UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION
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of the
Securities Exchange Act of 1934 (Amendment No. )
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Preliminary Proxy Statement
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to § 240.14a-12
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NUVERRA ENVIRONMENTAL SOLUTIONS, INC.
(Name of Registrant as Specified in its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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NUVERRA ENVIRONMENTAL SOLUTIONS, INC.
14624 N. Scottsdale Rd., Suite 300
Scottsdale, Arizona 85254
www.nuverra.com
March 27, 2014
Dear
Stockholder:
On behalf of the Board of Directors, we are pleased to invite you to attend the 2014 Annual Meeting of
Stockholders of Nuverra Environmental Solutions, Inc. (NYSE: NES) to be held on May 6, 2014 at 12:00 p.m., Eastern Daylight Time.
To be cost-effective, we are again holding a virtual Annual Meeting via the Internet. We are offering a live webcast of the Annual Meeting for our stockholders at
www.virtualshareholdermeeting.com/NES2014
where you will be able to listen to the Annual Meeting, vote electronically, and submit questions to Mr. Mark D. Johnsrud, our Chief Executive Officer and Vice Chairman.
In addition, we are pleased to take advantage of the United States Securities and Exchange Commission rule allowing companies to furnish
proxy materials to their stockholders over the Internet. We believe that this delivery process will expedite stockholders receipt of proxy materials. This delivery process will also lower the costs and reduce the environmental impact of our
Annual Meeting. On March 27, 2014, we mailed to our stockholders of record as of March 13, 2014 a Notice of Annual Meeting of Stockholders, as well as a Notice of Internet Availability of Proxy Materials containing instructions on how to
access our Proxy Statement, form of proxy card, Shareholder Letter and Annual Report to Stockholders for the fiscal year ended December 31, 2013. The Notice of Internet Availability of Proxy Materials also provides instructions on how to
receive a paper copy of the proxy materials, including a proxy card, by mail and how to vote.
The matters to be acted upon
are described in the Notice of Annual Meeting of Stockholders, the Notice of Internet Availability of Proxy Materials and in the Proxy Statement. We encourage you to carefully read these materials, as well as the Annual Report to Stockholders.
We urge you to participate in the Annual Meeting of Stockholders. Whether or not you plan to attend our live webcast of the
Annual Meeting of Stockholders, your vote is very important and we encourage you to vote promptly. You may vote your shares via a toll-free telephone number or over the Internet, as described in the proxy materials, or, if you received a paper copy
of the proxy card by mail, you may mark, sign and date the proxy card and return it in the envelope provided. Instructions regarding all three methods of voting are provided in the Notice of Internet Availability of Proxy Materials and on the proxy
card. If you do attend the live webcast, you will have the right to revoke your proxy and vote your shares at that time if you so desire. If you hold your shares through an account with a broker, nominee, fiduciary or other custodian, please follow
the instructions you receive from them to vote your shares.
Thank you for your ongoing support of and continued interest in
Nuverra Environmental Solutions, Inc.
Sincerely,
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/s/ Mark D. Johnsrud
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Mark D. Johnsrud
Chief Executive Officer and Vice Chairman
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NUVERRA ENVIRONMENTAL SOLUTIONS, INC.
14624 N. Scottsdale Rd., Suite 300
Scottsdale, Arizona 85254
www.nuverra.com
NOTICE OF THE 2014 ANNUAL MEETING OF STOCKHOLDERS
March 27, 2014
To our Stockholders:
Notice is hereby given that the 2014 Annual Meeting of Stockholders of Nuverra Environmental Solutions, Inc., a Delaware corporation, will
be held on May 6, 2014 at 12:00 p.m., Eastern Daylight Time, via the Internet at
www.virtualshareholdermeeting.com/NES2014
.
Only stockholders of record that own our common stock at the close of business on March 13, 2014 are entitled to notice of and to vote at the Annual Meeting. For ten days prior to the Annual Meeting,
a complete list of our stockholders entitled to vote at the meeting will be available for examination by any stockholder, for any purpose relating to the meeting, during ordinary business hours at our principal executive offices located at 14624 N.
Scottsdale Rd., Suite 300, Scottsdale, Arizona 85254.
At the Annual Meeting, we will consider the following proposals
described in detail in the accompanying Proxy Statement:
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To elect two Class I directors to hold office for a three-year term expiring at the annual meeting of stockholders to be held in 2017 or until their respective
successors are elected and qualified, or their earlier death, resignation or removal. The Board of Directors has nominated Edward A. Barkett and Robert B. Simonds, Jr. for election as Class I directors at the meeting;
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2.
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To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2014;
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3.
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To hold an advisory vote to approve executive compensation;
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4.
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To approve an amendment to the 2009 Equity Incentive Plan to (i) increase the shares authorized, (ii) continue compliance with Internal Revenue Code section
162(m) and (iii) make other administrative changes; and
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To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement of the meeting.
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on
May 6
,
2014.
Our proxy statement is attached. Our financial and other information is contained in our Annual Report to Stockholders for the fiscal year ended December 31, 2013. If you received a
Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials unless specifically requested. This proxy statement, our Shareholders Letter and our Annual Report to Stockholders for the fiscal
year ended December 31, 2013 are available at www.proxyvote.com. If you received a Notice of Internet Availability of Proxy Materials by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions
for requesting such materials included in the Notice of Internet Availability of Proxy Materials. In addition, the Notice of Internet Availability of Proxy Materials provides instructions on how stockholders may request to receive proxy materials
for future Annual Meeting materials in printed or email form.
YOUR VOTE IS IMPORTANT: Whether you plan to attend our live webcast of the Annual Meeting
or not, please vote your shares by the Internet, telephone or mail in order to ensure the presence of a quorum. If you attend the live webcast, you may choose to vote your shares at that time even if you have previously voted your shares. Any proxy
may be revoked by the submission of a later dated proxy or a written notice of revocation before close of the Annual Meeting.
Registered holders may vote:
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By Internet: go to
www.proxyvote.com
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By toll-free telephone: call 1-800-690-6903; or
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By mail (if you received a paper copy of the proxy materials by mail): mark, sign, date and promptly mail the enclosed proxy card in the postage-paid envelope.
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Beneficial Stockholders
. If your shares are held in the name of a broker, bank or other holder of record, follow the
voting instructions you receive from the holder of record to vote your shares.
By Order of the Board of Directors,
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/s/ Mark D. Johnsrud
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Mark D. Johnsrud
Chief Executive Officer and Vice Chairman
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NUVERRA ENVIRONMENTAL SOLUTIONS, INC.
14624 N. Scottsdale Rd., Suite 300
Scottsdale, Arizona 85254
www.nuverra.com
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NUVERRA ENVIRONMENTAL SOLUTIONS, INC.
14624 N. Scottsdale Rd., Suite 300
Scottsdale, Arizona 85254
www.nuverra.com
PROXY STATEMENT FOR THE 2014 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 6, 2014.
The accompanying proxy is solicited by the Board of Directors (the Board) of Nuverra Environmental Solutions, Inc. (we, our, us or the
Company), a Delaware corporation, for use at its annual meeting of stockholders to be held on May 6
,
2014 (the Annual Meeting) via live webcast on the Internet at
www.virtualshareholdermeeting.com/NES2014
,
or any adjournment or postponement thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders and described below. We first made this proxy statement (Proxy Statement) and the attached proxy card
available to stockholders on March 27
,
2014. You are cordially invited to attend the live webcast of the Annual Meeting and are requested to vote on the proposals described in this Proxy Statement.
The following matters will be considered at the Annual Meeting of Stockholders:
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To elect two Class I directors to hold office for a three-year term expiring at the annual meeting of stockholders to be held in 2017 or until their respective
successors are elected and qualified, or their earlier death, resignation or removal. The Board of Directors has nominated Edward A. Barkett and Robert B. Simonds, Jr. for election as Class I directors at the meeting;
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The ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2014;
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An advisory vote to approve executive compensation;
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4.
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Approve an amendment to the 2009 Equity Incentive Plan to (i) increase the shares authorized, (ii) continue compliance with Internal Revenue Code section
162(m) and (iii) make other administrative changes; and
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The transaction of such other business as may properly come before the Annual Meeting or any adjournment or postponement of the meeting.
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HOW TO PARTICIPATE IN THE ELECTRONIC MEETING
In order to participate in the Annual Meeting, please log on to
www.virtualshareholdermeeting.com/NES2014
, click on the
Investors section and then the Annual Meeting Webcast link at least 15 minutes prior to the start of the 12:00 p.m. Eastern Daylight Time meeting to provide time to register and download the required audio software, if
needed. All stockholders will need to register by entering your name and, if you would like to ask a question during the question and answer session following the Annual Meeting presentation, you will also need to enter the control number received
with your Notice of Internet Availability of Proxy Materials or, if you requested a paper copy, the proxy card. Questions that would be appropriate to raise in person and that relate to the purpose of the meeting will be accepted during the meeting.
To submit questions, please access the Annual Meeting webcast and select Ask a Question.
The webcast replay will
be available at
www.virtualshareholdermeeting.com/NES2014
until December 31, 2014.
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SOLICITATION AND VOTING
Voting Rights and Outstanding Shares
Only stockholders of record as of the close of business on March 13, 2014 will be entitled to vote at the Annual Meeting and any adjournment or postponement thereof. As of that date, we had
26,063,935 shares of common stock outstanding, all of which are entitled to vote with respect to all matters to be acted upon at the Annual Meeting. Each stockholder of record as of that date is entitled to one vote for each share of common stock
held by such stockholder. Our Bylaws provide that a majority of the outstanding shares of our common stock entitled to vote, whether present in person or represented by proxy, shall constitute a quorum for the transaction of business at the meeting.
Votes for and against, abstentions and broker non-votes (shares held by a broker or nominee that does not have the authority, either express or discretionary, to vote on a particular matter) will each be counted as present for purposes
of determining the presence of a quorum.
Vote Required
If a quorum is present, the votes required for the proposals to be considered at the Annual Meeting and the treatment of abstentions and
broker non-votes in respect of such proposals are as follows:
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Proposal 1
: The two nominees for Class I director receiving the highest number of votes will be elected Class I directors. Abstentions and
broker non-votes will not have any effect on the election of directors. Note that if your shares are held by a broker or nominee, such broker or nominee will not have authority to vote your shares in the election of directors unless you provide
instructions to him or her regarding how you would like your shares to be voted. Stockholders are not permitted to cumulate their shares for purposes of electing directors.
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Proposals 2, 3 & 4
: Our Bylaws state that each of the items brought before the stockholders at the Annual Meeting requires the affirmative
vote of the holders of a majority of the shares of our common stock present or represented by proxy and entitled to vote at the Annual Meeting. Notwithstanding the vote required by our Bylaws, Proposal 2 (ratification of the selection of our
independent registered public accounting firm) and Proposal 3 (an advisory vote to approve executive compensation), are advisory only and are not binding on us. Our Board will consider the outcome of the votes on Proposals 2 and 3 in considering
what action, if any, should be taken in response to the advisory vote by stockholders. Abstentions will have the same effect as an against vote, but broker non-votes will not have any effect on the outcome of the vote on these proposals.
Note that if your shares are held by a broker or nominee, such broker or nominee may exercise his or her discretion to vote your shares for Proposal 2 (ratification of the selection of our independent registered public accounting firm) but will not
have authority to vote your shares on Proposal 3 (an advisory vote to approve executive compensation) and Proposal 4 (approval of an amendment of the 2009 Equity Incentive Plan) unless you provide instructions to him or her regarding how you would
like your shares to be voted.
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Solicitation of Proxies
We will bear the expense of soliciting proxies. Our directors, officers, and other employees, without additional compensation, may solicit
proxies personally or in writing, by telephone, e-mail, or otherwise. We are required to request that brokers and nominees who hold stock in their names furnish our proxy materials to the beneficial owners of the stock, and we will reimburse these
brokers and nominees for their reasonable expenses incurred in so doing.
Voting Instructions and Revocation of
Proxy
All shares of our common stock represented by properly executed proxies received before or at the Annual Meeting
will, unless the proxies are revoked, be voted in accordance with the instructions indicated on those
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proxies. If no instructions are indicated on a proxy, the shares represented by such proxy will be voted as the Board recommends on each proposal. The persons named as proxies will vote on any
other matters properly presented at the Annual Meeting in accordance with their best judgment. A stockholder giving a proxy has the power to revoke his or her proxy at any time before it is exercised by delivering to the Corporate Secretary of the
Company a written notice revoking the proxy or a duly executed proxy with a later date, or by attending the live webcast of the Annual Meeting and voting his or her shares at that time. Attendance at the live webcast of the Annual Meeting will not,
in and of itself, constitute revocation of a proxy.
Stockholders whose shares are registered in their own names may vote
(1) by returning a proxy card (if they have received one), (2) via the Internet, or (3) by telephone. Specific instructions to be followed by any registered stockholder interested in voting via the Internet or by telephone are set
forth in the Notice of Internet Availability of Proxy Materials and on the proxy card. The Internet and telephone voting procedures are designed to authenticate the stockholders identity and to allow the stockholder to vote his or her shares
and confirm that his or her voting instructions have been properly recorded. If you do not wish to vote via the Internet or telephone, please complete, sign and return a proxy card (if they have received one). The Notice of Internet Availability of
Proxy Materials provides instructions on how stockholders may request printed proxy materials (including a proxy card).
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PROPOSAL 1ELECTION OF DIRECTORS
(Item 1 on Proxy Card)
Background
We have a classified Board currently consisting of ten members, all but two of whom are non-employee directors, divided into three classes (Class I, Class II and Class III). Directors in each class are
elected to serve for three-year staggered terms that expire in successive years. Our Class I directors terms expire this year. Accordingly, we are holding an election for our Class I directors at the Annual Meeting, with each Class I director
elected to serve a three-year term.
Effective as of the Annual Meeting, Richard J. Heckmann, a Class II director, and Lou
Holtz, a Class I director, will retire from the Board. As such, Mr. Holtz will not stand for re-election as a Class I director. The Board has appointed Mark D. Johnsrud as Chairman of the Board effective as of the Annual Meeting. The size of
the Board will be reduced from ten to eight persons when Messrs. Heckmann and Holtz retire.
The Board has nominated Edward A.
Barkett and Robert B. Simonds for election as Class I directors for three-year terms expiring at the annual meeting of stockholders to be held in 2017 or until their successors are elected and qualified, or their earlier death, resignation or
removal. If the nominees decline to serve or become unavailable for any reason, or if any additional vacancy occurs before the election (although we know of no reason to anticipate that this will occur), the proxies may be voted for such substitute
nominees as the Board may designate. Each nominee has consented to being named in this Proxy Statement and has agreed to serve if elected.
Vote Required and Board Recommendation
If a quorum is present and voting, the two nominees for Class I director receiving the highest number of votes will be elected as Class I directors. Abstentions and broker non-votes will be counted as
shares present for purposes of determining the presence of a quorum, but will have no effect on the result of the vote. Biographical information, including the principal occupation of and other directorships held by each director for at least the
past five years as well as the specific experience, qualifications, attributes and skills that led to the conclusion that each director should serve as a member of the Board is provided below with respect to the Class I nominees as well as the Class
II and Class III directors whose terms of office will continue after the Annual Meeting.
THE BOARD RECOMMENDS A VOTE
FOR THE NOMINEES NAMED ABOVE.
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Information Regarding Directors and Nominees
The following table sets forth information regarding our current directors, including the Class I nominees proposed to be elected at the
Annual Meeting. There are no family relationships between any directors or executive officers of the Company.
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Name
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Position with our Company
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Age
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Director
Since
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Class I Directors Nominated for Election at the 2014 Annual Meeting of Stockholders Whose Terms, if
Elected, Will Expire at the 2017 Annual Meeting of Stockholders:
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Edward A. Barkett
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Director
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47
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2009
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Robert B. Simonds, Jr.
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Vice Chairman
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51
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2010
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Class II Directors Whose Terms Expire at the 2015 Annual Meeting of Stockholders:
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Mark D. Johnsrud
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Chief Executive Officer and Vice Chairman
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55
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2012
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J. Danforth Quayle
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Director
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67
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2007
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Andrew D. Seidel
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Director
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51
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2008
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R. Dan Nelson
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Director
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64
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2013
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Class III Directors Whose Terms Expire at the 2016 Annual Meeting of Stockholders:
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Richard J. Heckmann(1)
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Executive Chairman
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70
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2007
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Alfred E. Osborne, Jr.
