the Proposed Amendment
On December 18, 1998, the Board of Directors adopted thelegacy 1998 Stock Option Plan, as amended and restated, which is of Natural Gas Services Group, Inc. (the “1998 Plan” or simplylimited nature as only stock options may be granted under that plan and (b) the “Plan”), and directed that the 19982019 Plan, be submitted to the shareholders for approval. The 1998 Plan became effective when it received such approval on December 18, 1998. On May 9, 2006, the Compensation Committee of the Board of Directors voted to amend the 1998 Plan and the amendments were approved by our shareholders at our 2006 Annual Meeting of Shareholders (the “2006 Plan”). The 2006 Plan amendments, among other things, extended the terms of 1998 Plan until March 1, 2016 and increasedwhich is described above.
(2) Of this total (i) 189,834 shares represents the number of shares of common stock issuable underunderlying outstanding stock options and (ii) 165,854 shares represent underlying outstanding time-vested restricted stock and restricted stock unit ("RSU") awards to our executive officers and independent directors and assumes a 100% issuance related to the 2006 Plan from 150,000 to 550,000. On April 15, 2009, the Compensation CommitteeRSUs.
(3) The outstanding restricted stock and RSU awards do not have an exercise price.
Overhang and Burn Rate.
As of March 31, 2022, 189,834 shares of the BoardCompany’s common stock were subject to outstanding stock options at a weighted average exercise price of Directors voted to further amend the$21.59 granted under our 1998 Stock Option Plan, to addas amended and restated. In addition, our 1998 Stock Option Plan, as amended and restated, has an additional 200,000355,003 shares reserved for potential issuance pursuant to future awards that may be granted during the remaining term of common stock to the Plan, thereby authorizing the issuancethat plan.
As of up to 750,000March 31, 2022, we have issued a total of 456,198 shares of common stock under the 2019 Plan, of which 165,854 continue to be subject to vesting requirements and 47,135 remain reserved for subsequent issuance. The total of these 212,989 shares represents 1.7% of our shares outstanding. We believe this "overhang" is reasonable compared to that of our peers.
“Burn rate” refers to the number of shares that are subject to awards that we grant over a particular period of time. The total number of shares of the Company’s common stock subject to awards that the Company granted under the 2019 Plan in each of the last three calendar years, and to date (as of March 31, 2022), are as follows:
● 199,810 shares in 2019 (which was 1.5% of the number of shares of the Company’s common stock issued and outstanding at the end of 2019);
● 123,185 shares in 2020 (which was 0.9% of the number of shares of the Company’s common stock issued and outstanding at the end of 2020);
● 156,339 shares in 2021 (which was 1.2% of the number of shares of the Company’s common stock issued and outstanding at the end of 2021);
● No shares in 2022, although we intend to grant restricted stock awards totaling 92,879 shares if this proposal is approved by our shareholders at the Annual Meeting (see "New Plan Benefits" below);
Thus, the total number of shares of the Company’s common stock subject to awards granted under the 2019 Plan per year over the last three fiscal years (2019, 2020 and 2021) has been, on average, 1.3% of the weighted-average number of shares of the Company’s common stock issued and outstanding for the corresponding year.
We anticipate that the Total Share Reserve will provide us with flexibility to continue to grant equity awards under the 2019 Plan through approximately the end of 2025. However, this is only an estimate, in the Company’s judgment, based on current circumstances. The total number of shares that are subject to the Company’s award grants in any one year or from year-to-year may change based on a number of variables, including, without limitation, the value of the Company’s common stock (since higher stock prices generally require that fewer shares be issued to produce awards of the same grant date fair value), changes in competitors’ compensation practices or changes in compensation practices in the market generally, changes in the number of employees, changes in the number of directors and officers, whether and the amendment was approved at our 2009 Annual Meetingextent to which vesting conditions applicable to equity-based awards are satisfied, acquisition activity and the need to grant awards to new employees in connection with acquisitions, the need to attract, retain and incentivize key talent, the type of Shareholders.awards the Company grants, and how the Company chooses to balance total compensation between cash and equity-based awards.
On April 5, 2016, subject to shareholder approval, the Board of Directors voted to amend and restate theNew Plan to extend the Plan until February 28, 2026 (the “2016 Plan” or simply the “Plan”) and increaseBenefits
The following table sets forth the number of shares of common stock issuableunderlying awards that will be issued to the officers listed below under the 2019 Plan from 750,000if this proposal to 1,000,000.increase the reserved shares under the plan is approved by our shareholders at the Meeting.
| | | | | | | | |
| Name and Position | Dollar Value ($) | Number of Restricted Stock Shares/Units(1) |
| Stephen C. Taylor, CEO | $ | 722,160 | | 60,839 | |
| Micah C. Foster, CFO | 196,300 | | 16,537 | |
| James R. Hazlett, VP - Technical Services | 184,025 | | 15,503 | |
| Executive Group (three persons) | $ | 1,102,485 | | 92,879 | |
(1) The 2016 Plan amendment will become effective if a majority of the votes cast areawards vest in favor of the proposal.annual one-third increments. If the amendmentthis proposal is not approved no further options may be granted underby our shareholders at the 2006 Plan, although all options granted prior to March 1, 2016, which continue to be outstanding, will remain in force until such time asMeeting, the options are either exercised or expire pursuant to the terms set forth in such options.
