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DIRECTOR COMPENSATION

Our Compensation Committee is responsible for recommending director compensation to the full Board for approval. Director compensation is designed to ensure the Company can attract and retain outstanding directors who meet the qualifications outlined in the Board’s Corporate Governance Principles, ensure alignment with long-term stockholder interests and recognize the substantial time commitments associated with service on the Board.

The independent membersEach non-employee member of the Board areis compensated in cash and equity. Mr. Hall receivedreceives additional cash compensation to reflect his additional responsibilities as Chairman of the Board. Messrs.As president and chief executive officer of Archrock, Mr. Childers Hildebrand and Rebrook diddoes not receive additional compensation for service on the Board. In December

Effective with the second quarter of 2020, the BoardCompensation Committee determined to providetemporarily reduce all cash and equityretainers by 25% due to the economic impact of the pandemic. Because the reduction in cash compensation was expected to Mr. Rebrook effective January 1,be temporary, cash retainers in effect prior to the reduction were used for the independent consultant’s evaluation of 2021 in the same amounts provided to all other directors.

director compensation. In evaluating director compensation for 2020,their review, the Compensation Committee considered data provided by the independent compensation consultant, which included data derived from the proxy statements of our peer companies and the National Association of Corporate Directors Compensation Survey for energy industry companies with revenues between $650$450 million and $2.9$3.0 billion. The review indicated that the structure of our director compensation program was consistent with our peer group however,and our typical director compensation fell just below(pre-reduction) was at the median of the peer group 50^th percentile. The Compensation Committee took into consideration indicators of a softening market and determined in December 2019 to approve no changes in the structure of the program and no increase in director compensation for 2020. However, in late 2020, the Compensation Committee reviewed the increased risk oversight responsibilities of the Audit and Nominating and Corporate Governance Committees as a result of the pandemic and our environmental, social and governance initiatives, respectively, and approved a modest increase in the chair retainers as described below.group.

Cash Compensation. Each independentnon-employee director earned an annual cash retainer (the “Base Retainer”) for his or her service during 2020.2021. The Chairman of the Board and the chairs of the Audit Committee, Compensation Committee and NominatingGovernance and Corporate GovernanceSustainability Committee each received an additional retainer for their services. All retainers are paid in arrears in equal quarterly installments. Directors are also reimbursed for reasonable expenses incurred to attend Board and committee meetings.

Effective During the first six months of 2021, the directors’ cash compensation was reduced by 25%, as discussed above; effective with the fourththird quarter of 20202021 and based on increased responsibilities,improved industry conditions, the Compensation Committee increased the Audit Committee chair retainer from $20,000cash retainers were restored to $22,500 per annumpre-pandemic levels, along with management and the Nominating and Governance Committee chair retainer from $15,000 to $20,000 per annum, both reduced by 25% due to the pandemic, as indicated in the chart below.  employee salaries.

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Equity-Based Compensation. On January 23, 2020,March 5, 2021, the Compensation Committee approved the grant of restricted stock or restricted stock units with a deferred delivery date to each independentnon-employee director with a grant date value equal to approximately $130,000. The number of shares awarded was determined based on the market closing price of our common stock on the grant date ($9.09)10.70) and resulted in the award of 14,30112,149 restricted shares or restricted stock units to each independentnon-employee director. The 2020 equity award was one-quarter vested on the grant date, and on each of June 1, September 1 and December 1, 2020.2021.

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Stock Ownership Requirements. Our stock ownership policy requires each independentnon-employee director to own an amount of our common stock equal to at least five times the Base Retainer amount (which currently equals $450,000 of our common stock) within five years of his or her election to the Board. We measure the stock ownership of our directors annually as of each June 30. All directors are in compliance with our stock ownership policy.

Director Stock and Deferral Plan. Under our Directors’ Stock and Deferral Plan (the “Directors’ Plan”), directors may elect to receive all or a portion of their cash compensation for Board service in the form of our common stock and may defer their receipt of commonthe stock. Mr. BrooksNo director elected to participate in the Directors’ Plan during 2020.2021.

Total Director Compensation. The following table shows the total compensation paid to each non-employee director for his or her service during 2020.2021. As shown below, excluding our Chairman of the Board, the equity (at-risk) portion of compensation is greater than 50% of each director’s total compensation.

¹ Represents the grant date fair value of our common stock calculated in accordance with ASC 718. In lieu of restricted stock, Ms. Hawes and Mr. Segner elected to receive restricted stock units with deferred delivery.

² Represents the payment of dividends on unvested restricted stock and unvestedstock. Dividend equivalent rights were accrued on the restricted stock units acquired underissued to Ms. Hawes and Mr. Segner and will be paid upon distribution of the Directors’shares underlying the units according to the terms of the Archrock, Inc. 2020 Stock Incentive Plan.

³ Pursuant to his election to participate in the Directors’ Plan, 75% of Mr. Brooks’ retainer was paid in the form of restricted stock units with deferred delivery; such units also earned dividend equivalent rights, which were paid as and when dividends were paid to stockholders, reflected in “All Other Compensation”. Mr. Brooks retired from the Board in January 2021.

⁴ Mr. Hildebrand, who resigned from the Board in July 2020, and Mr. Rebrook, who was elected to the Board in July 2020, were not compensated for Board service. Mr. Mallett was elected to the Board in January 2021.2021

MANAGEMENT SUCCESSION PLANNING

Succession planning is a critical Board function. The Board considers our business strategy in evaluating the skills and experience necessary for us to achieve our objectives. With input from our Chief Executive Officer, the Board routinely reviews management talent and leadership development and is actively engaged in succession planning. The Board has adopted a succession policy in the event of an unanticipated vacancy in the Chief Executive Officer position.

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COMPANY MANAGEMENT TEAM

The following provides information regarding our executive and senior leadership officers as of March 3, 2021.2022. Information concerning the business experience of Mr. Childers is provided under “Nominees for Director” in this Proxy Statement.

Donna A. Henderson

Age 53

Vice President and Chief Accounting Officer since January 2016

Ms. Henderson served as Vice President, Accounting, of our primary operating subsidiary since August 2015. From April 2013 until June 2015, she served as Vice President and Chief Accounting Officer of Southcross Energy Partners GP, LLC (a provider of natural gas gathering, processing, treating, compression and transportation services). From September 2011 to December 2012, she was the Vice President and Chief Audit Executive of GenOn Energy, Inc. (a wholesale electric generator that merged into NRG Energy). Prior to that position, Ms. Henderson served as Assistant Controller of GenOn Energy, Inc. and its predecessor companies, RRI Energy, Inc. and Reliant Energy Inc., from July 2005 to September 2011, and held various other leadership roles within the accounting department of that organization since September 2000. From 1996 to 2000, Ms. Henderson held various accounting positions with Lyondell Chemical (a manufacturer of chemicals and polymers). Ms. Henderson began her career with accounting firms Deloitte & Touche LLP and KPMG LLP. She also serves as an officer of certain Archrock, subsidiaries and is a member of the Executive Committee and Board of Trustees of the Good Samaritan Foundation. Ms. Henderson holds a B.B.A. in Accounting from Eastern New Mexico University and is a member of the American Institute of Certified Public Accountants.

inc. 2022 proxy statement | Stephanie C. Hildebrandt16

Age 56

Senior Vice President, General Counsel and Secretary since August 2017

Ms. Hildebrandt was a partner of global law firm Norton Rose Fulbright from February 2015 to July 2017. She previously served as the Senior Vice President, General Counsel and Secretary of Enterprise Products Partners L.P. (“Enterprise”, a publicly traded pipeline and infrastructure company and consumer energy service provider) from May 2010 to December 2014 and held various other roles at Enterprise. Ms. Hildebrandt has served as a member of the Tulane Center for Energy Law Advisory Board since 2019; as a member of the executive council, since 2020, and advisory council, since 2014, of the Kay Bailey Hutchison Center for Energy, Law & Business at the University of Texas; and as a member of the University of St. Thomas President's Advisory Board since 2016. She previously served as director and member of the audit committee of WildHorse Resource Development Corporation (an independent oil and natural gas resource company) from December 2017 until it was acquired in February 2019, and for a portion of her tenure, as chair of the compensation committee; director and member of the conflicts committee of Rice Midstream Management LLC, the general partner of Rice Midstream Partners LP (owner and operator of midstream natural gas assets in the Appalachian Basin) from March 2016 until it was acquired in July 2018; and director, chair of the compensation committee and member of the nominating and governance committee of TRC Companies, Inc. (a global consulting, engineering and construction management firm serving the oil and gas industry) from December 2014 until it was acquired in June 2017. Ms. Hildebrandt also serves as an officer and director of certain other Archrock subsidiaries. Ms. Hildebrandt earned a B.S. in Foreign Service from Georgetown University and a J.D. from Tulane University Law School.

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Elspeth A. Inglis

Age 52

Senior Vice President and Chief Human Resources Officer since October 2019

Ms. Inglis joined Archrock, in October 2019. She most recently served as Vice President, Culture Integration at Baker Hughes.  From 2013 to 2017, she served at GE Oil and Gas as Head of Human Resources, Downstream Technology Services (a global manufacturing business).  Ms. Inglis worked for Reliance Industries from 2011 to 2013 as Vice President, Human Resources supporting the startup operations for their US unconventional shale gas business. From 2002 to 2009, she served in positions of increasing responsibility at CGG (a geophysical services company) including Marine Human Resource Manager and Vice President Human Resources, Western Hemisphere in Houston and Senior Vice President Geophysical Services based in Paris.   She served as a Human Resource Manager for Enron Corp. from 1999 to 2001 in both London and Houston.  She serves on the board of directors human resource committee of Catholic Charities and is an advisory board member of Workforce Next. She also serves as an officer of certain Archrock subsidiaries. Ms. Inglis is a member of the Chartered Institute of Personnel and Development (UK) and holds her SPHR HR certification (US).  

inc. 2022 proxy statement | Eric W. Thode17

Age 55

Senior Vice President, Operations since February 2020

Mr. Thode served as Vice President, Operations since October 2018, having previously served as Vice President and Business Unit Director of the South Texas Business Unit of Archrock Services, L.P., our wholly owned operating subsidiary, since mid-2018 and December 2014, respectively. He was Business Unit Director of the Barnett Business Unit from June 2012 to December 2014. Mr. Thode also previously served as Director, Business Development, negotiating alliance contracts that generated over $100 million in annual revenue. Mr. Thode has worked with us and our predecessor subsidiaries, EESLP and UCI, since 2004. Prior to joining us, Mr. Thode worked at Enron Corporation as Director, Public Relations from 1999 to 2004 and at TEPPCO Partners as Manager, Government and Public Affairs from 1991 to 1999. Mr. Thode holds a B.S. in Economics and a Master of Public Administration from Texas A&M University.

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OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table provides information about beneficial owners, known by us as of March 3, 2021,2022, of 5% or more of our outstanding common stock (the “5% Stockholders”). Unless otherwise noted in the footnotes to the table, the 5% Stockholders named in the table have sole voting and investment power with respect to all shares shown as beneficially owned by them.

¹ Reflects shares of common stock beneficially owned as a percentage of approximately 153155 million shares of common stock outstanding as of March 3, 2021.2022.

² Based solely on a review of the Schedule 13G/A filed by BlackRock, Inc. on January 26, 2021.2022. BlackRock, Inc. has sole voting power over 21,546,14423,560,694 shares and sole dispositive power over 22,143,25324,386,732 shares.

³ Based on a review of the Schedule 13D/AForm 4 filed on March 5,June 17, 2021, by Old Ocean Reserves, LP (“Old Ocean,” formerly known as JDH Capital Holdings, L.P. (“JDH Holdings”). JDH HoldingsOld Ocean shares voting and dispositive power over all shares with JDH Capital Company (“JDH Capital”), Hildebrand Enterprises, LP (“Hildebrand Enterprises”), Hildebrand Enterprises Company (“Hildebrand Company”), Melinda B. Hildebrand and Jeffery D. Hildebrand. The principal business of JDH Capital is to manage investments and to serve as the general partner of JDH HoldingsOld Ocean and other affiliated entities. The principal business of Hildebrand Enterprises is to serve as a holding company of energy-related and other operating companies and investments and as the sole limited partner of JDH Holdings.Old Ocean. The principal business of Hildebrand Company is to serve as the general partner of Hildebrand Enterprises. The principal business occupation of Mrs. Hildebrand is investments. The principal business occupation of Mr. Hildebrand is investments and to serve as Executive Chairman and founder of Hilcorp Energy Company and President and Chief Executive Officer of Hildebrand Enterprises.

⁴ Based solely on a review of the Schedule 13G/A filed on February 10, 20219, 2022 by The Vanguard Group, Inc. on behalf of itself and the following subsidiaries (collectively, “Vanguard”(“Vanguard”): Vanguard Asset Management, Limited, Vanguard Fiduciary Trust Company, Vanguard Global Advisors, LLC, Vanguard

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Group (Ireland) Limited, Vanguard Investments Australia Ltd, Vanguard Investments Canada Inc., Vanguard Investments Hong Kong Limited and Vanguard Investments UK, Limited.. Vanguard does not have sole power to vote any of the shares reported, but has shared voting power over 152,133145,005 shares. Vanguard has sole dispositive power over 15,698,56116,146,874 shares and shared dispositive power over 272,415256,231 shares.

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⁵ Based solely on a review of the Schedule 13G filed by EarnestEARNEST Partners, LLC on February 16, 2021. Earnest9, 2022. EARNEST Partners, LLC has sole voting power over 8,369,32810,623,129 shares and sole dispositive power over 11,386,96814,106,386 shares.

⁶ Based solely on a review of the Schedule 13G/A filed by Dimensional Fund Advisors LP on February 12, 2021,8, 2022, which provides investment advice to four registered investment companies and acts as investment manager or sub-advisor to certain other commingled funds, group trusts and separate accounts (collectively, the “Funds”). Dimensional and its subsidiaries (collectively, “Dimensional”) may act as an adviser, sub-adviser and/or manager to certain Funds. Dimensional possesses sole voting power over 9,689,7899,228,404 shares and sole dispositive power over the 10,051,3809,454,101 shares held by the Funds and may be deemed to be the beneficial owner of the shares held by the Funds. However, all shares are owned by the Funds, and Dimensional disclaims beneficial ownership of such shares.

⁷ Based solely on a review of the Schedule 13G filed by Invesco Ltd. on February 16, 2021.9, 2022. Invesco Ltd., in its capacity as a parent holding company to its investment advisers (Invesco Advisers, Inc., Invesco Investment Advisers, LLC and Invesco Capital Management LLC), may be deemed to beneficially own the shares. Invesco Ltd. has sole voting power over 7,998,9857,930,052 shares and sole dispositive power over 8,054,4497,991,544 shares.

OWNERSHIP OF MANAGEMENT

The following table provides information, as of March 3, 2021,2022, regarding the beneficial ownership of our common stock by each of our directors, each of our Named Executive Officers and all of our current directors and executive officers as a group. Unless otherwise noted in the footnotes to the table, the persons named in the table have sole voting and investment power with respect to all shares shown as beneficially owned by them. The address for each individual listed below is c/o Archrock, Inc., 9807 Katy Freeway, Suite 100, Houston, Texas 77024.

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* Less than 1%

¹ For Ms. Hawes and Mr. Segner, includes restricted stock units awarded in 2021 and 2022 with deferred delivery. For all other directors, includes unvested restricted stock awarded in 2022. For executive officers, includes unvested restricted stock awards from annual grants that vest minimally over a three-year period from the date of grant. Officers and directors have voting power and, once vested, dispositive power.

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² For Mr. Childers, includes shares previously acquired under our 401(k) Plan and since February 2014, the 401(k) Plan's dividend reinvestment on previously acquiredsuch shares; for Mr. Thode, includes 8,375 shares held by immediate family members for which he shares dispositive power.power and 104 shares held by a family member for which he disclaims beneficial ownership.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our directors and officers are required to file reports of holdings and transactions in Archrock stock with the SEC on a timely basis. Based on our records, and other information, in 2020 Mr. Brooks’ acquisition of stock (with deferred delivery) as a participant in the Directors’ Plan, was filed late due to an administrative error. In addition, the February 2020 certification of performance awards was reported upon vesting and payout of the units in August 2020; this was an administrative error and was considered a late filing for each of Messrs. Childers and Ingersoll. Wewe believe all other filing requirements of Section 16(a) of the Exchange Act were met by our officers and directors.directors in 2021.

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PROPOSAL 2 RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBIC ACCOUNTING FIRM

 

Deloitte & Touche LLP (“Deloitte”) served as our independent registered public accounting firm for the fiscal year ended December 31, 2020.2021. The Audit Committee has selected Deloitte as our independent registered public accounting firm for the fiscal year ending December 31, 2021.2022. We are submitting the selection of Deloitte for stockholder ratification at the Annual Meeting.

 

Representatives of Deloitte attended all meetings of the Audit Committee in 20202021 as well as our 20202021 Annual Meeting of Stockholders. For additional information concerning the Audit Committee and its activities with Deloitte, see “Pre-Approval Policy” and “Report of the Audit Committee” following this proposal description. We expect that a representative of Deloitte will attend the Annual Meeting, and the representative will have an opportunity to make a statement if he or she so chooses. The representative will also be available to respond to appropriate questions from stockholders.

