•Certain prerequisites and other benefits
In 2018 and future years, we expect that earnings from performance-based stock options and performance-based RSUs granted prior to 2018 (and certain other arrangements) will continue to be tax-deductible pursuant to the MIP because they are considered grandfathered under the tax reform legislation. However, we are waiting for additional guidance on the tax reform act and these amounts may not be tax-deductible. We expect the other compensation paid to our NEOs above $1.0 million will not be tax-deductible.
| | | | | | | | | | | | | | |
Summary Compensation Table | | | | |
Compensation Committee Report
The Compensation Committee has reviewed and discussed the above Compensation Discussion and Analysis with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
This report of the Compensation Committee shall not be deemed “soliciting material,” or to be “filed” with the SEC or subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent that the Company specifically requests that the information be treated as soliciting material or specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act.
Timothy H. Day, Chairman
John Jackson
Julio Quintana
EXECUTIVE COMPENSATION MATTERS
Summary Compensation Table
The following information relates to compensation paid by the Company for the fiscal years ended 2017, 20162019 and 20152018 to the Company’s Chief Executive Officer its Chief Financial Officer, and each of the other threetwo most highly compensated executive officers:
|
| | | | | | | | | | | | | | | | | |
Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Pension Value and Nonqualified Deferred compensation Earnings ($) | All Other Compensation ($)(5) | Total ($) |
T.M. “Roe” Patterson, | 2017 | 658,269 |
| — |
| 9,115,924 |
| 1,641,017 |
| 630,000 |
| — |
| — |
| 12,045,210 |
|
President and Chief | 2016 | 630,000 |
| — |
| 9,171,126 |
| 2,104,717 |
| 1,253,700 |
| — |
| — |
| 13,159,543 |
|
Executive Officer | 2015 | 665,000 |
| — |
| 2,541,622 |
| — |
| — |
| — |
| 11,800 |
| 3,218,422 |
|
Alan Krenek, | 2017 | 395,208 |
| — |
| 3,244,487 |
| 582,289 |
| 311,250 |
| — |
| 900 |
| 4,534,134 |
|
Senior Vice President, | 2016 | 381,800 |
| — |
| 3,304,322 |
| 746,826 |
| 548,838 |
| — |
| — |
| 4,981,786 |
|
Chief Financial Officer, Treasurer and Secretary | 2015 | 401,592 |
| — |
| 689,268 |
| — |
| — |
| — |
| 11,800 |
| 1,102,660 |
|
James F. Newman, | 2017 | 395,208 |
| — |
| 3,244,487 |
| 582,289 |
| 311,250 |
| — |
| 6,616 |
| 4,539,850 |
|
Senior Vice President, | 2016 | 381,800 |
| — |
| 3,304,322 |
| 746,826 |
| 548,838 |
| — |
| — |
| 4,981,786 |
|
Region Operations | 2015 | 401,592 |
| — |
| 689,268 |
| — |
| — |
| — |
| 11,800 |
| 1,102,660 |
|
William T. Dame, | 2017 | 317,890 |
| — |
| 1,764,366 |
| 317,615 |
| 255,000 |
| — |
| 17,904 |
| 2,672,775 |
|
Vice President, | 2016 | 290,904 |
| — |
| 1,796,905 |
| 407,363 |
| 381,812 |
| — |
| — |
| 2,713,350 |
|
Pumping Services | 2015 | 329,015 |
| — |
| 484,030 |
| — |
| — |
| — |
| 11,800 |
| 866,588 |
|
Brett Taylor | 2017 | 271,408 |
| — |
| 1,176,256 |
| 211,749 |
| 149,055 |
| — |
| 5,405 |
| 1,813,873 |
|
Vice President, | 2016 | 262,200 |
| — |
| 1,183,379 |
| 271,582 |
| 243,753 |
| — |
| — |
| 1,960,914 |
|
Equipment, Quality Health, Safety and Environment | 2015 | 275,792 |
| — |
| 116,850 |
| — |
| — |
| — |
| 11,659 |
| 404,301 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($)(5) | Total ($) |
T.M. “Roe” Patterson, | 2019 | 713,860 | | — | | — | | — | | — | | — | | 429,509 | | 1,143,369 | |
President and Chief Executive Officer | 2018 | 700,000 | | — | | 1,429,018 | | — | | 315,000 | | — | | — | | 2,444,018 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
David Schorlemer | 2019 | 400,000 | | 200,000 | | 299,340 | | — | | 243,320 | | — | | 900 | | 1,143,560 | |
Senior Vice President, Chief Financial Officer, Treasurer and Secretary | 2018 (6) | 130,770 | | 160,000 | | 250,800 | | — | | — | | — | | 300 | | 541,870 | |
James F. Newman, | 2019 | 420,930 | | — | | 312,503 | | — | | 234,232 | | — | | 8,360 | | 976,025 | |
Senior Vice President — Region Operations | 2018 | 415,000 | | — | | 511,263 | | — | | 155,625 | | — | | 7,639 | | 1,089,527 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
______________
1.Under the terms of their employment agreements, Messrs. Patterson, Newman and Schorlemer are entitled to the compensation described under “Employment Agreements” below.
2.Pursuant to his appointment in August 2018, Mr. Schorlemer received guaranteed cash payment of $200,000 on each of March 15, 2019 and March 15, 2020 and will receive an additional $200,000 on March 15, 2021.
3.This column represents the total grant date fair value of RSAs, time-based phantom stock and performance-based phantom stock granted to each of the applicable named executive officers. The grant date fair value of performance-based phantom stocks granted in 2019, $1.22 was calculated in accordance with FASB ASC Topic 718, based on the fair value on the grant date, May 15, 2019. The value of time-based RSAs and time-based phantom stock was calculated based upon the closing market price of the stock on the grant date, May 15, 2019. The actual value that an executive officer will realize upon vesting of performance or time-based awards will depend upon the market price of the Company’s stock on the vesting date, so there is no assurance that the value realized by an executive officer will be at or near the value of the market price of the Company’s stock on the grant date. Refer to the Company's Annual Report on Form 10-K for the period ended December 31, 2019, filed with the SEC on March 13, 2020 for further discussion on our grant-date valuation of stock-based compensation.
4.Reflects aggregate bonus payments made utilizing metrics under our annual cash bonus incentive compensation plan and division-level Quarterly Incentive Bonus Plan. In 2019, Messrs. Patterson, Newman and Schorlemer did not participate in the Quarterly Incentive Bonus Plan and received only an annual cash bonus for 2019 performance that was paid in early 2020.
5.Includes vehicle allowance for 2019 and 2018 of $7,460 and $6,739 for Mr. Newman. Includes a cell phone allowance for 2019 and 2018 of $900 for Mr. Newman and a cell phone allowance for 2019 and 2018 of $900 and $300, respectively, for Mr. Schorlemer. Mr. Patterson did not participate in the cell phone allowance plan in 2019 and 2018. All other compensation for Mr. Patterson, in 2019, relates to severance related payments per the Separation Agreement as described below.
6.Mr. Schorlemer’s base salary for 2018 was prorated based on the August 27, 2018 effective date of his appointment as our Chief Financial Officer. He was not a NEO for the annual period of 2018.
18 | Basic Energy Services, Inc. 2020 Proxy Statement
| | | | | | | | | | | | | | |
(1)Outstanding Equity Awards at Fiscal Year-End | Under the terms of their employment agreements, Messrs. Patterson, Krenek, Newman, Dame and Taylor are entitled to the compensation described under “Employment Agreements” below. |
| | |
(2) | This column represents the total grant date fair value of RSUs granted to each of the applicable named executive officers. The fair value of performance-based RSUs granted in 2017, $36.33, was calculated in accordance with FASB ASC Topic 718, based on the fair value on the grant date, February 22, 2017. For 2016, the value of time-based RSU was calculated based upon the closing market price of the stock on December 27, 2016, the first day the reorganized Company's common shares began trading. The actual value that an executive officer will realize upon vesting of performance or time-based RSUs will depend upon the market price of the Company’s stock on the vesting date, so there is no assurance that the value realized by an executive officer will be at or near the value of the market price of the Company’s stock on the grant date. |
| |
(3) | The aggregate number of performance-based option awards granted to each executive officers at February 22, 2017, is as follows: Mr. Patterson 100,368, Messrs. Krenek and Newman 35,614 each, Mr. Dame 19,426 and Mr. Taylor 12,951. The option awards will vest in three equal installments beginning on February 22, 2017. Each option has an exercise price of $41.93. The fair value of the option awards included in this column represents the value of the award on the grant date, $16.35, which was determined in accordance with FASB ASC Topic 718, and excludes the effect of estimated forfeitures. Refer to the Company's Form 10-K for the period ended December 31, 2017 for further discussion on our grant-date valuation of stock-based compensation. |
| |
(4) | Reflects aggregate bonus payments made utilizing metrics under our annual cash bonus incentive compensation plan and division-level Quarterly Incentive Bonus Plan. In 2017, Messrs. Patterson, Krenek and Newman did not participate in the Quarterly Incentive Bonus Plan and received only an annual cash bonus for 2017 performance that was paid in early 2018. None of the named executive officers received any annual cash bonus payments under our annual cash bonus incentive compensation plan for 2016. Mr. Dame and Mr. Taylor participated in the Quarterly Incentive Bonus Plan in 2017 and 2015. |
| |
(5) | Includes employer contributions to Executive Deferred Compensation Plan as follows for 2017, 2016, and 2015, respectively: for Mr. Patterson, $0, $0 and $10,600; for Mr. Krenek, $0, $0 and $10,600; for Mr. Newman, $0, $0 and $10,600; for Mr. Dame, $0, $0 and $10,600; and for Mr. Taylor, $0, $0 and $10,459. Includes vehicle allowance for 2017 of $4,505 for Mr. Taylor, $5,716 for Mr. Newman and $17,004 for Mr. Dame. Includes a cell phone allowance for each NEO for $1,200 for 2015 and $900 for 2017, Mr. Patterson did not participate in the cell phone allowance plan in 2017. |
Grants of Plan-Based Awards
The following table sets forth information concerning grants of awards to each of our named executive officers under our MIP during fiscal 2017.