The purposes of the Plan, which are unchanged by the proposed amendment, are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees and consultants and to promote the success of our business.
Summary Description of the Plan
The following summary of the Plan, as amended and restated, is qualified in its entirety by reference to the text of the Plan, as amended and restated, which is attached as Appendix A. The Plan has been and will continue to be administered by the Compensation Committee of the Board of Directors. The Compensation Committee has full and final authority, in its discretion, to grant incentive stock options or non-statutory stock options, to select the persons who would be granted stock options and determine the number of shares subject to each option, the duration and exercise period of each option and the terms and conditions of each option granted.
The Major Provisions of the Plan as amended and restated are as follows:
Eligibility. The Compensation Committee is authorized to grant stock options to any person selected by the Compensation Committee, including employees, officers who are also directors of Natural Gas Services Group, directors who are not employees of Natural Gas Services Group and consultants. Incentive stock options may be granted only to employees of Natural Gas Services Group.
Option Price. The option exercise price for shares of common stock issued upon exercise of an option is such price as is determined by the Compensation Committee. However, for incentive stock options granted to employees the option priceawards will be not less than 100% of the fair market value of the Company’s common stock on the date the option is granted, except that if an incentive stock option is granted to an employee who owns more than 10% of our outstanding common stock, the option price will be not less than 110% of the fair market value of the common stock on the date of grant. Fair market value for purposes of the Plan is the closing price of the common stockpaid in cash as reported on the New York Stock Exchange on the relevant date.
Duration of Options. Each stock option will terminate on the date fixed by the Compensation Committee, which shall be not more than ten years after the date of grant. However, in the case of an incentive stock option granted to an employee who, at the time the option is granted, owns stock representing more than 10% of the our outstanding stock, the term of the option will be five years from the date of grant or such shorter time as may be provided in the stock option agreement.
Exercise Period. In the case of incentive stock options, if an optionee’s employment is terminated for any reason, except death or disability, the optionee has three months in which to exercise an option (but onlythey vest to the extent exercisable on the date of termination) unless the option by its terms expires earlier. If the employment of the optionee terminates by reason of total and permanent disability, the option may be exercised during the period of twelve months following termination of employment. If an optionee dies while an employee or within three months from the date of termination, the right to exercise shall terminate twelve months from the date of death. The options terminate immediately prior to the dissolution or liquidation of Natural Gas Services Group, unless the Compensation Committee gives each optionee the right to exercise his option as to all or any part of the option, includingreserved shares as to which the option would not otherwise be exercisable. If we sell all or substantially all of our assets or we merge with or into another entity in a transaction in which it is not the survivor, options will be assumed or an equivalent option will be substituted by the successor corporation, unless the Compensation Committee determines that the optionee has the right to exercise the option as to all of the shares, including shares as to which the option would not otherwise be exercisable. The Compensation Committee has the right to alter the terms of any option at grant or while outstanding pursuant to the terms of the Plan.
Payment. Payment for stock purchased on the exercise of a stock option must be made in full at the time the stock option is exercised. The Compensation Committee may, in its discretion, permit payment for the exercise price to be made in cash, check, other shares of common stock having a fair market value on the date of exercise equal to the aggregate exercise price of the shares as to which the option is exercised, or any combination of such methods of payment, or such other consideration and method of payment for the issuance of shares as permitted under the Colorado Business Corporation Act.2019 Plan have been exhausted.
Shares That May Be IssuedExcept as set forth above, additional awards under the Plan. Prior to the increase in authorized shares set forth in this proposal, a maximum of 750,000 shares of our common stock, as may be adjusted as described below, may be issued upon exercise of stock options granted under the Plan. This number includes the number of shares of Natural Gas’ common stock originally authorized in 1998 (150,000 shares) plus the additional shares added in the 2006 and 2009 amendments (600,000 shares). In connection with extending and restating the Plan, a total of 250,000 additional shares will be authorized pursuant to this proposed amendment. The 250,000 additional shares available represent approximately 1.9% of our common stock issued and outstanding on April 18, 2016. At the date of this proxy statement, 241,812 shares of common stock have already been issued under the Plan and 414,769 shares are subject to currently outstanding stock options, leaving 93,419 shares of common stock available from the 750,000 shares authorized prior to this proposal. The number of shares available under the Plan is subject to adjustment in the event of any stock split, stock dividend, recapitalization, spin-off or other similar action. If any stock option terminates or is canceled for any reason without having been exercised in full, the shares of stock not issued will then become available for additional grants of options.