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Director
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69
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2007
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Kevin L. Spence
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Director
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57
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2010
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Class I Director Retiring Effective as of Annual Meeting of Stockholders:
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Lou Holtz
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Director
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77
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2007
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Retiring effective as of Annual Meeting.
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Class I Directors Nominated for Election at the 2014 Annual Meeting Whose Terms, if Elected, Will Expire at the 2017 Annual Meeting of Stockholders
Edward A. Barkett
has served as a Director since February 2009. Mr. Barkett is the Founder and currently serves as the
President of Atlas Properties, Inc., a real estate development and management firm, a position he has held since 1993. For nearly 20 years, Mr. Barkett has been actively involved in building and managing businesses, and in real estate
investing, development, construction, leasing, and financing throughout the United States. Mr. Barkett is also a member of the Board of Directors of Bashas, Inc., the largest grocery store chain in the State of Arizona, and a member
of the Board of Directors of the San Joaquin Partnership, a public/private economic development corporation dedicated to job creation in San Joaquin County, California.
We believe that Mr. Barketts background in actively building and managing businesses provides the Board with valuable expertise relevant to the management of the Companys business
operations. In addition, Mr. Barketts service on other boards of directors provides him with experience that is valuable to the Board in exercising its governance and oversight responsibilities.
Robert B. Simonds, Jr.
has served as a Director since May 2010 and as Vice Chairman since October 2010. Mr. Simonds is
a longtime advocate for water rights and policy issues and in the immediate past was the Chairman of the Blue Ribbon Committee of the Metropolitan Water District of Southern California (MWD), the worlds largest water wholesaler,
where he represented the city of Los Angeles from 2004 to 2006. His family owns and controls water rights in Arizona. MWDs Blue Ribbon Committee makes recommendations for new business models and strategies to position MWD to meet the
regions water-related needs for the future. He was recently appointed to the National Academy of Sciences Board of Water Science and Technology (BWST). Mr. Simonds is also the Chairman of the Robert Simonds Company and a
seasoned producer of over
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30 major motion pictures that have generated in excess of $6 billion in worldwide revenue. He serves on the board of the Yale School of Management and is a governor of the Natural History Museum
of Los Angeles County.
We believe Mr. Simonds brings extensive experience and knowledge in water rights and policy
issues that are critical to the Companys domestic and international operations focusing on building companies in the environmental solutions sector, and particularly relating to the Companys water usage, disposal, transportation and
treatment business. In addition, Mr. Simonds involvement with MWD and BWST provides the Board with insight on the operations and strategic direction of companies in the water sector.
Directors Whose Terms Expire at the 2015 Annual Meeting of Stockholders (Class II Directors)
Mark D. Johnsrud
has served as Chief Executive Officer and as Vice Chairman since November 2012. Mr. Johnsrud
previously served as Chief Executive Officer of Power Fuels, a leading environmental services company in the Bakken Shale area in North Dakota, of which he was the sole owner prior to the merger of Power Fuels with and into a subsidiary of the
Company. Under Mr. Johnsruds leadership, Power Fuels saw significant growth from 2005 until the merger in November 2012. Prior to acquiring Power Fuels, Mr. Johnsrud previously served as a Managing Director at Acala Partners Inc., a
full-service investment bank focusing on supporting the agribusiness and food sectors. Mr. Johnsrud also served as Senior Vice President and Head of the U.S. Agribusiness Finance Group at Banque National de Paris, and as a Managing Director and
Senior Vice President of the Food and Agribusiness Group at Bank of America. Mr. Johnsrud is currently a member of the Board of Directors and the Executive Committee of the North Dakota Petroleum Counsel, an industry association representing
its member companies involved in all aspects of the oil and gas industry in North Dakota, South Dakota, and the Rocky Mountain region. Mr. Johnsrud holds a Masters of Science degree in economics from Texas A&M University and a Bachelor of
Science Degree from North Dakota State University.
We believe that Mr. Johnsruds significant experience within the
environmental services sector, particularly his highly successful execution of a growth strategy for water usage, disposal, transportation and treatment business focusing on the needs of unconventional oil and gas drilling operations, and his
background in investment banking and strategic planning provide the Board with valuable perspective and practical experience as the Company continues to expand its footprint and its environmental services offerings. As the former Chief Executive
Officer of Power Fuels, Mr. Johnsrud brings to the Board executive leadership, which provides further insight to the Board as it reviews the Companys strategic and financial plans.
J. Danforth Quayle
has served as a Director since May 2007. Mr. Quayle is the Chairman of Cerberus Global Investments,
a position he has held since 1999, when he joined Cerberus Capital Management, one of the worlds leading private investment firms with over $27 billion in committed capital. As chairman of Cerberus Global Investments, Mr. Quayle has been
actively involved in new business sourcing and marketing in North America, Asia and Europe. Prior to joining Cerberus, Mr. Quayle served as a Congressman and Senator from the State of Indiana and as the 44th Vice President of the United States.
During his tenure as Vice President, President George H.W. Bush named Mr. Quayle to head the Council of Competitiveness, which worked to ensure Americas international competitiveness in the 21st century. During his Vice Presidency,
Mr. Quayle made official visits to 47 countries and chaired the National Space Council. Since leaving public office in 1993, Mr. Quayle has established and sold an insurance business in Indiana. For two years he was a distinguished
visiting professor of international studies at Thunderbird, The American Graduate School of International Management in Phoenix, Arizona. Mr. Quayle is currently a Director of Aozora Bank, Tokyo, Japan. In addition, Mr. Quayle has served
on many public and private companies boards during the past 20 years, including board and committee service with USFilter and K2.
We believe that Mr. Quayles broad experience, including government service, provides the Board with unique insight into leadership and oversight responsibilities. His position as Chairman of
Cerberus Global Investments coupled with his active involvement in new business sourcing and marketing also makes Mr. Quayle
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well-suited to advise the Board on its operations and investments. In addition, Mr. Quayles long-time service on public and private companies boards provides him with a deep
understanding of issues facing public companies such as ours.
Andrew D. Seidel
has served as a Director since
October 2008. Since 2006, Mr. Seidel has served as the Chief Executive Officer of Underground Solutions, Inc. (UGSI), a water infrastructure and pipeline company in which the Company has an approximately 7% equity ownership interest
as of December 31, 2013. From 2000 to 2005, Mr. Seidel served as both Chief Executive Officer and Chief Operating Officer of USFilter, then a wholly-owned subsidiary of Veolia Environnement S.A. (NYSE: VE), until its sale to Siemens AG.
Mr. Seidel also served on the Management Board of Veolia Environnement S.A. from 2001 to 2004. From 1991 to 1999, Mr. Seidel served as Chief Operating Officer for the Water & Wastewater Group of USFilter. Mr. Seidel currently
serves as an Advisory Council Member of Vantage Point Venture Partners, one of the largest clean technology funds in the world. Mr. Seidel has also served as a Director of Aqua America (NYSE:WTR), USFilter and National Waterworks, a Thomas
Lee/JP Morgan water infrastructure business that was sold to Home Depot in 2006.
We believe that Mr. Seidels 20
years of water industry experience provides the Board with valuable perspective and expertise relevant to the Companys business in the environmental sector including growth of its water and other environmental services business organically and
through acquisitions. Mr. Seidels leadership positions with other public and private companies, including five years in executive positions with Veolia Environnement S.A., and six years in executive positions with UGSI, also makes him
experienced in financial accounting and SEC compliance issues and brings to the Board the insight of a business leader who has evaluated operational and business issues similar to those facing the Company.
R. Dan Nelson
has served as a Director since November 2013. Prior to joining the Board, Mr. Nelson spent 32 years at
ExxonMobil. During his 32-year career with ExonnMobil, Mr. Nelson served as Vice President of the companys Washington, D.C. office and Vice President and Officer of the corporation. He held a variety of other senior positions with
ExxonMobil in the United States, the United Kingdom and Saudi Arabia. These positions included a number of strategic roles focused on Mobils Middle East operations, Coordination Manager for Mobils business operations with the
Arabian-American Oil Company; Manager, Middle East region, Mobil Corporation; Planning and Analysis Manager for the supply and trading organization in Mobils global headquarters and Venture Manager for the companys liquefied natural gas
projects. Following the ExxonMobil merger, Mr. Nelson was appointed Chairman and Chief Executive Officer of ExxonMobil Saudi Arabia Inc.
We believe that Mr. Nelsons extensive experience in, and knowledge of, the energy industry provides the Board with valuable insight into strategic and operational issues impacting the
Companys shale exploration and production customers. In addition, Mr. Nelsons 32 year career with ExxonMobil provides him with extensive leadership and business management experience that are highly valuable to the Board in
exercising its management and oversight responsibilities. We believe Mr. Nelson also brings a deep understanding of global energy markets and trends impacting businesses operating in this sector, including the Company and its customers and
competitors, which provides a valuable strategic perspective to the Board.
Directors Whose Terms Expire at the 2016 Annual
Meeting of Stockholders (Class III Directors)
Richard J. Heckmann
has been serving as Executive Chairman of
the Board since November 2012. Mr. Heckmann served as Chairman of the Board and Chief Executive Officer from May 2007 until November 2012, and he has been a director since May 2007. Mr. Heckmann previously served as Chairman of the Board
of Directors and Chief Executive Officer of K2, Inc. (K2), a manufacturer of sporting goods equipment, until his retirement from K2 on August 8, 2007, when K2 was acquired by Jarden Corporation. During his tenure as Chairman and
Chief Executive Officer of K2 beginning in November 2002, K2 (which was in workout status at that time) more than doubled its revenues, from approximately $582 million for the year ended December 31, 2002 to approximately $1.4 billion for the
year ended December 31, 2006, and tripled its net income from
- 7 -
approximately $12.1 million for the year ended December 31, 2002 to approximately $37.7 million for the year ended December 31, 2006. Prior to his involvement in K2, in 1990,
Mr. Heckmann founded United States Filter Corporation (USFilter), a worldwide provider of water and wastewater treatment systems and services, serving as its Chairman, Chief Executive Officer and President. Through a series of
acquisitions, USFilter grew from annualized revenues of approximately $17.0 million in 1990 to over $5.0 billion in 1999, when it was acquired by Vivendi S.A. of Paris, France in March 1999 for approximately $8.2 billion, including the assumption of
approximately $1.8 billion of debt. In addition to over 40 years of executive management of large operating companies, Mr. Heckmann has extensive experience with business acquisitions at our Company and at USFilter, which it successfully
completed more than 150 acquisitions during Mr. Heckmanns tenure and at K2, which successfully completed more than 20 acquisitions during Mr. Heckmanns tenure. In 2003, Mr. Heckmann was appointed to the Corporate
Accountability and Listing Standards Committee, a special governance committee of the NYSE. He also served as Chairman of the Listed Company Advisory Committee of the NYSE from 2001 to 2003. Mr. Heckmann has served on many public and private
company boards during the past 40 years. He currently is a member of the Board of Directors of Jarden Corporation (NYSE: JAH), which acquired K2 in 2007, serving as Chair of Jarden Corporations Audit Committee and a member of Jarden
Corporations Executive Compensation Committee. Mr. Heckmann is also part owner of the National Basketball Associations Phoenix Suns franchise.
We believe that Mr. Heckmanns extensive business experience and past leadership of K2 and USFilter provide the Board with a unique perspective on operational matters and issues involved in the
Companys businesses and strategies. As a founder and former Chief Executive Officer of the Company, Mr. Heckmann also brings to the Board knowledge of the operations of the Company, which provides valuable insight to the Board as it
reviews the Companys strategic and financial plans. Mr. Heckmanns prior service with the NYSE as well as his 40 years of service on the boards of many public and private companies also gives him extensive knowledge of the operations
of public companies and potential issues facing companies such as ours that are listed on the NYSE as well as corporate governance practices and accountability.
Mr. Heckmann will retire from the Board effective as of the Annual Meeting.
Alfred E. Osborne, Jr.
has served as a director since May 2007. Dr. Osborne is the Senior Associate Dean at the UCLA
Anderson School of Management, a position he assumed in July 2003. He has been employed as a professor at UCLA since 1972 and has served the school in various capacities over the years. Currently, he also serves as the faculty director of the Harold
Price Center for Entrepreneurial Studies at UCLA, a position he has held since July 2003. Dr. Osborne is a member of the board of directors of Kaiser Aluminum, Inc. (NASDAQ: KALU), a fabricated aluminum products manufacturing company, where he
is Lead Director, a member of the audit committee and chair of the corporate governance committee, and Wedbush, Inc., a financial services and investment firm. Dr. Osborne also serves as a director of First Pacific Advisors family of seven
funds: FPA Capital, Crescent, International Value, New Income, Paramount, Perennial and Source Capital. Dr. Osborne has served on many public and private company boards during the past 30 years, including service on audit and governance
committees.
We believe that Dr. Osbornes background in entrepreneurial studies at UCLA makes him well positioned
to understand complex organizational, financial and managerial issues facing growth-oriented companies, which helps the Board understand and address issues which may exist at our Company as well as the companies or businesses that we may acquire. In
addition, his service on the board of directors of financial companies provides him with an understanding of financial and accounting issues which makes him a valuable resource to our Board and the Audit Committee. His long-time service on audit and
governance committees on the boards of many public and private companies brings to the Board extensive experience with audit matters and governance issues.
Kevin L. Spence
has served as a director since December 2010. Mr. Spence is currently the Chief Financial Officer of Purpose Technologies, Inc. (a/k/a Net Fusion Corporation), a
position he has held since March 2010. He has 25 years of experience in the financial and accounting fields, with prior positions including Chief
- 8 -
Financial Officer of Citation Technologies, Inc. since 2002, and Executive Vice President and Chief Financial Officer of USFilter from January 1992 to December 2000. Prior to that, he was an
audit partner with the international accounting firm of KPMG LLP. Mr. Spence was Chief Financial Officer of GreenCore Technologies, Inc. (f/k/a AquaCell Technologies, Inc.) from January 2007 to December 2008. Mr. Spence also concurrently
served as President and Chief Financial Officer of Aquacell Water, Inc., a former wholly owned subsidiary of GreenCore Technologies that shared corporate offices and operated under the same executive management team as GreenCore Technologies after
its spin-off in 2006. On November 7, 2008, an involuntary petition for liquidation under Chapter 7 was filed against GreenCore Technology, Inc. in the U.S. Bankruptcy Court for the District of Delaware.
We believe that Mr. Spences background as a present and prior Chief Financial Officer of various companies and as an audit
partner at KPMG LLP provides the board with keen insight into matters relating to strategic planning, financial reporting and financial management. Mr. Spences financial background and broad experience with management issues makes him a
valuable resource to the Board and the Audit Committee.
Class I Directors Retiring Effective as of the Annual Meeting
Lou Holtz
has served as a director since May 2007. Mr. Holtz became a college football television
analyst for ESPN in September 2005 after his retirement as the head football coach of the University of South Carolina in November 2004. Prior to joining the University of South Carolina in 1999, Mr. Holtz held various coaching positions,
including eleven seasons at the University of Notre Dame from 1986 to 1996, two seasons at the University of Minnesota from 1984 to 1985, seven seasons at the University of Arkansas from 1977 to 1983, four seasons at North Carolina State University
from 1972 to 1975 and three seasons at William and Mary College from 1969 to 1971. Mr. Holtz spent 1976 as the head coach of the New York Jets of the National Football League. Mr. Holtz is a noted motivational speaker and is the author
of
The Fighting Spirit
. He has served on many public and private companies boards during the past 20 years, including on the board of K2 from 2001 to 2007, and he provided advisory and consulting services to USFilter from 1996 to 1999.
Mr. Holtz is a nationally recognized speaker often engaged by public and private businesses, government and military organizations to provide insight and guidance on leadership and motivational issues applicable to multiple generations of
executives, managers, and employees.
We believe that as a successful coach for both collegiate and professional football for
over 30 years, Mr. Holtz brings to the Board significant leadership and management skills. Mr. Holtzs status as a nationally recognized speaker on leadership issues also makes him well-suited to provide the Board with guidance and
insight on leadership matters facing the Company. In addition to Mr. Holtzs ownership interest in several enterprises together with his long-time service on many public and private companies boards gives him substantial experience
on governance matters and makes him a valuable resource to our Board.