Grants of Plan-Based Awards — 2017
)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | All Other | All Other | | |
| | | Estimated Future Payouts | Estimated Future Payouts | Stock | Option | | |
| | | Under Non-Equity Incentive | Under Equity Incentive | Awards: | Awards: | | |
| | | Plan Awards | Plan Awards | Number of | Number of | Exercise or | |
| | | | | | | | | Shares of | Securities | Base Price | Grant Date |
| | | | | | | | | Stock or | Underlying | of Option | Fair Value |
| | Grant | Threshold | Target | Maximum | Threshold | Target | Maximum | Units | Options | Awards | of Stock and |
Name | | Date | ($) | ($) | ($) | (#) | (#) | (#) | (#) | (#) | ($/Sh) | Option Awards |
(a) | | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (l) |
| | | | | | | | | | | | |
T.M. “Roe” Patterson | | 2/22/17 (1) | — |
| — |
| — |
| — |
| 250,920 |
| 250,920 |
| — |
| — |
| — |
| $ | 9,115,924 |
|
| | 2/22/17 (2) | — |
| — |
| — |
| — |
| 100,368 |
| 100,368 |
| — |
| — |
| $ | 41.93 |
| $ | 1,641,017 |
|
Alan Krenek | | 2/22/17 (1)
| — |
| — |
| — |
| — |
| 89,036 |
| 89,036 |
| — |
| — |
| — |
| $ | 3,244,487 |
|
| | 2/22/17 (2) | — |
| — |
| — |
| — |
| 35,614 |
| 35,614 |
| — |
| — |
| $ | 41.93 |
| $ | 582,289 |
|
James F. Newman | | 2/22/17 (1) | — |
| — |
| — |
| — |
| 89,036 |
| 89,036 |
| — |
| — |
| — |
| $ | 3,244,487 |
|
| | 2/22/17 (2) | — |
| — |
| — |
| — |
| 35,614 |
| 35,614 |
| — |
| — |
| $ | 41.93 |
| $ | 582,289 |
|
William T. Dame | | 2/22/17 (1)
| — |
| — |
| — |
| — |
| 48,565 |
| 48,565 |
| — |
| — |
| — |
| $ | 1,764,366 |
|
| | 2/22/17 (2) | — |
| — |
| — |
| — |
| 19,426 |
| 19,426 |
| — |
| — |
| $ | 41.93 |
| $ | 317,615 |
|
Brett Taylor | | 2/22/17 (1) | — |
| — |
| — |
| — |
| 32,377 |
| 32,377 |
| — |
| — |
| — |
| $ | 1,176,256 |
|
| | 2/22/17 (2) | — |
| — |
| — |
| — |
| 12,951 |
| 12,951 |
| — |
| — |
| $ | 41.93 |
| $ | 211,749 |
|
______________
| |
(1) | Performance-based restricted stock units ("RSUs") were granted by our Board, as recommended by the Compensation Committee, to certain of our employees, including our named executive officers, on February 22, 2017. Performance for the award was measured based on the Company's relative total stock return (TSR) compared to the TSR of a selected peer group of energy services companies. The RSUs began to vest in three equal annual installments on February 8, 2018. |
| |
(2) | Performance-based stock option awards were granted by our Board, as recommended by the Compensation Committee, to certain of our employees, including our named executive officers, on February 22, 2017. Performance for the award was measured based on the Company's relative total stock return (TSR) compared to the TSR of a selected peer group of energy services companies. The stock options began to vest in three equal annual installments on February 8, 2018. |
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information concerning unexercised stock options and unvested RSUsrestricted stock of each of our named executive officers as of December 31, 2017:2019: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Option Awards | | Stock Awards |
| | | | | | | | | | | | | | | | | | Equity Incentive |
| | Number of | | Number of | | Equity | | | | | | Number of | | | | Equity Incentive | | Plan Awards: |
| | Securities | | Securities | | Incentive Plan | | | | | | Shares | | | | Plan Awards: | | Market or Payout |
| | Underlying | | Underlying | | Awards: Number of | | | | | | or Units of | | Market Value of | | Number of Unearned | | Value of Unearned |
| | Unexercised | | Unexercised | | Securities Underlying | | Option | | | | Stock That | | Shares or Units of | | Shares, Units or | | Shares, Units or |
| | Options | | Options | | Unexercised | | Exercise | | Option | | Have Not | | Stock That | | Other Rights that | | Other Rights That |
| | (#) | | (#) | | Unearned Options | | Price | | Expiration | | Vested | | Have Not Vested | | Have Not Vested | | Have Not Vested |
Name | | Exercisable | | Unexercisable | | (#) | | ($) | | Date | | (#) | | ($) | | (#) | | ($) |
(a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) |
| | | | | | | | | | | | | | | | | | |
T.M. “Roe” Patterson | | | | | | | | | | | | | | | | | | |
12/23/2016(1) | | — |
| | — |
| | — |
| | — |
| | — |
| | 83,640 |
| | $ | 1,963,031 |
| | — |
| | $ | — |
|
12/23/2016(2) | | 33,456 |
| | — |
| | 66,912 |
| | $36.55 | | 12/23/2026 |
| | — |
| | — |
| | — |
| | $ | — |
|
2/22/2017(3) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | $ | — |
| | 250,920 |
| | $ | 5,889,092 |
|
2/22/2017(4) | | — |
| | — |
| | 100,368 |
| | $41.93 | | 2/22/2027 |
| | — |
| | — |
| | — |
| | $ | — |
|
Alan Krenek | | | | | | | | | | | | | | | | | | |
12/23/2016(1) | | — |
| | — |
| | — |
| | — |
| | — |
| | 29,678 |
| | $ | 696,543 |
| | — |
| | $ | — |
|
12/23/2016(2) | | 11,872 |
| | — |
| | 23,742 |
| | $36.55 | | 12/23/2026 |
| | — |
| | — |
| | — |
| | $ | — |
|
2/22/2017(3) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | $ | — |
| | 89,036 |
| | $ | 2,089,675 |
|
2/22/2017(4) | | — |
| | — |
| | 35,614 |
| | $41.93 | | 2/22/2027 |
| | — |
| | — |
| | — |
| | $ | — |
|
James F. Newman | | | | | | | | | | | | | | | | | | |
12/23/2016(1) | | — |
| | — |
| | — |
| | — |
| | — |
| | 29,678 |
| | $ | 696,543 |
| | — |
| | $ | — |
|
12/23/2016(2) | | 11,872 |
| | — |
| | 23,742 |
| | $36.55 | | 12/23/2026 |
| | — |
| | — |
| | — |
| | $ | — |
|
2/22/2017(3) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | $ | — |
| | 89,036 |
| | $ | 2,089,675 |
|
2/22/2017(4) | | — |
| | — |
| | 35,614 |
| | $41.93 | | 2/22/2027 |
| | — |
| | — |
| | — |
| | $ | — |
|
William T. Dame | | | | | | | | | | | | | | | | | | |
12/23/2016(1) | | — |
| | — |
| | — |
| | — |
| | — |
| | 16,188 |
| | $ | 379,932 |
| | — |
| | $ | — |
|
12/23/2016(2) | | 6,476 |
| | — |
| | 12,950 |
| | $36.55 | | 12/23/2026 |
| | — |
| | — |
| | — |
| | $ | — |
|
2/22/2017(3) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | $ | — |
| | 48,565 |
| | $ | 1,139,821 |
|
2/22/2017(4) | | — |
| | — |
| | 19,426 |
| | $41.93 | | 2/22/2027 |
| | — |
| | — |
| | — |
| | $ | — |
|
Brett Taylor | | | | | | | | | | | | | | | | | | |
12/23/2016(1) | | — |
| | — |
| | — |
| | — |
| | — |
| | 10,792 |
| | $ | 253,288 |
| | — |
| | $ | — |
|
12/23/2016(2) | | 4,317 |
| | — |
| | 8,634 |
| | $36.55 | | 12/23/2026 |
| | — |
| | — |
| | — |
| | $ | — |
|
2/22/2017(3) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | $ | — |
| | 32,377 |
| | $ | 759,888 |
|
2/22/2017(4) | | — |
| | — |
| | 12,951 |
| | $41.93 | | 2/22/2027 |
| | — |
| | — |
| | — |
| | $ | — |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Option Awards | | | | | | Stock Awards | | | |
| | | | | | | | | |
| Number of Securities Underlying Unexercised Options | Number of Securities Underlying Unexercised Options | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock that have not vested | Market Value of Shares or Units of Stock that have not vested | Equity Incentive Plan Awards: Number of Unrestricted Shares, Units or Other Rights that have not vested | Equity Incentive Plan Awards: Market or Payout value of Unearned Shares, Units or Other Rights that have not vested |
| | | | | | | | | |
| (#) | (#) | | | | | | | |
Name | Exercisable | Unexercisable | (#) | ($) | | (#) | ($) | (#) | ($) |
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) |
T.M. “Roe” Patterson (1) | | | | | | | | | |
David Schorlemer | | | | | | | | | |
8/29/2018 (2) | — | | — | | — | | — | | — | | — | | — | | 66,000 | | $17,820 | |
5/15/2019 (3) | — | | — | | — | | — | | — | | — | | — | | 39,912 | | $10,776 | |
5/15/2019 (4) | — | | — | | — | | — | | — | | 39,912 | | $10,776 | | — | | — | |
5/15/2019 (5) | — | | — | | — | | — | | — | | 79,824 | | $21,552 | | — | | — | |
James F. Newman | | | | | | | | | |
12/23/2016 (6) | — | | — | | 35,614 | | $36.55 | | 12/31/2026 | — | | — | | — | | — | |
2/22/2017 (7) | — | | 11,871 | | 23,653 | | $41.93 | | 2/22/2027 | — | | — | | — | | — | |
2/22/2017 (8) | — | | — | | — | | — | | — | | — | | — | | 9,893 | | $2,671 | |
2/8/2018 (9) | — | | — | | — | | — | | — | | — | | — | | 10,641 | | $2,873 | |
2/8/2018 (10) | — | | — | | — | | — | | — | | — | | — | | 15,692 | | $4,237 | |
5/15/2019 (3) | — | | — | | — | | — | | — | | — | | — | | 41,667 | | $11,250 | |
5/15/2019 (4) | — | | — | | — | | — | | — | | 41,667 | | $11,250 | | — | | — | |
5/15/2019 (5) | — | | — | | — | | — | | — | | 83,331 | | $22,499 | | — | | — | |
(1) One thirdOn September 13, 2019, Mr. T.M. “Roe” Patterson notified the Board of his decision to voluntarily resign as President and Chief Executive Officer of the Company. Thus, all his outstanding stock and option awards were forfeited.
(2) Performance-based RSUs vestedwere granted by our Board, as recommended by the Compensation Committee on December 23, 2016August 8, 2018. Performance for the award is measured based on the Company's relative total stock return (“TSR”) compared to the TSR of a selected peer group of energy services companies. These units have a two year performance period and another one thirdwill vest in two equal installment beginning on March 15, 2020.
(3) RSUs were granted by our Board, as recommended by the Compensation Committee, to certain members of management, including our named executive officers, on May 15, 2019. RSUs begin to vest in three equal annual installments on May 15, 2020.
(4) On May 15, 2019, the Compensation Committee of the RSUsBoard made grants of cash-settled time-based phantom restricted stock to certain members of management. Cash-settled time-based phantom shares granted under the LTIP, vest in one-third increments on May 15, 2020, 2021 and 2022. Each cash-settled time-based phantom share is the economic equivalent of one share of Company common stock, subject to a maximum settlement amount of $9.00 per phantom share and are subject to accelerated vesting in certain circumstances.
(5) On May 15, 2019, the Compensation Committee of the Board made grants of cash-settled performance-based phantom restricted stock to certain members of management. Performance for the award is measured based on the Company's relative total stock return (“TSR”) compared to the TSR of a selected peer group of energy services companies. These units have a two year performance period and will vest in two equal installments beginning on May 15, 2021. Each cash-settled time-based phantom share is the economic equivalent of one share of Company common stock, subject to a maximum settlement amount of $9.00 per phantom share and are subject to accelerated vesting in certain circumstances.
(6) These options vested in equal installments beginning on December 23, 2017. The remainder will vest onAs of December 23, 2018.31, 2019, these options are fully vested.
(2)(7) One third of the options vested on December 23, 2017.February 8, 2018, and another one third vested on February 22, 2019. The remainder will vest in two equal annual installments on December 23, 2018 and 2019.February 22, 2020.
(3)(8) Performance-based RSUs were granted by our Board, as recommended by the Compensation Committee, to certain of our employees, including our named executive officers, on February 22, 2017. Performance for the award was measured based on the Company's relative total stock return (TSR)(“TSR”) compared to the TSR of a selected peer group of energy services companies. One third of the Performance-based RSUs vested on February 22, 2018, and another one third vested on February 22, 2019. The remainder will vest February 22, 2020.
(4) Performance-based stock options19 | Basic Energy Services, Inc. 2020 Proxy Statement
(9) Time-based RSUs were granted by our Board, as recommended by the Compensation Committee, to certain of our employees, including our named executive officers, on February 22, 2017.8, 2018. RSUs begin to vest in three equal annual installments on March 15, 2019.
(10) Performance-based RSUs were granted by our Board, as recommended by the Compensation Committee, to certain members of management, including our named executive officers, on February 8, 2018. Performance for the award wasis measured based on the Company's relative total stock return (TSR)(“TSR”) compared to the TSR of a selected peer group of energy services companies.
These units have a two year performance period and will vest in two equal installments beginning on March 15, 2020.