 

BOARD RECOMMENDATION   The Board recommends a vote “FOR” the ratification of the Audit Committee’s appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021.2022.

VOTE REQUIRED   Ratification of Proposal 2 requires the affirmative vote of the holders of a majority of the votes cast in favor of or against the proposal, which means that the number of shares voted “for” ratification must exceed the number of shares voted “against” ratification. Abstentions and broker non-votes will have no effect on the outcome of the vote.   Our organizational documents do not require that our stockholders ratify the selection of our independent registered public accounting firm. We are requesting ratification because we believe it is a matter of good corporate practice. If our stockholders do not ratify the selection, the Audit Committee will reconsider whether to retain Deloitte. Even if the selection is ratified, the Audit Committee may change the appointment at any time during the year if it determines that such a change would be in the best interests of us and our stockholders.

 

FEES PAID TO THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The following table presents fees for professional services rendered by Deloitte and its member firms and respective affiliates on our behalf for calendar years 20202021 and 2019.2020.

 

Types of Fees	2020		2019		2021	2020
	(In thousands)				(In thousands)
Audit fees 1	$1,595		$1,650		1,470	$1,595
Audit-related fees 2	240		285		70	240
Tax fees 3	125		35		100	125
All other fees	—		—		2	—
Total	$1,960		$1,970		$1,642	$1,960

 

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¹ Audit fees include fees billed by our independent registered public accounting firm related to audits and reviews of financial statements we are required to file with the SEC, audits of internal control over financial reporting and assistance with and review of documents filed with the SEC.

 

² Audit-related fees include fees billed by our independent registered public accounting firm primarily related to issuance of comfort letters.

 

³ Tax fees include fees billed by our independent registered public accounting firm primarily related to tax compliance and consulting services.

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In considering the nature of the services provided by Deloitte, the Audit Committee determined that such services are compatible with the provision of independent audit services. The Audit Committee discussed these services with Deloitte and our management to determine that they are permitted under the rules and regulations concerning auditor independence promulgated by (a) the SEC to implement the Sarbanes-Oxley Act of 2002, and (b) the American Institute of Certified Public Accountants.

 

PRE-APPROVAL POLICY

 

The Audit Committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by our independent registered public accounting firm. This policy generally provides that we will not engage our independent registered public accounting firm to render audit or non-audit services, and will not engage any other independent registered public accounting firm to render audit services, unless the service is specifically approved in advance by the Audit Committee.

 

The Audit Committee’s practice is to consider for approval, at its regularly scheduled meetings, all audit and non-audit services proposed to be provided by our independent registered public accounting firm. In situations where a matter cannot wait until the next regularly scheduled committee meeting, the chair of the Audit Committee has been delegated authority to consider and, if appropriate, approve audit and non-audit services. Approval of services and related fees by the Audit Committee chair is reported to the full Audit Committee at the next regularly scheduled meeting. All services performed by our independent registered public accounting firm in 20202021 were pre-approved pursuant to this policy.

 

REPORT OF THE AUDIT COMMITTEE

 

The purpose of the Audit Committee is to assist the Board in its general oversight of Archrock’s financial reporting, internal controls and audit functions. The Audit Committee Charter describes in greater detail the full responsibilities of the Audit Committee and is available on Archrock’s website at www.archrock.com.

 

The Audit Committee has reviewed and discussed the consolidated financial statements and management’s assessment and report on internal controls over financial reporting with management and Deloitte, Archrock’s independent registered public accounting firm.Deloitte. The Audit Committee also reviewed and discussed with Deloitte its review and report on Archrock’s internal control over financial reporting. Archrock published these reports in its Annual Report on Form 10-K for the year ended December 31, 2020,2021, which it filed with the SEC on February 23, 2021.2022. Management is responsible for the preparation, presentation and integrity of financial statements and the reporting process, including the system of internal controls. Deloitte is responsible for performing an independent audit of Archrock’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and issuing a report thereon, as well as expressing an opinion on the effectiveness of Archrock’s internal control over financial reporting. The Audit Committee monitors these processes.

 

The Audit Committee members are not professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management or the independent auditors. The Audit Committee serves a board-level oversight role, in which it provides advice, counsel and direction to management and the independent auditors on the basis of the information it receives, discussions with management and the independent auditors, and the experience of the Audit Committee’sCommittee members in business, financial and accounting matters. In accordance with law, the Audit Committee has ultimate authority and responsibility for selecting, compensating, evaluating, and, when appropriate, replacing Archrock’s independent auditors. The Audit Committee has the authority to engage its own outside advisers, including experts in particular areas of accounting, as it determines appropriate, apart from counsel or advisers hired by management.

 

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In this context, the Audit Committee discussed with Archrock’s internal auditors and Deloitte the overall scope and plans for their respective audits. The Audit Committee met with the internal auditors and Deloitte, with and without management present, to discuss the results of their examinations, their evaluations of Archrock’s internal controls, and the overall quality of Archrock’s financial reporting. Management represented to the Audit Committee that Archrock’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States, and the Audit Committee reviewed and discussed the consolidated financial statements with management and Deloitte, including a discussion of the quality, not just the acceptability, of the accounting principles applied, the reasonableness of significant judgments and the clarity of disclosures in the consolidated financial statements. The Audit Committee also discussed with Deloitte the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as currently in effect.

 

In addition, the Audit Committee discussed with Deloitte its independence, considered the compatibility of non-audit services with the auditors’ independence and received the written disclosures and letter required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), as currently in effect.

 

Based on the reviews and discussions referred to above, the Audit Committee recommended to Archrock’s Board, and the Board has concurred, that (a) the audited financial statements be included in Archrock’s Annual Report on Form 10-K for the year ended December 31, 2020,2021, for filing with the SEC; (b) Deloitte meets the requirements for independence; and (c) the appointment of Deloitte for 20212022 be submitted to the stockholders for ratification.

 

The Audit Committee of the Board of Directors

 

Frances Powell Hawes, Chair

Anne-Marie N. Ainsworth

Gordon T. Hall 

Edmund P. Segner, III

 

The information contained in this Report of the Audit Committee shall not be deemed to be “soliciting material,” to be “filed” with the SEC or be subject to Regulation 14A or Regulation 14C or to the liabilities of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing of Archrock, except to the extent that Archrock specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended, or the Exchange Act.

 

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PROPOSAL 3 ADVISORY VOTE TO APPROVE THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS

 

Pursuant to Section 14A of the Exchange Act, our stockholders are provided the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our Named Executive Officers as disclosed in this Proxy Statement. This proposal gives stockholders the opportunity to approve, reject or abstain from voting with respect to the compensation provided to our Named Executive Officers for 2020.2021.

 

As discussed in the Compensation Discussion and Analysis section of this Proxy Statement, our executive compensation program is designed to attract and retain individuals with the level of expertise and experience needed to help achieve the business objectives intended to drive both short- and long-term success and stockholder value. You are encouraged to read the detailed information concerning our executive compensation program and policies contained in the Compensation Discussion and Analysis following this proposal description, as well as the compensation-related tabular and other disclosure following the Compensation Discussion and Analysis.

 

	BOARD RECOMMENDATION   The Board has determined to hold a “say on pay” advisory vote every year. In accordance with this determination and Section 14A of the Exchange Act, the Board recommends that stockholders vote “FOR” the following resolution: “RESOLVED, that the stockholders of Archrock, Inc. approve, on an advisory basis, the compensation paid to its Named Executive Officers for 2020, as disclosed in this Proxy Statement, including the Compensation Discussion and Analysis, the Summary Compensation table and the other related tables and disclosure.”		VOTE REQUIRED   Approval of Proposal 3 requires the affirmative vote of the holders of a majority of the votes cast in favor of or against the proposal, which means that the number of shares voted “for” approval must exceed the number of shares voted “against” approval. Abstentions and broker non-votes will have no effect on the outcome of the vote.
“RESOLVED, that the stockholders of Archrock, Inc. approve, on an advisory basis, the compensation paid to its Named Executive Officers for 2021, as disclosed in this Proxy Statement, including the Compensation Discussion and Analysis, the Summary Compensation table and the other related tables and disclosure.”			Because the vote on this proposal is advisory in nature, the outcome will not be binding on the Company, the Board or the Compensation Committee and will not affect compensation already paid or awarded. However, the Board and the Compensation Committee value the opinions of our stockholders and will take into account the outcome of the vote when considering future compensation arrangements for our Named Executive Officers.

 

Consistent with the results of our stockholders’ most recent vote on the frequency of future “say on pay” votes, our Board has determined to hold future “say on pay” advisory votes on executive compensation on an annual basis. Unless the Board modifies its determination of the frequency of future “say on pay” advisory votes, the next “say on pay” advisory vote will be held at our 20222023 Annual Meeting of Stockholders.

 

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COMPENSATION DISCUSSION AND ANALYSIS CONTENTS

 

Executive Summary	2526
Named Executive Officers	2526
20202021 Performance Highlights and Response to COVID-19	2526
Most Recent Say On Pay Vote and Historical Program Changes	2728
Our Best Practices	2729
Components of Our 20202021 Executive Compensation	2829
CEO Realizable Compensation	2830
Discussion of Our Fiscal 20202021 Executive Compensation Program	2931
Compensation Philosophy and Objectives	2931
Elements of Compensation	3032
How our Compensation Committee Determines Executive Compensation	3032
Base Salary	3234
Annual Performance-Based Incentive Compensation	3335
Long-Term Incentive Compensation	3739
Other Compensation Policies, Practices  and Guidelines	4143
Compensation-Related Policies	4143
Stock Ownership Requirements	4143
Prohibition on Hedging and Pledging	4143

Executive Compensation Recoupment (“Clawback”)

4143

Retirement Savings, Welfare and Other Benefits	4143
Agreements with Executive Officers	4244
Risk Assessment Related to Our Compensation Structure	4345
Tax and Accounting Considerations	4345
Report of the Compensation Committee Report	4446
Compensation Tables	4547
Summary Compensation	4547
Grants of Plan-Based Awards	4749
Outstanding Equity Awards at Fiscal Year End	4850
Stock Vested	5052
Nonqualified Deferred Compensation	5153
Severance Benefit and Change of Control Arrangements	5254
Potential Payments Upon Termination or Change of Control	5456
CEO Pay Ratio	5557

 

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EXECUTIVE SUMMARY

 

NAMED EXECUTIVE OFFICERS

 

The Compensation Discussion and Analysis that follows focuses on compensation earned during 20202021 by our Chief Executive Officer, Chief Financial Officer and our other executive officers whom we refer to as "Named“Named Executive Officers".Officers.” It also summarizes our executive compensation philosophy, each element of compensation, and how each element supports our compensation objectives and corporate strategy. Our executive compensation program is designed to balance rewards and risks, drive performance and sustain long-term stockholder value. Our 20202021 Named Executive Officers were as follows:

 

D. Bradley Childers	Douglas S. Aron	Stephanie C. Hildebrandt	Jason G. Ingersoll	Eric W. Thode
President and Chief Executive Officer	Senior Vice President and Chief Financial Officer	Senior Vice President, General Counsel and Secretary	Senior Vice President, Sales and Operations Support	Senior Vice President, Operations

 

20202021 PERFORMANCE HIGHLIGHTS AND RESPONSE TO COVID-19

 

At the onset of the COVID-19 pandemic, our management team and Board modified our 2020 strategy to add heightened focus on the following objectives: protect employees, reduce expenses, preserve revenue, and maintain our dividend program. We metcontinued to meet these objectives and delivered solid performance against our 20202021 business plan and long-term strategic goals.

 

Financial and Operational	●	●    In response to the precipitous drop in demand in the first quarter of 2020, a direct result ofongoing market uncertainty resulting from the COVID-19 pandemic, we significantly reducedcontinued to exercise a disciplined approach to investment in new equipment, resultingwith only $37 million in growth capital expenditures during 2021, down 53% compared to 2020.
	●	Normalizing for a 64% reduction from 2019sales and use tax benefit in our 2020, total capital spending. ●    We achieved an 11% improvement in selling, general and administrative expenses through discretionary spending reductions,were 4% lower in 2021 despite significant inflationary pressure.
	●	We reduced debt by right-sizing$159 million by adhering to our organizationprudent capital allocation approach and through temporary reductions in base salaries for all salaried employees and directors’ cash retainers. ●    With aggressive cost management, we increased our contract operations gross marginthe sale of non-strategic assets. Over the past two fiscal years, debt has been reduced by 320 basis points to 65% in 2020 compared to 2019. $314 million.
	●    Through these actions, we managed 2020 Adjusted EBITDA to $415 million, roughly flat year-over-year, despite a 9% reduction in 2020 revenue compared to 2019 (see “Annual Performance-Based Incentive Compensation”). ●    In late 2019, we refinanced our debt and extended maturities into 2028, and in late 2020, we issued an additional $300 million of senior notes in a tack-on bond offering. This leverage neutral transaction enhances our financial flexibility over the next several years. ●	We generated free cash flow and maintained our dividend program, paying a total of $89 million in dividends to our stockholders, with a year-end yield of 6%, while also reducing debt by $155 million.8%. Cash available for dividend coverage remains well above our 2x target at approximately 2.9x. 2.2x.
	●	In the second half of 2021, we saw improvement in leading indicators for our business: heightened momentum in horsepower booking and growth in operating horsepower, which we accomplished through the redeployment of assets and selective capital spending.

Strategic	●	●    We believecontinue to work on our work over the past several yearslong-term strategy to high-grade our operations, and our equipment reduced the number ofwhich we believe has resulted in fewer equipment returns during 2020.the pandemic.
	●    We continued to execute on our strategic goal of divesting certain non-core assets.	We completed sales of compression and other assets totaling over $52$113 million. These transactions further our long-term objective to focus on larger compression horsepower and continue to standardize and reduce the average age of our compression fleet. ● We continuedalso believe this results in greater efficiencies in servicing units and improved emissions performance on a per horsepower basis.
	●	As 2021 came to advancea close, we optimized, standardized and digitized our business with the completion of several major phases of our process and technology transformation project. Our investments have focused on the automation of workflows through cloud-based technology, initiative that will ultimately streamlineintegration of digital and modernize virtually every aspectmobile tools for our field service technicians and expanded remote monitoring capabilities of our business. During the year, we converted our payrollvehicle and human resource functionscompressor fleets. We expect this technology commitment to result in improved operating efficiencies, reduced internal costs and we continue to workimproved profitability. We also believe it will facilitate reduced emissions on transitioning key operations support functions. When fully implemented, we intend for this initiative to facilitate additional data gathering that maya per horsepower basis and inform and direct our future goals for environmental performance and sustainability.

 

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Human Capital	● Capital	●We concluded 2021 with TRIR of 0.10, our best ever safety performance and a significant improvement over 2020 TRIR of 0.25. Safety has been a metric in our short-term incentive program for the past 1415 years and continues to be an operational priority. Our TARGET ZERO® program, which includes comprehensive safety and environmental procedures and the necessary training and tools, also empowers every employee to stop the job.
	●	Our executive management team took swift actioncontinued to protect employee well-being in responsemonitor COVID-19 protocols and make appropriate adjustments to the pandemic, establishing a multidisciplinary team, with representation from human resources, health safetyour requirements for office and environment (“HSE”), facilities and information technology,field personnel.
	●	We continued to develop a pandemic response plan. We implemented comprehensive protocols to protect the health and safety ofadvance our employees, customers and communities, including contactless parts pickup for field employees and customers and mandated social distancing and additional personal protection equipment requirements in the field. We adopted remote work for corporate employees and all non-essential travel was stopped. Employees began returning to the office, capped at 50% capacity, in the latter part of 2020, with daily temperature checks, increased signage, sanitizer, fresh air flow, personal protective equipment and additional cleaning services at all office locations. ●    Management provided frequent updates to the Board throughout the year and communicated weekly with employees regarding the impact of the pandemic on the oil and gas market, our Company and our employee population. ●    In response to an energy market that was moderating prior to the pandemic, we initiated the difficult process of right-sizing our work force; we accelerated these efforts as a result of COVID-19. As the backbone of our organization, every reduction in the field and in our shops was carefully considered, and efforts were made to relocate employees where feasible. ●    We are assessing our approach to diversity and inclusion objectives. In 2021, we conducted a comprehensive pay equity analysis to ensure pay equity across our organization without regard to gender or ethnicity. Based on Board review and based on those findings,input during the past year, we will undertake to changemodify or adopt additional programs and policies to ensure we continuedesigned to attract a diversity of ideas and innovation.

Climate Change and Sustainability	●	●    Despite the financialWe continued to place a high priority on ESG and operational challenges faced in the past year, we prioritized our focus on environmental and socialsustainability issues. We have formed a three internal working groups. Our cross-functional internal Sustainability Committee,ESG team is comprised of subject matter experts from our HSE, operations, reliability engineering, sales, human resources, investor relations and legal functions. The Sustainability Committeefunctions, reports quarterly to our executive leadership team and is responsible for coordination of our data collection and analysis. In addition, this committee reviews and recommends environmental and social initiatives and practices to support our approach to sustainability, consistent with our mission and values. Our technology team and new ventures team are exploring emerging technologies and business opportunities, respectively, for environmental and commercially viable solutions to complement our business operations and future strategic objectives.
	●    In 2020,	After implementing enhanced ESG oversight, our Governance and Sustainability Committee reviewed various ESG-related matters at each committee meeting held during 2021 and management reported to the full Board enhanced its oversight of environmental, socialon related matters in July and governance issues (see “The Board’s Role in Risk Oversight”). October 2021.
	●	Our 20192020 Sustainability Report, published in 20202021 and available at www.archrock.com, is our first that adheres to the SASB standards for midstream service providers. Our Sustainability Report was reviewed internally by our Disclosure Committee and includes estimated scope 1, 2 and 3 emissions.