CORPORATE GOVERNANCE
PRINCIPLES AND BOARD MATTERS
We believe that effective corporate governance is critical to our long-term success and
ability to create value for our stockholders. In connection with our initial public offering, or IPO, our listing on the American Stock Exchange in November 2007 and our subsequent listing on the NYSE in May 2008, the Board reviewed, and
from time to time as appropriate, the Board continues to review, our corporate governance policies and practices, as well as related provisions of the Sarbanes-Oxley Act of 2002, current and proposed rules of the United States Securities and
Exchange Commission (SEC), and the corporate governance requirements of the NYSE. Based upon its review, the Board has approved charters, policies, procedures and controls that we believe promote and enhance corporate governance,
accountability and responsibility with respect to the Company, its management and employees, and a culture of honesty and integrity. Our corporate governance guidelines, code of business conduct and ethics, environmental sustainability policy, and
the charters for each of our Board committees are available in the Governance section of our website at
http://ir.nuverra.com/phoenix.zhtml?c=217286&p=irol-govhighlights
- 9 -
and are available free of charge upon request addressed to Corporate Secretary, Nuverra Environmental Solutions, Inc., 14624 N. Scottsdale Rd., Suite 300, Scottsdale, Arizona 85254.
Additionally, in connection with the settlement of a shareholder derivative lawsuit, the Company entered into the Stipulation of
Settlement (the Stipulation) on April 1, 2013 with Plaintiff, Melissa Hess, who was acting individually and derivatively on behalf of the Companys shareholders. Per the Stipulation, the Company agreed to implement a number of
new corporate governance measures and maintain a number of existing corporate governance measures. The Company is working diligently to implement and maintain all required measures by the timeframe agreed to in the Stipulation.
Director Independence
We currently have ten directors on our Board. The rules of the NYSE require listed companies to have a board of directors with at least a majority of independent directors. For a director to qualify as
independent, the Board must affirmatively determine that the director has no material relationship with the Company, either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company that, in the
opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Each member of the Board must meet any mandatory qualifications for membership on the Board, and the Board as a whole must meet the minimum independence requirements imposed by the NYSE or any other
exchange or market on which our common stock is listed and any other laws and regulations applicable to us. Each member of the Board is required to promptly advise the Chairman of the Board and the Chairman of the Nominating and Governance Committee
of any matters which, at any time, may affect such members qualifications for membership under the criteria imposed by any applicable exchange or market, any other laws and regulations or these guidelines, including, but not limited to, such
members independence.
The Board has determined that eight of our ten Board members, Messrs. Barkett, Holtz, Nelson,
Osborne, Quayle, Seidel, Simonds and Spence, are independent both under current NYSE rules governing independence and under new NYSE rules governing independence, which became effective on July 1, 2013. In reaching its determination, the Board
reviewed the corporate governance rules of the NYSE, the Companys corporate governance policies and the individual circumstances of each director and determined that each of the directors identified as independent satisfied each standard. In
particular, in determining that Mr. Seidel is an independent director, the Board considered the Companys ownership of approximately 7% of the common stock of UGSI, of which Mr. Seidel is the Chief Executive Officer. In making its
finding, the Board also considered that the Company does not have any further relationships with UGSI outside of its stock ownership, which was acquired in 2009. In this context, the Board considered the NYSEs position that the NYSE does not
view ownership of even a significant amount of stock, by itself, as a bar to an independence finding.
Executive
Sessions
NYSE rules require the Companys non-management directors to meet at regularly scheduled executive sessions
without management present. Our Corporate Governance Guidelines, which are discussed more fully below under Corporate Governance Guidelines, provide that our non-management directors will meet in executive session without management
directors or management present on a regularly scheduled basis, but not less than quarterly. We adopted our Corporate Governance Guidelines in connection with the listing of our common stock on the NYSE, which occurred on May 23, 2008. Our
non-management directors held five executive sessions during 2013. The director to preside during an executive session is determined at the beginning of the meeting. In addition, our Audit Committee charter requires that the members of the Audit
Committee meet with our independent auditors in executive session. The members of the Audit Committee held seven executive sessions with our independent auditors during 2013.
- 10 -
Committees and Meeting Attendance
The Board has established a standing Audit Committee, Compensation Committee, and Nominating and Governance Committee. Each of these Board
committees operates under a written charter adopted by the Board. The Board committee charters are available in the Governance area of our website at
http://ir.nuverra.com/phoenix.zhtml?c=217286&p=irol-govhighlights
. All
committees consist of three persons, none of whom is employed by us and all of whom are independent under NYSE rules. From time to time, the Board will create special committees to address specific matters such as financial or corporate
transactions.
Members of the Audit Committee must also satisfy an additional SEC independence requirement, set forth in Rule
10A-3 promulgated under the United States Securities Exchange Act of 1934, as amended (the Exchange Act), which provides that they may not accept directly or indirectly any consulting, advisory or other compensatory fee from the Company
other than compensation in their capacity as director, or otherwise be an affiliated person of the Company. The Board has determined that Messrs. Osborne (Chair), Barkett, and Spence, each of whom is a member of our Audit Committee, all
satisfy the current heightened SEC independence requirements for Audit Committee members.
The Board and its Audit,
Compensation and Nominating and Governance Committees meet periodically in person and via conference calls throughout the year, and also hold special meetings and act by written consent from time to time as appropriate. The Board held five meetings
during 2013, and as noted above, the non-management members of the Board held five executive sessions. In 2013, each director attended 100% of the meetings of the Board and the meetings held by all Board committees on which such person served,
except that Mr. Holtz was absent from one Board meeting and two Compensation Committee meetings and Mr. Seidel was absent from one Board meeting.
The following table sets forth the three standing committees of the Board, the members of each committee during the last fiscal year and the number of meetings held by each committee.
|
|
|
|
|
|
|
Director
|
|
Audit
Committee
|
|
Compensation
Committee
|
|
Nominating and
Governance
Committee
|
Edward A. Barkett
|
|
X
|
|
|
|
|
Lou Holtz
|
|
|
|
X
|
|
X
|
Alfred E. Osborne, Jr.
|
|
Chair
|
|
|
|
|
J. Danforth Quayle
|
|
|
|
Chair
|
|
Chair
|
Andrew D. Seidel
|
|
|
|
|
|
|
Robert B. Simonds, Jr.
|
|
|
|
X
|
|
X
|
Kevin L. Spence
|
|
X
|
|
|
|
|
R. Dan Nelson(1)
|
|
|
|
|
|
|
Number of Meetings held in 2013
|
|
7
|
|
3
|
|
1
|
(1)
|
Mr. Nelson was appointed to the Nominating and Governance Committee in February 2014.
|
Policy Regarding Director Attendance at Annual Meetings of Stockholders
Directors are strongly encouraged to attend our annual meetings of stockholders and we currently expect all of our directors to be in attendance at the Annual Meeting on May 6, 2014. All of our
directors attended our 2013 Annual Meeting of Stockholders.
Audit Committee
The members of the Audit Committee are Messrs. Osborne (Chair), Barkett and Spence. As noted above, all members of the Audit Committee
meet the independence requirements of the NYSE and the additional independence requirements of the SEC. All members of the Audit Committee also meet the new independence requirements of the
- 11 -
NYSE, which became effective on July 1, 2013. The Audit Committees written charter can be found in the Governance section of our website at
http://ir.nuverra.com/phoenix.zhtml?c=217286&p=irol-govhighlights
. The Audit Committee oversees our accounting and financial reporting processes, internal control systems, independent auditor relationships and the audits of our financial
statements. The Audit Committees responsibilities include the following:
|
|
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selecting and hiring of our independent registered public accounting firm;
|
|
|
|
evaluating the qualifications, independence and performance of our independent registered public accounting firm;
|
|
|
|
reviewing and approving the audit and non-audit services to be performed by our independent registered public accounting firm;
|
|
|
|
reviewing the design, adequacy, implementation and effectiveness of our internal controls established for finance, accounting, legal compliance and
ethics;
|
|
|
|
reviewing the design, adequacy, implementation and effectiveness of our critical accounting and financial policies;
|
|
|
|
overseeing and monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to our
financial statements and accounting matters;
|
|
|
|
reviewing with management and our independent registered public accounting firm the results of our annual and quarterly financial statements;
|
|
|
|
reviewing with management and our independent registered public accounting firm any earnings announcements or other public announcements concerning our
operating results;
|
|
|
|
reviewing and approving any related party transactions (See Certain Relationships and Related Party Transactions below for further
discussion); and
|
|
|
|
overseeing, discussing with our Board, management and our independent registered public accounting firm and, as necessary, making recommendations to
our Board regarding how to address risks relating to accounting matters, financial reporting and legal and regulatory compliance and developments, and the services provided by our independent registered public accounting firm.
|
Audit Committee Financial Expert
. The Board has determined that Messrs. Osborne and Spence qualify
as audit committee financial experts as defined under SEC rules and regulations. As noted above, Messrs. Osborne and Spence meet the independence requirements of the NYSE and the additional independence requirements of the SEC. The Audit
Committees report appears later in this Proxy Statement.
Compensation Committee
The members of the Compensation Committee of the Board are Messrs. Quayle (Chair), Holtz and Simonds. As noted above, all members of the
Compensation Committee meet the independence requirements of the NYSE, and all are independent, outside directors within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code) and independent
non-employee directors within the meaning of Rule 16b-3 promulgated under the Exchange Act. All members of the Compensation Committee also meet the new independence requirements of the NYSE, which became effective on July 1, 2013. The
Compensation Committees written charter, which was amended to adopt new NYSE requirements regarding independent advisors, is attached as Appendix A hereto and also can be found in the Governance section of our website at
http://ir.nuverra.com/phoenix.zhtml?c=217286&p=irol-govhighlights
. The Compensation Committee has responsibility for the review, evaluation and approval of executive compensation, including the compensation philosophy, policies and plans for
our executive officers.
- 12 -
On behalf of the Board, the Committee monitors and assists the Board in determining
compensation for our senior management, directors and employees. The Compensation Committees responsibilities include the following:
|
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setting performance goals for our officers and reviewing their performance against these goals;
|
|
|
|
reviewing and recommending compensation and benefit plans for our officers and compensation policies for the Board and members of the Board committees;
|
|
|
|
reviewing the terms of employment agreements and arrangements with our officers;
|
|
|
|
reviewing and discussing with the Companys management the section of this Proxy Statement entitled Compensation Discussion and
Analysis and determining whether to recommend to the Board that such section be included in our Proxy Statement and in our annual report on Form 10-K;
|
|
|
|
producing an annual report on executive compensation for inclusion in our Proxy Statement; and
|
|
|
|
overseeing, discussing with our Board and management, and, as necessary, making recommendations to the Board regarding how to address risks relating to
employment, compensation and benefits policies. To assist it in satisfying these oversight responsibilities, the Compensation Committee meets regularly with management to understand the financial, human resources and stockholder implications of
compensation decisions being made.
|
The Board and the Compensation Committee do not discuss or make
decisions regarding an executive officers compensation in the presence of such executive officer. Except for consulting from time to time at the Committees request with both our Executive Chairman and Chief Executive Officer, our
executive officers, including the named executive officers (as defined below under Executive CompensationCompensation Discussion and Analysis), do not have any role in determining the form or amount of compensation paid to our
named executive officers. However, during 2013, Mr. Johnsrud, acting as our Chief Executive Officer, did provide input to the Compensation Committee with respect to compensation paid to the executive officers other than himself. For more
information on the responsibilities and activities of the Compensation Committee, including the committees processes for determining executive compensation, see Compensation Discussion and Analysis appearing on page 25 and the
Compensation Committees report on page 33 of this Proxy Statement. The Compensation Committee engaged Leadership Strategies, LLC as an independent compensation consultant during 2013 for the provision of data and recommendations to the
Compensation Committee during its monitoring, evaluations and actions with regard to executive compensation.
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation Committee are Messrs. Quayle (Chair), Holtz and Simonds. There were no interlocks or insider
participation between any member of the Board or Compensation Committee and any member of the board of directors or compensation committee of another company.
Nominating and Governance Committee
The members
of the Nominating and Governance Committee are Messrs. Quayle (Chair), Holtz, Osborne and Nelson. Mr. Nelson was appointed to the Nominating and Governance Committee in February 2014. As noted above, all members of the Nominating and Governance
Committee meet the independence requirements of the NYSE. All members of the Nominating and Governance Committee also meet the new independence requirements of the NYSE, which became effective on July 1, 2013. The Nominating and Governance
Committees written charter can be found in the Governance section of our website at
http://ir.nuverra.com/phoenix.zhtml?c=217286&p=irol-govhighlights
. On behalf of the Board, the Nominating
- 13 -
and Governance Committee assists the Board by identifying individuals qualified to become directors consistent with criteria established by the Board. The Nominating and Governance
Committees responsibilities include the following:
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|
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evaluating the composition, size and governance of the Board and its committees and making recommendations regarding future planning and the
appointment of directors to committees of our Board;
|
|
|
|
administering a policy for considering nominees for election to the Board;
|
|
|
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overseeing our directors performance and self-evaluation process;
|
|
|
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developing continuing education programs for the Board;
|
|
|
|
reviewing our corporate governance principles and providing recommendations to the Board regarding possible changes; and
|
|
|
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overseeing, discussing with our Board and management and, as necessary, making recommendations to the Board regarding how to address risks relating to
management and Board succession planning, ethics, corporate governance and business practices.
|
Selection of Board Nominees
The Nominating and Governance Committee reviews the qualifications of potential director candidates in accordance with its charter and our Corporate Governance Guidelines, which are discussed below.
The Nominating and Governance Committees consideration of a candidate for director includes assessment of the
individuals understanding of our business, the individuals professional and educational background, skills and abilities and potential time commitment and whether such characteristics are consistent with our Corporate Governance
Guidelines and other criteria established by the Nominating and Governance Committee from time to time. In addition, the Nominating and Governance Committee takes into account diversity of background and experience that the individual will bring to
the Board. To provide such a contribution to the Company, a director must generally possess one or more of the following, in addition to personal and professional integrity:
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experience in corporate management;
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experience with complex business organizations;
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experience as a board member or officer of another publicly held company;
|
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diversity of expertise, experience in substantive matters related to the Companys business and professional experience as compared to existing
members of our Board and other nominees; and
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practical and mature business judgment.
|
The Nominating and Governance Committee may also adopt such procedures and criteria not inconsistent with our Corporate Governance Guidelines as it considers advisable for the assessment of director
candidates. Other than the foregoing, there are no stated minimum criteria for director nominees. The Nominating and Governance Committee does however recognize that at least one member of the Board should meet the criteria for an audit
committee financial expert as defined by SEC rules, and that at least a majority of the members of the Board must meet the definition of independent director under NYSE rules.
Although we do not have a formal policy with regard to the consideration of diversity in identifying candidates for election to the
Board, the Nominating and Governance Committee recognizes the benefits associated with a diverse board, and takes diversity considerations into account when identifying candidates. The Nominating and Governance Committee utilizes a broad conception
of diversity, including diversity of professional experience, employment history, prior experience on other boards of directors, and more familiar
- 14 -
diversity concepts such as race, gender and national origin. These factors, and others considered useful by the Nominating and Governance Committee, will be reviewed in the context of an
assessment of the perceived needs of the Board at a particular point in time. After assessing the perceived needs of the Board, the Nominating and Governance Committee identifies specific individuals as a potential source of director candidates with
relevant experience. The priorities and emphasis of the Nominating and Governance Committee and of the Board may change from time to time to take into account changes in business and other trends and the portfolio of skills and experience of current
and prospective board members.
The Nominating and Governance Committee establishes procedures for the nomination process and
recommends candidates for election to the Board. Consideration of new Board nominee candidates involves a series of internal discussions, review of information concerning candidates, and interviews with selected candidates. Board members or
employees typically suggest candidates for nomination to the board. In 2013, we did not employ a search firm or pay fees to other third parties in connection with seeking or evaluating Board nominee candidates.
The Board nominees named in this Proxy Statement were approved by the Nominating and Governance Committee for inclusion in this Proxy
Statement, and were each recommended by other members of the Board.
Stockholder Nominations
The Nominating and Governance Committee will consider stockholder recommendations for candidates for the Board if the stockholder complies
with the advance notice, information and consent provisions contained in our Bylaws. See Stockholder Proposals For The 2015 Annual Meeting below for more information on these requirements.