Option Exercises and Stock Vested
The following table sets forth information concerning exercises of stock options and vesting of RSUs of each of our named executive officers during fiscal 2017:
Option Exercises and Stock Vested — 2017
0
|
| | | | | | | | | |
| | | | | |
| Option Awards | | Stock Awards |
| Number of Shares | Value | | Number of RSUs | Value |
| Acquired on Exercise | Realized on Exercise | | Acquired on Vesting | Realized on Vesting |
Name | (#) | ($) | | (#) | ($) |
(a) | (b) | (c) | | (d) | (e) |
| | | | | |
T.M. “Roe” Patterson | — |
| — |
| | 83,640 | $ | 2,011,542 |
|
Alan Krenek | — |
| — |
| | 29,679 | $ | 713,755.9 |
|
James F. Newman | — |
| — |
| | 29,679 | $ | 713,755.9 |
|
William T. Dame | — |
| — |
| | 16,188 | $ | 389,321.4 |
|
Brett Taylor | — |
| — |
| | 10,792 | $ | 259,547.6 |
|
Nonqualified Deferred Compensation Plans
The following table sets forth information concerning the nonqualified deferred compensation of our named executive officers during fiscal 2017:
Nonqualified Deferred Compensation — 2017
)
|
| | | | | | | | | | | | | |
| | | | | |
| | | | | |
| Executive | Registrant | Aggregate | Aggregate | Aggregate |
| Contributions | Contributions | Earnings in | Withdrawals/ | Balance at |
| in Last FY | in Last FY | Last FY | Distributions | Last FY |
Name | ($) | ($) | ($) | ($) | ($) |
(a) | (b)(1) | (c)(2) | (d) | (e) | (f)(3) |
| | | | | |
T.M. “Roe” Patterson | $ | 46,079 |
| — |
| $ | 80,399 |
| — |
| $ | 709,610 |
|
Alan Krenek | — |
| — |
| $ | 72,470 |
| — |
| $ | 502,410 |
|
James F. Newman | — |
| — |
| $ | 136,933 |
| — |
| $ | 700,831 |
|
William T. Dame | $ | 12,966 |
| — |
| $ | 67,436 |
| — |
| $ | 517,592 |
|
Brett Taylor | — |
| — |
| $ | 44,617 |
| — |
| $ | 275,661 |
|
__________________
| | | | | | | | | | | | | | |
(1)Employment Agreements | Executive contributions during 2017 are included in the executive’s salary and bonus amounts, as applicable, as reported in the Summary Compensation Table. |
| | |
(2) | Registrant contributions during 2017 are included in all other compensation in the Summary Compensation Table. |
| |
(3) | All amounts were previously reported as compensation in the Summary Compensation Tables for previous years. |
Each of our named executive officers is permitted to participate in our Executive Deferred Compensation Plan. An executive officer permitted to participate in this plan may defer a portion of his compensation, up to a maximum of 50% of his annual salary and 100% of his annual cash bonus, into his plan account. We make an annual matching contribution to each participating executive’s plan account, with the Company matching 100% of the first 3% of the executive’s salary that is deferred, and 50% of the next 2% of the executive’s salary that is deferred, up to a plan-year maximum of $10,600. We may also make discretionary contributions into an executive officer’s plan account from time to time as we deem appropriate, however, all Company matching contributions have been suspended since 2015. Subject to certain exceptions, our matching and discretionary contributions vest in one-fourth increments determined by the executive’s years of service, with vesting beginning after two years of service, and full vesting occurring after five years of service. Each executive officer is always
fully vested in his own contributions to his plan account. Earnings on an executive officer’s plan account for any given year are dependent upon the investment options chosen by the executive officer for such plan account. Generally, participants under this plan may elect when and how distributions of vested amounts in a plan account will be made, including whether such distributions are in annual installments or a lump sum. However, certain key employees, including our named executive officers, may not receive distributions before a date six months after the date their employment with us is terminated for any reason other than death or disability.
Potential Payments upon Termination or Change in Control
Each of our named executive officers is party to an employment agreement as described above. Pursuant to these agreements, these officers are entitled to certain severance benefits. In addition, the grant agreements relating to our executive officers’ stock option and restricted stock awards provide for accelerated vesting under certain circumstances, including a “double-trigger” requirement in connection with a change in control. The tables below quantify amounts that would have been paid assuming the following events took place on December 31, 2017.
Potential Post-Employment Payments as of December 31, 2017 — T.M. “Roe” Patterson
0
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | CIC with | | |
| | | | | | | Termination | | |
| | | | Termination | Termination | Change in | for Good | | |
| | | | by Company | by Executive | Control | Reason or | | |
| Voluntary | | Termination | Except for | for Good | without | Without | | |
| Termination | Retirement (1) | for Cause(2) | Cause | Reason(3) | Termination (4) | Cause (4) | Death | Disability |
Compensation | | | | | | | | | |
Severance(5) | $ | — |
| $ | 2,660,000 |
| $ | — |
| $ | 2,660,000 |
| $ | 2,660,000 |
| $ | — |
| $ | 3,990,000 |
| $ | — |
| $ | — |
|
Bonus(6) | — |
| 630,000 |
| — |
| 630,000 |
| 630,000 |
| — |
| 630,000 |
| 630,000 |
| 630,000 |
|
Long-Term Incentive(7): | | | | | | | | | |
Acceleration of Unvested Options | — |
| 3,044,161 |
| — |
| 3,044,161 |
| 3,044,161 |
| — |
| 3,044,161 |
| 3,044,161 |
| 3,044,161 |
|
Acceleration of Unvested RSUs | — |
| 7,852,123 |
| — |
| 7,852,123 |
| 7,852,123 |
| — |
| 7,852,123 |
| 7,852,123 |
| 7,852,123 |
|
Benefits and Perquisites(8): | | | | | | | | | |
Employer Contributions to Executive Deferred Compensation Plan | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
COBRA Continuation | N/A |
| 31,118 |
| N/A |
| 31,118 |
| 31,118 |
| N/A |
| 31,118 |
| — |
| — |
|
280G Tax Gross-up | N/A |
| N/A |
| N/A |
| N/A |
| N/A |
| N/A |
| — |
| N/A |
| N/A |
|
Total | $ | — |
| $ | 14,217,402 |
| $ | — |
| $ | 14,217,402 |
| $ | 14,217,402 |
| $ | — |
| $ | 15,547,402 |
| $ | 11,526,284 |
| $ | 11,526,284 |
|
Potential Post-Employment Payments as of December 31, 2017 — Alan Krenek
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | CIC with | | |
| | | | | | | Termination | | |
| | | | Termination | Termination | Change in | for Good | | |
| | | | by Company | by Executive | Control | Reason or | | |
| Voluntary | | Termination | Except for | for Good | without | Without | | |
| Termination | Retirement (1) | for Cause(2) | Cause | Reason(3) | Termination (4) | Cause (4) | Death | Disability |
Compensation | | | | | | | | | |
Severance(5) | $ | — |
| $ | 1,089,375 |
| $ | — |
| $ | 1,089,375 |
| $ | 1,089,375 |
| $ | — |
| $ | 1,452,500 |
| $ | — |
| $ | — |
|
Bonus(6) | — |
| 311,250 |
| — |
| 311,250 |
| 311,250 |
| — |
| 311,250 |
| 311,250 |
| 311,250 |
|
Long-Term Incentive(7): | | | | | | | | | |
Acceleration of Unvested Options | — |
| 1,080,159 |
| — |
| 1,080,159 |
| 1,080,159 |
| — |
| 1,080,159 |
| 1,080,159 |
| 1,080,159 |
|
Acceleration of Unvested RSUs | — |
| 2,786,218 |
| — |
| 2,786,218 |
| 2,786,218 |
| — |
| 2,786,218 |
| 2,786,218 |
| 2,786,218 |
|
Benefits and Perquisites(8): | | | | | | | | | |
Employer Contributions to Executive Deferred Compensation Plan Contributions to | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
COBRA Continuation | N/A |
| 20,981 |
| N/A |
| 20,981 |
| 20,981 |
| N/A |
| 20,981 |
| — |
| — |
|
280G Tax Gross-up | N/A |
| N/A |
| N/A |
| N/A |
| N/A |
| N/A |
| — |
| N/A |
| N/A |
|
Total | $ | — |
| $ | 5,287,983 |
| $ | — |
| $ | 5,287,983 |
| $ | 5,287,983 |
| $ | — |
| $ | 5,651,108 |
| $ | 4,177,627 |
| $ | 4,177,627 |
|
0
Potential Post-Employment Payments as of December 31, 2017 — James F. Newman
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | CIC with | | |
| | | | | | | Termination | | |
| | | | Termination | Termination | Change in | for Good | | |
| | | | by Company | by Executive | Control | Reason or | | |
| Voluntary | | Termination | Except for | for Good | without | Without | | |
| Termination | Retirement (1) | for Cause(2) | Cause | Reason(3) | Termination (4) | Cause (4) | Death | Disability |
Compensation | | | | | | | | | |
Severance(5) | $ | — |
| $ | 1,089,375 |
| $ | — |
| $ | 1,089,375 |
| $ | 1,089,375 |
| $ | — |
| $ | 1,452,500 |
| $ | — |
| $ | — |
|
Bonus(6) | — |
| 311,250 |
| — |
| 311,250 |
| 311,250 |
| — |
| 311,250 |
| 311,250 |
| 311,250 |
|
Long-Term Incentive(7): | | | | | | | | | |
Acceleration of Unvested Options | — |
| 1,080,159 |
| — |
| 1,080,159 |
| 1,080,159 |
| — |
| 1,080,159 |
| 1,080,159 |
| 1,080,159 |
|
Acceleration of Unvested RSUs | — |
| 2,786,218 |
| — |
| 2,786,218 |
| 2,786,218 |
| — |
| 2,786,218 |
| 2,786,218 |
| 2,786,218 |
|
Benefits and Perquisites(8): | | | | | | | | | |
Employer Contributions to Executive Deferred Compensation Plan Contributions to | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
COBRA Continuation | N/A |
| 28,682 |
| N/A |
| 28,682 |
| 28,682 |
| N/A |
| 28,682 |
| — |
| — |
|
280G Tax Gross-up | N/A |
| N/A |
| N/A |
| N/A |
| N/A |
| N/A |
| — |
| N/A |
| N/A |
|
Total | $ | — |
| $ | 5,295,684 |
| $ | — |
| $ | 5,295,684 |
| $ | 5,295,684 |
| $ | — |
| $ | 5,658,809 |
| $ | 4,177,627 |
| $ | 4,177,627 |
|
Potential Post-Employment Payments as of December 31, 2017 — William T. Dame
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | CIC with | | |
| | | | | | | Termination | | |
| | | | Termination | Termination | Change in | for Good | | |
| | | | by Company | by Executive | Control | Reason or | | |
| Voluntary | | Termination | Except for | for Good | without | Without | | |
| Termination | Retirement (1) | for Cause(2) | Cause | Reason(3) | Termination (4) | Cause (4) | Death | Disability |
Compensation | | | | | | | | | |
Severance(5) | $ | — |
| $ | 892,500 |
| $ | — |
| $ | 892,500 |
| $ | 892,500 |
| $ | — |
| $ | 1,190,000 |
| $ | — |
| $ | — |
|
Bonus(6) | — |
| 255,000 |
| — |
| 255,000 |
| 255,000 |
| — |
| 255,000 |
| 255,000 |
| 255,000 |
|
Long-Term Incentive(7): | | | | | | | | | |
Acceleration of Unvested Options | — |
| 589,177 |
| — |
| 589,177 |
| 589,177 |
| — |
| 589,177 |
| 589,177 |
| 589,177 |
|
Acceleration of Unvested RSUs | — |
| 1,519,753 |
| — |
| 1,519,753 |
| 1,519,753 |
| — |
| 1,519,753 |
| 1,519,753 |
| 1,519,753 |
|
Benefits and Perquisites(8): | | | | | | | | | |
Employer Contributions to Executive Deferred Compensation Plan Contributions to | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
COBRA Continuation | N/A |
| 20,981 |
| N/A |
| 20,981 |
| 20,981 |
| N/A |
| 20,981 |
| — |
| — |
|
280G Tax Gross-up | N/A |
| N/A |
| N/A |
| N/A |
| N/A |
| N/A |
| — |
| N/A |
| N/A |
|
Total | $ | — |
| $ | 3,277,411 |
| $ | — |
| $ | 3,277,411 |
| $ | 3,277,411 |
| $ | — |
| $ | 3,574,911 |
| $ | 2,363,930 |
| $ | 2,363,930 |
|
0
Potential Post-Employment Payments as of December 31, 2017 — Brett Taylor
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | CIC with | | |
| | | | | | | Termination | | |
| | | | Termination | Termination | Change in | for Good | | |
| | | | by Company | by Executive | Control | Reason or | | |
| Voluntary | | Termination | Except for | for Good | without | Without | | |
| Termination | Retirement(1) | for Cause(2) | Cause | Reason (3) | Termination (4) | Cause (4) | Death | Disability |
Compensation | | | | | | | | | |
Severance(5) | $ | — |
| $ | 320,625 |
| $ | — |
| $ | 320,625 |
| $ | 320,625 |
| $ | — |
| $ | 427,500 |
| $ | — |
| $ | — |
|
Bonus(6) | — |
| 142,500 |
| — |
| 142,500 |
| 142,500 |
| — |
| 142,500 |
| 142,500 |
| 142,500 |
|
Long-Term Incentive(7): | | | | | | | | | |
Acceleration of Unvested Options | — |
| 392,804 |
| — |
| 392,804 |
| 392,804 |
| — |
| 392,804 |
| 392,804 |
| 392,804 |
|
Acceleration of Unvested RSUs | — |
| 1,013,176 |
| — |
| 1,013,176 |
| 1,013,176 |
| — |
| 1,013,176 |
| 1,013,176 |
| 1,013,176 |
|
Benefits and Perquisites(8): | | | | | | | | | |
Employer Contributions to Executive Deferred Compensation Plan Contributions to | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
COBRA Continuation | N/A |
| 31,118 |
| N/A |
| 31,118 |
| 31,118 |
| N/A |
| 31,118 |
| — |
| — |
|
280G Tax Gross-up | N/A |
| N/A |
| N/A |
| N/A |
| N/A |
| N/A |
| — |
| N/A |
| N/A |
|
Total | $ | — |
| $ | 1,900,223 |
| $ | — |
| $ | 1,900,223 |
| $ | 1,900,223 |
| $ | — |
| $ | 2,007,098 |
| $ | 1,548,480 |
| $ | 1,548,480 |
|
| |
(1) | Retirement. “Retirement” is defined for purposes of each of our current executive officer’s employment agreement, as such executive’s voluntary termination of his employment after attaining age 65 (with the exception of Mr. Patterson being age 60) and accruing ten years of service with us. For purposes of the acceleration of unvested stock options,
|
“Retirement” means the voluntary termination of his employment by an executive officer after he has attained the age of 65.