Federal Income Tax Consequences Federal Income Tax Consequences
Incentive Stock Options. Some of the options granted under the Plan may constitute “incentive stock options” (“ISOs”) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). Under current federal income tax rules, there will be no federal income tax consequences to us or an optionee upon the grant of an ISO, nor will an optionee’s exercise of an ISO result in income recognition to the optionee or a deduction or other federal income tax consequences to Natural Gas Services Group. Although an optionee will not realize ordinary income upon his exercise of an ISO, the excess of the fair market value of the common stock acquired at the time of exercise over the option price may constitute an adjustment in computing alternative minimum taxable income under Section 56 of the Code and, thus, may result in the imposition of the “alternative minimum tax” pursuant to Section 55 of the Code on the optionee. The tax consequences of a disposition of stock acquired upon exercise of an ISO depends upon how long the optionee has held the shares. If an optionee does not dispose of common stock acquired through an ISO within two years after the ISO was granted, nor within one year of the ISO’s date of exercise, any gain realized upon a subsequent disposition of common stock will constitute long-term capital gain (or loss) to the optionee equal to the difference between the sale price of the shares and the exercise price. We are not entitled to any deduction under these circumstances. If the optionee fails to satisfy either of the foregoing holding periods, he must recognize ordinary income in the year of the disposition, which is referred to as a “disqualifying disposition”. Upon the occurrence of a disqualifying disposition of an ISO, the amount of such ordinary income generally is the lesser of (i) the excess of the fair market value of the common stock on the date of exercise over the option price or (ii) the actual gain realized upon such disposition. Any gain in excess of the amount taxed as ordinary income will be treated as a long-term or short-term capital gain, depending on how long the stock was held (currently a period of more than one year). We will receive a deduction in the amount equal to the amount constituting ordinary income to an optionee in the year of the disqualifying disposition (in addition to the employer’s side of payroll/withholding taxes paid).
Non-statutory Options. Certain stock options which do not constitute ISOs (“non-statutory options”) may also be granted under the Plan. Under current federal income tax rules, there will generally be no federal income tax consequences to us or the optionee upon the grant of a non-statutory option so long as the exercise price of the option is equal to or exceeds the fair market value of the underlying stock as of the date of grant. However, the optionee will realize ordinary income upon the exercise of a non-statutory option in an amount equal to the excess of the fair market value of the common stock acquired upon the exercise of such option over the option price. We are required to pay the applicable payroll taxes on such income of the optionee, and we are required to withhold and pay over to the relevant tax authorities the applicable income tax withholding and employee portion of payroll taxes on this income (which the optionee is required to pay over to us). We will receive a corresponding deduction in the amount of the income recognized by the optionee (subject to possible limitations imposed by Section 162(m) of the Code) , as well as a deduction for the employer’s portion of payroll taxes paid. Any gain or loss realized upon the optionee’s subsequent disposition of such common stock will constitute short-term or long-term capital gain or loss depending on the optionee’s holding period following the date of exercise (currently a period of more than one year). We do not receive a tax deduction for any such capital gain.
The federal income tax consequences described in this section are based on laws and regulations in effect on the date of this proxy statement, and there is no assurance that the laws and regulations will not change in the future and affect the tax consequences of the matters discussed in this section.
Termination of and Amendments to the Plan
The Board of Directors may terminate or amend the Plan from time to time in any manner permitted by applicable laws and regulations, except that no additional shares of our common stock may be allocated to the Plan and no change in the class of employees eligible to receive incentive stock options or any other material amendment to the Plan may be made without the approval of the shareholders.
Market Price of the Company's Common Stock
The closing market price of our common stock as reported on the New York Stock Exchange for April 18, 2016 was $22.17 per share.
Estimate of Benefits
Generally, awards under the2019 Plan are subject to the discretion of the Compensation Committee, and no determination has been made as to the types or amounts of awards that will be granted in the future to specific individuals pursuant to the 2019 Plan. Therefore, it is not possible to determine the future benefits that will be received by all potential participants. However,
Required Vote
Approval of this Proposal #3 requires a majority of the votes cast at the meeting. Abstentions and broker non-votes will have no effect on the outcome of this Proposal.
Board Recommendation
The Board recommends that the shareholders vote ‘FOR” the approval of the amendment to the 2019 Plan to increase the number of shares reserved for illustrative purposes, 50,000 options were granted to 17 employeesissuance under the Plan during the fiscal year ended December 31, 2015.plan by 650,000 shares of common stock.
Although executive officers and members of our Board of Directors are eligible to receive awards under the Plan, since 2006, awards under the Plan have been made exclusively to non-executive employees of the Company.52
Equity Compensation Plan Information
The following table below sets forth certainprovides information related to our Voting Common Stock which may be issued under our two existing equity compensation plans as of March 31, 2016, concerning2022, including the 2019 Plan:
| | | | | | | | | | | | | | | | | | | | |
| | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted-average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a) |
| PLAN CATEGORY | | (a) | | (b) | | (c) |
Equity compensation plans approved by security holders:(1) | | 355,688 | | (2) | $ | 21.59 | | (3) | 402,138 | |
| Equity compensation plans not approved by security holders: | | — | | | — | | | — | |
| Total | | 355,688 | | | $ | 21.59 | | (3) | 402,138 | |
(1) We have two equity incentive plans approved by our shareholders: (a) our legacy 1998 Stock Option Plan, as amended and restated, which is of limited nature as only stock options may be granted under that plan and (b) the 2019 Plan, which is described above.