The Nominating and Governance Committee will evaluate recommendations for director nominees submitted by directors, management or
qualifying stockholders in the same manner. All directors and director nominees (including any individuals designated by Mr. Johnsrud pursuant to the Stockholders Agreement) will be required to submit a completed directors and
officers questionnaire as part of the nominating process. The process may also include interviews and additional background and reference checks for non-incumbent nominees, at the discretion of the Nominating and Governance Committee.
To be in proper written form, our Bylaws provide that a stockholders notice to the Corporate Secretary must set forth
as to each person whom the stockholder proposes to nominate as a director: (i) the name and record address of such stockholder, (ii) the class or series and number of shares of capital stock of the Company that are owned beneficially or of
record by such stockholder, (iii) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) with respect to the nomination, including the nominee, (iv) any
derivative positions with respect to shares of the Companys capital stock held or beneficially held by or on behalf of such stockholder, the extent to which any hedging or other transaction or series of transactions has been entered into with
respect to shares of the Companys capital stock by or on behalf of such stockholder, and the extent to which any other agreement or understanding has been made, the effect or intent of which is to mitigate loss to, manage risk or benefit of
share price changes for, or increase or decrease the voting power of such stockholder with respect to shares of the Companys capital stock, (v) a representation that such stockholder is a holder of record entitled to vote at the annual
meeting and intends to appear in person or by proxy at the annual meeting to bring such nomination before the annual meeting, (vi) a representation whether the stockholder intends or is part of a group which intends (A) to deliver a proxy
statement and/or form of proxy to holders of at least the percentage of the Companys outstanding capital stock required to elect the nominee and/or (B) otherwise to solicit proxies from stockholders in support of such nomination, and
(vii) any other information relating to such stockholder required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the election of directors in an election contest
pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder.
- 15 -
In addition, the stockholders notice to our Corporate Secretary with respect to
persons that the stockholder proposes to directly nominate as a director must set forth (A) as to each individual whom the stockholder proposes to nominate, all information relating to the person that is required to be disclosed in
solicitations of proxies for the election of directors or is otherwise required, pursuant to Regulation 14A (or any successor provisions) under the Exchange Act (including their name, age, business address, residence address, principal occupation or
employment, the number of shares beneficially owned by such candidate, and the written consent of the such person to be named in the proxy statement as a nominee and to serve as a director if elected) and (B) such persons written consent
to being named in the proxy statement as a nominee and to serving as a director if elected.
Stockholder
Communications with the Board
Stockholders may communicate with any of the Companys directors, including the chair
of any of the committees of the Board or the non-management directors as a group by writing to them c/o Corporate Secretary, Nuverra Environmental Solutions, Inc., 14624 N. Scottsdale Rd., Suite 300, Scottsdale, Arizona 85254. Please specify to whom
your correspondence should be directed. The Corporate Secretary will promptly forward all correspondence to the Board or any specific committee member, as indicated in the correspondence, except for junk mail, mass mailings, job inquiries, surveys,
business solicitations or advertisements, or patently offensive or otherwise inappropriate material. The Companys Corporate Secretary may forward certain correspondence, such as product-related or service-related inquiries, elsewhere within
the Company for review and possible response.
Any interested party, including any employee, may make confidential, anonymous
submissions regarding questionable accounting or auditing matters or internal accounting controls and may communicate directly with the Chairman or Vice Chairman by letter to the above address, marked for the attention of the Chairman or Vice
Chairman. Any written communication regarding accounting, internal accounting controls or other financial matters are processed in accordance with procedures adopted by the Audit Committee.
Code of Business Conduct and Ethics
The Company
has a Code of Business Conduct and Ethics that is applicable to all directors, officers and employees of the Company. The Code of Business Conduct and Ethics is available in the Governance section of the Companys website at
http://ir.nuverra.com/phoenix.zhtml?c=217286&p=irol-govhighlights
and a printed copy may also be obtained by any stockholder upon request directed to Nuverra Environmental Solutions, Inc., 14624 N. Scottsdale Rd., Suite 300, Scottsdale,
Arizona 85254, Attention: Corporate Secretary. The Company intends to post amendments to or waivers, if any, from its Code of Business Conduct and Ethics (to the extent applicable to the Companys directors or its principal executive officer,
principal financial officer, or principal accounting officer) at this location on its website. Among other matters, our Code of Business Conduct and Ethics is designed to promote:
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honest and ethical conduct;
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avoidance of conflicts of interest;
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full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in our other public
communications;
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compliance with applicable governmental laws and regulations and stock exchange rules;
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prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons identified in the code; and
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accountability for adherence to the Code of Business Conduct and Ethics.
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- 16 -
Corporate Governance Guidelines
The Company has adopted Corporate Governance Guidelines that we believe reflect the Boards commitment to a system of governance that
enhances corporate responsibility and accountability. The Nominating and Governance Committee is responsible for implementing the guidelines and making recommendations to the Board concerning corporate governance matters. The guidelines are
available in the Governance section of our website at
http://ir.nuverra.com/phoenix.zhtml?c=217286&p=irol-govhighlights
. We will also furnish copies of the guidelines to any person who requests them. Requests for copies should
be directed to Nuverra Environmental Solutions, Inc., 14624 N. Scottsdale Rd., Suite 300, Scottsdale, Arizona 85254, Attention: Corporate Secretary.
Among other matters, the Corporate Governance Guidelines include the following:
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The Board will be made up of a majority of independent directors who, at a minimum, meet the criteria for independence required by NYSE rules.
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Non-management directors will meet in executive session without management present on a regularly scheduled basis, but not less frequently than
quarterly. In the event that the non-management directors include directors that are not independent under the NYSE rules, the independent directors should schedule an executive session at least once a year.
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The Board and its committees each conduct an annual self-evaluation.
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Directors are expected to regularly attend all meetings of the Board and of the committees of which they are members.
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To effectively discharge their oversight duties, directors have full and free access to our officers and employees.
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Board Leadership Structure and Role in Risk Management
Our Corporate Governance Guidelines provide that the Board may select our Chief Executive Officer as Chairman or appoint a Chairman who
does not also serve as Chief Executive Officer. In determining the appropriate leadership structure, the Board considers many factors, including the specific needs of the business, fulfilling the duties of the Board, and the best interests of the
Companys stockholders.
In connection with the Companys acquisition of Power Fuels in November 2012, the positions
of Chief Executive Officer and Chairman were separated, with Mr. Heckmann, our former Chief Executive Officer and Chairman, remaining as Executive Chairman of the Board, and Mr. Johnsrud, who joined us as Chief Executive Officer, joining
the Board as a Vice Chairman. Mr. Simonds also continues to serve as a Vice Chairman of the Board. The Board believed this leadership structure was best for the Company at the time because it provided the Company with the continued service of
Mr. Heckmann, who has significant expertise with respect to the water industry, finance and accounting matters, acquisitions and other strategic matters as well as corporate governance, accountability and risk management practices central to
the Boards duties; and it provided the Company with the services and leadership of Mr. Johnsrud, who has significant management experience and expertise with respect to the environmental services industry, in particular the successful
implementation of a growth strategy for this business.
The Board has appointed Mr. Johnsrud as Chairman of the Board
effective as of the Annual Meeting. Mr. Heckmann will be retiring from the Board effective as of the Annual Meeting. The Board believes the appointment of Mr. Johnsrud as Chairman is best for the Company at this time as a combined role of
Chairman and CEO will promote unified leadership and direction for the Company, which allows for a single, clear focus for management to execute the Companys strategy and business plans. Mr. Simonds will continue to serve as Vice Chairman
of the Board.
The Board believes that this leadership structure achieves independent oversight and management accountability
through regular executive sessions of the non-management directors that are mandated by our
- 17 -
Corporate Governance Guidelines and through a Board composed of a majority of independent directors. We do not have a designated lead independent director, instead allowing our independent
directors as a group to choose who among them is best suited to serve as chairman of each executive session.
In the normal
course of its business, the Company is exposed to a variety of risks, including operational risks such as long-term changes in commodity prices affecting its customer base or causing shifts in the means and/or location of its customers
operations, governmental policy decisions, and increasing competition from renewable sources of power generation, legislative and regulatory risks, including those related to climate change and air emissions, and general economic, credit and
investment risks. The Board is actively involved in oversight of risks that could affect the Company with an emphasis on understanding the key enterprise risks affecting the Companys business. In addition, the Board monitors the ways in which
the Company attempts to prudently mitigate risks, to the extent reasonably practicable and consistent with the Companys long-term strategies. This oversight is conducted primarily through committees of the Board, as set forth in the
descriptions of each of the committees above, but the full Board has retained responsibility for general oversight of risks. The Board satisfies this responsibility through reports by each committee chair regarding the committees
considerations and actions, as well as through regular reports directly from key operating, finance and legal officers responsible for oversight of particular risks within the Company; the Board also receives updates during the year on particular
matters relating to risks and risk controls that management believes need to be brought to its attention. At least quarterly, our executive management team provides a comprehensive corporate risk report to the full Board, discussing the primary
risks identified by management and the Companys risk control organization and risk control practices.
The Board
leadership structure and role in risk management has also been affected by the settlement of a shareholder derivative lawsuit (the Stipulation) on April 1, 2013 by and between the Company and Plaintiff, Melissa Hess, who was acting
individually and derivatively on behalf of the Companys shareholders. Per the Stipulation, the Company agreed to implement a number of new corporate governance measures and maintain a number of existing corporate governance measures. The
Company is working diligently to implement and maintain all required measures by the timeframe agreed to in the Stipulation.
- 18 -
AUDIT COMMITTEE MATTERS
Audit Committee Report
The Audit Committee is comprised of three non-employee directorsMessrs. Osborne (Chair), Barkett and Spenceand operates under a written charter, adopted by the Board, which is posted on the
Governance section of the Companys website at
http://ir.nuverra.com/phoenix.zhtml?c=217286&p=irol-govhighlights
. We believe the charter is in compliance with SEC regulations and NYSE rules.
The primary purposes of the Audit Committee are to assist the Board in fulfilling its responsibility to oversee (i) the integrity of
the financial statements of the Company, (ii) the Companys compliance with legal and regulatory requirements, (iii) the Companys independent registered public accounting firms qualifications and independence, and
(iv) the performance of the Companys independent registered public accounting firm and internal audit function. The independent registered public accounting firm reports directly to the Audit Committee.
Management has the primary responsibility for the preparation of the Companys financial statements and the internal financial
controls and reporting process. The Companys management has represented to the Audit Committee that the Companys Consolidated Financial Statements for the fiscal year ended December 31, 2013 were prepared in accordance with
generally accepted accounting principles in the United States. The Companys independent registered public accounting firm is responsible for auditing these Consolidated Financial Statements. In the performance of its oversight function, the
Audit Committee reviewed and discussed the audited Consolidated Financial Statements with management and the independent registered public accounting firm. The Audit Committee discussed with management the critical accounting policies and estimates
applied by the Company in the preparation of its Consolidated Financial Statements. The Audit Committee also discussed with the Companys management the process for certifications by the Chief Executive Officer and Chief Financial Officer with
respect to such financial statements as well as managements assessment of internal control over financial reporting as of December 31, 2013. The Audit Committee discussed with the independent registered public accounting firm the matters
required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol.1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
In addition, the Audit Committee received from the independent registered public accounting firm the written disclosures required by the
applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firms communication with the Audit Committee concerning independence and discussed with such firm its independence.
The Audit Committee also evaluated whether the independent registered public accounting firms provision of tax services to the Company was compatible with the registered public accounting firms independence and determined it was
compatible.
The Board has determined that Messrs. Osborne (Chair), Barkett and Spence meet the independence requirements of
Rule 10A-3 of the Exchange Act and applicable NYSE independence rules.
In reliance on the reviews and discussions referred to
above, the Audit Committee recommended to the Board, and the Board approved, that the audited Consolidated Financial Statements be included in Nuverra Environmental Solutions, Inc.s Annual Report on Form 10-K for the year ended
December 31, 2013 for filing with the SEC.
The Audit Committee has selected KPMG LLP as the Companys independent
registered public accounting firm for the year ending December 31, 2014, and has asked the shareholders to ratify the selection.
Alfred
E. Osborne, Jr. (Chair)
Kevin L. Spence
Edward A. Barkett
- 19 -
The Report of the Audit Committee does not constitute soliciting material, and shall not
be deemed to be filed or incorporated by reference into any other Company filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates the
Report of the Audit Committee by reference therein.
Independent Registered Public Accounting Firms
Fees and Services
The following is a summary of the independent registered public accounting fees billed to us for
professional services rendered by our current auditor KPMG for the fiscal years ended December 31, 2013 and 2012.
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Fee Category
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KPMG LLP
2013
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KPMG LLP
2012
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Audit Fees
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$
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1,328,930
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$
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1,114,125
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Audit Related Fees
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$
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294,613
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$
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431,676
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Tax Fees
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$
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250,000
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$
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52,454
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All Other Fees
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Total Fees
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$
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1,873,543
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$
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1,598,255
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Audit fees
consist of fees billed for each of 2013 and 2012 for professional services rendered in
connection with the audit of our annual Consolidated Financial Statements, reviews of our interim Consolidated Financial Statements included in our Form 10-Q, and audit-related work in connection with acquisitions completed during 2012.
Audit related fees
consist of fees that are reasonably related to the performance of the audit or review of our financial
statements and are not reported under the caption Audit Fees.
Tax fees
consist of fees billed for 2013 and
2012 for tax compliance and tax planning and advisory services.
Policy on Audit Committee Pre-Approval of Audit
and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
The Audit Committee has, by
resolution, adopted policies and procedures regarding the pre-approval of the performance by the independent registered public accounting firm of audit and non-audit services. The independent registered public accounting firm may not perform any
service unless the approval of the Audit Committee is obtained prior to the performance of the services, except as may otherwise be provided by law or regulation. All services described above were pre-approved by the Audit Committee in accordance
with this policy.
- 20 -
PROPOSAL 2RATIFICATION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
(Item 2 on Proxy Card)
Background
We are asking the stockholders to
ratify the Audit Committees appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2014. KPMG LLP is a registered public accounting firm with the Public Company Accounting Oversight
Board (the PCAOB), as required by the Sarbanes-Oxley Act of 2002 and the rules of the PCAOB. In the event the stockholders fail to ratify the appointment, the Audit Committee will reconsider this appointment. Even if the appointment is
ratified, the Audit Committee, in its discretion, may direct the appointment of different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the Companys
and its stockholders best interests.
KPMG LLP representatives are expected to attend the Annual Meeting via conference
call. They will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate stockholder questions.
Vote Required and Board Recommendation
The
affirmative vote of a majority of the shares of common stock present, in person or by proxy, entitled to vote at the Annual Meeting is required to ratify the appointment of KPMG LLP as the Companys independent registered public accounting firm
for 2014. Abstentions and broker non-votes will be counted as present for purposes of determining whether a quorum is present. Abstentions will have the same effect as an against vote, but broker non-votes will not have any effect on the
outcome of this Proposal.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR
THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2014.
- 21 -
PROPOSAL 3ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
(Item 3 on Proxy Card)
Background
In accordance with requirements of
Section 14A of the Securities Exchange Act (the Dodd-Frank Act) and the related rules of the SEC, we are providing our stockholders with the opportunity to cast a non-binding, advisory vote to approve the compensation of our named
executive officers as disclosed pursuant to the SECs executive compensation disclosure rules and set forth in this Proxy Statement (including the Compensation Discussion and Analysis, compensation tables and narratives accompanying those
tables).
Our executive compensation programs are designed and regularly reviewed by the Compensation Committee of the Board,
which consists entirely of independent directors. As described more fully under Compensation Philosophy in the Compensation Discussion and Analysis later in this Proxy Statement, our executive compensation programs are designed to
achieve the following objectives:
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provide a competitive total compensation package sufficient to attract, motivate and retain high caliber executives who will deliver long-term
shareholder value;
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support and recognize attainment of our tactical and strategic goals;
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maintain an appropriate balance between fixed and variable compensation, and long-term and short-term incentives, with recognition of our senior
executives responsibility for the Companys overall performance and market value; and
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ensure internal alignment of executive activities and actions with Company financial and operating objectives, without undue risk.