Executive Compensation

●

The Compensation Committee took the following actions in responseDue to the financial challenges created byimpact of the pandemic: ●    Base Salaries. TemporarilyCOVID-19 pandemic on the energy market, effective in June 2020 we temporarily reduced the base salary of our Chief Executive Officer by 25%, the base salaries of all other salaried employeesNamed Executive Officers by 10% and the cash retainers paid to the members of our Board by 25%. ●    2020 Incentive Program. The Adjusted EBITDA performance target  In July 2021, employee base salaries and director cash retainers were restored, with the exception of our Chief Executive Officer’s base salary which was not reduced despite the impactrestored by half of the pandemic as well as the downturn in the oil and gas industry during 2020; however, operating unit results were equalized to eliminate the disparate impact of the downturn on certain business units. ●    2020 Performance-Based Long-Term Incentive Awards. In consideration of the impact of the pandemic on all stockholders, no changes were made to the performance factors and payout criteria of performance-based equity awards granted in the first quarter of 2020; these awards are based on three-year growth in cash available for dividend and three-year relative total shareholder return.25% reduction.

 

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MOST RECENT SAY ON PAY VOTE AND HISTORICAL PROGRAM CHANGES

 

At our 20202021 Annual Meeting of Stockholders, our 20192020 executive compensation program received a 95% stockholder approval rating of approximately 94%.rating. Our Compensation Committee values the feedback it has received from our stockholders, and it took into consideration this overwhelming support of our program. Based in part upon feedback from our stockholders, the Compensation Committee has made the following enhancements to our executive compensation program over the past three years:

 

 

The Compensation Committee remains committed to the ongoing evaluation of our executive compensation program, taking into consideration market trends, best practices, industry conditions, our performance and feedback received from our stockholders.

 

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OUR BEST PRACTICES

 

Our executive compensation program provides balanced incentives and does not promote risks that are reasonably likely to have a material adverse effect on us. The Compensation Committee has incorporated severalcertain stockholder-aligned compensation governance practices into our executive compensation program, including:

 

Governance •●    100% independent directors on the Compensation Committee •●    Independent compensation consultant engaged by the Compensation Committee •●    Annual review and approval of our compensation strategy and program design by the Compensation Committee, including an annual market best practices and peer group review

Compensation Program Design •●    Includes a mix of short- and long-term compensation, with a majority of executive compensation at risk based on companyCompany performance •●    No “single trigger” change of control benefits •●    No tax gross-ups for change of control benefits or other executive compensation arrangements •●    Extremely limited perquisites

Policies •     Minimum of three-year●    Equity awards subject to vesting for equity awards to our executive officersover three years •●    Stock ownership guidelines for executive officers and directors •●    Adoption of policies related to executive compensation clawback and prohibition on short sales, hedging, or pledging of our securities ●    Annual risk assessment of our executive compensation program

Performance-Based Compensation Features •●    Safety performance is a component of ourmetric included in annual incentive program for the past 15 years •     Short-term●    Separate performance metrics included in the annual and long-term incentive programs ●    Three-year performance periods on all long-term incentive awards ●    All performance-based payouts are based on separate performance measures •     Three year performance periods •     Caps on payouts of performance-based compensationcapped

 

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COMPONENTS OF OUR 20202021 EXECUTIVE COMPENSATION

 

The charts below show the target annual total direct compensation for our CEO and our other Named Executive Officers (“NEOs”) for fiscal 2020.2021. These charts illustrate that the majority of compensation is variable (85% for our CEO and an average of 71%73% for our other Named Executive Officers).

 

CEO Target Total Direct Compensation Mix	NEO Target Total Direct Compensation Mix

 

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CEO REALIZABLE COMPENSATION

 

The chart below illustrates that our CEO’s realizable compensation aligns with total stockholder return (“TSR”).* Realizable compensation includes the actual annual incentive award paid for performance during each year and the year-end face value of equity-based awards granted during the year.

 

 

 

 

* TSR derived from Standard & Poor’s Capital IQ Platform and reflects adjustments for spin-off and dividends.

 

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DISCUSSION OF OUR FISCAL 2020 2021 EXECUTIVE COMPENSATION PROGRAM

 

COMPENSATION PHILOSOPHY AND OBJECTIVES

 

Our Philosophy and Objectives		How We Accomplish Our Objectives
Pay Competitively	Attract, retain and motivate an effective management team with the level of expertise and experience needed to achieve consistent profitability and return for our stockholders.	Total compensation should be competitive with that of comparably-sized companies within the oilfield services and midstream sectors and, where applicable, across a variety of industries, as further described below in “How Our Compensation Committee Determines Executive Compensation.”
Pay for Performance	Provide for performance-based, variable compensation designed to motivate and reward key accomplishments.	A balance of fixed and variable compensation is considered essential for motivating performance while mitigating risk.  As shown in the graphs in our executive summary, 85% of our Chief Executive Officer’s 20202021 target total direct compensation and approximately 71%73% of our other Named Executive Officers’ 20202021 target total direct compensation was variable, with realized value primarily dependent upon annual financial and operational performance as well as strategic initiatives and long-term stock price performance.
Stockholder Alignment	Align our Named Executive Officers’ compensation and our stockholders’ expectations for a profitable and sustainable long-term partnership.	Emphasis on equity-based compensation and share ownership encourages executives to act strategically to drive sustainable long-term performance and enhance long-term stockholder value. The Compensation Committee also believes that a competitive base salary ensures that the Company can attract and retain the level of managerial talent necessary to achieve optimal performance and profitability and, therefore, is also aligned with our stockholders' interest.

 

The chart below compares the compensation awarded by the Compensation Committee to our CEO at target compared to the year-end value of that compensation, and in the case of performance-based equity, at target performance. The year-end value of compensation was 17% less than target, demonstrating that our executives’ compensation is significantly correlated to performance-based components.

2021 CEO Target Compensation Compared to Year End Value

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ELEMENTS OF COMPENSATION

 

Our executive compensation program is designed to align our Named Executive Officers’ pay with individual and Company performance in order to achieve profitability and return for our stockholders, and to attract and retain executives with the level of expertise and experience necessary to achieve our business objectives while driving short- and long-term results. The key elements of our Named Executive Officers’ compensation and the targeted objectives of each are as follows:

 

Key Elements of Compensation	Description	Pay Competitively	Pay for Performance	Stockholder Alignment
Base salary	Fixed cash income   Establishes a base level of compensation that is essential to attract and retain talent	ü✓		ü✓
Annual performance-based incentive compensation	Variable cash incentive award earned annually   Based upon achievement of key annual financial, operational, safety, and individual performance goals that are expected to contribute to long-term stockholder returns	ü✓	ü✓	ü✓
Long-term incentive compensation ("LTI Awards")	Provided through a combination of restricted shares and performance units vesting over multiplea minimum period of three years   Promotes stockholder alignment by tying a significant portion of executive compensation directly to stockholder value	ü✓	ü✓	ü✓

 

HOW OUR COMPENSATION COMMITTEE DETERMINES EXECUTIVE COMPENSATION

 

The Compensation Committee is responsible for establishing and overseeing compensation programs that are consistent with our compensation philosophy. In carrying out this role, the Compensation Committee considers such factors as they deem relevant, including the following:

 

External Factors		Internal Factors
Data and analysis provided by the Compensation Committee’s independent compensation consultant		Current and past total compensation, including an annual review of base salary, short-term incentive pay and the value of LTI Awards received
Feedback provided from our stockholders and the results of our annual advisory say-on-pay vote		Company performance and operating unit performance (where applicable), as well as each executive’s impact on performance
Best practices in executive compensation		Our Chief Executive Officer’s recommendations (other than with respect to his own compensation)
Applicable macroeconomic and market considerations		Each executive’s relative scope of responsibility and potential
		Individual goal setting, performance and demonstrated leadership
		Internal pay equity and retention considerations

 

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Role and Independence of Compensation Consultant. For 2020, the Compensation Committee engaged2021, Pearl Meyer, an independent third-party compensation consultant, was engaged by the Compensation Committee to:

 

●

provide data and analysis to inform the Compensation Committee in selecting an appropriate peer group;

●

provide a review of market trends in executive compensation, including base salary, annual incentives, LTI Awards and total direct compensation; and

●

provide information on how trends in best practices, new rules, regulations and laws impact executive and director compensation practice and administration.

 

Following review and consultation with Pearl Meyer, the Compensation Committee determined that Pearl Meyer is independent and that no conflict of interest, either currently or during 2020,2021, results from this engagement. The Compensation Committee continues to monitor the independence of its compensation consultant on a periodic basis.

 

For 2020,2021, Pearl Meyer provided analysis of data derived from (a) proxy statements filed by the companies in our peer group, as further described below, and (b) surveys of the compensation practices of companies in the energy industry and across a variety of industries, in each case with annual revenues within a reasonable and comparable range relative to Archrock. In performing its compensation analysis, Pearl Meyer generally placed more weight on the proxy compensation data for Named Executive Officers at our peer companies than on the information derived from the broader compensation surveys, where sufficient data was available.

 

Pearl Meyer also provided input to the Compensation Committee in their review and determination of the appropriate types and mix of LTI Awards and the performance factors and related payout percentages for performance-based compensation awarded in 2020.2021.

 

20202021 Peer Group. The Compensation Committee annually reviews the composition of the peer group, based on input from its compensation consultant, and modifies it as circumstances, including industry consolidation and other competitive forces, warrant. Since there are few publicly traded companies that directly match our profile, the Compensation Committee uses a peer group that includes a diverse group of midstream, oilfield services and related companies with primarily domestic operations. The analysis presented by Pearl Meyer includes a review of each company’s financial data and business profile (including geographic footprint), and includes companies considered talent competitors, companies that identify us as a peer and companies identified by proxy advisory firms as potential peers.

Executive Compensation Peer Group. Based on the timing of peer group and executive compensation review, In consultation with Pearl Meyer, the Compensation Committee made nothe following changes into the 2021 peer group from 2019 for evaluating 2020 executive compensation. Characteristicsthe evaluation of this group, in addition to2021 total compensation as well as relative stock price performance for long-term incentive compensation over the above, included:period of January 1, 2021 through December 31, 2023:

 

●

removed Forum Energy Technologies, Inc. and TETRA Technologies, Inc., two oilfield services companies withthat were adversely impacted by the COVID-19 pandemic at the time the peer group was under consideration; and

●

added ChampionX Corporation, Enable Midstream Partners, LP and Enlink Midstream, LLC, based on assets and market capitalization, and in the case of Enable and Enlink, the desire to add additional midstream company representation in the peer group.

With these changes, the following peer group was approved by the Compensation Committee for 2021:

ChampionX Corporation		Helix Energy Solutions Group, Inc.		Oil States International, Inc.
Crestwood Midstream Partners LP		Helmerich & Payne, Inc.		Patterson-UTI Energy, Inc.
Enable Midstream Partners, LP		Newpark Resources, Inc.		Summit Midstream Partners, LP
Enlink Midstream, LLC		NOW Inc.		USA Compression Partners, LP
Exterran Corporation		Oceaneering International, Inc.

The Compensation Committee considered the peer group to be appropriate based on the following:

●

The companies in the peer group had estimated 2019 and 2020 revenuesrevenue ranging from approximately $500$400 million to $3.1 billion;$4.2 billion.

●

ArchrockArchrock’s ranking is inwas between the 50th and 70th percentile forbased on assets, and market capitalization and enterprise value relative to this group;group.

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The number, size and type of companies included in the peer group provide a reasonable comparator group for purposes of evaluating stock price performance.

●

The peer group includes companies with which we may compete for technical and managerial talent and that provide an appropriate reference point for assessing the competitiveness of our executive compensation program; andprogram.

●

The peer group provides an appropriate number of companies to provide a blend of data that is useful for determining the general positioning of our executive compensation. Executive compensation is targeted at the median of the market data, although individual pay levels may vary from median depending upon multiple factors including individual responsibilities, impact to the organization, tenure in position and individual performance.

 

Our 2020 compensation peer group, selected by the Compensation Committee in consultation with Pearl Meyer, included the following companies:

Exterran Corporation		NOW Inc.		Summit Midstream Partners, LP
Forum Energy Technologies, Inc.		Oceaneering International, Inc.		Superior Energy Services, Inc.
Helix Energy Solutions Group, Inc.		Oil States International, Inc.		TETRA Technologies, Inc.
Helmerich & Payne, Inc.		Patterson-UTI Energy, Inc.		USA Compression Partners, L.P.
Newpark Resources, Inc.		SemGroup Corporation

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Long-Term Incentive Peer Group. In consultation with Pearl Meyer, the Compensation Committee made the following changes to the 2020 peer group for the evaluation of relative stock price performance for the period of January 1, 2020 through December 31, 2022:

●

removed SemGroup Corporation due to its acquisition by Energy Transfer LP in December 2019;

●

removed Superior Energy Services, Inc. due to stock exchange delisting in 2019; and

●

added Crestwood Midstream Partners L.P., based on its assets and market capitalization as well as the desire to add another midstream company.

With these changes, the following peer group was approved by the Compensation Committee for 2020 performance awards that are based on relative stock price performance for the three-year performance period of January 1, 2020 through December 31, 2022:

Crestwood Midstream Partners LP		Newpark Resources, Inc.		Patterson-UTI Energy, Inc.
Exterran Corporation		NOW Inc.		Summit Midstream Partners, LP
Forum Energy Technologies, Inc.		Oceaneering International, Inc.		TETRA Technologies, Inc.
Helix Energy Solutions Group, Inc.		Oil States International, Inc.		USA Compression Partners, L.P.
Helmerich & Payne, Inc.

Archrock ranked between the 50^th and 75^th percentiles for estimated 2020 revenues, assets, and market capitalization relative to the peer group.

Role of Management. The most significant aspects of management’s, including our Chief Executive Officer’s, role in the compensation-setting process are:

 

●

recommending compensation programs, compensation policies, compensation levels and incentive opportunities that are based on analysis provided by our independent compensation consultant and are consistent with our business strategies;

●

preparing and distributing materials for Compensation Committee review and consideration;

●

recommending corporate performance goals on which performance-based compensation will be based; and

●

assisting in the evaluation of employee performance.

 

Our Chief Executive Officer annually reviews the individual performance of our Named Executive Officers and recommends salary adjustments, annual cash incentives and LTI Awards for executives other than himself, which the Compensation Committee considers along with the other factors discussed above.

 

BASE SALARY

 

Due to the negative impact of the COVID-19 pandemic on the oil and gas industry and at the recommendation of Mr. Childers to reduce costs and improve cash flow, in 2020 the Compensation Committee approved the entry into a compensation letter with each Named Executive Officer under which each executive agreed to a temporary 10% reduction (25% in the case of Mr. Childers) in base salary (the “Pre-Reduction Base Salary”), effective as of June 7, 2020 (the “Compensation Letters”). Based on improved energy market conditions, tightening of the labor market and inflationary pressure, the Compensation Committee determined to restore the base salary of Ms. Hildebrandt and Messrs. Aron, Ingersoll and Thode to each executive’s Pre-Reduction Base Salary effective July 4, 2021. At Mr. Childers’ request, his salary was restored by only half of the 25% reduction to his base salary, subject to future review in the discretion of the Compensation Committee.

In its review of executive compensation in early 2021, the Compensation Committee determined that the Pre-Reduction Base Salary for each of Ms. Hildebrandt and Messrs. Childers, Aron and Ingersoll was appropriate. This determination was based on the competitive positioning of our Named Executive Officers'each officer’s base salariessalary as compared to the data provided by our independent compensation consultant, market conditions and individual performance, the Compensation Committee determined that Messrs. Childers, Aron and Ingersoll and Ms. Hildebrandt were appropriately positioned. The Compensation Committee, therefore, approved Mr. Childers’ existing base salary and approved modest increases in base salaries for Ms. Hildebrandt and Messrs. Aron and Ingersoll, consistent with the Company’s overall merit program.performance. In determining Mr. Thode’s increase, in February 2020, the Compensation Committee took into account Mr. Thode’shis performance, leading to his promotion to Senior Vice President, internal equity of executive compensation and the positioning of his salary relative to market data.

 

Impact of COVID-19 on 2020 Base Salaries. Due to the negative impact of the pandemic on the oil and gas industry and at the recommendation of Mr. Childers to reduce costs and improve cash flow, in April 2020, the Compensation Committee approved the entry into a compensation letter with each Named Executive Officer under which each executive agreed to a 10% reduction (25% in the case of Mr. Childers) in base salary, effective as of June 7, 2020 (the “Compensation Letters”).