(2) Of this total (i) 189,834 shares represents the number of shares of common stock authorized forunderlying outstanding stock options and (ii) 165,854 shares represent underlying outstanding time-vested restricted stock and restricted stock unit ("RSU") awards to our executive officers and independent directors and assumes a 100% issuance under allrelated to the RSUs.
(3) The outstanding restricted stock and RSU awards do not have an exercise price.
Overhang and Burn Rate.
As of March 31, 2022, 189,834 shares of the Company’s equity compensation plans.common stock were subject to outstanding stock options at a weighted average exercise price of $21.59 granted under our 1998 Stock Option Plan, as amended and restated. In addition, our 1998 Stock Option Plan, as amended and restated, has an additional 355,003 shares reserved for potential issuance pursuant to future awards that may be granted during the remaining term of that plan.
|
| | | | | | | | | |
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options or Issued upon Vesting | | Weighted-average Issuance or Exercise Price of Outstanding Options | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) |
| Equity compensation plans approved by security holders: | | | |
| Stock Option Plan | 392,019 |
| | $ | 19.28 |
| | 93,419 |
|
| Restricted Stock / Unit Plan | 92,391 |
| | $ | 21.53 |
| | 331,541 |
|
| Total | 484,410 |
| | | | 424,960 |
|
Dilution, “Burn Rate and Overhang
We actively manage our long-term dilution by limitingrate” refers to the number of shares that are subject to equity awards that we grant annually, expressed asover a percentageparticular period of weighted average common shares outstanding and referred to as burn rate. Burn rate is another measure of dilution that shows how rapidly a company is depleting its shares reserved for equity compensation plans and measures the potential dilutive effect of annual equity grants. Our burn rate for 2015 was 1.5%.
An additional metric that we use to measure the cumulative impact of our equity programs is overhang (number of shares subject to equity awards outstanding under our equity plans but not exercised or settled, plustime. The total number of shares availableof the Company’s common stock subject to beawards that the Company granted dividedunder the 2019 Plan in each of the last three calendar years, and to date (as of March 31, 2022), are as follows:
● 199,810 shares in 2019 (which was 1.5% of the number of shares of the Company’s common stock issued and outstanding at the end of 2019);
● 123,185 shares in 2020 (which was 0.9% of the number of shares of the Company’s common stock issued and outstanding at the end of 2020);
● 156,339 shares in 2021 (which was 1.2% of the number of shares of the Company’s common stock issued and outstanding at the end of 2021);
● No shares in 2022, although we intend to grant restricted stock awards totaling 92,879 shares if this proposal is approved by weightedour shareholders at the Annual Meeting (see "New Plan Benefits" below);
Thus, the total number of shares of the Company’s common stock subject to awards granted under the 2019 Plan per year over the last three fiscal years (2019, 2020 and 2021) has been, on average, 1.3% of the weighted-average number of shares of the Company’s common sharesstock issued and outstanding plus availablefor the corresponding year.
We anticipate that the Total Share Reserve will provide us with flexibility to continue to grant equity awards under our equity plans). Our overhang asthe 2019 Plan through approximately the end of December 31, 2015 was 7.7%. If2025. However, this is only an estimate, in the Company’s judgment, based on current circumstances. The total number of shares that are subject to the Company’s award grants in any one year or from year-to-year may change based on a number of variables, including, without limitation, the value of the Company’s common stock (since higher stock prices generally require that fewer shares be issued to produce awards of the same grant date fair value), changes in competitors’ compensation practices or changes in compensation practices in the market generally, changes in the number of employees, changes in the number of directors and officers, whether and the extent to which vesting conditions applicable to equity-based awards are satisfied, acquisition activity and the need to grant awards to new employees in connection with acquisitions, the need to attract, retain and incentivize key talent, the type of awards the Company grants, and how the Company chooses to balance total compensation between cash and equity-based awards.
New Plan Benefits
The following table sets forth the number of shares of common stock underlying awards that will be issued to the officers listed below under the 2019 Plan if this proposal to extendincrease the reserved shares under the plan is approved by our shareholders at the Meeting.
| | | | | | | | |
| Name and Position | Dollar Value ($) | Number of Restricted Stock Shares/Units(1) |
| Stephen C. Taylor, CEO | $ | 722,160 | | 60,839 | |
| Micah C. Foster, CFO | 196,300 | | 16,537 | |
| James R. Hazlett, VP - Technical Services | 184,025 | | 15,503 | |
| Executive Group (three persons) | $ | 1,102,485 | | 92,879 | |
(1) The awards vest in annual one-third increments. If this proposal is not approved by our shareholders at the Meeting, the awards will be paid in cash as they vest to the extent the reserved shares under the 2019 Plan have been exhausted.