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The features of our executive compensation programs are described in the Compensation Discussion and
Analysis, and include the following highlights which we believe reinforce stockholder interests:
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based on beneficial ownership, our Chief Executive Officer and Vice Chairman is our largest stockholder, which significantly aligns his interests with
our other stockholders interests;
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a portion of executive compensation has historically been awarded in the form of long-term equity incentives that have multi-year vesting periods and
we have continued this practice as new executives are hired;
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no executives contractual annual cash bonus opportunity is greater than 60% of his base salary (provided, that the bonus opportunities for
Messrs. Johnsrud and Heckmann are discretionary, as determined by the Committee);
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our named executive officers, other than Mr. Parkinson, have employment agreements that we believe provide market-competitive severance benefits
and protections; and
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the Companys mix of long-term equity awards, annual bonus structure and oversight of compensation programs is designed to mitigate risk by
emphasizing a long-term focus on compensation and financial performance.
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We request stockholder approval
of the compensation of our named executive officers as disclosed pursuant to the SECs executive compensation disclosure rules and set forth in this Proxy Statement (including the Compensation Discussion and Analysis, compensation tables and
narratives accompanying those tables).
As an advisory vote, this Proposal is not binding upon the Company. However, the
Compensation Committee of the Board, which is responsible for designing and administering our executive compensation programs, values the opinions expressed by stockholders in their vote on this Proposal, and will consider the outcome of the vote
when making future compensation decisions for named executive officers.
- 22 -
Vote Required and Board Recommendation
The affirmative vote of a majority of the shares of common stock present, in person or by proxy, entitled to vote at the Annual Meeting is
required to approve Proposal No. 3. Abstentions and broker non-votes will be counted as present for purposes of determining whether a quorum is present. Abstentions will have the same effect as an against vote, but broker non-votes
will not have any effect on the outcome of this Proposal.
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL NO. 3.
- 23 -
EXECUTIVE OFFICERS
The Companys executive officers are appointed by the Board and serve at the discretion of the Board. Set forth below are the names
and certain biographical information regarding the Companys executive officers as of March 13, 2014.
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Name
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Position with our Company
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Age
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Executive
Officer
Since
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Richard J. Heckmann*
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Executive Chairman
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70
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2007
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Mark D. Johnsrud*
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Chief Executive Officer
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55
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2012
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Jay C. Parkinson
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Executive Vice President and Chief Financial Officer
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38
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2012
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W. Christopher Chisholm
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Executive Vice President and Chief Accounting
Officer
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55
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2011
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*
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See Proposal 1Election of DirectorsInformation Regarding Directors and Nominees for biographical information regarding Messrs. Heckmann and
Johnsrud. Mr. Heckmann will be retiring from the Board effective as of the Annual Meeting.
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Jay C. Parkinson,
Executive Vice President and Chief Financial Officer
Mr. Parkinson has served as our Executive Vice President and
Chief Financial Officer since September 2012. As Chief Financial Officer, he is involved in developing the Companys overall financial structure, including the financial and accounting controls for all our operating subsidiaries. As Chief
Financial Officer, he also is responsible for all finance and accounting related functions of the Company and its operating subsidiaries, including SEC reporting and Sarbanes-Oxley compliance. Prior to joining the Company, Mr. Parkinson worked
in the Energy Investment Banking group at Jefferies & Company, Inc. since January 2006, most recently as a Managing Director. From June 2003 to December 2005, Mr. Parkinson worked in the Investment Banking Group at Johnson
Rice & Company L.L.C., most recently as a Vice President. Mr. Parkinson received his bachelors degree in History from Georgetown University in 1997, his masters degree in International Relations from the London School of
Economics and Political Science in 1999 and his Master of Business Administration from the Tulane Universitys A.B. Freeman School of Business in 2003.
W. Christopher Chisholm, Executive Vice President and Chief Accounting Officer
Mr. Chisholm currently serves as our Executive Vice President and Chief Accounting Officer. The Board appointed Mr. Chisholm the principal accounting officer of the Company effective as of
March 10, 2014. Mr. Chisholm has served in various executive leadership positions in the Companys finance and accounting group since joining the Company in November 2011. Prior to joining the Company, Mr. Chisholm was Executive
Vice President and Chief Financial Officer of Envirogen Technologies, Inc. where together with a predecessor entity, Basin Water, Inc., he was employed since 2008. On July 16, 2009, Basin Water, Inc. filed bankruptcy under Chapter 11 of the
United States Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. From 2004 to 2008, Mr. Chisholm was Executive Vice President, Finance & Administration and Chief Financial Officer of Veolia Water North America,
LLC. From 1997 to 2004, Mr. Chisholm held various positions with USFilter, including Group Controller, Vice President and Chief Financial Officer of the Water and Waste Water Group and Executive Vice President of Finance. Prior to his tenure at
USFilter and predecessor companies, Mr. Chisholm was an Audit Senior Manager at KPMG LLP, an international accounting firm. Mr. Chisholm received a Bachelor of Business Administration degree with emphasis in accounting from Northeast
Louisiana University, now known as the University of Louisiana at Monroe, and is a Certified Public Accountant.
- 24 -
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Introduction
This Compensation Discussion and Analysis describes
the material elements of compensation awarded to, earned by, or paid during the last completed fiscal year to our principal executive officer, principal financial officer, and the three other most-highly compensated individuals, who served as
executive officers of the Company during Fiscal 2013. These following five individuals are referred to as the named executive officers (NEOs) in this Compensation Discussion and Analysis:
Richard J. Heckmann, Executive Chairman;
Mark D. Johnsrud, Chief Executive Officer and Vice Chairman;
Jay C. Parkinson, Executive Vice President and Chief Financial Officer;
W. Christopher Chisholm, Executive Vice President and Chief Accounting Officer; and
Christopher E. Kevane, Former Executive Vice President, Chief Legal Officer and Secretary.
The compensation of the NEOs for Fiscal 2013 is set forth in the Fiscal 2013 Summary Compensation Table and other tables contained in
this Proxy Statement.
Overview
In Fiscal 2012, we successfully completed two major transactions: the acquisition of Thermo Fluids and the merger of Power Fuels, and more than doubled our size in terms of revenue. These transactions
were an important step in positioning the Company to better compete in an increasingly competitive industry and generate long-term returns for our shareholders.
Fiscal 2013 was one of strategic transformation for our Company. The Company united all of our business units under the new brand of Nuverra Environmental Services. Rebranding the Company represents a
fundamental dedication to supporting sustainable energy generation and American energy independence. Our unique customer value proposition enables us to provide a one-stop environmental solution to our customers with a national footprint that is
focused solely on environmental solutions and innovative approaches to environmental sustainability.
In
July 2013, we entered into an agreement with Halliburton to advance the treatment and recycling of produced water to be re-used in the hydraulic fracturing process. As part of the agreement, the Company and Halliburton work together in the Bakken
Shale area to offer the H20Forward
SM
service to our
customers which enables the recycling of waste streams of flowback and produced water for use in well completions. Also in July 2013, we completed an acquisition in the Bakken Shale of an oilfield waste disposal landfill which is an integral
component in being a full-cycle, closed-loop environmental solutions provider.
In Q4 2013 we announced plans for a new
divisional structure designed to maximize operating efficiencies, leverage future growth opportunities, and optimize sales and business development activities to align with our customers. We expect to complete the initiative during 2014.
Summary
2013 was
a year of great progress as we took significant steps in our strategic transformation. Accomplishments with regard to leadership attraction and compensation design in support of the Companys strategy included the following:
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We have been actively building the Companys executive team beyond our named executive officers. In corporate leadership, we hired three highly
experienced executives to lead our information technology, human resources and investor relations and communication functions. We announced plans
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- 25 -
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for a new divisional structure and started recruiting for Division Presidents, and recently hired a Division President for our Rocky Mountain Division.
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We have historically granted long-term incentive awards to our named executive officers in the form of stock options, based on the belief that stock
options were the most appropriate form of long-term incentive, and we have continued this practice as new executives are hired into the organization. As we embark on a new phase of our transformation and as we continue to monitor equity granting
trends and practices, we have begun to use other equity instruments such as restricted stock units as part of our pay mix. We have included these full value awards in the pay mix to ensure we stay competitive in the market place in recruiting and
retaining executive talent.
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We finalized a cash bonus plan for senior executives. For 2014, the Senior Executive Incentive Plan (SEIP) will provide for cash annual incentive award
opportunities tied heavily to achievement of specific, pre-determined financial performance goals based on earnings before interest, taxes, depreciation and amortization (EBITDA) and management objectives.
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During 2013 we made discretionary bonus awards. Such awards were not tied to specific, pre-defined financial and/or non-financial performance goals
because any such goals set in early 2013 would have become irrelevant given the Companys transformation efforts in 2013.
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In making discretionary bonus awards to our named executive officers, the Compensation Committee considered the executives contributions to the
organization during the rebranding and transformation process.
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Both Messrs. Heckmann and Johnsrud elected not to receive any bonus payment for 2013 performance.
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To stay ahead of a changing and competitive landscape, we continued to invest in our people, products, technology and new opportunities.
Looking ahead, we have brought together a senior management team with extensive combined experience, with an emphasis on acquiring and building sustainable businesses based on operational excellence, health and safety, technological development and
financial discipline.
Stockholder Advisory Vote on Executive Compensation
At our 2013 Annual Meeting of Stockholders, approximately 98.4% of the Companys shareholders present or represented and voting on
the matter approved and supported our executive compensation practices in the advisory say on pay vote. As such, and in light of the transformation of the organization during 2013, the Compensation Committee determined to continue its
general philosophy and decision-making process related to executive compensation matters in a manner consistent with its prior practices. As the need exists to further refine our executive compensation policies and practices to keep abreast of
marketplace trends and to attract and retain top talent, the Compensation Committee approved a revised compensation philosophy for use in 2014.
Governance Policies and Actions
We endeavor to maintain good corporate governance standards in our executive compensation policies and practices. As a result, the following provides policies and practices that were in effect or modified
in 2013:
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All members of the Compensation Committee meet the new independence requirements of the NYSE.
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An independent compensation consultant is retained directly by the Compensation Committee.
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The Compensation Committee conducts an annual review of our compensation strategy.
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The Company provides its shareholders with an annual advisory vote to approve the compensation of the Companys named executive officers.
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- 26 -
Compensation Philosophy and Objectives
Our compensation philosophy provides a foundation for design, comparison and management of the Companys executive compensation
programs. The overarching objective of our executive compensation program is to attract, motivate and retain executives who will deliver long-term shareholder value. Our success is driven through the use of competitive compensation programs with
strong links to Company and individual performance.
Nuverra achieves this objective by providing a market-competitive
compensation program that consists of base salary, annual incentives and long-term incentives. Nuverras Compensation Committee compares compensation to market practices of a select group of other publicly traded companies and published
executive pay survey sources that are representative of peer group and general industry companies with which our Company competes for executive talent.
Nuverra emphasizes pay-for-performance alignment by basing a significant portion of target total direct compensation on short-term and long-term incentive pay. Short-term and long-term incentives align
executives with shareholder interests via annual business objectives and multi-year performance results, which together drive shareholder value. Short-term incentive goals arise from Nuverras Board-approved annual operating plan, while
long-term incentives are tied to Nuverras stock price movements and shareholder returns, and they can also be tied to Board-approved long-term strategic goals.
Incentive-pay structure provides for maximum payouts in instances when Company performance both exceeds internal expectations and results in strong returns for shareholders. Furthermore, we align
financial interests of our executives with those of our shareholders through emphasis on long-term incentives and encouragement of equity ownership.
Our executive compensation philosophy comprises principles that we will seek to follow, and to which the Compensation Committee will refer when making pay-related decisions in 2014 and beyond.
Role of the Compensation Committee
The Compensation Committee of the Board oversees the design and administration of our executive compensation programs, with the objectives of providing compensation packages that are competitive within
our industry and maintaining a balanced focus on both short and long-term performance goals. The compensation packages of our named executive officers consist of base salary, annual cash incentive bonus and intermediate-term restricted stock awards
and long-term incentives in the form of stock option awards.
Role of Management
Mr. Johnsrud, our Chief Executive Officer and Vice Chairman, reviews the performance of each of the executive officers (other than
himself, whose performance is reviewed by the Compensation Committee with input from the full Board of Directors), and makes compensation recommendations to the Compensation Committee for consideration. Mr. Johnsrud consults with
Mr. Heckmann, our Executive Chairman, regarding executive compensation matters to the extent that he believes necessary or useful. The Compensation Committee has the discretion to approve, modify or reject any recommended compensation
adjustments or awards.
Role of the Compensation Consultant
The Companys compensation philosophy is based on the desire for executive remuneration to align with the interests of shareholders.
To do this, the Compensation Committee worked to ensure that senior executive incentives are heavily weighted toward Company performance while being generally consistent with market norms.
We seek to deliver pay-for-performance while meeting the following objectives:
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Attract, motivate and retain highly qualified executives;
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- 27 -
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Establish challenging, but realistic objectives, balanced between short-term and long-term objectives;
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Provide a meaningful portion of compensation in variable (versus fixed) pay, with a significant portion of variable compensation in the form of
long-term equity awards; and
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Ensure internal alignment of executive activities and actions with Company financial and operating objectives, without undue risk.
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In order to ensure that our executive compensation programs support and contribute to creating the
achievement of Company objectives, the Compensation Committee receives regular updates on our business results from management and reviews our quarterly financial statements and management projections.
The Compensation Committee is comprised solely of independent directors. In addition, the Compensation Committee has the sole authority
to retain and if necessary, terminate a consulting firm to assist in the evaluation of Chief Executive Officer and other senior executive officer compensation plans. In 2013, the Compensation Committee retained
Leadership Strategies LLC
(LSLLC), as an independent compensation consultant, to assist with our review of the compensation packages provided to our senior executives as well as to design a metric and performance based incentive plan for senior executive
positions.
As part of the process of selecting LSLLC as a compensation consultant, the Committee gave consideration to
factors identified by the SEC as possibly contributing to conflicts, including the scope of the work performed for the Compensation Committee, the fees paid for such services, and any personal or business relationships between our executives or the
Compensation Committee members and LSLLC. The Compensation Committee determined that there are no conflicts of interest or potential conflicts of interest in the engagement of LSLLC as an independent advisor. The Committee has also considered the
six factors for determining independence identified by new NYSE rules (effective July 11, 2013) and set forth in the Compensation Committees Charter in making its determination that LSLLC is independent.
In April 2013, the Compensation Committee, with the assistance of LSLLC, selected a comparative industrial peer group for compensation
comparison purposes based on industry, revenue and/or market capitalization similarity to the Company comprised of:
Basic Energy Services, Inc.
;
C&J Energy Services, Inc.
;
Energy Solutions, Inc.
;
Forbes Energy Services,
LLC.
;
Key Energy Services, Inc.
;
National Oilwell Varco, Inc.
;
Newpark Resources, Inc.
;
US Ecology, Inc.
and
Waste Connections, Inc.
in order to ensure that the Company was within a competitive range with
regard to common base compensation and total compensation practices. The Compensation Committee expects to evaluate the peer group annually on a going-forward basis.
In May 2013, all elements of total direct compensation were analyzed with regard to the named executive officers and found to be in a competitive range. Compensation decisions were guided, in part, by
review of the peer group data from LSLLC and in part by reference to industry survey data provided for the
Upstream Oil and Natural Gas Support Activities
industry, on a nationwide basis by the
Economic Research Institute
(ERI) as well
as additional published data for validation purposes (the peer group and industry survey data collectively referred to herein as the market data). In addition, the members of the Compensation Committee are familiar with competitive
compensation programs based on their experiences owning and/or managing other companies and sitting on other private and public companies boards of directors. The Compensation Committee does not target executive compensation at any particular
percentage-of-market level in comparison with other companies, but instead uses the market data and familiarity with contemporary current executive compensation programs to conduct an overall assessment of senior executive compensation
competitiveness as well as plan design.
Beginning in June 2013, LSLLC assisted the Compensation Committee with the design of
a significantly updated senior executive incentive plan intended to motivate and reward senior executive contributions to Company financial, brand and competitive objectives with a significant emphasis on EBITDA. That plan was implemented on
January 1, 2014 and is intended to be self-funded meaning that a large majority of potential payouts are contingent upon the Company meeting or exceeding its EBITDA objective. Additionally, this plan includes a methodology for
setting and evaluating performance against individualized objectives for evaluating
- 28 -
officer performance and outcome contribution, for the purpose of motivating exceptional performance in pursuit of Company financial, brand and competitive objectives.