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The following chart lists each executive’s annualized 2019 base salary, merit increase percentage determined in early 2020, new 2020 base salary in effect through June 7, 2020 (the “Pre-Reduction Base Salary”)(Pre-Reduction and reduced), the percentage reduction due to the pandemic,2021 merit increase and the post-reductionrestored base salary effective as of June 7, 2020.July 4, 2021.

 

	2019		2020
Name	Base Salary ($)		Merit Increase (%)	Pre-Reduction Base Salary ($)	Pandemic Reduction (%)	Post-Reduction Base Salary ($)	Pre-Reduction Base Salary 1/1/20 – 6/6/20 Annualized ($)	Pandemic Reduction (%)	Reduced Base Salary 6/7/20 – 7/3/21 Annualized ($)	2021 Merit Increase (%)	Restored Base Salary 7/4/21 – 12/31/21 Annualized ($)
Childers	875,000		—	875,000	25.0	656,250	875,000	25.0	656,250	—	765,625
Aron	450,000		2.2	460,000	10.0	414,000	460,000	10.0	414,000	—	460,000
Hildebrandt	410,000		2.4	420,000	10.0	378,000	420,000	10.0	378,000	—	420,000
Ingersoll	350,000		2.9	360,000	10.0	324,000	360,000	10.0	324,000	—	360,000
Thode	300,000		16.7	350,000	10.0	315,000	350,000	10.0	315,000	2.9	360,000

 

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ANNUAL PERFORMANCE-BASED INCENTIVE COMPENSATION

 

During the first quarter of each year, the Compensation Committee adopts a program to provide the short-term cash incentive element of our Named Executive Officers’ compensation for that year. In February 2020,early 2021, the Compensation Committee adopted the short-term incentive program for 20202021 (the “2020“2021 Incentive Program”). Each Named Executive Officer’s potential cash payout under the 20202021 Incentive Program ranged from 0% to 200% of his or her incentive target, as described below. No payouts would be made unless Company results exceeded 50% of target performance. Under the 20202021 Incentive Program, the Compensation Committee determined payouts to the Named Executive Officers using the following formula:

 

 

The Compensation Committee believes Adjusted EBITDA is a comprehensive measure of financial performance, requiring focus on various components of financial and operating health, and an appropriate measure of management’s ability to run the business on an annual basis. The above formula, which in addition to a corporate-level goal includes operating unit and individual goals, is designed to create a focus on the overall success of the Company as well as the achievement of line of sight performance objectives. In addition, the Compensation Committee has retained discretion to include or exclude exceptional, non-recurring items, which could result in unintended consequences and an erroneous performance achievement to the advantage or detriment of employees, including our Named Executive Officers.

2020 Incentive Program Target. The Compensation Letters provide that in connection with the salary reduction, for purposes of calculating any other payments or benefits, the Company shall apply the Pre-Reduction Base Salary. Therefore, each Named Executive Officer’s cash incentive target was a specified percentage of Eligible Earnings during 2020 as defined in the footnote below. The table below presents each Named Executive Officer's 2020 cash incentive target as a specified percentage of his or her Eligible Earnings and a potential payout assuming the achievement of results at 100%.

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		2020 Incentive Program Target
Name	2020 Eligible Earnings ($)1	Percent (%) of Eligible Earnings	($) 2
Childers	908,654	120	1,090,385
Aron	475,000	75	356,250
Hildebrandt	433,462	70	303,423
Ingersoll	371,154	70	259,808
Thode	350,000	70	245,000

 

 

¹ Each Named Executive Officer’s Eligible Earnings includes (a) actual salary paid for the first seven pay periods of 2020 (based on the calendar, an extra pay cycle is included during 2020) plus (b) the Pre-Reduction Base Salary pro-rated for the remaining 20 pay cycles in 2020.

² The 2020 Incentive Program potential payout at target assumes Company, operating unit and individual results (as discussed below) are achieved at 100%.

The incentive target for Mr. Thode was increased from 60% to 70% by the Compensation Committee in February 2020 to position his target compensation at the median of the market data and to place additional emphasis on performance-based compensation.

Company Results. The Compensation Committee set the target performance criteria for 2020* Adjusted EBITDA at $437.1 million, a 13% increase over 2019 actual performance of $387.1 million. At the time the 2020 Incentive Program was approved, the Compensation Committee considered the performance criteria at target to be a challenging goal, particularly with indications in late 2019 and early 2020 of a slowing market. The Compensation Committee considered it extremely challenging due to the macro impact of the pandemic.

Adjusted EBITDA for 2020 was achieved at approximately $415 million, which was 95%<80% of target performance and resultedwill result in a performance payout factor of 86.7%0%.

						2020 Performance
	2020 Adjusted EBITDA Performance Range 1					Achievement		Payout
	Below Threshold (0% payout)	Threshold (50% payout)	Target (100% payout)	Maximum (150% payout)		($)	(%)	(%)
	< $349.7M	$349.7M	$437.1M	$524.5M		415M	95	86.7

¹ Adjusted EBITDA, a non-GAAP measure, is defined as net income (loss) excluding loss from discontinued operations, net of tax, income taxes, interest expense, depreciation and amortization, long-lived and other asset impairment, restatement and other charges, restructuring and other charges, corporate office relocation costs, debt extinguishment loss, transaction-related costs, indemnification (income) expense, net, non-cash stock-based compensation expense and other items. See the inside cover of the 20202021 Annual Report for a reconciliation of net income (loss) to Adjusted EBITDA.

The Compensation Committee believes Adjusted EBITDA is a comprehensive measure of financial performance, requiring focus on various components of financial and operating health, and an appropriate measure of management’s ability to run the business on an annual basis. The above formula is designed to create a focus on the overall success of the Company as well as the achievement of line of sight performance objectives. In addition, the Compensation Committee retains discretion to include or exclude exceptional, non-recurring items, which could result in unintended consequences and an erroneous performance achievement to the advantage or detriment of employees, including our Named Executive Officers.

2021 Incentive Program Target. For purposes of calculating payments under the Company’s Incentive Program, the Compensation Letters provided that the Company shall apply the Pre-Reduction Base Salary. Therefore, each Named Executive Officer’s cash incentive target was a specified percentage of Eligible Earnings during 2021 as defined in the footnote below. The table below presents each Named Executive Officer's 2021 cash incentive target as a specified percentage of his or her Eligible Earnings and a potential payout assuming the achievement of results at 100%.

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		2021 Incentive Program Target
Name	2021 Eligible Earnings 1 ($)	Percent (%) of Eligible Earnings	($)
Childers	875,000	120	1,050,000
Aron	460,000	80	368,000
Hildebrandt	420,000	75	315,000
Ingersoll	360,000	70	252,000
Thode	360,000	70	252,000

¹ Eligible Earnings for Mr. Childers is his Pre-Reduction Base Salary, according to the terms of his Compensation Letter. For Ms. Hildebrandt and Messrs. Aron, Ingersoll and Thode, Eligible Earnings is each executive’s current base salary.

 

To place additional emphasis on performance-based compensation, the Compensation Committee determined to increase the 2021 incentive target for Mr. Aron and Ms. Hildebrandt by an additional 5% of eligible earnings as shown in the chart.

Operating Unit Results. Weighting of Performance Criteria.Under the 2020 Incentive Program, operating unit results, based on pre-determined objectives for Adjusted EBITDA, safety, people, technology, and where applicable, operating unit financial and operational metrics for 2021 were measured for each Named Executive Officer,weighted as applicable, with the following weighting:follows:

 

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	% Weighting for Each Named Executive Officer
Operating Unit Performance Factors	Childers, Aron, Hildebrandt	Ingersoll	Thode
Safety 1	5% TRIR 5% PVIR	5% TRIR	5% Operations TRIR 5% Operations PVIR
People	10%	10%	10%
Technology	10%	10%	10%
Financial/Operational Metrics	70% Adjusted EBITDA	25% Horsepower Bookings 20% Aftermarket Services Revenue 15% Year-End Horsepower 15% Revenue per Horsepower	40% Contract Operations Results 15% Aftermarket Services Results 15% Make Ready Results

	% Weighting for Each Named Executive Officer
Performance Criteria	Childers, Aron, Hildebrandt	Ingersoll	Thode
Adjusted EBITDA	80%	70%	70%
Safety 1	5% TRIR 5% PVIR	10% TRIR	5% Operations TRIR 5% Operations PVIR
Technology	10%	10%	10%
Operating Unit Metrics	Not applicable	10%	10%

 

 

¹TRIR is total recordable incident rate and PVIR is preventable vehicle incident rate.

 

Adjusted EBITDA Target and Results. The Compensation Committee set the performance target for 2021 Adjusted EBITDA at $326 million. In determining the performance target, the Compensation Committee took into consideration the following factors:

We have not disclosed

●

Due to the sharp decline in demand and market volatility caused by the COVID-19 pandemic, Archrock took an aggressive approach to reductions in growth capital spending during 2020 and continuing into 2021.

●

The full year 2021 impact of 2020 returns of horsepower was considered, as well as our expectation for additional horsepower declines and pricing pressure in 2021, which historically occurs in gas compression services revenue following a significant decline in oil and gas production. Further, the market faced continued uncertainty from the potential impact of COVID-19 variants.

●

In 2020, we completed the sale of over $52 million in non-core assets to pay down debt and standardize our fleet, which was expected to reduce Adjusted EBITDA in 2021.

●

The Company realized a non-recurring tax benefit in 2020 of nearly $11 million.

For these reasons, the Compensation Committee considered the target for Adjusted EBITDA appropriate. Adjusted EBITDA performance had to be achieved at 80% or greater of target performance for our Named Executive Officers to earn a payout under the 2021 Incentive Program.

Adjusted EBITDA for 2021 was achieved at $361 million. In its discretion, the Compensation Committee, reduced Adjusted EBITDA for purposes of the 2021 Incentive Plan to $357 million, which was 109.6% of target performance and resulted in a performance payout factor of 148%. The Compensation Committee considered the positive net impact of asset sales on Adjusted EBITDA in 2021 of $21 million. Because such asset sales are part of the Company’s longer-term strategy to standardize and reduce the age of its compression fleet, the Compensation Committee determined to make no discretionary adjustments to the portion of performance achievement attributable to such asset sales. The Compensation Committee did, however, reduce the performance achieved for Adjusted EBITDA by $3.7 million (a payout factor of 4%) for non-recurring items that had no strategic significance to the Company.

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2021 Adjusted EBITDA Performance Range					2021 Performance Results
Below Threshold	Threshold	Target	Maximum		Achievement		Payout	Weighting
(0% payout)	(50% payout)	(100% payout)	(200% payout)		($)	(%)	(%)	(%)
< $261M	$261M	$326M	$392M		357M	109.6	148	70-80

Safety Criteria and Results. The Company views safety performance as a core indicator of our success, therefore, the Compensation Committee has included safety as a standalone component of our incentive program for over 15 years. Our safety results include all permanent and part-time employees and contractors and are measured against over 4 million man hours worked and over 23 million miles driven in 2021. To achieve a payout, 2021 performance had to meet or be better than our safety criteria as indicated in the chart below.

			2021 Performance Results
	2021 Safety Criteria		Results	(%) Achievement	(%) Payout	Weighting Applicable to Ingersoll (%)	Weighting Applicable to All Other NEOs (%)
TRIR 1	</= 0.50		0.10	>100	100	10	5
PVIR 2	</= 0.50		0.13	>100	100	—	5

¹ TRIR (calculated pursuant to OSHA guidelines) = total number of recordable incidents (TRIR) x 200,000/divided by the total hours worked during the year

² PVIR (calculated pursuant to API guidelines) = total number of preventable vehicle incidents x 1,000,000 miles/divided by mileage driven during the year

Technology Targets and Results. At the end of 2021, we had completed several major phases of our process and technology transformation project that enables us to harness technology in all aspects of our business to drive operational efficiencies and enhance our value proposition to our customers. Our investments have focused on the automation of workflows, integration of digital and mobile tools for our field service technicians and expanded remote monitoring capabilities of our vehicle and compressor fleets. We expect this project to, among other things, help us achieve increased asset uptime, improve the efficiency of our field service technicians, improve our supply chain and inventory management and reduce our emissions and carbon footprint, thereby improving our profitability.

		2021 Performance Results
2021 Technology Performance Criteria		Achievement (%)	Payout (%)	Weighting (%)
The Compensation Committee’s quantitative and qualitative evaluation of the following: Defined Project Milestones/Timeline Financial Performance Risk Mitigation Internal Adoption		100	100	10%

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Operating Unit Targets and Results. Operating Unit performance criteria are applicable to Mr. Ingersoll, Sales and Operations Support, and to Mr. Thode, Operations, and include more granular and specific line of sight performance goals necessary to maintain our focus on operating efficiencies at the business unit level and critical to the Company’s success.

		2021 Performance Results
2021 Operating Unit Performance Criteria 1		Weighting (%)	Combined Achievement (%)	Combined Weighting (%)
Sales and Operations Support – Ingersoll Horsepower Bookings Aftermarket Services Quoted Job Performance		70 30	146	10
Operations – Thode Service Availability Aftermarket Services Quoted Job Performance Startup Quality		60 25 15	99	10

¹ Specific performance targets with respect to the achievement of these operating unit performance factorsare not disclosed because they are derived from internal analyses reflecting our business strategy and will not otherwise be publicly disclosed.strategy. We believe their disclosure would provide our competitors, customers and other third parties with significant insights regarding our confidential business strategies that could cause us substantial competitive harm.

 

Impact of COVID-19 on Operating Unit Results. The Company achieved Adjusted EBITDA of $415 million and delivered on its strategic and operational performance objectives. The Compensation Committee considered this an exceptional result, particularly in light of the severe impact of the pandemic on the oil and gas industry. The financial results were achieved in part due to a significant reduction in operating costs and capital spending, which had a disproportionate impact on sales and bookings. Further, the amount of horsepower returned was significantly mitigated through the efforts of our sales and operations support teams. These efforts were critical to achievement of 2020 Adjusted EBITDA and to protecting the overall health of the Company, but alternatively meant that certain operating units could not reach their targets set for the year. The Compensation Committee determined to rebalance the portion of operating unit performance associated with financial and operational performance in light of the disproportionate impact of the pandemic on certain operating units. This decision results in equal sharing of the benefit of the Company’s overall results during an unprecedented year.

The following provides additional insight into operating unit performance metrics and the performance achievement for each factor and the impact of the Compensation Committee’s decision to adjust operating unit financial and operational performance achievement due to the disparate impact of the pandemic on certain operating units.

Operating Unit Performance Factors	Percentage (%) Performance Achievement
	Childers, Aron, Hildebrandt	Ingersoll	Thode
Safety, People and Technology	67	60	67
Financial/Operational – Actual/Adjusted	85.7/100	30.1/85	85.4/100
Total Operating Unit Performance (based on Adjusted Financial/Operational performance achievement)	90.0	78.8	90.0

Individual Performance. In early 2020,2021, the Compensation Committee approved individual performance objectives for Mr. Childers related to the Company's financial and operational performance, strategic initiatives (including strategic asset sales, debt reduction, implementation of our process and technology transformation project and certain ESG initiatives), leadership goals and Company culture initiatives. Upon conclusion of fiscal year 2020,2021, the Compensation Committee met with Mr. Childers to discuss his performance relative to the approved individual objectives. Thereafter, the Compensation Committee met in executive session and reported its assessment to the full Board. The Board delivered its evaluation to Mr. Childers, the result of which is summarized below and in “Executive Summary – 20202021 Performance Highlights and Response to COVID-19”Highlights”. The Compensation Committee considered each Named Executive Officers’ accomplishments during 2020,2021, including implementation of operational improvements, demonstrated leadership, capital discipline, progress on sustainability data gathering, analysis and reporting and the achievementsuccessful implementation of certain milestones in connection with a multi-yearmajor components of our process and technology initiative to modernize the Company’s operations.transformation project.

 

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Following such assessments of individual performance during 2020,2021, the Compensation Committee and Board concluded that Mr. Childers exceededmet expectations, and the Compensation Committee determined that each of Ms. Hildebrandt and Messrs. Aron, Ingersoll and Thode exceeded expectations.

 

The Compensation Committee also considered each Named Executive Officer's (including Mr. Childers’) individual contribution toward significant strategic initiatives and accomplishments that were not specifically enumerated in the 20202021 Incentive Program performance criteria but are critical to the Company’s long-term strategic objectives or became imperative due to the COVID-19 pandemic. Specifically, the Compensation Committee considered the following:

 

●

Our team deliveredcontinued to deliver exceptional operational and financial performance in an uncertain market, and met the midstexisting and additional compression needs of our customers despite a sharp and unexpected industry downturn. Working with customers, our sales team stabilized operating horsepower. With reduced operating costs and a near elimination of allrelatively small capital expenditures during the last three quarters of the year, expenses were brought in line with revenues.budget.

 

●

In December 2020, the Company added an additional $300 million aggregate principal amount to its debt portfolio through a tack-on to our 6.25% Senior Notes issued in an aggregate principal amount of $500 million in late 2019. The tack-on offering increases our flexibility and access to capital in an uncertain market environment.

●

Despite the challenging environment for the oil and gas industry, weWe continued to execute on our strategy to monetize non-core natural gas compression or other assets. The proceeds of these divestitures, along with free cash flow, were used to reduce debt by approximately $155$159 million.