Except as set forth above, additional awards under the 2019 Plan are subject to the discretion of the Compensation Committee, and no determination has been made as to the types or amounts of awards that will be granted in the future to specific individuals pursuant to the 2019 Plan. Therefore, it is not possible to determine the future benefits that will be received by participants.
Required Vote
Approval of this Proposal #3 requires a majority of the votes cast at the meeting. Abstentions and broker non-votes will have no effect on the outcome of this Proposal.
Board Recommendation
The Board recommends that the shareholders vote ‘FOR” the approval of the amendment to the 2019 Plan to increase the number of shares reserved for issuance under the plan by 250,000650,000 shares is approved, our overhang as of that date would increase to 9.4% and then would be expected to decline over time.common stock.
REPORT OF THE AUDIT COMMITTEE
The following are the factors that were material to the evaluationprimary function of the CompensationAudit Committee and Board, with input from management, in determining acceptable and targeted levels of dilution: competitive data from relevant peer companies, the current and future accounting expense associated with the Company's equity award practices, and the influence of shareholder advisory firms. The Company's equity programs are revisited at least annually and assessed against these (and other) measures. We believe that the Company's burn rate and overhang (with or without the extension and additional shares requested under the Plan) are reasonable and reflect a prudent use of equity for compensation purposes.
Summary
We strongly believe the approval of the amended and restated Plan which extends the plan for an additional 10-year term and increases the number of authorized shares for issuance from 750,000 to 1,000,000 is essential to our continued success. Awards such as those provided under the Plan provide an important incentive for participants and will help us to attract, retain and motivate qualified individuals to serve on behalf of our company.
Vote Required
Approval of this proposal requires the affirmative vote of the holders of a majority of the shares casting votes in person or by proxy on this proposal at the Annual Meeting. The number of such affirmative votes must be at least a majority of the required quorum for the meeting.
Recommendation of the Board of Directors
The Board believes the proposed amendments to and restatement of the Plan are in the best interests of Natural Gas Services Group, Inc. is oversight of the Company’s financial reporting process, public financial reports, internal accounting and financial controls, and the independent audit of the annual consolidated financial statements. The Committee acts under a charter, which can be found on the Company’s website at www.ngsgi.com. The adequacy of the charter is reviewed at least annually. The Chairman and all members of the Audit Committee are independent directors within the meaning of Section 303A of the New York Stock Exchange Listed Company Manual.
The Committee met eight (8) times in 2021. In these meetings, as discussed in more detail below, it had extensive reports and discussions with the independent auditors, internal accounting professionals, and members of management.
In performing its oversight function, the Committee reviewed and discussed the consolidated financial statements with management and Moss Adams LLP (“Moss Adams”), the Company’s independent auditors. Management indicated, and Moss Adams' audit opinion stated, that the Company’s consolidated financial statements were fairly stated in accordance with generally accepted accounting principles. The Committee discussed significant accounting policies applied by the Company in its financial statements, as well as alternative treatments. It also discussed with Moss Adams matters covered by Public Company Accounting Oversight Board (“PCAOB”) standards, including PCAOB AS 1301 Communication with Audit Committees. In addition, the Committee reviewed and discussed management’s report on internal control over financial reporting, which confirmed the effectiveness of the Company’s internal control over financial reporting.
The Audit Committee also discussed with Moss Adams its independence from the Company and management, including the communications Moss Adams is required to provide under applicable PCAOB rules. The Committee considered any non-audit services provided or proposed by Moss Adams to the Company, and concluded that the auditors’ independence has been maintained. In the year ended December 31, 2021 and up until the filing of this Proxy statement, Moss Adams had not provided any material non-audit services to the Company.
The Audit Committee discussed with the Company’s internal accounting professionals and Moss Adams the overall scope and plans for the audit and met periodically with Moss Adams, both with and without management present. Discussions included the results of their reviews and examination, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.
The Audit Committee met with the Company’s management to discuss the comprehensive risk management and compliance processes of the Company, and reviewed other topics of interest.
Based on the reviews and discussions referred to above, in reliance on management and the opinion Moss Adams included in its report on the financial statements, and subject to the limitations of its role described below, the Audit Committee recommended to the Board, and the Board approved, the inclusion of the audited financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, for filing with the U.S. Securities and Exchange Commission.
In carrying out its responsibilities, the Audit Committee looks to management and the independent auditors. Management is responsible for the preparation and fair presentation of the Corporation’s financial statements and for maintaining effective internal control. Management is also responsible for assessing and maintaining the effectiveness of internal control over the financial reporting process in compliance with Sarbanes-Oxley Section 404 requirements. The independent auditors are responsible for auditing the Company’s annual financial statements, and expressing an opinion as to whether the statements are fairly stated, in all material respects, in conformity with generally accepted accounting principles. The independent auditors perform their responsibilities in accordance with the standards of the PCAOB. Audit Committee members are not professionally engaged in the practice of accounting or auditing, and are not experts under the Securities Act of 1933 in either of those fields or in auditor independence.