Significant purposes of this 2014 plan are to:
|
|
|
Tie pay directly to performance and outcomes. A significant portion of senior executive total target compensation is not guaranteed and is tied to
performance metrics designed to drive shareholder value. If goals are not fully attained, little or no incentive compensation will be paid. Payouts under the plan range from 0% to 100% of base salary.
|
|
|
|
Mitigate undue risk. We mitigate undue risk, including utilizing caps on incentive award payments and vesting periods on potential equity payments,
restrictive covenants, and multiple performance metrics. The Compensation Committee annually reviews our compensation risk profile to ensure that our compensation-related risks are not reasonably likely to have a material adverse effect on the
Company.
|
LSLLC reported directly to the Compensation Committee during its engagement in 2013, and did not
at any time during 2013 or prior to 2013 provide any other services to the Company. Additionally, the Compensation Committee has determined the terms of LSLLCs retention and services in its sole discretion without involvement by any Company
executives or employees, and LSLLCs interactions with Company executives during 2013 were generally limited to providing information to certain executives for the sole purpose of implementing Compensation Committee decisions.
Competitive Positioning
As noted in
Role of Compensation Consultant
section above, the Compensation Committee retained LSLLC of Scottsdale, Arizona as its executive compensation consultant. Leadership Strategies assisted
in conducting a competitive assessment of market compensation practices, comparing compensation levels of the Companys executive officers to the competitive marketplace, and assisting in the development of the SEIP.
Each year, the Compensation Committee reviews the appropriateness of our compensation peer group. In early 2014, the Compensation
Committee re-assessed the peer group and made changes to better reflect and align with our revised compensation philosophy. The organizations in our peer group are intended to represent industry-specific companies with which our Company might
compete for executive talent. For 2014, the Compensation Committee approved a compensation peer group comprised of companies:
|
|
|
With which the Company could compete for executive talent;
|
|
|
|
From the Environmental Services Industry and Oil and Gas Equipment Services Industry (appropriate GICS code classifications);
|
|
|
|
That falls within relevant Company-size parameters.
|
The Company competes in a very specialized, niche industry with limited comparable organizations (including in terms of annual revenue size). Because senior executive pay levels tend to be correlated to
Company revenue, the Compensation Committee considers compensation peer group executive pay levels (market pay levels) both generally and also with regard to our Companys size in relation to that of peer companies.
As a result of such criteria and considerations, the following 12 companies comprise our compensation peer group for 2014:
|
|
|
Basic Energy Services, Inc.
|
|
Heritage-Crystal Clean, Inc.
|
C&J Energy Services, Inc.
|
|
Key Energy Services, Inc.
|
CARBO Ceramics Inc.
|
|
Newpark Resources, Inc.
|
Casella Waste Systems, Inc.
|
|
RPC, Inc.
|
Clean Harbors, Inc.
|
|
TETRA Technologies, Inc.
|
Forbes Energy Services Ltd.
|
|
Waste Connections, Inc.
|
- 29 -
In addition to publicly disclosed compensation information of these peer companies, the
Compensation Committee will consider other sources of internal and external data in making individual and overall compensation decisions. For example, external data from published executive compensation surveys will be considered. Moreover, from an
internal perspective, we will also give consideration to an individuals contributions to the organization, leadership qualities, skills, experience and contributions to the overall performance of the Company.
Components of Named Executive Officer Compensation
The Compensation Committee is committed to a strong, positive link between our short-term and long-term objectives and our compensation practices. The executive compensation program for our named
executive officers is comprised of four basic components: base salary; annual fixed cash incentives and an additional discretionary incentive opportunity; periodic intermediate-term incentive awards in the form of restricted stock; and long-term
incentive awards in the form of stock options. The Committee believes that this combination of fixed and variable components plus annual, intermediate and long-term components, is an appropriate structure in order for us to achieve our compensation
objectives described above.
Base Salary
. Base salaries provide a fixed component and minimum level of compensation for
our executives, taking into account their respective responsibilities, level of experience and individual performance as well as internal pay equity considerations. The Company has recognized that to attract talented employees from key positions at
other companies with which we compete for executive talent, and to retain those employees, we must be able to pay competitive base salaries (supplemented by cash and equity incentive compensation). In addition, the Compensation Committee takes into
account Company performance, executive responsibility, individual execution of duties and internal pay alignment in reviewing compensation.
During 2013, Mr. Johnsrud reviewed the performance of Messrs. Parkinson and Chisholm and recommended, and the Compensation Committee approved, base salary increases to $450,000 and $300,000
respectively which became effective on December 23, 2013. Messrs. Heckmann, Johnsrud and Kevane did not receive salary increases in 2013.
Annual Cash Incentive Opportunity
. Pursuant to his employment agreement, Mr. Chisholm is eligible to receive a guaranteed bonus equal to 10% of his base salary, provided that he remains
employed by the Company on the date of payment. (See Executive Employment Agreements and Potential Payments upon Termination or Change-in-Control below for more information about potential severance benefits for our named executive
officers). In addition, pursuant to their employment agreements, Messrs. Heckmann, Johnsrud, and Chisholm are each eligible to earn a variable discretionary bonus each year, depending on the subjective review of their individual contributions and
overall Company performance, as recommended by our Chief Executive Officer for named executive officers other than himself, and reviewed and determined by the Compensation Committee. The discretionary bonus opportunity for Mr. Chisholm is up to
50% of his respective base salary. Messrs. Heckmann and Johnsrud do not have a specific target or maximum percentage set forth in their employment agreements, and Mr. Parkinson does not have an employment agreement. Compensation philosophy
going forward will examine the use of guaranteed bonus as it does not align with revised philosophy.
Under the terms of his
employment agreement, Mr. Chisholm is entitled to a $25,000 guaranteed bonus, which the Company paid in March 2014. Messrs. Heckmann and Johnsrud elected not to receive any type of incentive bonus payout in 2013.
Equity Incentive Awards.
In 2009, we adopted and the Companys shareholders approved the Heckmann Corporation 2009 Equity
Incentive Plan (the Equity Incentive Plan), which provides for various forms of equity incentive awards, including restricted stock or stock options, to be made at the discretion of the Compensation Committee.
- 30 -
|
|
|
Intermediate-Term Incentive Awards.
We believe that the periodic use of intermediate-term incentive awards in the form of restricted stock,
granted under our Equity Incentive Plan, is an important component of our executive compensation program. We believe that in general, for each of our executives, such grants of restricted stock will provide an incentive to remain in our employ
without the need for a short-term significant increase in our stock price, due to the inherent value of the stock underlying the awards (as opposed to stock option awards, which lose incentive and retention value if our stock price falls below the
exercise price). During 2013, we granted 2,500 shares of restricted stock to Mr. Kevane in connection with his commencement of employment which, had he remained employed, would have vested one-third a year on the anniversary of the grant date
(see the Grants of Plan-Based Awards table below for more information). In March 2014, we granted shares of restricted stock to Messrs. Parkinson and Chisholm for 2013 performance.
|
|
|
|
Long-Term Incentive Awards.
We currently utilize stock options, granted under our Equity Incentive Plan, as the primary vehicle for providing
long-term compensation incentives to our named executive officers and other management employees. The Compensation Committee believes that stock options are an important part of compensation packages granted to these employees because they help
attract and retain talented employees; the value received by the recipient of a stock option is based on the growth of our stock price, thereby creating and enhancing incentives to increase our stock price and maximize shareholder value; and they
create a balance with shorter-term incentives such as base salary and bonuses and intermediate-term incentives such as restricted stock. The Compensation Committee determines the terms of and the number of shares underlying stock option awards to
the named executive officers, and has taken into account the recommendations of our Chairman and Chief Executive Officer in making decisions with regard to the other named executive officers. During 2013, we granted 5,000 stock options to
Mr. Kevane in connection with his commencement of employment, which had he remained employed, would have vested one-third a year on the anniversary of the grant date (see the Grants of Plan-Based Awards table below for more
information).
|
In determining the number of applicable shares and the vesting schedule of restricted stock
and stock options granted to named executive officers and other employees, the Compensation Committee generally takes into account the individuals position, tenure with the Company, scope of responsibility, value of stock options in relation
to the other elements of the individuals total compensation and, where applicable, the need to attract and retain the individual for his or her current position. All stock option grants have an exercise price of at least fair market value on
the date of grant. All equity awards to named executive officers are required to be approved by the Compensation Committee.
Severance Arrangements and Change-in-Control Payments
With the exception of Messrs. Parkinson and Kevane, we have
entered into employment agreements with each of our current named executive officers that contain provisions that provide certain severance and change-in-control benefits, which are fully discussed in the Executive Employment Agreements
and Potential Payments upon Termination or Change-in-Control sections below. We believe these employment agreements provide severance and change-in-control protection in a manner similar to common practice in the marketplace.
Our outlook with respect to these change-in-control provisions is that they are appropriate because they make it easier for the
executives to focus on the best interests of our Company and shareholders rather than the implications for them personally in the event our Company faces the possibility of a change-in-control. These provisions were designed to:
|
|
|
be consistent with current market practices;
|
|
|
|
afford reasonable protection without creating any undue windfall;
|
|
|
|
enhance the Companys ability to retain key employees during critical but uncertain times; and
|
|
|
|
enhance an acquirers potential interest in retaining key executives.
|
- 31 -
Severance payments are only made under the employment agreements if the named executive
officer executes a full general release of claims in favor of the Company. We believe that these severance and change-in-control payment provisions in our executive employment agreements are necessary in order for us to provide competitive
compensation within our industry and to encourage our named executive officers to remain in our employ, while also protecting the interests of the Company and its shareholders in certain circumstances of a key executives separation from
employment.
Assessment of Risk
The Compensation Committee takes risk into consideration when reviewing and approving executive compensation, including when it approved our executive compensation program and as reflected in our 2013
compensation actions. After assessing the possible risks, the Compensation Committee has concluded that the current executive compensation programs, reflected in our 2013 compensation actions, do not encourage inappropriate or excessive risk-taking
and do not create the likelihood of a material adverse impact on the Company. In making its determination, the Compensation Committee considered the structure of our compensation plans, including the use of base salaries, short-term incentives and
equity-based intermediate and long-term incentive awards, as well as capped, discretionary bonus opportunities under our short-term incentive plans.
Tax and Accounting Information
Section 162(m) of the Code and
regulations adopted thereunder place limits on deductibility of compensation in excess of $1.0 million paid in any one year to certain of our named executive officers, unless this compensation qualifies as performance based as determined
under regulations of the U.S. Treasury Department. The non-performance based compensation paid in cash to each of our named executive officers did not exceed the $1.0 million limit per officer in 2013.
Our equity compensation plan is designed so that full value awards which vest solely based on performance may be performance-based
compensation and deductible under Section 162(m). Stock options granted at or above market value will also be performance-based compensation and deductible under Section 162(m). However, full value awards which vest based on time will not
be qualified as performance-based and may not be deductible.
Although it considers the tax implications of its compensation
decisions, the Compensation Committee believes its primary focus should be to attract, retain, and motivate high-caliber executives and to align the executives interests with those of our shareholders. Thus, while in the course of structuring
our compensation policies the Compensation Committee considers ways to maintain the tax deductibility of the compensation for named executive officers. The Compensation Committee intends to retain the necessary discretion to compensate executives in
a manner in keeping with overall compensation goals and strategies, and may choose to provide compensation which may not be deductible by reason of Section 162(m).
In addition, the Compensation Committee has considered and will continue to consider the impact of the requirement under FASB ASC Topic 718 that we record in our financial statements the expense incurred
when stock options are granted to employees. In addition, the Compensation Committee will examine the tax impact on employees and the potential tax deductions to the Company with respect to the exercise of stock option grants. We do not pay or
reimburse any named executive officers for any taxes due upon exercise of a stock option or upon the vesting of a restricted stock award.
- 32 -
Compensation Committee Report
The Compensation Committee has reviewed and discussed with the Companys management the Compensation Discussion and Analysis
(CD&A) set forth above. Based on such review and discussion, the Compensation Committee has recommended to the Board of the Company that the CD&A be included in the Companys Annual Report on Form 10-K for the year ended
December 31, 2013 and this Proxy Statement.
J. Danforth Quayle (Chair)
Lou Holtz
Robert B. Simonds, Jr.
- 33 -
2013 Summary Compensation Table
The following table summarizes the compensation during the last three fiscal years (as applicable) to the Companys named executive
officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
Name and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)(1)
|
|
|
Option
Awards
($)(2)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Richard J. Heckmann
|
|
|
2013
|
|
|
|
702,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,435
|
(3)
|
|
|
715,127
|
|
Executive Chairman
|
|
|
2012
|
|
|
|
511,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
511,538
|
|
|
|
2011
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500,000
|
|
|
|
|
|
|
|
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|
Mark D. Johnsrud
|
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|
2013
|
|
|
|
702,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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23,399
|
(4)
|
|
|
726,091
|
|
Chief Executive Officer and Vice Chairman
|
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2012
|
|
|
|
58,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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58,333
|
|
|
|
|
|
|
|
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|
Jay C. Parkinson
|
|
|
2013
|
|
|
|
402,885
|
|
|
|
75,000
|
(5)
|
|
|
|
|
|
|
|
|
|
|
18,377
|
(6)
|
|
|
496,262
|
|
Executive Vice President and Chief Financial Officer
|
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2012
|
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|
|
120,000
|
|
|
|
300,000
|
|
|
|
798,000
|
|
|
|
648,000
|
|
|
|
|
|
|
|
1,866,000
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|
|
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|
|
|
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W. Christopher Chisholm
|
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2013
|
|
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252,308
|
|
|
|
100,000
|
(7)
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|
|
|
|
|
|
|
|
|
|
16,822
|
(8)
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369,130
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|
Executive Vice President
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2012
|
|
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250,000
|
|
|
|
62,500
|
(9)
|
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|
|
|
|
|
|
|
|
|
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|
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312,500
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|
and Chief Accounting Officer
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2011
|
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|
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27,885
|
|
|
|
3,219
|
|
|
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964,500
|
|
|
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459,000
|
|
|
|
|
|
|
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1,454,604
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|
|
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|
|
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Christopher E. Kevane
|
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2013
|
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142,692
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|
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105,000
|
(10)
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72,750
|
|
|
|
74,980
|
|
|
|
5,286
|
(11)
|
|
|
400,708
|
|
Former Executive Vice President,
Chief Legal Officer and Secretary
|
|
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|
|
|
|
|
|
|
|
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|
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(1)
|
The amounts reported in this column represent the aggregate grant date fair value of awards of the restricted stock awards or units granted to the NEOs in each covered
fiscal year and do not reflect whether the recipient has actually realized a financial benefit from the award. The assumptions used in the calculations of these amounts are included in Note 13 to our Consolidated Financial Statements contained in
our Annual Report on Form 10-K for Fiscal 2013.
|
(2)
|
The amount reported in this column reflects the aggregate grant date fair value of stock options, in accordance with Topic 718, and do not reflect compensation actually
realized by our named executive officers. These stock options vest ratably on an annual basis over three years provided that the option recipient continues to be employed by us on such dates. Additional information regarding the assumptions used to
estimate the fair value of the stock option awards is included in Note 13 to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for Fiscal 2013.
|
(3)
|
The amount reported in this column for Fiscal 2013 represents $10,418 in medical premiums, $267 in dental premiums, $20 in vision premiums, $1,611 in disability
premiums and $119 in life insurance premiums.
|
(4)
|
The amount reported in this column for Fiscal 2013 represents $14,927 in medical premiums, $1,230 in dental premiums, $322 in vision premiums, $376 in disability
premiums and $82 in life insurance premiums. This amount also includes $6,462 contributed on a matching basis pursuant to the terms of the Section 401(k) plan.
|
(5)
|
The amount reported in this column for Fiscal 2013 represents a discretionary cash award paid to Mr. Parkinson.
|
(6)
|
The amount reported in this column for Fiscal 2013 represents $10,418 in medical premiums, $267 in dental premiums, $20 in vision premiums, $1,611 in disability
premiums and $119 in life insurance premiums. This amount also includes $5,942 contributed on a matching basis pursuant to the terms of the Section 401(k) plan.
|
(7)
|
The amount reported in this column for Fiscal 2013 represents a $25,000 guaranteed bonus per Mr. Chisholms Employment Agreement, and a discretionary cash
award of $75,000.