| |
(2) | Cause. Under each executive officer’s employment agreement, the definition of “Cause” includes, among other things, conviction of the executive officer of a crime involving moral turpitude or a felony, commission by the executive officer of fraud upon, or misappropriation of funds of, the Company, knowing engagement by the executive officer in any activity in direct competition with the Company, and a material breach by the executive officer of such employment agreement. For purposes of the acceleration of unvested stock options, “Cause” has the same meaning as it in the employment agreements. For purposes of the acceleration of unvested RSUs, “Cause” has the same meaning as it has in the employment agreements.
|
| |
(3) | Good Reason. Under each executive officer’s employment agreement, the definition of “Good Reason” includes, among other things, a reduction in the executive officer’s base salary or bonus opportunity, a relocation of more than fifty miles of the executive officer’s principal office, a substantial and adverse change in the executive officer’s duties, control, authority, status or position, the failure of the Company to continue in effect any pension plan, life insurance plan, health-and-accident plan, retirement plan, disability plan, stock option plan, deferred compensation plan or executive incentive compensation plan under which the executive officer was receiving material benefits, or the Company’s material reduction of the executive officer’s benefits under any such plan, and any material breach by the Company of any other material provision of such employment agreement. Prior to terminating his employment for Good Reason, the executive officer must comply with the notice provisions of his employment agreement. For purposes of the acceleration of unvested stock options, “Good Reason” has the same meaning as it has in the employee agreements. For purposes of the acceleration of unvested RSUs, “Good Reason” has the same meaning as it has in the employment agreements.
|
| |
(4) | Change in Control. Under each executive officer’s employment agreement, the definition of “Change in Control” (or “CIC”) includes, subject to certain exceptions, (i) acquisition by any individual, entity or group of beneficial ownership of 50% or more of either the then-outstanding shares of common stock of the Company or the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors, (ii) approval by the stockholders of the Company of a merger, unless immediately following such merger, substantially all of the holders of the Company’s securities immediately prior to the merger beneficially own more than 50% of the common stock of the corporation resulting from such merger, and (iii) the sale or other disposition of all or substantially all of the assets of the Company. For purposes of the acceleration of unvested stock options, “Change in Control” has the same meaning as it has for purposes of the MIP. For purposes of the acceleration of unvested restricted stock, “Change in Control” has the same meaning as it has for purposes of the executive officer’s employment agreement.
|
Termination by the Company except for Cause or termination of his own employment for Good Reason or Retirement
Each executive officer would be entitled to a lump sum severance payment equal to a multiple of the sum of his base salary plus his current annual incentive target bonus for the full year in which the termination of employment occurred. For Mr. Patterson the multiple is two, for Messrs. Krenek, Newman and Dame the multiple is 1.50, for Mr. Taylor the multiple is .75. During 2017, the annual incentive target bonus for our named executive officers utilized was 90% for Mr. Patterson, 75% for Messrs. Krenek, Newman and Dame and 50% for Mr. Taylor, in each case of their annual salary as of the end of the fiscal year.Based on performance metrics, the Company paid annual cash incentive bonuses for the fiscal year 2017 to each of its named executive officers.
Termination by the Company except for Cause, or termination of his own employment for Good Reason or Retirement, within the six months preceding or the twelve months following a Change in Control
Instead of the payment disclosed in the previous paragraph, each executive officer would be entitled to a lump sum severance payment equal to a multiple of the sum of his base salary plus the higher of (i) his current annual incentive target bonus for the full year in which the termination of employment occurred or (ii) the highest annual incentive bonus received by him for any of the last three fiscal years. For Mr. Patterson, the multiple is three, for Messrs. Krenek, Newman and Dame the multiple is two, and for Mr. Taylor the multiple is one.
| |
(6) | Bonus. In addition to severance payments, the named executive officers are entitled to a pro rata portion of their estimated bonus upon certain events of termination. The above tables reflect the annual incentive target bonus for the named executive officers for 2017.
|
Stock Options
In the event of a termination of the executive by the Company for Cause or resignation by the executive without a Good Reason, all unvested stock options will be forfeited immediately, automatically and without consideration upon the termination. In the event of termination by the Company without Cause or resignation for a Good Reason, any portion of the unvested stock options that would have vested had the executive continued his service during the 12 months following the termination will vest on such termination or resignation date. In the event of Death or Disability, all unvested stock options fully vest on such date. In the event of any Change of Control, all unvested options will fully vest.
Restricted Stock Units
In the event of a termination of the executive by the Company for Cause or resignation by the executive without a Good Reason, all unvested RSUs will be forfeited immediately, automatically and without consideration upon the termination. In the event of termination by the Company without Cause or resignation for a Good Reason, any portion of the unvested RSUs that would have vested had the executive continued his service during the 12 months following the termination will vest on such termination or resignation date. In the event of Death or Disability, all unvested RSUs fully vest on such date. In the event of any Change of Control, all unvested RSUs will fully vest.
| |
(8) | Other Benefits and Perquisites. |
Employer Contributions to Executive Deferred Compensation Plan
Each executive officer will become fully vested in all unvested matching and discretionary contributions made by the Company into his plan account upon (i) obtaining the age of 65, (ii) his death or disability or (iii) a termination for any reason whatsoever within 24 months following a Change in Control. Otherwise, each executive officer will forfeit any unvested portion of his plan account upon a termination for any reason. Additionally, certain key employees, including the named executive officers, may not receive distributions before a date six months after the date they separate service from the Company for any reason other than death or disability.
COBRA Continuation
In addition to the above cash benefits paid pursuant to each executive officer’s employment agreement, the Company will continue to provide the executive officer and his dependents with health benefits for up to 18 months.
280G Tax Gross-up
The employment agreements for Messrs. Patterson, Krenek, Newman, and Dame provide for gross up payments to the extent Section 280G of the Internal Revenue Code would apply to any payments as excess “parachute” payments. The tax gross-up terms have been included in the applicable employment agreement for each of these officers since prior to 2008.
Any benefits payable as described above are payable in a cash lump sum not later than 60 calendar days following the termination date. The employment agreements of the named executive officers also contain certain non-competition and non-solicitation provisions. For additional information regarding these employment agreements, see “Executive Compensation Matters — Employment Agreements.”
Employment Agreements
Pursuant to our employment agreement, effective May 2013,December 19, 2019, with T.M. “Roe” Patterson,Keith L. Schilling, our President and Chief Executive Officer, Mr. Patterson’sSchilling’s initial annual base salary was set at $650,000 and is subject to adjustment at least annually. Mr. PattersonSchilling is entitled to an annual performance bonus if certain performance criteria are met. In addition, Mr. PattersonSchilling is eligible from time to time to receive grants of stock options and other long-term equity incentive compensation under our equity compensation plan.LTIP. If Mr. Patterson’sSchilling’s employment were to be terminated for certain reasons, he would be entitled to a lump sum severance payment equal to two times the sum of his annual base salary plus his current annual incentive target bonus for the full year in which the termination of employment occurred. Additionally, if Mr. Patterson’s employment were to be terminated for certain reasons within the six months preceding or the twelve months following a change in control of our company, he would be entitled to a lump sum severance payment equal to three1.5 times the sum of his annual base salary plus the higher of (i) his current annual incentive target bonus for the full year in which the termination of employment occurred or (ii) the highest annual incentive bonus received by him for any of the last three completed fiscal years. Additionally, in the event that within the six months preceding or the twelve months following a change of control of the Company, Mr. Patterson’sSchilling’s Employment Agreement is not renewed by the Company and a new employment agreement has not been entered into, Mr. Schilling will be entitled to the same severance benefits described above, subject to certain conditions. Mr. Schilling’s employment agreement renews automatically each January 1st for a one-year period unless notice of termination is properly given by us or Mr. Patterson.Schilling. In the event that Mr. Patterson’sSchilling’s employment agreement is not renewed by us for any reason other than cause and a new employment agreement has not been entered into prior to the expiration of the then-current term, Mr. PattersonSchilling will be entitled to the same severance benefits described above.
We entered into a Separation Agreement on September 13, 2019 with Mr. Patterson (the “Separation Agreement”), pursuant to which he will receive (i) a severance payment of $1,442,000, minus applicable taxes and withholdings, and a $200,000 one-time cash payment within ten days following the six-month anniversary of his separation from the Company effective on January 2, 2020 (the “Separation Date”), (ii) after-tax reimbursement of 100% of the COBRA premiums for up to 18 months after the Separation Date or the date Mr. Patterson becomes eligible for group health insurance coverage under another employer’s group health insurance, whichever is sooner, and (iii) reimbursement of attorneys’ fees in an amount up to $20,000 incurred by him in consultations related to the Separation Agreement. In addition, Mr. Patterson received (i) all base salary through the Separation Date, pay for any accrued unused paid time off as of the Separation Date, and his performance bonus for the year 2019, in each case to the extent payable in accordance with Mr. Patterson’s Amended and Restated Employment Agreement, dated as of October 24, 2016, as amended and (ii) all vested benefits under the Basic Energy Services, Inc. 401(k) Plan and the Basic Energy Services, Inc. Executive Deferred Compensation Plan, in each case in accordance with the terms of the respective plan.
Pursuant to the Separation Agreement, all equity incentive awards previously granted to Mr. Patterson continued to be governed by the terms and conditions of their respective award agreements. All incentive awards that were unvested immediately prior to the Separation Date were forfeited as of the Separation Date. All stock options which vested prior to the Separation Date remained exercisable for 90 days following the Separation Date, after which they expire.