●

While a remote working environment in 2020 presented challenges from a culture development perspective, our executive leadership team provided weekly updates to employees, providing transparency regarding the challenges of and our response to the pandemic, including its impact on both the Company’s performance and employee health. The year was used to lay the groundwork for a more comprehensive attraction, development and retention program for our technical team, as well as programs to enhance diversity and inclusion.

 

●

In addition to the inclusion of quantitative safety metrics in our 20202021 Incentive Program, our management team’s performance was evaluated based on qualitative measures related to the development during 20202021 of certain internal initiatives aimed at our policy, communication strategy (including the publication of our Corporate Sustainability Report)future environmental performance as well as important groundwork for diversity and governance approach to environmental and social issues.inclusion initiatives.

 

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The chart below provides each Named Executive Officer’s target cash incentive, multiplied by the achievement percentages for Company performance, operating unit performance and individual performance and the payout earned.

 

Name	2020 Cash Incentive Target 1 ($)	Company Performance Factor (%)	X	Operating Unit Performance Factor 2 (%)	X	Individual Performance (%)	=	Performance Achievement (%)	=	Total Payout Earned ($)
Childers	1,090,385	86.7		90.0		120		93.6		1,021,000
Aron	356,250	86.7		90.0		125		97.5		347,477
Hildebrandt	303,423	86.7		90.0		110		85.8		260,437
Ingersoll	259,808	86.7		78.8		120		82.0		213,000
Thode	245,000	86.7		90.0		150		117.0		286,760

¹ Assumes Company and, as applicable, operating unit results are achieved at 100%.

Name	2021 Cash Incentive Target ($)	Company Performance Factor (%)	X	Individual Performance (%)	=	Performance Achievement (%)	=	Total Payout Earned ($)
Childers	1,050,000	138.4		100		138.4		1,453,200
Aron	368,000	138.4		110		152.2		560,243
Hildebrandt	315,000	138.4		110		152.2		479,556
Ingersoll	252,000	138.2		110		152.0		383,160
Thode	252,000	133.5		120		160.2		403,757

 

² As discussed under “Impact of COVID-19 on Operating Unit Results” above, the Compensation Committee equalized all operating unit financial and operational performance achievement. Actual operating unit financial and operational performance results are provided above.

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LONG-TERM INCENTIVE COMPENSATION

 

During 2020,2021, our long-term incentive program consisted of the following LTI Awards:

 

Award Type	LTI Mix		Features
Restricted Stock	60%	●	·Time-vested awards that vest one-third per year ·     Encourages
		●	Supports retention objectives and incentivizes employees to work toward long-term performance goals by aligning their interests with stockholder interests ·
		●	Dividends are paid on unvested shares as and when they are paid to our stockholders
Cash Available for Dividend (“CAD”) Performance Units	20%10%	●	·     Performance-basedPerformance awards that are earned based upon achievement of growth incumulative cash available for dividend duringfor the three-year performance period, January 1, 20202021 through December 31, 20222023 ·
		●	Performance goals are intended to drive consistent stockholder returns ·
		●	Payout will range between 0% to 200% of units awarded at target
		●	Earned units cliff-vest following conclusion of the three yearthree-year performance period ·
		●	Units are denominated in shares but settled in cash based on the stock price on the date of vesting; the awards are non-dilutive ·
		●	Dividend equivalents are accrued during the performance period and are paid based on the actual number of units earned and vested
Total Shareholder Return (“TSR”)Leverage Performance Units	20%10%	●	·     Performance-basedPerformance awards that are earned based upon achievement of total stockholder return performance relative to our peersleverage reduction targets over athe three-year performance period, January 1, 20202021 through December 31, 20222023 ·
		●	Performance goals are intended to drive long-term consistent stockholder valueimprove the Company’s financial profile
		●	Payout will range between 0% to 200% of units awarded at target ·
		●	Earned units cliff-vest following conclusion of the three-year performance period
		●	·Units are denominated in shares andbut settled in shares or cash based on the stock price on the date of vesting, complimentary tovesting; the underlying performance criteria and the value creation aspect of the awardawards are non-dilutive
		●	·Dividend equivalents are accrued during the performance period and are paid based on the actual number of units earned and vested
Total Stockholder Return (“TSR”) Performance Units	20%	●	Performance awards that are earned based upon achievement of total stockholder return performance relative to our peers over the three-year performance period, January 1, 2021 through December 31, 2023
		●	Performance goals are intended to drive long-term consistent stockholder value
		●	Payout will range between 0% to 200% of units awarded at target
		●	Earned units cliff-vest following conclusion of the three-year performance period
		●	Units are denominated in shares and settled in shares on a one-for-basis, complimentary to the underlying performance criteria and the value creation aspect of the award
		●	Dividend equivalents are accrued during the performance period and are paid based on the actual number of units earned and vested

 

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Long-Term Incentive Plans. Grants of restricted stock and performance awards through April 30, 2020performance-based restricted stock units were made under the Archrock, Inc. 20132020 Stock Incentive Plan, (as amended, the “2013 Stock Incentive Plan”), which was approved by our stockholders in April 2013. In April 2020, our stockholders approved the adoption of our 2020 Stock Incentive Plan. Thereafter, all awards have been made are under our2020. The 2020 Stock Incentive Plan and no additional awards may be made under the 2013 Stock Incentive Plan. The Stock Incentive Plans areis administered by the Compensation Committee.

 

Timing of Awards. We generally seek to grant equity incentive awards on a regular and predictable cycle and we have historically granted during the first quarter of each year. The Compensation Committee generally establishes its schedule for making annual LTI Awards several months in advance, and does not make such awards based on knowledge of material nonpublic information. This practice results in awards typically being granted on a regular, predictable cycle. Equity-based awards are occasionally granted at other times during the year, such as upon the hiring of a new employee or following the promotion of an employee. LTI Awards are granted and valued based on the market closing price of our common stock on the date of approval by the Compensation Committee.

 

Named Executive Officers' 20202021 LTI Awards. In determining the grant of 20202021 LTI Awards, the Compensation Committee considered the factors discussed above under “How Our Compensation Committee Determines Executive Compensation,” and also reviewed share utilization with respect to the 20132020 Stock Incentive Plan, and potential overhang and burn rate under various award scenarios. The Compensation Committee also considered the retention aspect of awards as well as performance metrics that balance short- and long-term objectives. The following chart provides the total value of each Named Executive Officer's 20202021 LTI Award based on the grant date market value of our stock and the number of shares and units awarded (in the case of performance-based units, listed at target payout).

 

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Name	Target Long-Term Incentive Grant Date Value ($)	Restricted Shares  (#)	CAD Performance Units (#)	TSR Performance Units (#)	Target Long-Term Incentive Grant Date Value ($)	Restricted Shares (#)	CAD Performance Units (#)	Leverage Performance Units (#)	TSR Performance Units (#)
Childers	4,000,000	264,026	88,008	88,008	4,100,000	229,906	38,318	38,317	76,635
Aron	1,000,000	66,006	22,002		1,100,000	61,682	10,280	10,280	20,560
Hildebrandt	800,000	52,805	17,601		850,000	47,663	7,944	7,943	15,887
Ingersoll	600,000	39,603	13,201		600,000	33,644	5,607	5,607	11,214
Thode	500,000	33,003	11,001		600,000	33,644	5,607	5,607	11,214

 

20202021 Performance-Based LTI Awards.

 

CAD and Leverage Performance Units. CAD Performance Units may be earned based upon growth in our cash available for dividend over the three-year performance period of January 1, 2020 through December 31, 2022 (the “CAD Performance Units”), with payout ranging from 0% to 200% of the total units granted. The percentage of each award of2021 CAD and Leverage Performance Units that may be earned at the conclusion of the performance period will be based on the achievement of the performance factorfactors over a three-year performance period as indicated in the chart below.

 

	Potential Payout Based on Performance Achievement
Performance Factor	Below Threshold (0% payout)	Threshold (50% payout)	Target (100% payout)	Maximum (200% payout)
Average Annual Growth Rate in Cash Available for Dividend 1 Calculated as the sum of the annual growth (as compared to the prior year) in cash available for dividend divided by the weighted average of common shares outstanding for the fiscal year for each of the three fiscal year performance periods, divided by three	<1.0%	1.0%	3.0%	6.0%

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	Performance Achievement and Payout
Performance Factor	Below Threshold (0% payout)	Threshold (50% payout)	Target (100% payout)	Maximum (200% payout)
Cumulative CAD Adjusted EBITDA, minus Maintenance and other Capital Expenditures, minus Cash Taxes, minus Cash Interest measured for the three-year performance period	<$450M	$450M	$550M	$750M
Leverage 1 The ratio of (a) Total Indebtedness as of the performance period end to (b) EBITDA (earnings before interest, taxes, depreciation and amortization) for the period of four (4) consecutive fiscal quarters most recently ended (i.e., EBITDA as of the performance period end)	>5.0x	5.0x	4.5x	=/<3.5x

 

¹ Cash Available for Dividend is defined as Adjusted EBITDA², minus maintenanceThe calculation of Leverage includes the Parent and other capital expenditures, minus cash taxes, minus cash interest.

² Adjusted EBITDA,its Restricted Subsidiaries on a non-GAAP measure, is defined as net income (loss) excluding loss from discontinued operations, net of tax, income taxes, interest expense, depreciation and amortization, long-lived and other asset impairment, restatement and other charges, restructuring and other charges, corporate office relocation costs, debt extinguishment loss, transaction-related costs, indemnification (income) expense, net, non-cash stock-based compensation expense and other items.consolidated basis in accordance with GAAP. All capitalized terms have the meaning ascribed to them under the Company’s revolving credit agreement.

 

At the conclusion of the three-year performance period, a number of CAD and Leverage Performance Units ranging from 0% to 200% of the total number of CAD Performance Unitsunits granted will be earned. If the Company'sCompany’s performance falls between the levels specified in the chart, the percentage of CAD and Leverage Performance Units that will be earned will be determined using straight-line interpolation between such levels. No payout will be earned if the Company'sCompany’s CAD and Leverage performance is below the threshold level. The earned CAD and Leverage Performance Units are also subject to three-year cliff vesting on January 25, 2023,March 5, 2024, subject to continued employment through the vesting date. In addition, the award is subject to accelerated vesting as described below under “Potential Payments upon Termination or Change of Control”. Each earned CAD and Leverage Performance Unit is payable in cash based on the market closing price of our common stock on the date of vesting. The award includes tandem DERs which are accrued during the performance period and will be paid based on the number of units earned and vested.

 

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TSR Performance Units. TSR Performance Units may be earned based upon our three-year total stockholder return (the “TSR Performance Units”), with payout ranging between 0% and 200% of the units granted. The percentage of each award of2021 TSR Performance Units that willmay be earned will be determined at the conclusion of the three-year performance period of January 1, 2020 through December 31, 2022, based on the Company'sour TSR performance rank relative to the companies in our 2020 Long-Term Incentive Peer Group.2021 peer group at the conclusion of the three-year performance period.

 

	PotentialPerformance Achievement and Payout Based on Performance Achievement1
	Below Threshold (0% payout)	Threshold (36%34% payout)	Target (100% payout)	Maximum (200% payout)
Performance Factor	Rank Based on 2020 Long-Term Incentive2021 Peer Group
Total Stockholder Return The Average Fair Market Value 12 at the end of the performance period plus dividends paid over the performance period divided by the Average Fair Market Value at the beginning of the performance period	< 1213th	1213th	7th 2	1st

 

 

¹ Average Fair Market Value as of any given date is the average fair market value of a share of Archrock common stock during the 20 consecutive trading dates ending on and including such date.

² Payout at target assumesPayouts assume no changes in the Long-Term Incentive Peer Group.2021 peer group. In the event a company in the Long-Term Incentive Peer Grouppeer group becomes insolvent or liquidates, that company shall remain in the group, but will be moved to the lowest rank. In the event a company is acquired or merged into another company and is not the surviving company, or as a result of any other corporate transaction, such company shall be removed from the Long-Term Incentive Peer Grouppeer group and the percentile payouts shall be ratably adjusted.

 

As discussed above, based² Average Fair Market Value as of any given date is the average fair market value of a share of Archrock common stock during the 20 consecutive trading dates ending on and including such date.

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Based on our ordinal rank in the Long-Term Incentive Peer Grouppeer group at the conclusion of the three-year performance period, a number of TSR Performance Units ranging from 0% to 200% of the total number of TSR Performance Units granted will become earned. If the Company'sCompany’s TSR rank falls between the levels specified in the chart above, the percentage of TSR Performance Units that will be earned will be determined using straight-line interpolation between such levels. No payout will be earned if the Company'sCompany’s TSR rank is below the threshold level. The earned TSR Performance Units are also subject to three-year cliff vesting on January 25, 2023,March 5, 2024, subject to continued employment through the vesting date. In addition, the award is subject to accelerated vesting as described below under “Potential Payments upon Termination or Change of Control”. Each earned TSR Performance Unit is payable as a share of common stock upon vesting. The award includes tandem DERs which are accrued during the performance period and will be paid based on the number of units earned and vested.

2019 Performance Units. In 2019, the Compensation Committee awarded performance units to our Named Executive Officers measured over the period of January 1, 2019 through December 31, 2021 (the “2019 Performance Units”) based on the following performance criteria:

 

Impact

●

total stockholder return (the “2019 TSR Performance Units”), the payment of COVID-19which was based on 2020 Performance-Based LTI Awards. Despiteour stock price performance relative to our 2019 peer group. Archrock ranked third among the potential negative impact of14 companies included in the pandemiccomparison. Based on performance achievement,this result, the Compensation Committee determined to makethat the 2019 TSR Performance Units were payable at 168% of target.

●

growth in cash available for dividend (the “2019 CAD Performance Units”), the payment of which was based on the average annual dividend growth rate per share. The average annual dividend growth rate over the performance period did not meet the threshold performance criteria; therefore, the Compensation Committee determined that no changes to the 2020 Performance-Based LTI Awards. payout was earned.

 

2018 TSR Performance Units. In 2018,The following chart provides the Compensation Committee awarded TSRnumber of 2019 Performance Units (the “2018 TSRawarded and the number of 2019 Performance Units”), the payment of which isUnits earned and paid based on our stock price performance relative to our 2018 peer group over the performance period of January 1, 2018 through December 31, 2020. Archrock ranked 2^nd among the 16 companies included in the comparison. Based on this result, the Compensation Committee determined that the 2018 TSR Performance Units are payable at 186% of target, subject to cliff vesting on August 20, 2021.actual performance. Each 2018 TSRearned 2019 Performance Unit will be paidwas settled as a share of common stock or the cash equivalent based on the market closing price on the date of vesting, as follows:vesting.

 

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	2019 TSR Performance Units				2019 CAD Performance Units
Name	Payable at Target		Paid Based on Performance		Payable at Target		Paid Based on Performance
Childers	82,802		139,107		82,802	—
Aron	19,108		32,101		19,108	—
Hildebrandt	15,923		26,750		15,923	—
Ingersoll	10,615		17,833		10,615	—
Thode	8,492		14,266		8,492	—

 Table

Dividend equivalents were accrued during the performance period and were paid on earned 2019 Performance Units upon vesting of Contentsthe underlying award.

Name	Units Payable at Target	Units Payable Based on Performance
Childers	53,685	99,854
Hildebrandt	6,310	11,737
Ingersoll	4,470	8,314

 

Vesting of LTI Awards. All annual awards granted to employees, including our Named Executive Officers, include a minimum three-year vesting period.

 

Upon a Termination Due to Death or Disability. The award agreements for all outstanding equity awards provide that, upon a termination due to death or disability, the award will accelerate in full. Performance units will accelerate (a) in full based on the achievement of the applicable performance measures if such achievement has been or can be determined by the Compensation Committee in good faith as of the date of termination due to death or disability or (b) if the Compensation Committee cannot reasonably determine the achievement percentage, then achievement at the target performance level.

 

Upon a Change of Control. The award agreements for all outstanding equity awards are structured as “double trigger” arrangements, that is, they provide that no portion of the award shall be subject to accelerated vesting solely upon a change of control. Instead, such awards will be subject to accelerated vesting only if a termination of the applicable executive’s employment by the Company without cause or by the executive for good reason occurs six months prior to or within eighteen months following a change of control. Performance units will accelerate (a) in full based on the achievement of the applicable performance measures as determined by the Compensation Committee in good faith as of the date of termination or (b) if the Compensation Committee cannot reasonably determine the achievement percentage, then achievement at the target performance level.

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OTHER COMPENSATION POLICIES, PRACTICES &AND GUIDELINES

 

COMPENSATION-RELATED POLICIES

 

Stock Ownership Requirements. The Compensation Committee believes that stock ownership requirements closely align our Named Executive Officers’ interests with those of our stockholders by ensuring they hold a meaningful ownership stake in our Company. Our Chief Executive Officer is required to hold an aggregate amount of our common stock with a market value of at least five times his annual base salary (two times annual base salary in the case of our other Named Executive Officers). Our Compensation Committee reviews the stock ownership of our Named Executive Officers annually as of June 30. As of the date of this Proxy Statement, all Named Executive Officers subject to the stock ownership guidelines were in compliance with the guidelines.