Shareholders approved the appointment of Moss Adams as the Company’s independent auditors at the annual meeting of the Company held on June 17, 2021. The Audit Committee appointed Moss Adams to audit the Company’s financial statements for 2022, subject to shareholder ratification of the appointment.
The Committee, along with the other members of the Board, management, and the Company’s internal accounting professionals annually evaluates Moss Adams qualifications, performance, and independence, including the performance of the lead audit partner, in deciding whether or not to retain Moss Adams. That evaluation includes consideration of: (1) Moss Adams’ quality control; (2) All relationships between Moss Adams and the Company covered by the PCAOB; (3) Moss
Adams’ expertise and experience in the oil and gas industry with specific attention to the oilfield services and compression sectors; and (4) The quality of Moss Adams’ audit plans.
The Committee believes that Moss Adams’ role as the Company’s independent registered public accounting firm is appropriate given their experience and expertise with middle market public companies in the oilfield service industry and their knowledge of the Company’s business, as well as the effectiveness of their audit plans. Based on the Audit Committee’s evaluation of Moss Adams’ qualifications, performance, and independence, as well as regular meetings with the lead partner, the Audit Committee believes that the continued retention of Moss Adams as the Company’s independent registered public accounting firm is in the best interest of the Company and its shareholders, as the availability of an adequate number of shares reserved for grant under the Plan and the other amended terms described above will assist in the recruitment and retention of the best available personnel.stockholders.
The Board of Directions of Natural Gas Services Group recommends a vote "FOR" the proposal to amend and restate the Stock Option Plan, a copy which is included in this Proxy Statement as Appendix A. Proxies received
Respectfully submitted by the Board of Directors will be so voted unless shareholders specify in their proxies a contrary choice.
Audit Committee,
David L. Bradshaw, Chairman
Leslie A. Beyer
Nigel J. Jenvey
PROPOSAL 4 –- RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We are asking the shareholders to ratify the Audit Committee’s appointment of BDO USA,Moss Adams LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016. BDO USA,2022. Moss Adams LLP is a registered public accounting firm with the Public Company Accounting Oversight Board (“PCAOB”), as required by the Sarbanes-Oxley Act of 2002 and the rules of the PCAOB. Shareholder ratification of the appointment is not required under the laws of the State of Colorado, but the Board believes it is important to allow the shareholdershareholders to vote on the proposal. In the event the shareholders fail to ratify the appointment, the Audit Committee will reconsider this appointment. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in our best interests and that of our shareholders.
BDO USA,Moss Adams LLP representatives are expected to attend the 20162022 Annual Meeting in person.person or via video conference. They will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate shareholder questions.
The Board of Directors recommends that the shareholders vote “FOR” the ratification of the appointment of Moss Adams LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022.
Principal Accountant Fees
Our principal accountantPrincipal Accountant for the fiscal years ended December 31, 2013, 20142021 and 20152020, was BDO USA, LLP.Moss Adams.
The aggregate fees billed for professional services rendered by BDO USA, LLPMoss Adams for the audit of our consolidated financial statements for our fiscalthe years ended December 31, 20142021 and 20152020, and the review of the financial statements on Forms 10-Q for the fiscal quarters in such fiscal years were approximately $236,000$242,250 and $273,916,$257,575, respectively.
Audit Related Fees
During the years ended December 31, 20142021 and 2015,2020, there were no audit related fees.
Tax Fees
We were not billed by nor was there any tax feeswork performed by BDO USA, LLPMoss Adams during the years ended December 31, 2014 or 2015.2021 and 2020.
All Other Fees
No other fees were billed by BDO USA, LLP,Moss Adams during our fiscal years ended December 31, 20142021 and 2015,2020, other than as described above.
Audit Committee Pre-Approval Policies and Procedures
As of the date of this proxy statement, our Audit Committee has not established general pre-approval policies and as of December 31, 2015,2021, our Audit Committee had not established pre-approval policies and procedures for the engagement of our principal accountant to render audit or non-audit services. However, in accordance with Section 10A(i) of the Exchange Act, our Audit Committee, as a whole, approves the engagement of our principal accountant prior to the accountant rendering audit or non-audit services.
Certain rules of the Securities and Exchange Commission provide that an auditor is not independent of an audit client if the services it provides to the client are not appropriately approved, subject, however, to ade minimusminimis exception contained in the rules. The Audit Committee pre-approved all services provided by BDO USA, LLPMoss Adams in 20152021 and thede minimusminimis exception was not used.
The Board of Directors recommends that the shareholders vote “FOR” the ratification of the appointment of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016.