Mr. Schorlemer’s employment agreement provides for an initial base salary of $400,000. Mr. Schorlemer is also entitled to an annual performance bonus if certain performance criteria are met. Under the employment agreement, Mr. Schorlemer is eligible from time to time to receive awards of long-term equity incentive compensation under Basic’s equity compensation plans. Mr. Schorlemer also received payments of $200,000 on each of March 15, 2019 and March 15, 2020 and is entitled to receive another $200,000 payment on March 15, 2021. In addition, effective August 29, 2018, Mr. Schorlemer was granted 66,000 performance-based Restricted Stock Units under the Basic Energy Services, Inc. Management Incentive Plan based on a two-year performance period and followed by a two-year vesting period.
If Mr. Schorlemer’s employment is terminated for certain reasons, he would be entitled to a lump sum severance payment equal to 1.5 times the sum of his base salary plus his current annual incentive target bonus for the full year in which the termination of employment occurred. Additionally, if Mr. Schorlemer’s employment is terminated for certain reasons within the six months preceding or the twelve months following a change of control
20 | Basic Energy Services, Inc. 2020 Proxy Statement
of Basic, he would be entitled to a lump sum severance payment equal to two times the sum of his base salary plus the higher of (i) his current annual incentive target bonus for the full year in which the termination of employment occurred or (ii) the highest annual incentive bonus received by him for any of the last three completed fiscal years. In the event that within the six months preceding or the twelve months following a change of control of the Company, Mr. Schorlemer’s employment agreement is not renewed by the Company and a new employment agreement has not been entered into, Mr. Schorlemer will be entitled to the same severance benefits described above, subject to certain conditions.
We have also entered into an employment agreement with Alan Krenek, effective December 2006, our Senior Vice President, Chief Financial Officer, Treasurer and Secretary. James F. Newman, our Senior Vice President — Region Operations and William T. Dame, our Vice President — Pumping Services, effective November 2013. Pursuant to their agreements, Messrs. Krenek,the agreement, Mr. Newman and Dame werewas given an initial annual base salariessalary of $240,000, $400,000 and $295,000 respectively which areis subject to adjustment at least annually. Each of Messrs. Krenek,Mr. Newman and Dame is also entitled to an annual performance bonus if certain performance criteria are met. In addition, each of Messrs. Krenek,Mr. Newman and Dame is eligible from time to time to receive grants of stock options and other long-term equity incentive compensation under our equity compensation plan.LTIP. If theMr. Newman's employment of any of these officers were to be terminated for certain reasons, he would be entitled to a lump sum severance payment equal to 1.5 times the sum of his annual base salary plus his current annual incentive target bonus for the full year in which the termination of employment occurred. Additionally, if the employment of any of these officers were to be terminated for certain reasons within the six months preceding or the twelve months following a change in control of our company,Company, he would be entitled to a lump sum severance payment equal to two times the sum of his annual base salary plus the higher of (i) his current annual incentive target bonus for the full year in which the termination of employment occurred or (ii) the highest annual incentive bonus received by him for any of the last three fiscal years. Each of theseThe employment agreementsagreement renews automatically each January 1st for a one-year period unless notice of termination is properly given by us or the officer. In the event that anyeither of these employment agreements is not renewed by us for any reason other than cause and a new employment agreement has not been entered into prior to the expiration of the then-current term, the officer will be entitled to the same severance benefits described above.
The employment agreementsagreement for Messrs. Patterson, Krenek,Mr. Newman and Dame also provideprovides for gross up payments to the extent Section 280G of the Internal Revenue Code would apply to such payments as excess “parachute” payments. These provisions have been included in the applicable employment agreements for each of these officers since prior to 2008.
We have also entered into an employment agreement with Brett Taylor, our Vice President - Equipment, Quality Health, Safety & Environment. Pursuant to the agreement with Mr. Taylor, Mr. Taylor’s was entitled to an initial annual base salary of $285,000, which is subject to adjustment at least annually. Mr. Taylor is also entitled to an annual performance bonus if certain performance criteria are met. In addition, Mr. Taylor is eligible from time to time to receive grants of stock options and other long-term equity incentive compensation under our equity incentive plan. If Mr. Taylor’s employment were to be terminated for certain reasons, he would be entitled to a lump sum severance payment equal to 0.75 times the sum of his annual base salary plus his current annual incentive target bonus for the full year in which the termination of employment occurred. Additionally, if Mr. Taylor’s employment were to be terminated for certain reasons within the six months preceding or the twelve months following a change in control of our company, he would be entitled to a lump sum severance payment equal to 1.0 times the sum of his annual base salary plus the higher of (i) his current annual incentive target bonus for the full year in which the termination of employment occurred or (ii) the highest annual incentive bonus received by him for any of the last three fiscal years. Mr. Taylor’s employment agreement renews automatically each January 1 for a one-year period unless notice of termination is properly given by us or Mr. Taylor. In the event that within the six months preceding or the twelve months following a change in control of our company, Mr. Taylor’s employment agreement is not renewed by us for
any reason other than cause and a new employment agreement has not been entered into prior to the expiration of the then-current term, Mr. Taylor will be entitled to the change in control severance benefits described above.
As consideration for our entering into the above employment agreements, each of Messrs. Patterson, Krenek,Schilling, Newman Dame and TaylorSchorlemer has agreed in his employment agreement that, for a period of six months following the termination of his employment by us without cause or by him for good reason, and for a period of two years following the termination of his employment for retirement or any other reason, he will not, among other things, engage in any business competitive with ours, render services to any entity that is competitive with us or solicit business from certain of our customers or potential customers. These non-competition restrictions will not apply in the event that such termination is within twelve months of a change in control of our company. Additionally, each officer has agreed not to solicit any of our employees to terminate, reduce or otherwise adversely affect his employment with us for a period of two years following the termination of his employment by us for whatever reason.
Our Compensation Committee reviews and discusses periodically with a compensation consultant the salary and wage levels of our officers and employees, including our named executive officers.NEOs. In February 2017,2020, our Compensation Committee, based on its discussion with its compensation consultant, did not increase 2017increased 2020 base salaries from the 20162019 salary amounts for each of our executive officers. Base salaries for 2017 were2020 are as follows: Mr. PattersonSchilling - $630,000;$650,000; Mr. KrenekSchorlemer - $381,800;$400,000; and Mr. Newman - $381,800; Mr. Dame - $290,904; and Mr. Taylor - $262,000.$408,049.
21 | Basic Energy Services, Inc. 2020 Proxy Statement
CEO Pay Ratio
As of November 15, 2017, Basic employed 4,093 people, all in the United States. Using a consistently applied compensation measure, we determined as of November 15, 2017 the median total annual compensation of all our employees (excluding our CEO), and then identified the “median employee” within that population, whose total annual compensation is estimated to be $68,175.
To identify the median compensated employee, we used total cash compensation, including base salary, actual bonus paid and overtime and allowances as applicable. Salaries were annualized for those full and part-time employees who did not work for the full year. Reasonable estimates of cash compensation were made for those employees who were hired during 2017 using current base salary and target bonus amounts and any overtime or allowances paid during 2017. In determining the annual total compensation of the median employee, we calculated such employee's compensation in accordance with Item 402(c)(2)(x) of the Regulation S-K as required pursuant to SEC executive compensation rules. This calculation is the same calculation used to determine total compensation for purposes of the 2017 Summary Compensation Table with respect to each of the NEOs.
Our CEO’s total 2017 compensation reported in the Summary Compensation Table was $12,045,210. Therefore, our CEO to median employee pay ratio is estimated to be 177:1.
This ratio is significantly influenced by the inclusion of one-time equity awards of performance-based restricted stock units (“Emergence RSUs”) and performance-based stock options (“Emergence Options”) granted to our CEO in 2017 in connection with the Company’s emergence from Chapter 11 in 2016 (collectively, the “Emergence Grants”). The Emergence Grants were intended to retain our CEO upon such emergence from bankruptcy and are not intended to be an ongoing part of our CEO’s compensation. Of the $12,045,210 in total CEO compensation from the Summary Compensation Table, the Emergence RSUs account for $9,115,924, based on their fair value of $36.33, which was calculated in accordance with FASB ASC Topic 718. The Emergence Options comprised $1,641,017 of the total CEO compensation in 2017, based on their fair value of $16.55, which was determined in accordance with FASB ASC Topic 718, and excludes the effect of estimated forfeitures. The actual value that an executive officer will realize upon vesting of performance-based RSUs will depend upon the market price of the Company’s stock on the vesting date, so there is no assurance that the value realized by an executive officer will be at or near the value of the market price of the Company’s stock on the grant date.
The Company believes that a pay ratio calculated excluding the Emergence Grants, but instead including, on a hypothetical basis, an amount of compensation for equity grants based on target equity compensation as described in the Executive Summary of the Compensation Discussion and Analysis of this proxy statement, would be more indicative of Mr. Patterson’s compensation in a normal year. If our CEO had been awarded such target compensation in 2017, which would have been valued at $2,030,000, and had not received the Emergence Grants, his total 2017 compensation would have equaled $3,318,269, resulting in a CEO pay ratio of 49:1.
SEC rules do not specify a single methodology for identification of the median employee, and other companies may use assumptions and methodologies that are different from those used by us in calculating their pay ratio. Accordingly, the pay ratio disclosed by other companies may not be comparable to the Company's pay ratio as disclosed above. Neither the Compensation Committee nor management of Basic used the pay ratio measure in making compensation decisions.
Director Compensation
The following table sets forth information concerning the 20172019 compensation of each of our directors other than T. M. “Roe” Patterson, who iswas a named executive officer and receivesreceived no compensation for serving as a director:
Director Compensation — 2017 | | | Fees Earned or | Stock | Option | Non-Equity Incentive | Change in Pension Value and | All Other | | |
| Paid in Cash | Awards | Awards | Plan Compensation | Nonqualified Deferred | Compensation | Total | | | | | | | | | | | | | | | | |
Name | ($) | ($) | Compensation Earnings | ($) | ($) | Name | Fees Earned or Paid in Cash | Stock Awards | Option Awards | Non-Equity Incentive Plan Compensation | Nonqualified Deferred Compensation Earnings | All Other Compensation | Total |
| | | ($) |
(a) | (b) | (c) (1) | (d) | (e) | (f) | (g) | (h) | (a) | (b) | (c) (1) | (d) | (e) | (f) | (g) | (h) |
| | | | |
Timothy H. Day | $ | 130,110 |
| $ | 146,536 |
| — |
| — |
| — |
| — |
| $ | 276,646 |
| |
Julio M. Quintana | $ | 88,997 |
| $ | 121,174 |
| — |
| — |
| — |
| — |
| $ | 210,171 |
| |
Julio M. Quintana (Chairman) | | Julio M. Quintana (Chairman) | 93,750 | | 70,081 | | — | | — | | — | | — | | 163,831 | |
Timothy H. Day (2) | | Timothy H. Day (2) | 115,167 | | 89,815 | | — | | — | | — | | — | | 204,982 | |
John Jackson | $ | 97,435 |
| $ | 121,174 |
| — |
| — |
| — |
| — |
| $ | 218,609 |
| John Jackson | 90,000 | | 70,081 | | — | | — | | — | | — | | 160,081 | |
James D. Kern | $ | 79,656 |
| $ | 121,174 |
| — |
| — |
| — |
| — |
| $ | 200,830 |
| James D. Kern | 75,000 | | 70,081 | | — | | — | | — | | — | | 145,081 | |
Samuel E. Langford | $ | 79,575 |
| $ | 121,174 |
| — |
| — |
| — |
| — |
| $ | 200,749 |
| |
Anthony J. DiNello | $ | 81,781 |
| $ | 121,174 |
| — |
| — |
| — |
| — |
| $ | 202,955 |
| |
Samuel E. Langford (2) | | Samuel E. Langford (2) | 75,000 | | 70,081 | | — | | — | | — | | — | | 145,081 | |
Anthony J. DiNello (2) | | Anthony J. DiNello (2) | 78,601 | | — | | — | | — | | — | | — | | 78,601 | |
0
| |
(1) | This column represents the total grant date fair value of restricted stock awards granted to each of the applicable directors. The fair value of restricted stock awards was calculated based upon the closing market price of the Company’s common stock on the grant date. |
1.This column represents the total grant date fair value of restricted stock awards granted to each of the applicable directors. The fair value of restricted stock awards and the cash-settled restricted stock units were calculated based upon the closing market price of the Company’s common stock on the grant date.