 

Prohibition on Hedging and Pledging. Company policy prohibits all employees and directors from entering into any transaction designed to hedge or offset any decrease in the market value of our equity securities, including purchasing financial instruments (such as variable forward contracts, equity swaps, collars or exchange funds), or otherwise trading in market options (such as puts or calls), warrants, or other derivative instruments of our equity securities. In addition, our Named Executive Officers and directors may not pledge, hypothecate or otherwise encumber shares of the Company'sCompany’s common stock as collateral for indebtedness.

 

Executive Compensation Recoupment (“Clawback”). The Company has adopted a formal Clawback policy that allows, as applicable, the adjustment to or recovery of Performance-Based Compensation that exceeds the amount that would have been earned or paid had it been determined based on a restatement of the Company’s financial results due to material non-compliance with financial reporting requirements as a result of misconduct, including fraud or theft of Company assets. For this purpose, Performance-Based Compensation generally means all bonuses and other incentive and equity compensation (including, but not limited to, stock options), the amount, payment and/or vesting of which was calculated based on financial reporting measures. Performance-Based Compensation is deemed to be “received” in the fiscal period during which the applicable financial reporting measure is attained, even if the payment or grant occurs after the end of that fiscal period.

 

RETIREMENT SAVINGS, WELFARE AND OTHER BENEFITS

 

Our Named Executive Officers participate in our company-sponsoredCompany-sponsored benefit programs on generally the same basis as other salaried employees. These benefits are designed to provide retirement income and protection against the financial hardship that can result from illness, disability or death.

 

Retirement Savings Plan. The Archrock 401(k) Plan allows certain employees who are U.S. citizens, including our Named Executive Officers, to defer a portion of their eligible salary, up to the Internal Revenue Code (the “Code”) maximum deferral amount, on a pre-tax basis or on a post-tax (Roth) basis. Participants make contributions to an account maintained by an independent trustee and direct how those contributions are invested. We match 100% of a participant’s contribution up to a maximum of 5% of his or her annual eligible compensation. Participants vest in our matching contributions after two years of employment.

 

Employee Stock Purchase Plan. The Archrock, Inc. Employee Stock Purchase Plan (the “ESPP”) provides our eligible employees, including our Named Executive Officers, the opportunity to purchase our common stock through payroll deductions and is designed to comply with Section 423 of the Code. Our Compensation Committee, which administers the ESPP, has the discretion to set the purchase price at 85% to 100% of the fair market value of a share of our common stock on one of the following dates: (i) the offering date, (ii) the purchase date or (iii) the offering date or the purchase date, whichever is lower. Employees who elected to participate in the ESPP could purchase a share of our common stock at the lesser of (a) 95% of the fair market value of a share of common stock on the offering date or (b) 95% of the fair market value of a share of common stock on the purchase date. Offering periods consist of three-month periods, or such other periods as may be determined from time to time by our Compensation Committee. A total of 1,000,000 shares of our common stock has been authorized and reserved for issuance under the ESPP. As of December 31, 2020, 611,7072021, 521,719 shares remained available for purchase under the ESPP.

 

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Deferred Compensation Plan. The Archrock, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”) allows certain key employees who are U.S. citizens, including our Named Executive Officers, to defer receipt of their compensation, including up to 100% of their salaries and bonuses, and be credited with Company contributions designed to serve as a make-up for the portion of the employer-matching contribution that cannot be made under the Archrock 401(k) Plan due to Code limits. Participants generally must make elections relating to compensation deferrals and plan distributions in the year preceding that in which the compensation is earned. Contributions to the Deferred Compensation Plan are self-directed investments in the various funds available under the plan. There are thus no interest calculations or earnings measures other than the performance of the investment funds selected by the participant. Participants direct how their contributions are invested and may change these investment elections at any time.

 

Health and Welfare Benefit Plans. We maintain a standard complement of health and welfare benefit plans for our employees, including our Named Executive Officers, which provide medical, dental and vision benefits, employee assistance, health savings and flexible spending accounts, short-term and long-term disability insurance, accidental death and dismemberment insurance and life insurance coverage. These benefits are provided to our Named Executive Officers on the same terms and conditions as they are provided to our other employees.

 

Perquisites. The Compensation Committee has approved a de minimis amount of perquisites for our Named Executive Officers that falls below the $10,000 disclosure threshold; the Compensation Committee believes this approach to perquisites is in our stockholders’ best interest.

 

AGREEMENTS WITH EXECUTIVE OFFICERS

 

Executive Employment Letters. Each of our Named Executive Officers entered into employment letters with us, which set forth the applicable executive’s initial title, reporting relationship and compensation (the “Employment Letters”). Under the Employment Letters, each such Named Executive Officer is eligible for an annual base salary, short-term incentive target and LTI Award value, which are subject to annual review by our Compensation Committee. In addition, each Employment Letter provides that the applicable executive is eligible to participate in all employee benefit plans maintained by the Company.

 

Agreements Related to Termination of Employment. We have entered into severance benefit agreements and change of control agreements with each of our Named Executive Officers. Our Compensation Committee believes that severance and change of control agreements are necessary to attract and retain executive talent and are, therefore, a customary part of executive compensation. Our change of control agreements are structured as “double trigger” agreements. In other words, the change of control alone does not trigger benefits; rather, benefits are paid only if the executive incurs a qualifying termination of employment within six months prior to or 18 months following a change of control. See “Severance Benefit and Change of Control Arrangements” and “Potential Payments upon Termination or Change of Control” for a description of the terms of and the potential payouts under those agreements.

 

Impact of COVID-19 – Compensation Letters. As indicated under “Base Salary”, COVID-19 – Compensation Letters. As indicated under “Base Salary,” the Compensation Letters entered into among the Company and each Named Executive Officer in April 2020 provided for temporary salary reductions (25% in the case of our CEO and 10% for all other Named Executive Officers). Under the Compensation Letters, entered into among the Company and each Named Executive Officer in April 2020 provide for temporary salary reductions (25% in the case of our CEO and 10% for all other Named Executive Officers). Under the Compensation Letter, (a) all payments and benefits (except 401(k) contributions and benefits) shall be based on the Pre-Reduction Base Salary and (b) if the executive incurs a qualifying termination of employment under his or her severance or change of control agreement then, for purposes of calculating the applicable severance payments and benefits payable thereunder, the Company will apply the Pre-Reduction Base Salary. In addition, each Named Executive Officer agreed to waive his or her right to resign employment with us for “Good Reason” (as defined in the applicable agreement) in connection with these compensation changes. In the event of any subsequent reduction in annual base salary, the cumulative impact of such subsequent reduction and the compensation changes described in the Compensation Letter may be taken into account for determining whether “Good Reason” exists under the applicable agreement.

 

Effective July 2021, Mr. Childers’ base salary was restored by half of the 25% reduction and effective April 2022, his base salary will be fully restored. Effective July 4, 2021, the base salary was restored for each of Ms. Hildebrandt and Messrs. Aron, Ingersoll and Thode. Upon payout to our Named Executive Officers during the first quarter of 2022 of performance-based compensation earned under the 2021 Incentive Program and, with respect to Mr. Childers, the full restoration of his base salary in April 2022, the Compensation Letters are no longer in effect.

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RISK ASSESSMENT RELATED TO OUR COMPENSATION STRUCTURE

 

Pearl Meyer performed an analysis of our compensation practices in 20202021 to identify areas of compensation-related risk and risk mitigation. This analysis supports our position that our compensation practices reflect sound risk management practices and do not promote risks that are reasonably likely to result in a material adverse effect on us. For example, our Compensation Committee and management set performance goals in light of past performance, future expectations and market conditions that they believe do not encourage the taking of unreasonable risks. Our Compensation Committee believes its practice of considering non-financial and other qualitative factors in determining compensation awards discourages excessive risk taking and encourages good judgment. In addition, we believe executive compensation is allocated between cash and equity-based awards, between fixed and variable awards, and between short-term and long-term focused compensation in a manner that encourages decision-making that balances short-term goals with long-term goals and thereby reduces the likelihood of excessive risk taking. Finally, our Compensation Committee has established (a) short-term incentives that balance various Company objectives and provide for payout limits, and (b) LTI Awards with three-year minimum performance and vesting periods; we believe these program features further balance short- and long-term objectives and encourage employee behavior designed to achieve sustained profitability and stockholder value.

 

TAX AND ACCOUNTING CONSIDERATIONS

 

Section 162(m) of the Code. Section 162(m) of the Code generally disallows the deductibility of certain compensation expenses in excess of $1,000,000 to certain executive officers within a fiscal year. Compensation that is “performance-based” may be excluded from this limitation only if it is payable pursuant to a binding written agreement in effect on November 2, 2017 that is not materially modified. We believe that maintaining the discretion to evaluate the performance of and compensate our executive officers is an important part of our responsibilities and benefits our stockholders, even if compensation may be non-deductible under Section 162(m) of the Code. In light of the repeal of the performance-based compensation exception to Section 162(m) of the Code, the Compensation Committee expects in the future to approve compensation that is non-deductible for income tax purposes.

 

Section 280G of the Code. Section 280G of the Code disallows a tax deduction for excess parachute payments to certain executives of companies that undergo a change of control. In addition, Section 4999 of the Code imposes a 20% excise tax on the individual with respect to the excess parachute payment. Parachute payments are compensation linked to or triggered by a change of control and may include, but are not limited to, bonus payments, severance payments, certain fringe benefits, and payments and acceleration of vesting from LTI plans including stock options and other equity-based compensation. Excess parachute payments are parachute payments that exceed a threshold determined under Section 280G of the Code based on the executive’s average prior compensation. Since 2009, we have had a policy of prohibiting tax gross-ups on income attributable to change of control agreements and other executive benefit agreements, which is discussed further in “Potential Payments upon Termination or Change of Control”.

 

Accounting for Stock-Based and Unit-Based Compensation. We have followed Financial Accounting Standards Board Accounting Standards Codification 718, “Stock Compensation” (“ASC 718”) in accounting for stock-based and unit-based compensation awards. ASC 718 requires companies to calculate the grant date “fair value” of their stock-based and unit-based awards using a variety of assumptions. ASC 718 also requires companies to recognize the compensation cost of their stock-based and unit-based awards in their income statements over the period that an employee is required to render service in exchange for the award. We expect that we will regularly consider the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our stock incentive plans and programs. As accounting standards change, we may revise certain programs to appropriately align accounting expenses of our equity awards with our overall executive compensation philosophy and objectives.

 

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REPORT OF THE COMPENSATION COMMITTEE REPORT

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

 

Submitted by the Compensation Committee of the Board of Directors

 

James H. Lytal, Chair

Gordon T. Hall

J.W.G. Honeybourne

Leonard W. Mallett

 

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COMPENSATION TABLES

 

SUMMARY COMPENSATION

 

The following table shows the compensation paid during the years shown to our Named Executive Officers.

 

Name and Title	Year	Salary ($)(1)	Bonus ($)	Stock Awards   ($)(2)		Option Awards   ($)		Non-Equity Incentive Plan   Compensation   ($)(3)			All Other Compensation   ($)(4)			Total ($)			Year		Salary ($)(1)		Stock Awards   ($)(2)			Non-Equity Incentive Plan   Compensation   ($)(3)			All Other Compensation   ($)(4)		Total ($)
D. Bradley Childers	2020	782,452	—	4,245,524		—		1,021,000			74,272			6,123,248			2021		710,937		4,375,869			1,453, 200			69,266		6,609,272
President and Chief	2019	861,539	—	4,188,963		—		1,027,700			78,600			6,156,802			2020		782,452		4,245,524			1,021,000			74,272		6,123,248
Executive Officer	2018	818,269	—	3,612,605		—		1,140,422			377,916			5,949,212			2019		861,539		4,188,963			1,027,700			78,600		6,156,802
Douglas S. Aron	2020	448,462	—	1,061,376		—		347,477			50,178			1,907,493			2021		437,000		1,173,997			560,243			39,224		2,210,464
Senior Vice President and	2019	445,192	—	966,674		—		555,100			39,345			2,006,311			2020		448,462		1,061,376			347,477			50,178		1,907,493
Chief Financial Officer	2018	155,288	—	499,991		—		150,000			13,440			818,719			2019		445,192		966,674			555,100			39,345		2,006,311
Stephanie C. Hildebrandt	2020	409,231	—	849,090		—		260,437			39,549			1,558,308			2021		399,000		907,169			479,556			32,972		1,818,697
Senior Vice President,	2019	407,308	—	805,554		—		388,600			31,906			1,633,368			2020		409,231		849,090			260,437			39,549		1,558,308
General Counsel and Secretary	2018	397,308	—	624,998		—		330,000			73,027			1,425,333			2019		407,308		805,554			388,600			31,906		1,633,368
Jason G. Ingersoll	2020	350,385	—	636,816		—		213,000			33,020			1,233,221			2021		342,000		640,341			383,160			27,750		1,393,251
Senior Vice President,	2019	347,308	—	537,032		—		325,600			33,214			1,243,154			2020		350,385		636,816			213,000			33,020		1,233,221
Sales and Operations Support	2018	329,231	—	442,712		—		340,000			63,184			1,175,127			2019		347,308		537,032			325,600			33,214		1,243,154
Eric W. Thode	2020	329,808	—	530,688		—		286,760			19,500			1,166,756			2021		337,500		640,341			403,757			31,213		1,412,811
Senior Vice President,	2019	300,000	—	429,620		—		287,300			22,378			1,039,298			2020		329,808		530,688			286,760			19,500		1,166,756
Operations																	2019		300,000		429,620			287,300			22,378		1,039,298

 

(1)

Amounts reported in this column reflect base salaries earned on a fiscal year basis.

 

(2)

The amounts in this column for 20202021 represent the grant date fair value of (a) restricted shares of our common stock, (b) CADCash-Settled Performance Units at target level and (c) TSR Performance Units at target level. The grant date fair values of the CAD Performance Units at maximum potential payout wereare as follows:

 

Name	CAD Performance Units Maximum Payout (based on $9.09$10.70 grant date fair value) ($)
Childers	1,600,0001,640,000
Aron	400,000440,000
Hildebrandt	320,000340,000
Ingersoll	240,000
Thode	200,000240,000

 

The grant date fair value of performance awards at target payout in the Summary Compensation table and at maximum payout in the above table is calculated in accordance with ASC 718.  The amounts reflect our accounting expense and do not correspond to the actual value that was considered by the Compensation Committee on the date of grant nor the value that will be recognized by our Named Executive Officers. For a discussion of valuation assumptions, see Note 24 (Stock-Based Compensation) to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020.2021. See “Long-Term Incentive Compensation – Named Executive Officers’ 20202021 LTI Awards” for the target grant date value approved by the Compensation Committee.

 

(3)

The amounts in this column for 20202021 represent cash payments under the 20202021 Incentive Program, which covered the compensation measurement and performance year ended December 31, 2020,2021, and were paid during the first quarter of 2021.2022.

 

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(4)

The amounts in this column for 20202021 include the following:

 

Name	401(k) Plan Company Contribution ($)(a)		Deferred Compensation Plan Company Contribution ($)(b)		Other ($)(c)		Total ($)		401(k) Plan Company Contribution ($)(a)		Deferred Compensation Plan Company Contribution ($)(b)		Other ($)(c)		Total ($)
Childers	14,250		60,022		—		74,272		14,500		54,766		—		69,266
Aron	14,250		35,928		—		50,178		14,500		24,724		—		39,224
Hildebrandt	14,250		25,299		—		39,549		14,500		18,472		—		32,972
Ingersoll	14,250		18,770		—		33,020		14,500		13,250		—		27,750
Thode	14,250		5,250		—		19,500		14,500		16,713		—		31,213

 

(a)

The amounts shown represent the Company’s matching contributions for 2020.2021.

 

(b)

Our Named Executive Officers could contribute up to 100% of their base pay and bonus to the Deferred Compensation Plan, and the Company made certain matching contributions designed to serve as a make-up for the portion of the employer matching contributions that cannot be made under our 401(k) Plan due to Code limits.

 

(c)

None of our Named Executive Officers received aggregate perquisites or personal benefits in excess of $10,000 during 2020.2021.

 

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GRANTS OF PLAN-BASED AWARDS

 

The following table shows the short- and long-term incentive plan awards granted to the Named Executive Officers in 2020.2021.