PROPOSAL 5 - CONSIDERATION OF AN AMENDMENT TO THE COMPANY’S BYLAWS TO IMPLEMENT A MAJORITY VOTING STANDARD IN UNCONTESTED ELECTIONS OF DIRECTORS
Background
The Company has received a proxy statement proposal from a shareholder under Securities and Exchange Commission Rule 14a-8 requesting that a proposal be included in this Proxy Statement which would require the Board of Directors to initiate the appropriate process to provide that director nominees be elected by the affirmative vote the majority votes cast at an annual meeting in connection with uncontested elections. For reasons set forth below, and consistent with recent corporate governance initiatives described in this proxy statement, the Board of Directors agreed with the request and has initiated the process.
Amendment
55
The Board of Directors has adopted and recommends that shareholders approve an amendment (the “Amendment”) to the Company’s Bylaws to implement a majority voting standard for the election of directors in uncontested elections. A copy of the proposed amendment to the Bylaws is attached as
Appendix B to this Proxy Statement.
Implementation and Purpose of the Amendment
Section 7-107-209 of the Colorado Business Corporation Act (the “Act”) and the Company's Bylaws provide that directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting in which a quorum is present. Under plurality voting, director nominees receiving the greatest number of votes “for” election (although not necessarily a majority) are elected as directors.
Section 7-107-208 of the Act provides that a Colorado corporation may impose a greater voting requirement for the election of directors, if authorized by its articles of incorporation or, if authorized by the articles of incorporation, through bylaws adopted by the shareholders. The Company's Articles of Incorporation provide that the Bylaws may provide for a greater voting requirement as long as such Bylaws are adopted by the Company's shareholders.
Considering the foregoing, the Board of Directors has amended Section 10 of Article II of the Bylaws to provide for a majority voting standard in uncontested director elections. Under the new majority voting standard, a nominee for director in an uncontested election shall be elected to the Board if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election. For this purpose, abstentions and broker non-votes will not count as votes cast. Directors will continue to be elected by plurality vote at any meeting of shareholders where the number of director nominees exceeds the number of directors to be elected, commonly referred to as a contested election. In the event a director fails to receive a majority of the votes cast in an uncontested election, the Board of Directors may, within its powers, decrease the number of directors, fill the vacancy, or take other appropriate action.
The transition from plurality voting to majority voting in the election of Directors is a current trend in corporate governance, with a significant majority of the companies in the S&P 500 having adopted the majority vote standard. By requiring that a Director nominee receive a majority of the votes cast (excluding abstentions and broker non-votes) in favor of his or her election to the Board of Directors, shareholders are provided with a more meaningful role in the election of Directors. Under the Company's current plurality voting standard in connection with uncontested elections, a nominee for the Board can be elected with as little as a single affirmative vote, because withheld votes have no effect.
If this proposal is approved by our shareholders, the Board of Directors will revise its director resignation policy to provide that any incumbent director who does not receive a majority of the votes cast is required to tender his or her resignation.
The Board continues to believe that the plurality vote standard should continue to apply in contested director elections. If a majority vote standard is used in a contested election, fewer candidates could be elected to the Board than the number of authorized board seats if too many directors receive more “against” than “for” votes. Therefore, the Amendment retains plurality voting in contested director elections.
Vote Required
Approval of this proposal requires the affirmative vote of the holders of a majority of the shares casting votes in person or by proxy on this proposal at the Annual Meeting. The number of such affirmative votes must be at least a majority of the required quorum for the meeting.
Effective Date
If approved by the Company’s shareholders, the Amendment will become immediately effective. The new majority voting standard would then be applicable to an uncontested election of directors at the Company’s 2017 annual meeting of shareholders.
Our Board of Directors recommends a vote "FOR" approval of the amendment to the Bylaws to implement a majority voting standard in uncontested elections of Directors.
SHAREHOLDER PROPOSALS
Under SEC Rule 14a-8, if a shareholder wants us to include a proposal in our proxy statement and form of proxy for presentation at our 201720222 Annual Meeting of Shareholders, the proposal must be received by us at our principal executive offices at 508 West Wall Street,404 Veterans Airpark Lane, Suite 550,300, Midland, Texas 7970179705 by December 19, 2016,January 25, 2023 unless the date of our 20172023 Annual Meeting of Shareholders is more than 30 days from the anniversary date of our 20162022 Annual Meeting of Shareholders, in which case the deadline is a reasonable time before we print and mail our proxy materials for the 20172022 Annual Meeting of Shareholders. The proposal should be sent to the attention of the Corporate Secretary of Natural Gas Services Group.
Rule 14a-4 of the SEC's proxy rules allows a company to use discretionary voting authority to vote on matters coming before an annual meeting of shareholders for the prior year's annual meeting of shareholders or the date specified by an overriding advance notice provision in the company's bylaws. Our bylaws do not contain such an advance notice provision. Accordingly, for our 2017 annual meeting, shareholders' written notices must be received by us before March 9, 2017 for any proposal a shareholder wishes to bring before the meeting but for which such shareholder does not seek to have a written proposal considered for inclusion in the proxy statement and form of proxy. Your notice should be addressed to President, Natural Gas Services Group, Inc., 508 West Wall Street, Suite 550, Midland, Texas 79701.