2.Mr. DiNello resigned from the Board effective November 8, 2019. Mr. Day and Mr. Langford resigned from the Board effective March 9, 2020.
For additional information regarding fees earned for services as a director in 2017,2019, including annual retainer fees, committee and chairmanship fees, and meeting fees, see “Board of Directors and Committees of the Board — Board of Directors — Compensation.”
| | | | | | | | | | | | | | |
Transactions with Related Persons, Promoters and Certain Control Persons | | | | |
Transactions with Related Persons Promoters and Certain Control Persons
Transactions with Related Persons.. During 2017,2019, there were no transactions with related persons that were required to be disclosed in this proxy statement.statement pursuant to Item 404(d) of Regulation S-K.
Review, Approval or Ratification of Transactions with Related Persons. Pursuant to the charter of the Audit Committee, the Audit Committee is responsible for establishing procedures for the approval of all related party transactions between the Company and any officer or director that would potentially require disclosure. The Board of Directors has adopted a written policy regarding related party transactions that is to be administered by the Audit Committee. The policy applies generally to transactions, arrangements or relationships in which the Company was, is or will be a participant, in which the amount involved exceeds $60,000$120,000 and in which any related person had, has or will have a direct or indirect material interest. Related persons include, among others, directors and officers of the Company, beneficial owners of 5% or more of the Company’s voting securities, immediate family members of the foregoing persons, and any entity in which the foregoing persons are employed, are a principal or in which such person has more than a 10% beneficial ownership interest. The Company’s Chief Financial Officer is responsible for submitting related person transactions to the Audit Committee for approval by the committee at regularly scheduled meetings, or, if such approval is not practicable, to the Chairman of the Audit Committee for approval between such meetings. When considering related person transactions, the Audit Committee, or where submitted to the Chairman, the Chairman, will consider all of the relevant facts available, including, but not limited to: the benefits of the transaction to the Company; the impact on a director’s independence in the event the related person is a director; the availability of other sources for comparable products or services; the terms of the transaction; and the terms of comparable transactions available to unrelated third parties or to employees of the Company generally. In addition, the Stockholders Agreement with Ascribe (as defined below) provides that certain actions of the Company and its subsidiaries require approval of a special committee of the Board comprised
22 | Basic Energy Services, Inc. 2020 Proxy Statement
solely of at least two independent directors. The Company is not aware of any transaction that was required to be reported in its filings with the SEC where such policies and procedures either did not require review or were not followed.
Compensation Committee Interlocks
| | | | | | | | | | | | | | |
Change in Control Transaction | | | | |
On March 9, 2020, the Company entered into a Purchase Agreement (the “Purchase Agreement”) with Ascribe Investments III LLC, a Delaware limited liability company (“Ascribe”), NexTier Holding Co., a Delaware corporation (“Seller”) and Insider ParticipationC&J Well Services, Inc., a Delaware corporation, and wholly owned subsidiary of Seller (“CJWS”).
Messrs. Day (Chairman)Pursuant to the Purchase Agreement, among other things, (i) Seller transferred and delivered to the Company and the Company purchased and acquired from Seller, all of the issued and outstanding shares of capital stock of CJWS held by Seller (the “Stock Purchase”), Jackson and Quintana serve assuch that CJWS became a wholly-owned subsidiary of the members of our Compensation Committee. The Board of Directors has determined that Messrs. Day, Jackson and Quintana are independent directors (as defined by NYSE listing standards). None of our executive officers servesCompany; (ii) as a memberportion of the boardconsideration for the Stock Purchase, Ascribe, on behalf of directors or compensation committeethe Company, conveyed to Seller certain 10.75% senior secured notes due October 2023 issued by the Company to Ascribe in an aggregate amount equal to $34.4 million (the “Ascribe Senior Notes”); (iii) Ascribe entered into an Exchange Agreement, dated March 9, 2020, with the Company (the “Exchange Agreement”) pursuant to which, among other things, Ascribe exchanged the Ascribe Senior Notes for (a) 118,805 shares of any entity that has one or morenewly issued common stock equivalent preferred stock, designated as “Series A Participating Preferred Stock,” par value $0.01 per share, of its executive officers servingthe Company (the “Series A Preferred Stock”) and (b) an amount in cash approximately equal to $1.5 million (the “Exchange Transaction” and, together with the Stock Purchase and the other transactions contemplated by the Purchase Agreement, the “C&J Transaction”), and (iv) the Company agreed to hire Jack Renshaw as a memberSenior Vice President, Western Region, upon consummation of our Boardthe C&J Transaction.
The Exchange Agreement
Pursuant to the Exchange Agreement, as partial consideration for the Exchange Transaction, the Company issued to Ascribe 118,805 shares of Directors or Compensation Committee.newly issued Series A Preferred Stock of the Company, which constitutes 83% of the equity interest in the Company. Upon consummation of the Exchange Transaction, the Company’s public shareholders owned approximately 14.94% of the equity interests in the Company.
The Company has issued and outstanding $300 million principal amount of the 10.75% Senior Secured Notes due 2023 (the “Notes”), issued pursuant to that certain Indenture, dated as of October 2, 2018 (the “Base Indenture”) by and among the Company, the guarantors party thereto and UMB Bank, National Association, as trustee and collateral agent (the “Trustee”), as supplemented by the First Supplemental Indenture, dated as of August 22, 2019, by and among the Company, the guarantors party thereto and the Trustee (the “First Supplemental Indenture” and, together with the Base Indenture, the “Indenture”). Under the Exchange Agreement, as partial consideration for the Exchange Transaction, the Company paid to Ascribe an amount in cash equal to, $1.5 million, representing the accrued (but unpaid) interest, from and including the most recent date to which interest has been paid pursuant to the terms of the Notes and the Indenture but excluding the date of the closing of the C&J Transaction, on the aggregate principal amount of the Ascribe Senior Notes. Leadership StructureIf Ascribe is required to pay the Make-Whole Payment to Seller pursuant to the Purchase Agreement, the Company will be required to reimburse to Ascribe the amount of such Make-Whole Payment (such amount, the “Make-Whole Reimbursement Amount”) either (i) in cash (a) to the extent the Company has available cash (as determined by an independent committee of the Company’s Board) and (b) subject to satisfaction of certain “Payment Conditions” set forth in the Credit Agreement (as defined below) or (ii) if the Company is unable to pay the full Make-Whole Reimbursement Amount in cash pursuant to clause “(i)” of this paragraph, in additional Notes as permitted under the Indenture. In consideration of providing the Make-Whole Payment to Seller, the Company paid Ascribe $1 million in cash at the closing of the C&J Transaction.
Stockholders’ Agreement & Governance
In connection with the Exchange Agreement, the Company and Ascribe entered into a Stockholders Agreement. As contemplated by the Stockholders Agreement, simultaneously with the closing of the transactions
23 | Basic Energy Services, Inc. 2020 Proxy Statement
contemplated by the Exchange Agreement, the Board was reconstituted from six directors to seven directors, comprised of Directors(i) three Class I directors with terms to expire in 2020 (the “Class I Directors”), (ii) two Class II directors with terms to expire in 2021 (the “Class II Directors”) and (iii) two Class III directors with terms to expire in 2022 (the “Class III Directors”). Additionally, effective as of the closing of the C&J Transaction, each of Messrs. Timothy H. Day and Samuel E. Langford resigned from the Board and (a) Lawrence First was appointed as a Class I Director, (c) Derek Jeong was appointed as a Class II Director and (b) Ross Solomon was appointed as a Class III Director. Pursuant to the terms of the Stockholders Agreement, following the closing of the C&J Transaction and until the Board Rights Termination Date (as defined below), Ascribe is entitled to designate for nomination for election to the Board all members of the Board, provided that such designations must be made in a manner to ensure that at all times the Board is comprised of at least two independent directors. The subsidiaries require approval of a special committee of the Board comprised solely of at least two independent directors. The “Board Rights Termination Date” means the earlier to occur of (A) the date on which Ascribe Affiliated Entities (as defined below), collectively, no longer beneficially own 25% of the fully-diluted common equity of the Company (including the Series A Preferred Stock) and (B) the date on which Ascribe and its affiliates, collectively, no longer constitute the largest holder of fully-diluted common equity of the Company (including the Series A Preferred Stock). The “Ascribe Affiliated Entities” will be comprised of (x) Ascribe and each investment fund which Ascribe or its affiliates controls or for which Ascribe or its affiliates act as a manager or investment advisor and (y) each other person (including portfolio companies) in which person(s) described in clause (x) of this sentence holds a majority of the outstanding equity or voting securities.
| | | | | | | | | | | | | | |
Leadership Structure of the Company’s Board | | | | |
Mr. DayQuintana is the Chairman of the Board. The Chairman is not the principal executive officer of the Company. The Board believes that the separation of the Chairman and the Chief Executive Officer functions in this structure is appropriate for oversight purposes on behalf of its investors, because it clarifies the individual roles of the Chairman and given thatChief Executive Officer, allows the Chief Executive Officer to speak for the Company’s common stock is publicly traded.management, provides independent Board oversight by an independent Chairman and enhances accountability. The Board periodically reviews the leadership structure and may make changes in the future.
| | | | | | | | | | | | | | |
Board Role in Risk Oversight of the Company | | | | |
The Board has delegated certain responsibilities to the Audit Committee under the Company’s Audit Committee charter. These responsibilities include, among others: (i) meeting periodically with management and/or the Company’s Chief Financial Officer and Chief Accounting Officer to review and discuss (A) the Company’s major financial risk exposures and steps management has taken to monitor and control such exposures, including guidelines and policies with respect to risk management and risk assessment and (B) the effects of regulatory and accounting changes; (ii) reviewing and discussing with the Company’s independent auditor reports that the independent auditors are required to provide to the Audit Committee relating to significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements; (iii) discussing periodically with members of management, the Company’s internal auditors and the Company’s independent auditor the adequacy and effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting, any changes in internal controls, and any significant deficiencies or material weaknesses in the design or operation of internal controls; and (iv) establishing and maintaining whistleblower procedures for complaints received by the Company regarding accounting, internal accounting controls and auditing matters, and for the confidential, anonymous submission by Company employees of concerns regarding questionable accounting or auditing matters. In connection with these risk oversight matters, the Audit Committee also regularly reviews with management safety and litigation matters.
24 | Basic Energy Services, Inc. 2020 Proxy Statement
The Board receives regular reports from the Chairman of the Audit Committee regarding its activities and actions, as well as any issues that arise with respect to the quality or integrity of the Company’s financial statements, the Company’s
compliance with legal or regulatory requirements, the performance and independence of the auditors, and the performance of the internal audit function.
The Board does not have any separate risk committees. However, the Compensation Committee, in connection with setting 20172019 and 20182020 compensation, has considered whether its compensation policies and practices are reasonably likely to cause a material adverse effect on the Company. Risk oversight with respect to other Company matters, to the extent applicable, remains with the Board or the Company’s management.
25 | Basic Energy Services, Inc. 2020 Proxy Statement
Audit Committee Report
The Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of Basic Energy Services, Inc. (the “Company”) consists of three directors who are independent, as defined by the standards of the New York Stock Exchange and the rules of the Securities and Exchange Commission. Under the charter approved by the Board, the Audit Committee assists the Board in overseeing matters relating to the accounting and financial reporting practices of the Company, the adequacy of its internal controls and the quality and integrity of its financial statements and is responsible for selecting and retaining the independent auditors. The Company’s management is responsible for preparing the financial statements of the Company, and the independent auditors are responsible for auditing those financial statements. The Audit Committee’s role under the charter is to provide oversight of management’s responsibility. The Committee is not providing any expert or special assurance as to the Company’s financial statements or any professional certification as to the independent auditors’ work. The Committee met seven times during the year ended December 31, 2017.2019.