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- 34 -
(8)
|
The amount reported in this column for Fiscal 2013 represents $8,844 in medical premiums, $267 in dental premiums, and $1,611 in disability premiums and $119 in life
insurance premiums. This amount also includes $5,981 contributed on a matching basis pursuant to the terms of the Section 401(k) plan.
|
(9)
|
The amount reported in this column for Fiscal 2012 represents a $25,000 guaranteed bonus per Mr. Chisholms Employment Agreement, and a discretionary cash
award of $37,500, which was not previously reported due to when it was calculated and paid.
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(10)
|
The amount reported in this column for Fiscal 2013 represents a $30,000 sign-on bonus per Mr. Kevanes offer letter, and a discretionary cash award of
$75,000.
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(11)
|
The amount reported in this column for Fiscal 2013 represents $1,060 in medical premiums, $341 in disability premiums and $20 in life insurance premiums. This amount
also includes $3,865 contributed on a matching basis pursuant to the terms of the Section
401(k) plan.
|
Grants of Plan-Based Awards in 2013
The following table sets forth certain information regarding grants of plan-based awards during 2013 to our named executive officers.
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Name
|
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Grant Date
|
|
|
All Other Stock
Awards:
Number of
Shares of
Stock or Units
(#)(1)
|
|
|
All Other Option
Awards:
Number
of
Securities
Underlying Options
(#)(2)
|
|
|
Exercise or
Base Price of
Option Awards
($/Sh)
|
|
|
Grant Date Fair
Value of Stock
and Option
Awards ($)(3)
|
|
Richard J. Heckmann
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Mark D. Johnsrud
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Jay C. Parkinson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
W. Christopher Chisholm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher E. Kevane
|
|
|
Aug 5, 2013
|
|
|
|
2,500
|
|
|
|
5,000
|
|
|
$
|
29.10
|
|
|
$
|
147,730
|
|
(1)
|
Mr. Kevane received an award of restricted stock in 2013 awarded under the Companys 2009 Equity Incentive Plan, which vests 1/3 on each anniversary date of
the grant, with full vesting upon the third anniversary of the grant date, subject to continued employment on such vesting date.
|
(2)
|
Mr. Kevane received a stock option awards in 2013 in connection with his commencement of employment with the Company. His option grant was awarded under the
Companys 2009 Equity Incentive Plan, and was granted with an exercise price at fair market value on the date of grant. The stock option grant becomes one-third vested on each anniversary of the grant date, with full vesting upon the third
anniversary, subject to his continued employment on each vesting date.
|
(3)
|
The dollar amount reflected in this column for the restricted stock and option awards is equal to the aggregate grant date fair value of such award computed in
accordance with FASB ASC Topic 718. For a discussion of the assumptions and methodologies used to calculate the grant date fair value of these awards, please see the discussion of equity awards contained in Note 11 to the Companys Consolidated
Financial Statements included as part of the Companys Annual Report filed with the SEC on Form 10-K for the fiscal year ending December 31, 2013.
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- 35 -
Outstanding Equity Awards at 2013 Fiscal Year End
The following table discloses certain information regarding all outstanding equity awards held by each of our named
executive officers as of December 31, 2013. All of these awards were granted under our 2009 Equity Incentive Plan. Some values contained in the table below have not been, and may never be, realized. The options might never be exercised and the
value, if any, will depend on the share price on the exercise date.
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|
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|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Award Date
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
UnExercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
|
|
|
Market Value
of Shares or
Units of Stock
That
Have Not
Vested
($)
|
|
Richard J. Heckmann
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark D. Johnsrud
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jay C. Parkinson
|
|
|
Sep 10, 2012
|
|
|
|
12,500
|
|
|
|
17,500
|
(1)
|
|
$
|
39.90
|
|
|
|
Sep 10, 2022
|
|
|
|
20,000
|
(2)
|
|
$
|
335,800
|
|
W. Christopher Chisholm
|
|
|
Nov 11, 2011
|
|
|
|
10,417
|
|
|
|
4,583
|
(1)
|
|
$
|
64.30
|
|
|
|
Nov 15, 2021
|
|
|
|
15,000
|
(2)
|
|
$
|
251,850
|
|
Christopher E. Kevane
|
|
|
Aug 5, 2013
|
|
|
|
|
|
|
|
5,000
|
(3)
|
|
$
|
29.10
|
|
|
|
Aug 5, 2023
|
|
|
|
2,500
|
(3)
|
|
$
|
41,975
|
|
(1)
|
Assuming continued employment with the Company, one-third of options vest on the one-year anniversary, then one-thirty-sixth for the following twenty-four months.
|
(2)
|
Assuming continued employment with the Company, all granted units will vest on the third anniversary date of the grant.
|
(3)
|
Assuming continued employment with the Company, one-third of the granted options or units will vest on the anniversary date of the grant for each of the succeeding
three years.
|
Executive Employment Agreements
On November 30, 2012, we entered into employment agreements with Messrs. Heckmann and Johnsrud that provide the terms and conditions
of their employment including certain compensation and benefits arrangements, and each with certain payments and benefits in the event the executives employment is terminated by us other than for cause or if the executive resigns with good
reason.
On November 9, 2011, we entered into an employment agreement with Mr. Chisholm that provide the terms and
conditions of his employment, including certain compensation and benefits arrangements, and with certain payments and benefits in the event his employment is terminated by us other than for cause or if the executive resigns with good reason.
We do not have an employment agreement with Messrs. Parkinson and Kevane, and the executives are not entitled to any
severance or other payments in connection with the executives termination of employment. Mr. Kevane was not entitled to and did not receive severance payments in connection with his resignation.
The employment agreements with Messrs. Heckmann, Johnsrud, and Chisholm have three-year terms. After the initial three-year term and each
anniversary thereafter, the employment agreements with Messrs. Heckmann and Johnsrud will extend for an additional year unless the executive or the Company gives notice at least 30 days prior to the end of the term that he or it does not wish to
extend the term. The employment agreements with Mr. Chisholm will terminate at the end of the three-year term unless extended by mutual agreement between the executive and the Company.
Pursuant to their respective employment agreements, Messrs. Heckmann, Johnsrud, and Chisholm had annual salaries of $700,000, $700,000
and $250,000 respectively, subject to annual review by the Compensation Committee. The employment agreements for Messrs. Heckmann and Johnsrud provide each executive an opportunity to receive an annual incentive bonus, in accordance with the
achievement of performance objectives
- 36 -
determined each year by the Compensation Committee, in a discretionary amount to be determined by the Compensation Committee and not tied to a specific percentage of annual salary in the
employment agreements. Mr. Chisholms agreement entitles him to receive a guaranteed bonus of 10% of his annual salary each year, and provides him with the opportunity to earn an additional performance-based bonus of up to 50% of his
annual salary. Each executives agreement also provides for health and vacation benefits, and contemplates that the executive will be eligible for future equity or other incentive awards.
As we renew existing agreements, we will evaluate, and possibly discontinue, the guaranteed bonus element to ensure the agreement(s)
align with our revised compensation philosophy.
Potential Payments upon Termination or Change-in-Control
The employment agreements for Messrs. Heckmann, Johnsrud and Chisholm provide for the following payments and benefits if
the executive is terminated by us without cause or resigns for good reason:
|
|
|
For Mr. Heckmann, (i) payment of an amount equal to his highest annual rate of base salary over the most recent twelve months in installments
over a period of 12 months, (ii) payment of a pro-rata portion of the annual bonus he would have otherwise earned at the same time as bonuses are paid to continuing employees, (iii) reimbursement for health premiums payable for COBRA
continuation coverage for a period of up to 12 months, and (iv) full vesting of all outstanding equity awards, other than those awards intended to constitute qualified performance-based compensation.
|
|
|
|
For Mr. Johnsrud, (i) payment of an amount equal to his highest annual rate of base salary over the most recent twelve months in installments
over a period of 12 months, (ii) payment of a pro-rata portion of the annual bonus he would have otherwise earned at the same time as bonuses are paid to continuing employees, (iii) reimbursement for health premiums payable for COBRA
continuation coverage for a period of up to 12 months, and (iv) full vesting of all outstanding equity awards, other than those awards intended to constitute qualified performance-based compensation.
|
|
|
|
For Mr. Chisholm, (i) a lump-sum payment of an amount equal to his most recent twelve months base salary (and if the termination is
without cause, twelve months of his guaranteed bonus), (ii) reimbursement for health premiums payable for COBRA continuation coverage for a period of up to 12 months, and (iii) full vesting of all outstanding equity awards
|
In the event of a termination by us without cause or resignation for good reason, in either case, in
connection with a change-in-control of the Company (which generally means a termination within one year after a change-in-control), Messrs. Heckmann, Johnsrud, and Chisholm will be entitled to receive the following enhanced payments and benefits in
lieu of those described above:
|
|
|
For Mr. Heckmann, (i) a lump-sum payment of an amount equal to 2.9 times the sum of his annual base salary in effect on the termination date
(or in effect immediately prior to the change-in-control, if higher) and his annual bonus for the year immediately prior to the year in which the change-in-control occurs, (ii) reimbursement for health premiums for COBRA continuation coverage
or an individual health care plan for a period of up to 24 months, and (iii) full vesting of all outstanding equity awards.
|
|
|
|
For Mr. Johnsrud, (i) a lump-sum payment of an amount equal to 2.9 times the sum of his annual base salary in effect on the termination date
(or in effect immediately prior to the change-in-control, if higher) and his annual bonus for the year immediately prior to the year in which the change-in-control occurs, (ii) reimbursement for health premiums for COBRA continuation coverage
or an individual health care plan for a period of up to 24 months, and (iii) full vesting of all outstanding equity awards.
|
|
|
|
For Mr. Chisholm, (i) a lump-sum payment of an amount equal to two times the sum of his annual base salary and guaranteed bonus, in each case
as in effect on the termination date or immediately prior to the change-in-control, whichever is higher, (ii) reimbursement for health premiums for COBRA continuation coverage or an individual health care plan for a period of up to 24 months,
and (iii) full vesting of all outstanding equity awards.
|
- 37 -
Under the employment agreements for Messrs. Heckmann, Johnsrud and Chisholm, in the event
the executives employment terminates due to death or disability, each executives agreement entitles him to receive the same severance payments described above for a non-change-in-control related termination by us without cause. In order
to receive the severance payments and benefits described above, each executive is required to execute a full general release of claims in favor of the Company.
For purposes of the employment agreements for Messrs. Heckmann, Johnsrud and Chisholm, cause is generally deemed to exist if the executive, at any time: commits a material breach of his
employment agreement, is guilty of gross negligence, recklessness (other than for Mr. Chisholm) or willful misconduct in connection with or affecting the business or affairs of the Company, engages in material and intentional unauthorized use,
misappropriation, destruction or diversion of any tangible or intangible asset or corporate opportunity of the Company, or is convicted of, or pleads no contest to, a felony criminal offense. For purposes of the employment agreements for
Mr. Chisholm, cause is also generally deemed to exist if the executive, at any time is guilty of insubordination.
For purposes of the employment agreements for Messrs. Heckmann, Johnsrud and Chisholm, good reason generally means a material reduction in base salary, a material reduction in an
executives authority, duties, and executive responsibilities (for Mr. Chisholm, his respective duties, positions and responsibilities) with the Company, a material change in his employment, or a material breach of his employment agreement
by the Company. For purposes of the employment agreements for Messrs. Heckmann and Johnsrud, good reason also means a change in direct reporting to anyone other than the Board of Directors of the Company.
The tables below show the estimated payments and benefits that will be made to Messrs. Heckmann, Johnsrud and Chisholm under various
scenarios related to a termination of employment, including in connection with a change in control of the Company. The tables below assume that such termination occurred on December 31, 2013. The actual amounts that would be paid to any
executive can only be determined at the time of an actual termination of employment and may vary from those set forth below. The major assumptions that we used in creating the tables are set forth directly below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
without
Cause
or for Good
Reason
|
|
|
Termination
Following
Change in
Control
|
|
|
Disability
|
|
|
Death
|
|
Richard J. Heckmann
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance Payments(1)
|
|
$
|
700,000
|
|
|
$
|
2,030,000
|
|
|
$
|
700,000
|
|
|
$
|
700,000
|
|
Bonus(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits(4)
|
|
|
19,222
|
|
|
|
41,444
|
|
|
|
19,222
|
|
|
|
13,310
|
|
Stock Awards(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
719,222
|
|
|
$
|
2,071,444
|
|
|
$
|
719,222
|
|
|
$
|
713,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
without
Cause
or for Good
Reason
|
|
|
Termination
Following
Change in
Control
|
|
|
Disability
|
|
|
Death
|
|
Mark D. Johnsrud
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance Payments(1)
|
|
$
|
700,000
|
|
|
$
|
2,030,000
|
|
|
$
|
700,000
|
|
|
$
|
700,000
|
|
Bonus(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits(4)
|
|
|
19,222
|
|
|
|
37,264
|
|
|
|
19,222
|
|
|
|
7,968
|
|
Stock Awards(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
719,222
|
|
|
$
|
2,067,264
|
|
|
$
|
719,222
|
|
|
$
|
707,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 38 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
without
Cause
|
|
|
Termination
for Good
Reason
|
|
|
Termination
Following
Change in
Control
|
|
|
Disability
|
|
|
Death
|
|
W. Christopher Chisholm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance Payments(1)
|
|
$
|
300,000
|
|
|
$
|
300,000
|
|
|
$
|
600,000
|
|
|
$
|
300,000
|
|
|
$
|
300,000
|
|
Bonus(3)
|
|
|
30,000
|
|
|
|
|
|
|
|
60,000
|
|
|
|
30,000
|
|
|
|
30,000
|
|
Benefits(4)
|
|
|
18,932
|
|
|
|
18,932
|
|
|
|
36,829
|
|
|
|
18,932
|
|
|
|
7,829
|
|
Stock Awards(5)
|
|
|
251,850
|
|
|
|
251,850
|
|
|
|
251,850
|
|
|
|
251,850
|
|
|
|
251,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
600,782
|
|
|
$
|
570,782
|
|
|
$
|
948,679
|
|
|
$
|
600,782
|
|
|
$
|
589,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents 12 months of base pay if terminated without a Change-in-Control, and 24 months for Mr. Chisholm with a Change-in-Control, and 2.9 times the annual
salary for Messrs. Johnsrud and Heckmann with a Change-in-Control.
|
(2)
|
Represents discretionary bonus earned through termination date. For Change-in-Control, represents 2.9 times the discretionary bonus earned through termination date.
|
(3)
|
Represents 12 months of guaranteed bonus if terminated without a Change-in-Control, and two times the 12 month guaranteed bonus amount with a Change-in-Control.
|
(4)
|
Represents 12 months medical, dental and vision insurance premiums. For a Change-in-Control, represents 24 months of coverage. If separation is the result of death,
medical, dental and vision will be paid for the Executives spouse and/or children.
|
(5)
|
Represents all outstanding stock options and unvested restricted stock, which become fully vested and exercisable upon a Change-in-Control or the executives death
or disability.
|
Total amounts payable upon a change-in-control for all executives may be reduced to the extent
necessary so that the amount payable is not subject to excise tax under Section
4999 of the Internal Revenue Code.
2013 DIRECTOR COMPENSATION
Directors of publicly traded companies have substantial responsibilities and time commitments, and there is a competitive market for
highly qualified and experienced directors. As such, the Compensation Committee seeks to provide appropriate compensation to directors taking into account these factors.
Based on a review of our historical practices and a general review of market-competitive practices, our Compensation Committee determined in 2012 (and continued the practice into 2013) that the annual
retainer for all non-executive members of the Board will be $75,000 per annum, paid in the form of restricted stock under our 2009 Equity Incentive Plan. These restricted stock awards vest 1/2 on each of the two anniversaries following the grant
date.
In addition, members of the Board services on the Audit Committee receive a cash amount of $1,000 per Audit Committee
session attended, with the chairperson receiving an additional $1,000 per session. Directors are also reimbursed for their out-of-pocket expenses incurred in traveling to a Board meeting.