In order to curtail controversy as to the date on which a proposal was received by us, it is suggested that proponents submit their proposals by certified mail-return receipt requested. Such proposals must also meet the other requirements established by the SEC for stockholder proposals.
In addition, pursuant to our Bylaws, a stockholder who intends to nominate a candidate for election to the Board or to propose other business for consideration at the 2023 Annual Meeting of Stockholders must deliver to the Company notice and certain information concerning themselves and their shareholder proposals.
proposal or director nomination not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting (the “annual meeting anniversary date”); provided, however, that, if the annual meeting is scheduled to be held on a date more than 30 days before or more than 60 days after the annual meeting anniversary date, notice must be delivered to us not later than the close of business on the later of the 120th day prior to the scheduled date of such annual meeting and not later than the latest of (i) the 90th day prior to such annual meeting, or (ii) the 10th day after public disclosure of the date of such annual meeting.
Accordingly, any notice given by or on behalf of a stockholder pursuant to these provisions of our Bylaws (and not pursuant to Rule 14a-8 of the Exchange Act) must be received no earlier than February 16, 2023, and no later than March 20, 2023 Such notice should be addressed to: Natural Gas Services Group, Inc., Corporate Secretary, at 404 Veterans Airpark Lane, Suite 300, Midland, Texas 79705.
With respect to special meetings of the shareholders, the business that may be brought at the meeting will be limited to that stated in the Company's notice of meeting. In the event we call a special meeting of shareholders for the purpose of electing one or more directors to the Board, any such shareholder entitled to vote in such election of directors may nominate a person or persons (as the case may be) for election to such position(s) as specified our notice of meeting, if such shareholder delivers a notice that complies with the requirements of our Bylaws to the secretary of the Company at its principal executive offices not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of: (x) the 90th day prior to such special meeting; or (y) the tenth (10th) day following the first date of public disclosure of the date of the special meeting and of the nominees proposed by the Board.
These requirements are separate from and in addition to the SEC’s requirements described in the first paragraph of this section relating to including a proposal in our proxy statements.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Because of our relatively small size, to date we have not developed formal processes by which shareholders or other interested parties may communicate directly with Directors. Until formal procedures are developed and posted on our website (www.ngsgi.com), any communication to one or more members of our Board of Directors may be made by sending them in care of Investor Relations, Natural Gas Services Group, Inc., 508 West Wall Street,404 Veterans Airpark Lane, Suite 550,300, Midland, Texas 79701.79705. Shareholders should clearly note on the mailing envelope that the letter is a “Shareholder-Board Communication.” All such communications will be forwarded to the intended recipients.
OTHER MATTERS
Our Board of Directors does not know of any matters to be presented at the meeting other than the matters set forth herein. If any other business should come before the meeting, the person’s named in the enclosed proxy card will vote such proxy according to their judgment on such matters.
New York Stock Exchange Certification. We listed our common stock on the New York Stock Exchange in October 2008. The certification of our Chief Executive Officer required by the NYSE Listing Standards, Section 303A.12(a), relating to our compliance with the NYSE Corporate Governance Listing Standards, was submitted to the NYSE on June 4, 2015,July 22, 2019, in connection with our listing on the exchange. The certifications of our Chief Executive Officer and Principal Accounting Officerprincipal accounting officer required by the SEC in connection with our Annual Report on Form 10-K for the year ended December 31, 2015,2021, were submitted to the SEC on March 11, 2016,18, 2022, with our Annual Report on Form 10-K.
You may obtain our Annual Report on Form 10-K for the fiscal year ended December 31, 2015,2021, without charge upon written request to Stephen C. Taylor,John W. Chisholm, Interim President, at Natural Gas Services Group, Inc., 508 West Wall Street,404 Veterans Airpark Lane, Suite 550,300, Midland, Texas 79701.79705. In addition, the exhibits to the Annual Report on Form 10-K for the fiscal year ended December 31, 2015,2021, may be obtained by any shareholder upon written request to Mr. Taylor.Chisholm.
In addition, we use our website as a channel of distribution for Companycompany information. We make available free of charge on the Investor Relations section of our website (www.ngsgi.com) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. We also make available through our website other reports filed with or furnished to the SEC under the Securities Exchange Act of 1934, as amended, including our proxy statements and reports filed by officers and directorsDirectors under Section 16(a) of the Exchange Act, as well as our Code of Business Ethics and the charters to our various Committees of our Board of Directors. We do not intend for information contained in our website to be part of this proxy statement.
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| BY ORDER OF THE BOARD OF DIRECTORS |
April 29, 2016 | |
| May 18, 2022 | /s/ Stephen C. TaylorJohn W. Chisholm |
| Midland, Texas | Stephen C. Taylor Chairman of the Board,John W. Chisholm Interim President, and Chief Executive Officer and Director |