The independent auditors provided the Committee a written statement describing all the relationships between the auditors and the Company that might bear on the auditors’ independence consistent with Public Company Accounting Oversight Board (“PCAOB”) Rule 3526 (Communication with Audit Committees Concerning Independence). The Committee also discussed with the auditors any relationships that may impact the independence of the auditors.
The Committee discussed and reviewed with the independent auditors all communications required to be discussed by standards of the Public Company Accounting Oversight Board,PCAOB, including those described in PCAOB AS 1301, “Communication with Audit Committees.”
The Committee reviewed the Company’s audited financial statements as of and for the year ended December 31, 2017,2019, and discussed them with management and the independent auditors. Based on such review and discussions, the Committee recommended to the Board that the Company’s audited financial statements be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2017,2019, for filing with the Securities and Exchange Commission.
This report of the Audit Committee shall not be deemed “soliciting material,” or to be “filed” with the Securities and Exchange Commission or subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically requests that the information be treated as soliciting material or specifically incorporates it by reference into a document filed under the Securities Act.
John Jackson, Chairman
Timothy H. Day
James D. Kern
Julio Quintana
Independent Auditor and Fees
26 | Basic Energy Services, Inc. 2020 Proxy Statement
| | | | | | | | | | | | | | |
Independent Auditor and Fees | | | | |
KPMG LLP, a registered public accounting firm, audited the Company’s consolidated financial statements for fiscal 20172019 and has advised the Company will have a representative available at the 20182020 Annual Meeting to respond to appropriate questions. Such representative will be permitted to make a statement if he or she so desires.
KPMG LLP has billed the Company and its subsidiaries fees as set forth in the table below for (i) the audits of the Company’s 20172019 and 20162018 annual financial statements reviews of quarterly financial statements, and review of the Company’s documents filed with the Securities and Exchange Commission (Audit Fees), (ii) assurance and other services reasonably related to the audit or review of the Company’s financial statements (Audit-Related Fees), (iii) services related to tax compliance (Tax Fees) and (iv) all other services provided by KPMG LLP (All Other Fees).
|
| | | | | | | | | | | | |
| | | | |
| | Tax Fees | Audit Related | All Other |
| Audit Fees | Fees (1) | Fees (2) | Fees (3) |
Fiscal 2017 | $ | 1,225,000 |
| $ | — |
| $ | — |
| $ | 113,000 |
|
Fiscal 2016 | $ | 1,270,880 |
| $ | 642,360 |
| $ | 575,000 |
| $ | 20,000 |
|
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| Audit Fees | | | All Other Fees (1) |
Fiscal 2019 | $1,368,500 | | | | | $103,000 | |
Fiscal 2018 | $1,452,000 | | | | | $160,000 | |
___________
(1) “All Other Fees” consists of fees related to the adoption of ASC Topic 842 - Leases, and out of scope work related to an acquisition. All other fees in 2018 consisted of fees related to the adoption of ASC Topic 842 - Leases and a comfort letter. There were no fees billed by KPMG in 2019 or 2018 that would constitute “Audit-Related Fees” or “Tax Fees.”
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(1)Audit Committee Pre-Approved Policies and Procedures | “Tax Fees” consist of fees paid for reviews performed in connection with Restructuring Tax Services in 2016. |
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(2) | “Audit Related Fees” consist of fees paid for incremental costs related to bankruptcy in connection with the 2016 audit. |
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(3) | "All Other Fees" consist of Fees consists of fees related to the adoption of ASC Topic 606 - Revenue from Contracts with Customers and consent related to offerings in 2017, and the registration statement on Form S-8 and related consent in 2016. |
Audit Committee Pre-Approved Policies and Procedures
The Audit Committee of the Board of Directors has adopted policies regarding the pre-approval of auditor services. The Audit Committee historically approves at its May meeting all services provided by the independent public accountants. All additional services must be pre-approved on a case-by-case basis. The Audit Committee reviews the actual and budgeted fees for the independent public accountants at its first and fourth meetings. All of the services provided by KPMG LLP during fiscal 20172019 were pre-approved by the Audit Committee.
PROPOSAL 2:
ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
We are asking stockholders to approve, on a non-binding advisory basis, the Company’s compensationThe affirmative vote of its named executive officers as disclosed in this proxy statement. At our 2017 Annual Meetingholders of Stockholders, our Board recommended, and a majority of our stockholders approved, the voting on this advisory vote each year. As described above in “Compensation Discussion and Analysis,” the Compensation Committee has structured our executive compensation program to achieve the following key objectives:
attract, reward and retain the highest quality executive officers;
recognize individual performance and the performance of the Company relative to the performance of other companies of comparable size, complexity and quality;
provide motivation toward, and reward the accomplishment of, corporate annual objectives;
align executive officers’ compensation to stockholder interests; and
align executive officers’ incentives with both the short-term and long-term goals of the Company.
We urge stockholders to read “Compensation Discussion and Analysis” beginning on page 16 of this proxy statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as “Executive Compensation Matters” and the related compensation tables and narrative therein beginning on page 28, which provide detailed information on the compensationpower of our named executive officers. The Compensation Committee and the Board of Directors believe that the policies and procedures articulatedVoting Stock present in “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our named executive officers reported in thisperson or represented by proxy statement has and will contribute to the Company’s recent and long-term success.
In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, we are asking stockholders to approve the following resolution at the 2018 Annual Meeting of Stockholders:
RESOLVED, that the stockholders of Basic Energy Services, Inc. (the “Company”) approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers as disclosed in the Compensation Discussionmeeting and Analysis and Executive Compensation Matters sections and the related compensation tables, notes and narrative in the Proxy Statement for the Company’s 2018 Annual Meeting of Stockholders.
This advisory resolution, commonly referredentitled to as a “say-on-pay” resolution, is non-binding on the Board of Directors. Although non-binding, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program.
A majority of the votes castvote is required to approve this proposal. Brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote on this proposal.
27 | Basic Energy Services, Inc. 2020 Proxy Statement
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PROPOSAL 2: APPROVAL OF AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCK |
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The Board unanimously recommends that you vote FOR this proposal. |
On March 24, 2020, the Board approved an amendment to Article FOURTH of our Second Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) to increase the number of authorized shares of capital stock from 85,000,000 to 203,805,000 shares, consisting of 5,000,000 previously authorized shares of preferred stock, 80,000,000 previously authorized shares of common stock and 118,805,000 newly authorized shares of common stock. The text of the proposed amendment is set forth below, and included in Appendix A.
Purpose and Effects of the Proposed Amendment
We are currently authorized pursuant to our Certificate of Incorporation to issue up to 80,000,000 shares of common stock. As of March 9, 2020, there were 24,936,864 shares of common stock issued and outstanding, resulting in 55,063,136 shares of authorized and unissued shares of common stock available for issuance. The purpose of our proposed increase in the authorized shares of common stock is to ensure sufficient shares of common stock will be available for issuance by us in the event the Series A Preferred Stock (as defined below) is converted into shares of common stock.
On March 9, 2020, the Company entered into a Purchase Agreement with Ascribe III Investments LLC, a Delaware limited liability company (“Ascribe”), NexTier Holding Co., a Delaware corporation, and C&J Well Services, Inc., a Delaware corporation (“C&J”). Under the terms of the Purchase Agreement and related agreements, the Company acquired C&J and issued 118,805 shares of Series A Preferred Stock to Ascribe in exchange for Senior Secured Notes, which the Company used as a portion of the purchase price for C&J. Acquiring 118,805 shares of Series A Preferred Stock increased Ascribe’s percentage equity ownership interest to approximately eighty-five percent, decreasing the existing stockholders’ percentage equity ownership interest. However, the proposed increase in authorized shares of common stock in connection with the Purchase Agreement will not further dilute the existing stockholders’ percentage equity ownership interest in relation to the Series A Preferred Stock.
If the proposed amendment is approved by stockholders, the newly authorized shares of common stock would be held in reserve for the conversion of the Series A Preferred Stock into common stock, should that occur, leaving the company with 55,063,136 shares available to be issued for any proper corporate purpose, including future acquisitions, investment opportunities, the establishment of collaboration or other strategic agreements, capital raising transactions of equity or convertible debt securities, future at the market offerings of common stock, stock splits, stock dividends, issuance under current or future employee equity plans or for other corporate purposes. The remainder of the shares would be available for issuance from time to time at the discretion of the Board without further stockholder action, except as may be required for a particular transaction by law, stock exchange regulations or other agreements or restrictions we may enter into in the future. To the extent that additional authorized shares of Directors unanimously recommendscommon stock beyond those held in reserve for the conversion of the Series A Preferred Stock are issued in the future, they will decrease the existing stockholders’ percentage equity ownership interests and could be issued at prices lower than the prices at which existing stockholders purchased their stocks. Any such issuance of additional shares of common stock could have the effect of diluting the earnings per share and book value per share of outstanding shares of common stock.
28 | Basic Energy Services, Inc. 2020 Proxy Statement
Implementation of Proposed Amendment
If Proposal 2 is approved by the requisite holders of the Voting Shares as set forth above, the proposed amendment to article FOURTH of the Certificate of Incorporation will become effective upon the filing of a Certificate of Amendment to the Certificate of Incorporation with the Delaware Secretary of State.
Text of the Amendment
We propose to amend the first paragraph of Article FOURTH of the Certificate of Incorporation so that the first sentence of the paragraph would read in its entirety as follows:
“FOURTH: The total number of shares of capital stock of the corporation shall be 203,805,000, which shall consist of 5,000,000 shares of Preferred Stock, par value of $0.01 per share, and 198,805,000 shares of Common Stock, par value of $0.01 per share.”
The only changes that would be made to the first paragraph of Article FOURTH of the Certificate of Incorporation, as currently in effect, would be to increase the number of authorized shares of common stock from 80,000,000 to 198,805,000 and to reflect a corresponding increase in the aggregate number of shares of capital stock of all classes that may be issued from 85,000,000 to 203,805,000. The full text of the proposed amendment to the Certificate of Incorporation to effect Proposal 2 is included in Appendix A to this Proxy Statement.
The affirmative vote of holders of a majority of the voting power of our Voting Stock present in person or represented by proxy at the meeting and entitled to vote is required to approve this proposal. Brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote FORon this proposal, your broker will deliver a non-vote on this proposal.
PROPOSAL 3:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR
29 | Basic Energy Services, Inc. 2020 Proxy Statement
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PROPOSAL 3: APPROVAL OF AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO PERMIT STOCKHOLDERS TO ACT BY WRITTEN CONSENT |
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The Board unanimously recommends that you vote FOR this proposal. |
Overview
In addition to the proposed amendment to our Articles of Incorporation described in Proposal 2, the Board recommends that the stockholders approve an amendment to the Certificate of Incorporation to permit stockholders to act by written consent.
Under the provisions of Section 228 of the Delaware General Corporation Law (the “DGCL”), corporate action of stockholders without a meeting of stockholders may be taken by the written consent of holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, unless otherwise specified in the certificate of incorporation. Our current Certificate of Incorporation does not allow for stockholders to act by written consent. Accordingly, the adoption of Proposal 3 would conform the applicable provisions of our Certificate of Incorporation to the requirements of Section 228 of the DGCL.
Our Board believes that the proposed amendment would be in the best interests of our Company and its stockholders. It will allow the Company, in situations where approval by the stockholders is required, to take prompt action by obtaining the requisite stockholder consent in writing, without the delay and expense of convening a stockholder meeting for the purpose of approving the action. The Board believes that in such cases where stockholders representing the requisite number of votes necessary to authorize an action have already consented to a given action, the stockholder meeting becomes a formality that utilizes time and resources that are better spent on other corporate functions. Pursuant to the Exchange Agreement discussed above under the heading “Change in Control Transaction,” as partial consideration for the Exchange Transaction, the Company issued to Ascribe 118,805 shares of newly issued Series A Preferred Stock of the Company, which constitutes 83% of the voting equity interest in the Company. Upon consummation of the Exchange Transaction, Ascribe held approximately 85.2% of the voting equity interests in the Company. Please see “Security Ownership of Certain Beneficial Owners and Management” for more information. Accordingly, following the approval of Proposal 3, Ascribe will be able to unilaterally determine matters submitted to a vote of stockholders, such as approval of significant corporate transactions, by written consent without a meeting of stockholders until such time as its ownership interest decreases to less than 50%.