 

		Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1)						Estimated Possible Payouts Under Equity Incentive Plan Awards(2)						All Other Stock Awards: Number of Shares of Stock or Units (#)(3)		Grant Date Fair Value of Stock and Option Awards ($)(4)					Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1)						Estimated Possible Payouts Under Equity Incentive Plan Awards(2)						All Other Stock Awards: Number of Shares of Stock or Units (#)(3)		Grant Date Fair Value of Stock Awards ($)(4)
Name	Grant Date	Threshold ($)	Target ($)			Maximum ($)		Threshold (#)		Target (#)		Maximum (#)							Grant Date		Threshold ($)		Target ($)		Maximum ($)		Threshold (#)		Target (#)		Maximum (#)
Childers	1/23/20	—		1,090,385		2,180,770			—		88,008		176,016		—		799,993		3/5/21		—		1,050,000		2,100,000		—		76,635		153,270		—		819,995
	1/27/20										88,008		176,016				997,131		3/5/21										76,635		153,270				1,095,881
	1/23/20														264,026		2,399,996		3/5/21														229,906		2,459,994
Aron	1/23/20	—		356,250		712,500			—		22,002		44,004		—		199,998		3/5/21		—		368,000		736,000		—		20,560		41,120		—		219,992
	1/23/20										22,002		44,004				261,384		3/5/21										20,560		41,120				294,008
	1/23/20														66,006		599,995		3/5/21														61,682		659,997
Hildebrandt	1/23/20	—		303,423		606,847			—		17,601		35,202		—		159,993		3/5/21		—		315,000		630,000		—		15,887		31,774		—		169,991
	1/23/20										17,601		35,202				209,100		3/5/21										15,887		31,774				227,184
	1/23/20														52,805		479,997		3/5/21														47,663		509,994
Ingersoll	1/23/20	—		259,808		519,616			—		13,201		26,402		—		119,997		3/5/21		—		252,000		504,000		—		11,214		22,428		—		119,990
	1/23/20										13,201		26,402				156,828		3/5/21										11,214		22,428				160,360
	1/23/20														39,603		359,991		3/5/21														33,644		359,991
Thode	1/23/20	—		245,000		490,000			—		11,001		22,002		—		99,999		3/5/21		—		252,000		504,000		—		11,214		22,428		—		119,990
	1/23/20										11,001		22,002				130,692		3/5/21										11,214		22,428				160,360
	1/23/20														33,003		299,997		3/5/21														33,644		359,991

(1)

The amounts in these columns show the range of potential payouts under the 20202021 Incentive Program. The actual payouts under the plan were determined in February 20212022 and paid in March 2021, as shown2022, and are included in the Summary Compensation table for 2020.2021.

 

(2)

The amounts in these columns show the range of potential payouts of performance units awarded under the 20132020 Stock Incentive Plan and cliff vest at the conclusion of a three-year performance period, subject to continued employment. “Target” is 100% of the number of 20202021 performance units awarded. “Threshold” is the lowest possible payout (0% of the grant), and “Maximum” is the highest possible payout (200% of the grant). The entries include (a) CAD and Leverage Performance Units, which are combined in the chart with each performance objective weighted at 50% of the total award (cash settled) and (b) TSR Performance Units (stock settled). See also “Long-Term Incentive Compensation – 2020 Performance-based2021 Performance-Based LTI Awards” for more information regarding these awards.

 

(3)

Shares of restricted stock awarded under the 20132020 Stock Incentive Plan that vest one-third per year over a three-year period, subject to continued service through each vesting date.

 

(4)

The grant date fair value of performance units (at target) and restricted stock is calculated in accordance with ASC 718. For a discussion of valuation assumptions, see Note 24 (Stock-Based Compensation) to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.

 

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

 

The following table shows our Named Executive Officers’ equity awards and equity-based awards denominated in our common stock outstanding at December 31, 2020.2021.

 

		Option Awards						Stock Awards					Stock Awards (1)
Name		Number of Securities Underlying Unexercised Options Exercisable (#) (1)	Number of Securities Underlying Unexercised Options Unexercisable (#)	Option Exercise Price ($)	Option Expiration Date			Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($) (2)	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Yet Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Yet Vested ($) (2)		Number of Shares or Units of Stock That Have Not Vested (#) (3)			Market Value of Shares or Units of Stock That Have Not Vested ($) (2)			Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Yet Vested (#)			Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Yet Vested ($) (2)
Childers		63,891		25.18	3/4/2021		501,206(3)		4,340,444	45,927(4)	397,728		488,723			3,655,648			82,802(4)			619,359
										82,802(5)	717,065								88,008(5)			658,300
										88,008(6)	762,149								76,635(6)			573,230
										53,685(7)	464,912								82,802(7)			619,359
										82,802(8)	717,065								88,008(8)			658,300
										88,008(9)	762,149								76,635(9)			573,230
Aron							117,292(3)		1,015,749	19,108(5)	165,475		124,792			933,444			19,108(4)			142,928
																			22,002(5)			164,575
																			20,560(6)			153,789
										22,002(6)	190,537								19,108(7)			142,928
										19,108(8)	165,475								22,002(8)			164,575
										22,002(9)	190,537								20,560(9)			153,789
Hildebrandt							99,387(3)		860,691	6,486(4)	56,169		98,788			738,934			15,923(4)			119,104
										15,923(5)	137,893								17,601(5)			131,655
										17,601(6)	152,425								15,887(6)			118,835
										6,310(7)	54,645								15,923(7)			119,104
										15,923(8)	137,893								17,601(8)			131,655
										17,601(9)	152,425								15,887(9)			118,835
Ingersoll							71,272(3)		617,216	4,594(4)	39,784		70,660			528,537			10,615(4)			79,400
										10,615(5)	91,926								13,201(5)			98,743
										13,201(6)	114,321								11,214(6)			83,881
										4,470(7)	38,710								10,615(7)			79,400
										10,615(8)	91,926								13,201(8)			98,743
										13,201(9)	114,321								11,214(9)			83,881
Thode							53,671(3)		464,791	8,492(5)	73,541		64,137			479,745			8,492(4)			63,520
										11,001(6)	95,269								11,001(5)			82,287
										8,492(8)	73,541								11,214(6)			83,881
										11,001(9)	95,269								8,492(7)			63,520
																			11,001(8)			82,287
																			11,214(9)			83,881

 

(1)

Because theNo options in this column were fully vested as ofoutstanding at December 31, 2020, the vesting schedules are not reported.2021.

 

(2)

Based on the market closing price of our common stock on December 31, 2020: $8.66.2021: $7.48.

 

(3)

Includes shares of restricted stock that vest at the rate of one-third per year beginning on the initial vesting date shown below, subject to continued service through each vesting date.

 

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Name		Unvested Shares		Initial Vesting Date
Childers		71,57682,802		8/20/191/25/20
		165,604176,015		1/25/2021
		264,026229,906		1/25/213/5/22
Aron		13,07119,107		8/20/191/25/20
		38,21544,003		1/25/2021
		66,00661,682		1/25/213/5/22
Hildebrandt		14,73615,923		8/20/191/25/20
		31,84635,202		1/25/2021
		52,80547,663		1/25/213/5/22
Ingersoll		10,43810,615		8/20/191/25/20
		21,23126,401		1/25/2021
		39,60333,644		1/25/213/5/22
Thode		3,6848,492		8/20/191/25/20
		16,98422,001		1/25/2021
		33,00333,644		1/25/213/5/22

 

(4)

Includes earned performance units that vest at the rate of one-third per year beginning August 20,Unearned 2019 the initial vesting date, subject to continued service through each vesting date.

(5)

Unearned CAD Performance Units that were outstanding as of December 31, 2021 and cliff vestvested on January 25, 2022, subject to continued service through the vest date.2022. Amounts shown are the number of units awarded at target performance. The number of actual units paid will bewere determined by the Compensation Committee following the conclusion of the three-year performance period, January 1, 2019 through December 31, 2021.2021, as discussed under “Long-Term Incentive Compensation – 2019 Performance Units.”

 

(6)(5)

Unearned 2020 CAD Performance Units that cliff vest on January 25, 2023, subject to continued service through the vest date. Amounts shown are the number of units awarded at target performance. The number of actual units paid will be determined by the Compensation Committee following the conclusion of the three-year performance period, January 1, 2020 through December 31, 2022.

 

(7)(6)

Unearned TSR2021 CAD Performance and Leverage Units that cliff vest on August 20, 2021, subject to continued service through the vest date. Amounts shown are the number of units awarded at target performance. The number of actual units paid were determined by the Compensation Committee following the conclusion of the three-year performance period, January 1, 2018 through December 31, 2020 as described under “Long-Term Incentive Compensation — 2018 TSR Performance Units”.

(8)

Unearned TSR Performance Units that cliff vest on January 25, 2022,March 5, 2024, subject to continued service through the vest date. Amounts shown are the number of units awarded at target performance. The number of actual units paid will be determined by the Compensation Committee following the conclusion of the three-year performance period, January 1, 20192021 through December 31, 2021.2023.

 

(9)(7)

Unearned 2019 TSR Performance Units that were outstanding as of December 31, 2021 and cliff vested on January 25, 2022. Amounts shown are the number of units awarded at target performance. The number of actual units paid were determined by the Compensation Committee following the conclusion of the three-year performance period, January 1, 2019 through December 31, 2021, as discussed under “Long-Term Incentive Compensation – 2019 Performance Units.”

(8)

Unearned 2020 TSR Performance Units that cliff vest on January 25, 2023, subject to continued service through the vest date. Amounts shown are the number of units awarded at target performance. The number of actual units paid will be determined by the Compensation Committee following the conclusion of the three-year performance period, January 1, 2020 through December 31, 2022.

 

(9)

Unearned 2021 TSR Performance Units that cliff vest on March 5, 2024, subject to continued service through the vest date. Amounts shown are the number of units awarded at target performance. The number of actual units paid will be determined by the Compensation Committee following the conclusion of the three-year performance period, January 1, 2021 through December 31, 2023.

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STOCK VESTED

 

The following table shows the value realized by the Named Executive Officers upon the vesting of equity awards covering our common stock during 2020.2021. No stock options were outstanding or exercised during 2020.2021.

 

			Stock Awards							Stock Awards
Name			Number of Shares and   Units   Acquired on   Vesting   (#) (1)		Value Realized on   Vesting   ($) (2)					Number of Shares and   Units   Acquired on   Vesting   (#) (1)				Value Realized on   Vesting   ($) (2)
Childers			330,878		2,564,324					388,170				3,395,904
Aron			32,181		259,191					54,182				483,917
Hildebrandt			55,211		412,475					66,485				580,344
Ingersoll			37,771		289,887					47,164				411,743
Thode			20,738		159,729					23,178				211,112

(1)

Includes our restricted stock and stock- and cash-settled performance units that vested during 2020.2021.

 

(2)

The value realized for vested awards was determined by multiplying the fair market value of our common stock (the market closing price of our common stock on the vesting date) by the number of shares or units that vested, plus dividend equivalents attributable to the 20172018 Performance Units, which were accrued over the three-year performance and vesting period and paid upon vesting, in the amount of $116,494$195,015 for Mr. Childers, $22,922 for Ms. Hildebrandt and $8,235$16,237 for Mr. Ingersoll. Shares and units vested on various dates throughout the year; therefore, the value listed represents the aggregate value of all shares and units that vested for each Named Executive Officer in 2020.2021.

 

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NONQUALIFIED DEFERRED COMPENSATION

 

The following table shows the Named Executive Officers’ compensation for 20202021 under our nonqualified deferred compensation plan.

 

Name			Executive Contributions   in Last   Fiscal Year   ($)		Company Contributions   in Last   Fiscal Year   ($) (1)		Aggregate Earnings/   (Losses)   in Last   Fiscal Year   ($)		Aggregate Withdrawals/   Distributions  ($)		Aggregate Balance at   Last Fiscal   Year End   ($)
Childers		54,772			60,022		81,286		(14,864)		598,305
Aron		50,178			35,928		34,456		—		168,830
Hildebrandt		20,049			25,299		7,720		—		67,111
Ingersoll		13,520			18,770		15,299		—		94,936
Thode		—			5,250		4,640		—		23,617

Name			Executive Contributions   in Last   Fiscal Year   ($)				Company Contributions   in Last   Fiscal Year   ($) (1)				Aggregate Earnings/   (Losses)   in Last   Fiscal Year   ($)				Aggregate Withdrawals/   Distributions ($)				Aggregate Balance at   Last Fiscal   Year End   ($)
Childers				49,766				54,766				138,144				(15,929)				825,051
Aron				39,224				24,724				31,409				—				264,187
Hildebrandt				17,157				18,472				15,572				—				118,312
Ingersoll				11,100				13,250				13,780				—				133,066
Thode				13,500				16,713				5,323				—				59,153

(1)

The amounts in this column represent Company contributions to each Named Executive Officer’s Deferred Compensation Plan account earned in 20202021 but paid in the first quarter of 2021.2022. These amounts are included in “All Other Compensation” in the Summary Compensation table for 20202021 and in “Aggregate Balance at Last Fiscal Year End” in this table.

 

Under our Deferred Compensation Plan, eligible employees are permitted to defer receipt of up to 100% of their base salary and bonus. We also make certain employer matching contributions designed to serve as a make-up for the portion of the employer matching contributions that cannot be made under our 401(k) Plan due to Code limits. The amounts deferred under each participant’s Deferred Compensation Plan account are deemed to be invested in investment alternatives chosen by the participant from a range of choices established by the plan administrator. The balances of participant accounts are adjusted to reflect the gains or losses that would have been obtained if the participant contributions had actually been invested in the applicable investment alternatives.

 

Participants may elect to defer the distribution of their account balances until the occurrence of a specified future date or event, including: (a) a future date while the participant is employed by us, as specified by the participant, (b) the participant’s separation from service (within the meaning of Section 409A of the Code), including due to death, or (c) the participant’s disability. Participants may also elect whether to receive distributions of their account balances in a single lump-sum amount or in annual installments to be paid over a period of two to ten years.

 

Payment of a participant’s account will be made or commence, as applicable, as follows:

 

●

for lump sum payments, on the earlier of: (x) in the case of a specified in-service date, January 1 of such year and (y) in the case of a separation from service or disability, the date of the participant’s separation of service or, if earlier, disability and

 

●

for installment payments, the earlier of: (x) in the case of a specified in-service date, January 1 of such year and (y) in the case of a separation from service or disability, January 1 of the calendar year immediately following the date of the participant’s separation of service or, if earlier, disability.

 

The Deferred Compensation Plan is administered by our Compensation Committee. The Deferred Compensation Plan is an unfunded plan for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended. We have established a “rabbi trust” to satisfy our obligations under the Deferred Compensation Plan.

 

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SEVERANCE BENEFIT AND CHANGE OF CONTROL ARRANGEMENTS

 

Severance Benefit Agreements. We have entered into a severance benefit agreement with each of our Named Executive Officers. Each such agreement provides that if the executive’s employment is terminated by us without cause or by the executive for good reason at any time through the term of the agreement (one year, to be automatically renewed for successive one-year periods until notice of non-renewal is given by either party), he or she will receive a lump sum payment in cash on the 35^th day after the termination date equal to the sum of:

 

●

his or her annual base salary then in effect plus the target annual incentive program opportunity; plus

 

●

a pro-rated portion of his or her target annual incentive program opportunity for the termination year based on the length of time during which he or she was employed during such year; plus

 

●

any earned but unpaid annual incentive program award for the fiscal year ending prior to the termination date; plus

 

●

a payment equal to twelve months of the portion of the monthly premiums that would be payable by us under our group health plan had the executive’s employment not terminated, based on the executive’s elections as in effect on the termination date, together with the monthly administrative fee that would be assessed under COBRA.

 

In addition, the executive would be entitled to the accelerated vesting as of the termination date of that portion of each of his or her outstanding unvested Archrock equity, equity-based or cash awards that was scheduled to vest on the next vesting date immediately following the termination date. In the case of outstanding performance shares or units which are based in common stock of Archrock and subject to time-based cliff vesting at the end of a three-year performance period (including the CAD, Leverage and TSR Performance Units), such shares or units shall vest as follows: if the termination date occurs in the first year of the performance period, one-third of the performance units payable at target; if the termination date occurs in the second year of the performance period, two-thirds of the performance units payable at target; or if the termination date occurs in the third year of the performance period, depending on whether performance has been determined, (a) 100% of the performance units payable at target or (b) a percentage of the performance units payable at target based on actual performance.

 

Each executive’s entitlement to the payments and benefits under his or her severance benefit agreement is subject to his or her execution (and non-revocation) of a waiver and release for our benefit. In addition, each executive is subject to non-disparagement restrictions following termination.

 

Change of Control Agreements. We have entered into a change of control agreement with each of our Named Executive Officers. Each such agreement provides that if the executive’s employment is terminated by us other than for cause, death or disability, or by the executive for good reason (in each case, a “Qualifying Termination”), within six months before or 18 months following a change of control (as defined in the change of control agreements), he or she would receive a cash payment within 60 days after the termination date equal to:

 

●

two times (three times in the case of Mr. Childers) his or her current annual base salary plus two times (three times in the case of Mr. Childers) his or her target annual incentive program opportunity for that year; plus

 

●

a pro-rated portion of the target annual incentive program opportunity for the termination year based on the length of time during which the executive was employed during such year; plus

 

●

any earned but unpaid annual incentive program award for the fiscal year ending prior to the termination date; plus

 

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●

two times the total of the Company contributions that would have been credited to him or her under the Archrock 401(k) Plan and any other deferred compensation plan had he or she made the required amount of elective deferrals or contributions during the twelve months immediately preceding the termination month; plus

 

●

a lump-sum cash payment equal to twenty-four months of the portion of the monthly premiums that would be payable by us under our group health plan had the executive’s employment not terminated, based on the executive’s elections as in effect on the termination date, together with the monthly administrative fee that would be assessed under COBRA.

 

In addition, the executive would be entitled to the accelerated vesting of all his or her unvested LTI Awards.

 

Our change of control agreements do not provide for tax gross-ups. Instead, the agreements include a Section 280G “best pay” provision pursuant to which in the event any payments or benefits received by the executive would be subject to an excise tax under Section 4999 of the Code, the executive will receive either the full amount of his or her payments or a reduced amount such that no portion of the payments is subject to the excise tax (whichever results in the greater after-tax benefit to the executive).