Implementation of Proposed Amendment
If Proposal 3 is approved by the requisite holders of the Voting Shares as set forth above, the proposed amendment to article NINTH of the Certificate of Incorporation will become effective upon the filing of a Certificate of Amendment to the Certificate of Incorporation with the Delaware Secretary of State.
Text of the Amendment
We propose to amend Article NINTH of the Certificate of Incorporation to read as follows:
“NINTH: Any action which may be taken at any annual or special meeting of stockholders may be taken without a meeting and without prior notice, if one or more consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes that
30 | Basic Energy Services, Inc. 2020 Proxy Statement
would be necessary to authorize or take such action at a meeting at which all of the shares entitled to vote thereon were present and voted.”
The full text of the proposed amendment to the Certificate of Incorporation to effect Proposal 3 is included in Appendix A to this Proxy Statement.
The affirmative vote of holders of a majority of the voting power of our Voting Stock present in person or represented by proxy at the meeting and entitled to vote is required to approve this proposal. Brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote on this proposal.
31 | Basic Energy Services, Inc. 2020 Proxy Statement
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PROPOSAL 4: ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION |
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The Board unanimously recommends that you vote FOR this proposal. |
We are asking stockholders to approve, on a non-binding advisory basis, the Company’s compensation of its NEOs as disclosed in this proxy statement. At our 2017 Annual Meeting of Stockholders, our Board recommended, and a majority of our stockholders approved, the voting on this advisory vote each year.As described above in “Executive Compensation Matters” the Compensation Committee has structured our executive compensation program to achieve the following key objectives:
•attract, reward and retain the highest quality executive officers;
•recognize individual performance and the performance of the Company relative to the performance of other companies of comparable size, complexity and quality;
•provide motivation toward, and reward the accomplishment of, corporate annual objectives;
•align executive officers’ compensation to stockholder interests; and
•align executive officers’ incentives with both the short-term and long-term goals of the Company.
We urge stockholders to read “Executive Compensation Matters” beginning on page 16 of this proxy statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives and the related compensation tables and narrative therein beginning on page 18, which provide detailed information on the compensation of our NEOs. The Compensation Committee and the Board believe that the policies and procedures articulated in “Executive Compensation Matters” are effective in achieving our goals and that the compensation of our NEOs reported in this proxy statement has and will contribute to the Company’s recent and long-term success.
In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, we are asking stockholders to approve the following resolution at the 2020 Annual Meeting of Stockholders:
RESOLVED, that the stockholders of Basic Energy Services, Inc. (the “Company”) approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers as disclosed in the Executive Compensation Matters section and the related compensation tables, notes and narrative in the Proxy Statement for the Company’s 2020 Annual Meeting of Stockholders.
This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board. Although non-binding, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program.
Required Vote
The affirmative vote of holders of a majority of the voting power of our Voting Stock present in person or represented by proxy at the meeting and entitled to vote is required to approve this proposal. Brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote on this proposal.
32 | Basic Energy Services, Inc. 2020 Proxy Statement
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PROPOSAL 5: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR |
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The Board unanimously recommends that you vote FOR this proposal. |
The Audit Committee has selected KPMG LLP as the Company’s independent auditor for fiscal year 2018,2020, and the Board of Directors is asking stockholders to ratify that selection. Although current law, rules, and regulations, as well as the charter of the Audit Committee, require the Company’s independent auditor to be engaged, retained and supervised by the Audit Committee, the Board is submitting the selection of KPMG LLP for ratification by stockholders as a matter of good corporate practice. If the selection is not ratified, the Audit Committee will consider whether it is appropriate to select another registered public accounting firm. Even if the selection is ratified, the Audit Committee in its discretion may select a different registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.
Required Vote
The affirmative vote of holders of a majority of the sharesvoting power of common stockour Voting Stock present in person or represented by proxy at the meeting and entitled to vote is required to approve the ratification of the selection of KPMG as the Company’s independent auditor for the current fiscal year.
The Board of Directors unanimously recommends that you voteFOR this proposal.
OTHER MATTERS
33 | Basic Energy Services, Inc. 2020 Proxy Statement
Management knows of no other business that will be presented to the meeting for a vote. If other matters properly come before the meeting, the persons named as proxies will vote on them in accordance with their best judgment.
The Company is soliciting proxies for the 20182020 Annual Meeting and will bear the cost of solicitation. In addition to solicitation by mail, certain of the directors, officers or regular employees of the Company may, without extra compensation, solicit the return of proxies by telephone or electronic media. Arrangements will be made with brokerage houses, custodians and other fiduciaries to send proxy material to their principals, and the Company will reimburse these parties for any out-of-pocket expenses.
PROPOSALS OF STOCKHOLDERS FOR 2019 | | |
PROPOSALS OF STOCKHOLDERS FOR 2021 ANNUAL MEETING |
Proxy Statement Proposals
Under SEC rules, stockholders wishing to submit proposals for inclusion in the proxy statement for the 2021 Annual Meeting of Stockholders must ensure that such proposals are received by the Company at the Company’s principal executive offices at 801 Cherry Street, Suite 2100, Fort Worth, Texas 76102, Attention: Corporate Secretary, on or before [●], 2021.
Other Proposals and Nominations
The Company expects that its 20192021 Annual Meeting of Stockholders will be held in May 20192021 consistent with prior annual meetings. The Company’s Bylaws govern the submission of nominations for director or other business proposals that a stockholder wishes to have considered at a meeting of stockholders, but which are not included in the Company’s proxy statement for that meeting. Stockholders of record who intend to submit a proposal at the annual meeting of stockholders in 20192021 must provide written notice to the Company in accordance with the Company’s Bylaws. Under the Company’s Bylaws, such notice must be received at the Company’s principal executive offices, addressed to the Secretary of the Company, not earlier than January 21, 20196, 2021 nor later than February 20, 2019,5, 2021, which are dates at least 90 days but not more than 120 days in advance of the first anniversary of the date of the Company’s 20192020 Annual Meeting. The notice must contain the information required by the Company’s Bylaws.
Stockholders who intendThese advance notice provisions are in addition to, submitand separate from, the requirements that a stockholder must meet in order to have a proposal at the annual meeting of stockholders in 2019 and desire that such proposal be included in the proxy materials for such meeting must followstatement under the procedures prescribed inrules of the SEC, see “Proxy Statement Proposals” above. A proxy granted by a stockholder will give discretionary authority to the proxies to vote on any matters introduced pursuant to the above advance notice bylaw provisions, subject to applicable rules of the SEC.
Copies of the Company’s Bylaws and Rule l4a-8 underare available on its website, www.basices.com, or may be obtained from the Securities Exchange Act of 1934, as amended. To be eligible for inclusion in the proxy materials, stockholder proposals must be received by the Secretary of the Company at the Company’s principal executive offices not earlier than January 21, 2019 nor later than February 20, 2019. Stockholders are also advised to review our Bylaws, which contain additional requirements about advance notice of stockholder proposals and director nominations.
Corporate Secretary.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
34 | Basic Energy Services, Inc. 2020 Proxy Statement
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DELINQUENT SECTION 16(A) REPORTS |
Based solely upon a review of reports on Forms 3 and 4 and amendments thereto furnished to the Company during fiscal 2017,2019, reports on Form 5 and amendments thereto furnished to the Company with respect to fiscal 2017,2019, and written representations from officers and directors that no Form 5 was required to be filed, the Company believes that all filing requirements applicable to its officers, directors and beneficial owners of more than 10% of the common stock under Section 16(a) of the Securities Exchange Act of 1934, as amended, were complied with during fiscal 2017.2019, except that, inadvertently, Mr. Patterson’s Form 4 reporting four transactions relating to forfeiture of certain incentive awards was filed late on November 26, 2019.
We have adopted a procedure called "householding." Under this procedure, we are delivering only one copy of the Notice of Internet Availability of Proxy Materials and, as applicable, any additional proxy materials to multiple stockholders who share the same address, unless we have received contrary instructions from an affected stockholder.
We will deliver promptly upon written or oral request a separate copy of the Notice of Internet Availability of Proxy Materials, Annual Report or the Proxy Statement to any stockholder at a shared address to which a single copy of any of those documents was delivered. To receive a separate copy of the Notice of Internet Availability of Proxy Materials, Annual Report or Proxy Statement, you may submit a written request to Secretary, Basic Energy Services, Inc., 801 Cherry Street, Suite 2100, Fort Worth, Texas 76102 or call (817) 334-4100. You may also review the Company’s filings with the Securities and Exchange Commission by visiting our website at www.basicenergyservices.com.www.basices.com.
If you are a holder of record and would like to revoke your householding consent and receive a separate copy of the Annual Report or Proxy Statement in the future, please contact our Secretary at the contact information listed above. You will be removed from the householding program within 30 days of receipt of the revocation of your consent.
Any stockholders of record who share the same address and currently receive multiple copies of our Notice of Internet Availability of Proxy Materials, Annual Report and Proxy Statement who wish to receive only one copy of these materials per household in the future should contact our Secretary at the contact information listed above to participate in the householding program. Stockholders who participate in householding will continue to receive separate proxy cards.
A number of brokerage firms have instituted householding. If you hold your shares in "street name," please contact your bank, broker or other holder of record to request information about householding.
The Corporate Governance Guidelines, the Code of Ethics and the charters of the Audit Committee, the Nominating and Corporate Governance Committee and the Compensation Committee are also available on the Company’s website at www.basicenergyservices.comwww.basices.com, and copies of these documents are available to stockholders, without charge, upon request.
4935 | Basic Energy Services, Inc. 2020 Proxy Statement
Appendix A
FORM OF
CERTIFICATE OF AMENDMENT
TO
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BASIC ENERGY SERVICES, INC.
Basic Energy Services, Inc. (the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “DGCL”), hereby certifies as follows pursuant to Section 242 of the DGCL:
FIRST: This Certificate of Amendment amends the Second Amended and Restated Certificate of Incorporation of the Corporation filed in the Office of the Secretary of State of the State of Delaware on December 23, 2016 (the “Certificate of Incorporation”).
SECOND: The Board of Directors of the Corporation, acting in accordance with the provisions of Section 242 of the DGCL, adopted resolutions setting forth amendments to the Certificate of Incorporation of the Corporation to (i) increase the total number of shares of authorized common stock of the Corporation and (ii) permit stockholder action by written consent, and declaring said amendments to be advisable and in the best interests of the Corporation, as follows:
RESOLVED, that the first sentence of Article FOURTH of the Corporation’s Certificate of Incorporation, as amended, be, and hereby is, amended to read as follows:
“FOURTH: The total number of shares of capital stock of the Corporation shall be 203,805,000, which shall consist of 5,000,000 shares of Preferred Stock, par value of $0.01 per share, and 198,805,000 shares of Common Stock, par value of $0.01 per share.”
RESOLVED, that Article NINTH of the Corporation’s Certificate of Incorporation, as amended, be, and hereby is, amended to read as follows:
“NINTH: Any action which may be taken at any annual or special meeting of stockholders may be taken without a meeting and without prior notice, if one or more consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all of the shares entitled to vote thereon were present and voted.”
THIRD: That at the 2020 Annual Meeting of the Stockholders held on [●], 2020, the foregoing amendments were duly approved by more than a majority of voting power of the outstanding shares of common stock, par value $0.01 per share, of the Company and Series A Participating Preferred Stock, par value $0.01 per share, of the Company, voting together as one class, in accordance with Section 242 of the DGCL.
FOURTH: The foregoing amendments shall be effective as of 5:00 p.m., Eastern Time, on the date of filing of this Certificate of Amendment with the Secretary of State of the State of Delaware.
FIFTH: All other provisions of the Certificate of Incorporation shall remain in full force and effect.
[Signature Page Follows]
IN WITNESS WHEREOF, the Corporation has caused these Article of Amendment to be signed and attested by its duly authorized officer this [●] day of [●], 2020.
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BASIC ENERGY SERVICES, INC. | |
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