 

Each executive’s entitlement to the payments and benefits under his or her change of control agreement is also subject to his or her execution (and non-revocation) of a waiver and release for our benefit. In addition, in the event an executive receives payments from the Company under his or her change of control agreement, such executive will be subject to confidentiality, non-disclosure, non-solicitation and non-competition restrictions for two years following a termination of his or her employment.

 

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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL

 

The following table shows the potential payments to the Named Executive Officers upon a theoretical termination of employment or change of control (as applicable) occurring on December 31, 2020.2021. The amounts shown are, as applicable, based on each Named Executive Officer’s Pre-Reduction Base Salary and assumes an Archrock common stock value of $8.66$7.48 per share, the December 31, 20202021 market closing price. The actual amount paid out to an executive upon an actual termination or change of control can only be determined at the time of such event.

 

Name		Termination Due to Death or Disability   ($)(1)		Termination Without Cause or Resignation   with Good Reason   ($)(2)			Change of Control Without a Qualifying   Termination   ($)(3)			Change of Control with a Qualifying   Termination   ($)(3)			Termination Due to Death or Disability   ($)(1)				Termination Without Cause or Resignation   with Good Reason   ($)(2)				Change of Control Without a Qualifying   Termination   ($)(3)				Change of Control with a Qualifying   Termination   ($)(3)
D. Bradley Childers
Cash Severance		—		2,975,000	(4)		—			6,825,000	(5)			—				2,975,000	(4)			—				6,825,000	(5)
Stock Options		—		—			—			—
Restricted Stock (6)		4,340,444		2,099,069			—			4,340,444				3,655,648				1,850,887				—				3,655,648
Performance Awards (7)		3,821,069		2,326,827			—			3,821,069				3,701,777				2,498,604				—				3,701,777
Other Benefits (8)		—		21,291			—			191,126				—				21,291				—				194,114
Total Pre-Tax Benefit		8,161,513		7,422,187			—			15,177,639				7,357,425				7,345,782				—				14,376,539
Douglas S. Aron
Cash Severance		—		1,150,000	(4)		—			1,955,000	(5)			—				1,196,000	(4)			—				2,024,000	(5)
Stock Options		—		—			—			—
Restricted Stock (6)		1,015,749		469,203			—			1,015,749				933,444				461,285				—				933,444
Performance Awards (7)		712,025		347,659			—			712,025				922,583				607,815				—				922,583
Other Benefits (8)		—		20,266			—			140,888				—				20,266				—				118,979
Total Pre-Tax Benefit		1,727,774		1,987,128			—			3,823,662				1,856,027				2,285,366				—				3,999,006
Stephanie C. Hildebrandt
Cash Severance		—		1,008,000	(4)		—			1,722,000	(5)			—				1,050,000	(4)			—				1,785,000	(5)
Stock Options		—		—			—			—
Restricted Stock (6)		860,691		417,937			—			860,691				738,934				369,599				—				738,934
Performance Awards (7)		691,449		396,287			—			691,449				739,189				492,972				—				739,189
Other Benefits (8)		—		17,720			—			114,537				—				17,720				—				101,383
Total Pre-Tax Benefit		1,552,140		1,839,944			—			3,388,677				1,478,123				1,930,291				—				3,364,506
Jason G. Ingersoll
Cash Severance		—		864,000	(4)		—			1,476,000	(5)			—				864,000	(4)			—				1,476,000	(5)
Stock Options		—		—			—			—
Restricted Stock (6)		617,216		296,644			—			617,216				528,537				262,026				—				528,537
Performance Awards (7)		490,987		277,276			—			490,987				524,049				346,379				—				524,049
Other Benefits (8)		—		22,812			—			111,663				—				22,812				—				101,123
Total Pre-Tax Benefit		1,108,203		1,460,732			—			2,695,866				1,052,586				1,495,217				—				2,629,709
Eric W. Thode
Cash Severance		—		840,000	(4)		—			1,435,000	(5)			—				864,000	(4)			—				1,476,000	(5)
Stock Options		—		—			—			—
Restricted Stock (6)		464,791		200,713			—			464,791				479,745				229,690				—				479,745
Performance Awards (7)		337,619		161,567			—			337,619				459,377				292,677				—				459,377
Other Benefits (8)		—		20,266			—			79,531				—				20,266				—				102,957
Total Pre-Tax Benefit		802,410		1,222,546			—			2,316,941				939,122				1,406,633				—				2,518,079

 

(1)

“Disability” is defined in the 2013 and 2020 Stock Incentive Plan.Plans.

 

(2)

“Cause” and “Good Reason” are defined in the severance benefit agreements.

 

(3)

“Qualifying Termination” is defined in the change of control agreements. No payments may be made in the event of a change of control absent a Qualifying Termination.

 

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(4)

If the executive had been terminated without Cause or resigned with Good Reason on December 31, 2020,2021, under the executive’s severance benefit agreement his or her cash severance would consist of (a) the sum of the executive’s base salary and target annual incentive opportunity (calculated as a percentage of annual base salary for 2020)2021), plus (b) the executive’s target annual incentive opportunity (calculated as a percentage of annual base salary for 2020)2021).

 

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(5)

If the Company consummated a change of control that was followed by the executive’s Qualifying Termination on December 31, 2020,2021, under the executive’s change of control agreement his or her cash severance would consist of (a) two times (three times for Mr. Childers) the sum of the executive’s base salary and target annual incentive opportunity (calculated as a percentage of annual base salary for 2020)2021), plus (b) the executive’s target annual incentive opportunity (calculated as a percentage of his or her annual base salary for 2020)2021).

 

(6)

The amounts in this row represent the value of the accelerated vesting of the executive’s unvested restricted stock based on the December 31, 20202021 closing price of our common stock.

 

(7)

The amounts in this row represent the value of the accelerated vesting of the executive’s unvested performance awards based on the December 31, 20202021 market closing price of our common stock.

 

(8)

The amounts in this row represent each Named Executive Officer’s right to the payment, as applicable, of (a) in the event of a termination without Cause or voluntary resignation for Good Reason, a lump sum payment comprised of the executive’s medical benefit premiums for a one year period and the amount of the administrative fee assessed under COBRA, or (b) in the event of a Qualifying Termination in connection with a change of control, a lump sum payment comprised of the executive’s medical benefit premiums for a two year period, the amount of the administrative fee assessed under COBRA and two times the Company contributions for the preceding 12 months under the 401(k) Plan and deferred compensation plan.

 

CEO PAY RATIO

 

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information regarding the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Childers, our Chief Executive Officer. We consider the pay ratio specified below to be a reasonable estimate, calculated in a manner that is intended to be consistent with Item 402(u) of Regulation S-K.

 

Mr. Childers had an annual total compensation of $6,123,248$6,609,272 in 20202021 as reflected in the “Total” column of our Summary Compensation table included in this Proxy Statement. With respect to the annual total compensation of the median employee, we identified and calculated the elements of such employee’s compensation for 20202021 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation for 20202021 of $96,773.$106,297. As a result, we estimate that Mr. Childers' 20202021 annual total compensation was approximately 6362 times that of the median of the annual total compensation of all of our employees (other than the CEO).

 

Archrock has elected to identify its median employee every three years unless there is a significant change in employee population or employee compensation arrangements. In determining the median employee, Archrock prepared a listing of all employees (including full-time, part-time, seasonal and temporary employees) as of December 31, 2020 and the total compensation of each such employee for fiscal year 2020.  The median employee was selected from this list. Archrocklist and did not change for 2021. The Compensation Committee believes this is reasonable on the basis there has elected to identify its median employee every three years unless there is abeen no significant change in its employee population, or employee compensation arrangements.arrangements, or the compensation of the median employee.

 

This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. Because the SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.

 

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ADDITIONAL INFORMATION

 

20212022 ANNUAL MEETING OF STOCKHOLDERS

 

Stockholders Entitled to Vote. Owners of our common stock as of the close of business on the record date of March 3, 2021,2022, are entitled to receive notice of and to vote at the Annual Meeting. At the close of business on March 3, 2021,2022, there were 152,788,049155,296,353 shares of common stock outstanding. Each share of common stock entitles the holder to one vote on all matters submitted to a vote at the Annual Meeting and any adjournment or postponement of the meeting. A complete list of the stockholders entitled to vote will be available for examination at the meeting and for at least 10 days prior to the meeting at our corporate offices located at 9807 Katy Freeway, Suite 100, Houston, Texas 77024.

 

Voting Methods.

 

Stockholder of Record. If you are a stockholder of record, you may vote over the telephone, by Internet, by mailing in a proxy card, in person at the Annual Meeting or you can give a proxy to be voted at the meeting. Please refer to the specific voting instructions set forth on the Notice of Internet Availability of Proxy Materials.

 

Street Name Holder. If, like most of our stockholders, you hold your shares through a bank, broker or other nominee (in “street name”), you must vote your shares in the manner prescribed by your bank, broker or other nominee. Your broker or other nominee will either explain how to vote your stock or enclose a voting instruction card for you to use in directing the broker or other nominee how to vote your stock. If you are a street name holder, you may vote your stock in person at the Annual Meeting only if you obtain a signed proxy from your broker or other nominee giving you a right to vote the stock.

 

Annual Meeting Quorum. A quorum of stockholders is necessary for a valid meeting. The presence in person or by proxy of the holders of a majority of the outstanding shares of our common stock will constitute a quorum for the Annual Meeting. Under our Third Amended and Restated Bylaws, as amended, and under Delaware law, abstentions and “broker non-votes” are counted as present in determining whether the quorum requirement is satisfied.

 

“Broker Non-Votes”Non-Votes and Their Impact on the Annual Meeting. A broker non-vote occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power for that proposal and has not received instructions from the beneficial owner. Under the rules of the New York Stock Exchange (“NYSE”),NYSE, brokers do not have discretionary authority to vote shares in connection with non-routine matters without instructions from the beneficial owner. Therefore, if you hold your shares in the name of a bank, broker or other nominee, for your vote to be counted on any of the proposals other than Proposal 2, you will need to communicate your voting decisions to your bank, broker or other nominee before April 28, 2021.2022.

 

Each proposal to be voted on at the Annual Meeting is described in this Proxy Statement, as is the vote required to approve each proposal. For any other matters that may be properly presented for consideration at the Annual Meeting, the persons named as proxies will have discretion to vote on those matters according to their best judgment to the same extent as the person delivering the proxy would be entitled to vote. As of the date of this Proxy Statement, we do not anticipate that any other matters will be properly presented for consideration at the Annual Meeting.

 

How to Change Your Vote. A proxy may be revoked at any time before it is voted by sending written notice of revocation to our Secretary (see “Company Contact Information”), by delivering a later-dated proxy (by one of the methods described above) or by voting in person at the meeting. The Secretary may be contacted at the following address: Archrock, Inc., 9807 Katy Freeway, Suite 100, Houston, Texas 77024, Attention: Secretary. If you hold your shares in street name, you should follow the directions provided by your broker or other nominee regarding how to revoke your proxy.

 

Tabulation of Votes. An independent representative has been selected to tabulate and certify the vote results and act as the inspector of election for the Annual Meeting.

 

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Solicitation of Votes. This solicitation is made on behalf of the Board, and we will pay the cost of soliciting proxies. In addition to solicitations by mail, our directors, officers and employees, without additional compensation, may solicit proxies on the Company's behalf in person, by telephone, or by electronic communication. We must also pay brokerage firms, banks, broker-dealers and other similar organizations representing beneficial owners certain fees associated with:

forwarding the Notice of Internet Availability of Proxy Materials to beneficial owners;

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forwarding the Notice of Internet Availability of Proxy Materials to beneficial owners;

forwarding printed proxy materials by mail to beneficial owners who specifically request them; and

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forwarding printed proxy materials by mail to beneficial owners who specifically request them; and

obtaining beneficial owners’ voting instructions.

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obtaining beneficial owners’ voting instructions.

 

Availability of Proxy Materials. Instead of mailing a printed copy of our proxy materials, including this Proxy Statement, form of proxy card and our 20202021 Annual Report to Stockholders, we have elected to provide access to such documents on the Internet. Most stockholders will not receive printed copies of the proxy materials unless they request them, in which case printed copies of the proxy materials will be provided at no charge. Our Notice of Internet Availability of Proxy Materials was first mailed to stockholders of record and beneficial owners on or about March 17, 2021.16, 2022. Any stockholder may request to receive proxy materials in printed form by mail or electronically by e-mail for this year and on an ongoing basis by following the instructions set forth in the Notice of Internet Availability of Proxy Materials.

 

Householding. The SEC rules regarding the delivery of the notice of internet availability, proxy statements and annual reports permit us, in specified circumstances, to deliver a single set of these reports to any address at which two or more stockholders reside. This method of delivery, often referred to as householding, will reduce the amount of duplicative information that security holders receive and lower printing and mailing costs for us. Each stockholder will continue to receive a separate proxy card.

 

We have attempted to deliver only one Notice of Internet Availability of Proxy Materials to eligible stockholders who share an address, unless we received contrary instructions from any such stockholder prior to the mailing date. We will deliver promptly, upon written or oral request, a separate copy of the Notice of Internet Availability of Proxy Materials to a stockholder at a shared address to which a single copy of such document was delivered. Any stockholder who would like to receive a separate copy of the Notice of Internet Availability of Proxy Materials, now or in the future, should submit this request to our Secretary. The Secretary may be contacted at the following address: Archrock, Inc., 9807 Katy Freeway, Suite 100, Houston, Texas 77024, Attention: Secretary.(see “Company Contact Information”). Beneficial owners sharing an address who receive multiple copies of the Notice of Internet Availability of Proxy Materials and who would like to receive a single copy of such materials in the future will need to contact their broker, bank or other nominee to request that only a single copy of such document be mailed to all stockholders at the shared address in the future.

 

20222023 ANNUAL MEETING OF STOCKHOLDERS

 

Any stockholder proposal that is intended for inclusion in our Proxy Statement for our 20222023 Annual Meeting of Stockholders must be received by our Secretary at the address provided below no later than October 18, 2021.2022.

 

Our bylaws establish an advance-notice procedure for stockholder proposals or director nominations to be brought before an annual meeting but not included in our Proxy Statement. Under these bylaw provisions, we must receive written notice of a stockholder proposal or director nomination to be brought before the 20222023 Annual Meeting of Stockholders on or after October 18, 20212022 and no later than November 17, 20212022 for that proposal or nomination to be considered timely. Stockholder proposals and director nominations brought under these bylaw provisions must include the information required under our bylaws, including the following:

 

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a description of the material terms of certain derivative instruments to which the stockholder or the beneficial owner, if any, on whose behalf the nomination or proposal is being made is a party, a description of the material terms of any proportionate interest in our shares or derivative instruments held by a general or limited partnership in which such person is a general partner or beneficially owns an interest in a general partner, and a description of the material terms of any performance-related fees to which such person is entitled based on any increase or decrease in the value of our shares or derivative instruments; and

 

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with respect to a nomination of a director, a description of the material terms of all direct and indirect compensation and other material monetary arrangements during the past three years, and any other material relationships between or among the proponent of the nomination and his or her affiliates, on the one hand, and each proposed nominee and his or her affiliates, on the other hand, including all information that would be required to be disclosed pursuant to Rule 404 promulgated under the SEC’s Regulation S-K if the proposing person were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant.

 

A stockholder submitting a proposal or director nomination under our bylaw provisions must, among other things:

 

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include the name and address of the stockholder, and the number of our shares that are, directly or indirectly, owned beneficially and of record by the stockholder;

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state whether the stockholder intends to deliver a proxy statement and form of proxy to holders of a sufficient number of voting shares to carry the proposal or to elect the nominee or nominees, as applicable;

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be a stockholder of record as of the time of giving the notice and at the time of the meeting at which the proposal or nomination will be considered and include a representation to that effect; and

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update and supplement the required information ten (10) business days prior to the date of the meeting.

 

These requirements in our bylaws are in addition to the SEC’s requirements with which a stockholder must comply to have a stockholder proposal included in our Proxy Statement. Stockholders may obtain a copy of our bylaws by making a written request to our Secretary at the address provided below.

 

Stockholder proposals and nominations of directors must be delivered to our Secretary at the address provided below.

 

COMMUNICATION WITH THE BOARD

 

Stockholders or other interested parties may communicate with the entire Board or any individual member of the Board by writing to Gordon T. Hall, Chairman, at the address provided below. All written inquiries will be immediately forwarded as directed. In addition, any concern or inquiry may be communicated to the Audit Committee or the Board by calling our compliance hotline at 1-844-809-1630 or by going to www.archrock.ethicspoint.com.

 

COMPANY DOCUMENTS

 

We will provide to any stockholder or potential investor, without charge, upon written or oral request, by first class mail or other equally prompt means, a copy of this Proxy Statement or Annual Report on Form 10-K for the year ended December 31, 2020.2021. These documents are also available on our website at www.archrock.com.

 

COMPANY CONTACT INFORMATION

 

The Company's Secretary and Investor Relations Departments can be contacted as follows:

 

By mail:

Archrock, Inc.

9807 Katy Freeway, Suite 100

Houston, Texas 77024

 

By telephone: (281) 836-8000

 

By email: investor.relations@archrock.com

 

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