- 39 -
The following table provides information on the compensation of the members of our Board
(who are not also our employees) during 2013. The compensation paid to Mr. Heckmann and Mr. Johnsrud, who are both employees, is presented above in the Summary Compensation Table and the related tables. Neither Mr. Heckmann nor
Mr. Johnsrud received any additional compensation for his service as a director.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned
or
Paid in Cash ($)(1)
|
|
|
Stock
Awards
($)(2)(3)
|
|
|
Total
($)
|
|
Edward A. Barkett
|
|
$
|
5,000
|
|
|
$
|
75,000
|
|
|
$
|
80,000
|
|
Lou Holtz
|
|
|
|
|
|
$
|
75,000
|
|
|
$
|
75,000
|
|
Alfred E. Osborne, Jr.
|
|
$
|
10,000
|
|
|
$
|
75,000
|
|
|
$
|
85,000
|
|
J. Danforth Quayle
|
|
|
|
|
|
$
|
75,000
|
|
|
$
|
75,000
|
|
Andrew D. Seidel
|
|
|
|
|
|
$
|
75,000
|
|
|
$
|
75,000
|
|
Robert B. Simonds, Jr.
|
|
|
|
|
|
$
|
75,000
|
|
|
$
|
75,000
|
|
Kevin L. Spence
|
|
$
|
5,000
|
|
|
$
|
75,000
|
|
|
$
|
80,000
|
|
R. Dan Nelson
|
|
|
|
|
|
$
|
75,000
|
|
|
$
|
75,000
|
|
(1)
|
Directors who are members of our Audit Committee receive $1,000 in fees per meeting attended, and our Chairperson of the Audit Committee (Dr. Osborne) receives an
additional $1,000 in fees per meeting attended.
|
(2)
|
Each of our non-employee directors received an award of 4,944 restricted shares in 2013 that vest 1/2 on each of the first two anniversaries of the grant date. The
dollar amount reflected above is equal to the aggregate grant date fair value of the restricted shares ($15.17, as of December 5, 2013) computed in accordance with FASB ASC Topic 718. For a discussion of the methodologies used to calculate the
grant date fair value of these awards, please see the discussion of equity awards contained in Note 11 to the Companys Consolidated Financial Statements included as part of the Companys Annual Report filed with the SEC on Form 10-K for
the fiscal year ending December 31, 2013.
|
(3)
|
As of December 31, 2013, our non-employee directors held the following number of stock options and unvested restricted stock awards. All awards consist of
restricted stock except for the 50,000 stock options granted to Mr. Simonds in 2010.
|
|
|
|
|
|
Name
|
|
Number of awards
|
|
Edward A. Barkett
|
|
|
5,819
|
|
Lou Holtz
|
|
|
5,819
|
|
Alfred E. Osborne, Jr.
|
|
|
5,819
|
|
J. Danforth Quayle
|
|
|
5,819
|
|
Andrew D. Seidel
|
|
|
5,819
|
|
Robert B. Simonds, Jr.
|
|
|
55,819
|
|
Kevin L. Spence
|
|
|
5,819
|
|
R. Dan Nelson
|
|
|
4,944
|
|
- 40 -
PROPOSAL 4AMENDMENT OF THE 2009 EQUITY INCENTIVE PLAN TO
(I) INCREASE SHARES AUTHORIZED, (II) CONTINUE COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M) AND (III) MAKE
OTHER ADMINISTRATIVE CHANGES
(Item 4 on Proxy Card)
Background
We are asking that stockholders vote
in favor of amending the 2009 Equity Incentive Plan. The proposed amendment will increase the number of shares of Common Stock that may be issued pursuant to the 2009 Equity Incentive Plan by 2,300,000 shares, to a total of 3,300,000 shares.
1
In addition, the amendment will raise the limitation on the number of
shares which may be issued under the Plan in the form of full value awards by 920,000, to a total of 1,320,000 shares. The 2009 Plan, as amended by the First Amendment, currently authorizes the issuance of up to 1,000,000 shares of our Common Stock,
with no more than 400,000 issuable in the form of full value awards. In determining the amount of the increases contemplated by the proposed amendment to the 2009 Equity Incentive Plan, the Compensation Committee considered a number of factors,
including the following:
|
|
|
the number of shares currently available under the Plan (376,543);
|
|
|
|
the Companys burn rate (the historical rate of granting equity-based incentives over the past three years as a percentage of outstanding shares)
of 1.32%;
|
|
|
|
the Companys overhang including the additional shares request (total amount of awards outstanding under the Companys existing equity-based
grants as a percentage of outstanding shares) of 12.23%; and
|
|
|
|
the Companys desire to have sufficient capacity under the Plan to continue to grant equity-based incentives for the next two to three years.
|
Approval of the amendment would allow the Compensation Committee to continue to grant incentive awards and
reward opportunities that are tied to performance of the Common Stock, and continue to grant full-value forms of awards where it deems such awards appropriate.
The following table shows information regarding outstanding options and full-value awards as of March 14, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of Exercise Prices
|
|
Outstanding
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Years of
Contracutal
Life
|
|
|
Unissued
Full Value
Awards(1)
|
|
$16.50 - $64.50
|
|
|
245,667
|
|
|
$
|
36.61
|
|
|
|
7.65
|
|
|
|
266,447
|
|
(1)
|
Includes restricted stock units and restricted stock awards. No amounts are shown for the Range of Exercise Prices as exercise price is not applicable for full value
awards.
|
Additionally, approval of this proposal will constitute reapproval of the material terms of the
performance goals and award limits for performance-based awards, so as to continue to allow the Company the opportunity to make awards under the 2009 Equity Incentive Plan that are intended to be tax deductible in compliance with the
performance-based compensation exception to Section 162(m) of the U.S. Internal Revenue Code and permit the Company to claim an income tax deduction for the payment of such awards. The performance goals set forth in the 2009 Equity
Incentive Plan were last approved by our stockholders five years ago when the 2009 Equity Incentive Plan was initially adopted and approved by stockholders, and there have been no changes to that list of potential performance goals since that time.
1
|
All share numbers reflect the Companys December 2013 10:1 reverse stock split.
|
- 41 -
The proposed amendment will also make certain administrative changes to the 2009 Equity
Incentive Plan. The proposed amendment will reflect the Companys name change from Heckmann Corporation to Nuverra Environmental Solutions, Inc., reflect the December 2013 10:1 reverse stock split, specify the annual limit on awards of Options
and/or SARs and clarify certain change in control and repricing language.
The proposed amendment to the 2009 Equity Incentive
Plan is attached hereto as
Appendix A
, and the First Amendment of the 2009 Equity Incentive Plan and 2009 Equity Incentive Plan are attached hereto as
Appendix B
.
Persons eligible to participate in the 2009 Equity Incentive Plan include all Directors, Employees and Consultants. Currently all eight
non-employee Directors and approximately 2,500 employees (including executive officers) and consultants are eligible to participate in the Plan. The basis of participation by any person is the grant of an award by the Compensation Committee. Awards
are made to individuals who the Compensation Committee believes have the ability to contribute to the growth and profitability of the Company.
The 2009 Equity Incentive Plan provides a range of incentive tools and sufficient flexibility to permit the Boards Compensation Committee to implement them in ways that will make the most effective
use of the shares our stockholders authorize for incentive purposes. We intend to use these incentives to attract new key employees and to continue to retain existing key employees, directors and other service providers for the long-term benefit of
the Company and its stockholders.
Summary of 2009 Equity Incentive Plan
The following summary provides a general description of the material features of the 2009 Equity Incentive Plan and the First Amendment of
the 2009 Equity Incentive Plan, and is qualified in its entirety by reference to the full text of the plan attached as
Appendix B
.
General.
The purpose of the Plan is to advance the interests of the Company and its stockholders by providing an incentive program that will enable the Company to attract and retain employees,
consultants and directors and to provide them with an equity interest in the growth and profitability of the Company. These incentives are provided through the grant of stock options, stock appreciation rights, restricted stock, restricted stock
units, performance shares, performance units, other stock-based awards and cash-based awards.
Authorized
Shares.
A total of 1,000,000 shares of the Companys common stock was authorized for issuance under the Plan upon the approval of the First Amendment to the 2009 Equity Incentive Plan by the stockholders in 2012. Shares issued under
the Plan may consist of any combination of authorized but unissued or reacquired shares of the Companys common stock. The proposed amendment will increase the number of shares of the Companys common stock that may be issued under the
Plan by 2,300,000 to a total of 3,300,000.
Share Counting.
If any award granted under the Plan expires or
otherwise terminates for any reason without having been exercised or settled in full, or if shares subject to forfeiture or repurchase are forfeited or repurchased by the Company for not more than the participants purchase price, any such
shares reacquired or subject to a terminated award will again become available for issuance under the Plan. Shares will not be treated as having been issued under the Plan and will therefore not reduce the number of shares available for issuance to
the extent an award is settled in cash. Shares that are withheld or reacquired by the Company in satisfaction of a tax withholding obligation or that are tendered in payment of the exercise price of an option will not be made available for new
awards under the Plan. Upon the exercise of a stock appreciation right or net-exercise of an option, the number of shares available under the Plan will be reduced by the gross number of shares for which the award is exercised.
Adjustments for Capital Structure Changes.
Appropriate and proportionate adjustments will be made to the number of shares
authorized under the Plan, to the numerical limits on certain types of awards described below, and to outstanding awards in the event of any change in our common stock through merger, consolidation,
- 42 -
reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares or
similar change in our capital structure, or if we make a distribution to our stockholders in a form other than common stock (excluding normal cash dividends) that has a material effect on the fair market value of our common stock. In such
circumstances, the Compensation Committee also has the discretion under the Plan to adjust other terms of outstanding awards as it deems appropriate.
Full Value Award Limit.
In addition to the limitation described above on the total number of shares of our common stock that will be authorized for issuance under the Plan, the plan limits the
number of shares that may be issued under certain types of awards, subject to adjustment as described above under Share Counting and Adjustments for Capital Structure Changes. No more than 400,000 shares may be issued under
the Plan pursuant to full value awards, which are defined by the Plan as awards settled in stock other than an option, stock appreciation right or restricted stock or other stock-based award for which the company will receive monetary
consideration equal to the grant date fair market value of the shares subject to the award. The proposed amendment will increase the number of shares of the Companys common stock that may be issued in the form of full value awards under the
Plan by 920,000 to a total of 1,320,000.
Other Award Limits.
To enable compensation provided in connection with
certain types of awards to qualify as performance-based within the meaning of Section 162(m) of the Code, the Plan establishes a limit on the maximum aggregate number of shares or dollar value for which such awards may be granted to
an employee in any fiscal year, as follows:
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|
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No more than 50,000 shares under stock-based awards.
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|
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No more than $2,500,000 for each full fiscal year contained in the performance period under cash-based awards.
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The proposed amendment will increase the limit on the maximum aggregate number of shares for which such awards may be granted to an
employee in any fiscal year by 290,000 to 330,000.
Administration.
The Plan generally will be administered by the
Compensation Committee of the Board, although the Board retains the right to appoint another of its committees to administer the Plan or to administer the Plan directly. In the case of awards intended to qualify for the performance-based
compensation exemption under Section 162(m) of the Code, administration of the Plan must be by a compensation committee comprised solely of two or more outside directors within the meaning of Section 162(m). (For purposes of
this summary, the term Committee will refer to either such duly appointed committee or the Board.) Subject to the provisions of the Plan, the Committee determines in its discretion the persons to whom and the times at which awards are
granted, the types and sizes of awards, and all of their terms and conditions. The Committee may, subject to certain limitations on the exercise of its discretion required by Section 162(m) or otherwise provided by the Plan, amend, cancel or
renew any award, waive any restrictions or conditions applicable to any award, and accelerate, continue, extend or defer the vesting of any award. The Plan provides, subject to certain limitations, for indemnification by the Company of any director,
officer or employee against all reasonable expenses, including attorneys fees, incurred in connection with any legal action arising from such persons action or failure to act in administering the Plan. All awards granted under the Plan
will be evidenced by a written or digitally signed agreement between the Company and the participant specifying the terms and conditions of the award, consistent with the requirements of the Plan. The Committee will interpret the Plan and awards
granted thereunder, and all determinations of the Committee generally will be final and binding on all persons having an interest in the Plan or any award.
Prohibition of Option and Stock Appreciation Right Repricing.
The Plan expressly provides that, without the approval of a majority of the votes cast in person or by proxy at a meeting of our
stockholders, the Committee may not provide for any of the following with respect to underwater options or stock appreciation rights: (1) either the cancellation of such outstanding options or stock appreciation rights in exchange for the grant
of new options or stock appreciation rights at a lower exercise price or the amendment of outstanding options or
- 43 -
stock appreciation rights to reduce the exercise price, (2) the issuance of new full value awards in exchange for the cancellation of such outstanding options or stock appreciation rights,
or (3) the cancellation of such outstanding options or stock appreciation rights in exchange for payments in cash.
Eligibility.
Awards may be granted to employees, directors and consultants of the Company or any present or future parent or
subsidiary corporation or other affiliated entity of the Company. Incentive stock options may be granted only to employees who, as of the time of grant, are employees of the Company or any parent or subsidiary corporation of the Company.
Stock Options.
The Committee may grant nonstatutory stock options, incentive stock options within the meaning of
Section 422 of the Code, or any combination of these. The exercise price of each option may not be less than the fair market value of a share of our common stock on the date of grant. However, any incentive stock option granted to a person who
at the time of grant owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company (a 10% Stockholder) must have an exercise price
equal to at least 110% of the fair market value of a share of common stock on the date of grant.
The Plan provides that the
option exercise price may be paid in cash, by check, or cash equivalent; by means of a broker-assisted cashless exercise; by means of a net-exercise procedure; to the extent legally permitted, by tender to the Company of shares of common stock owned
by the participant having a fair market value not less than the exercise price; by such other lawful consideration as approved by the Committee; or by any combination of these. Nevertheless, the Committee may restrict the forms of payment permitted
in connection with any option grant. No option may be exercised unless the participant has made adequate provision for federal, state, local and foreign taxes, if any, relating to the exercise of the option, including, if permitted or required by
the Company, through the participants surrender of a portion of the option shares to the Company.
Options will become
vested and exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the Committee. The maximum term of any option granted under the Plan is ten years, provided that an
incentive stock option granted to a 10% Stockholder must have a term not exceeding five years. Unless otherwise permitted by the Committee, an option generally will remain exercisable for three months following the participants termination of
service, provided that if service terminates as a result of the participants death or disability, the option generally will remain exercisable for 12 months, but in any event the option must be exercised no later than its expiration date,
and provided further that an option will terminate immediately upon a participants termination for cause (as defined by the Plan).
Options are nontransferable by the participant other than by will or by the laws of descent and distribution, and are exercisable during the participants lifetime only by the participant. However,
an option may be assigned or transferred to certain family members or trusts for their benefit to the extent permitted by the Committee and, in the case of an incentive stock option, only to the extent that the transfer will not terminate its tax
qualification.
Stock Appreciation Rights.
The Committee may grant stock appreciation rights either in tandem with
a related option (a Tandem SAR) or independently of any option (a Freestanding SAR). A Tandem SAR requires the option holder to elect between the exercise of the underlying option for shares of common stock or the surrender
of the option and the exercise of the related stock appreciation right. A Tandem SAR is exercisable only at the time and only to the extent that the related stock option is exercisable, while a Freestanding SAR is exercisable at such times or upon
such events and subject to such terms, conditions, performance criteria or restrictions as specified by the Committee. The exercise price of each Tandem SAR must be the exercise price of the related option, and the exercise price of each
Freestanding SAR may not be less than the fair market value of a share of our common stock on the date of grant.
Upon the
exercise of any stock appreciation right, the participant is entitled to receive an amount equal to the excess of the fair market value of the underlying shares of common stock as to which the right is exercised
- 44 -
over the aggregate exercise price for such shares. Payment of this amount upon the exercise of a Tandem SAR may be made only in shares of common stock whose fair market value on the exercise date
equals the payment amount. At the Committees discretion, payment of this amount upon the exercise of a Freestanding SAR may be made in cash, shares of common stock, or any combination thereof. The maximum term of any stock appreciation right
granted under the Plan is ten years.
Stock appreciation rights are generally nontransferable by the participant other than by
will or by the laws of descent and distribution, and are generally exercisable during the participants lifetime only by the participant. If permitted by the Committee, a Tandem SAR related to a nonstatutory stock option and a Freestanding SAR
may be assigned or transferred to certain family members or trusts for their benefit to the extent permitted by the Committee. Other terms of stock appreciation rights are generally similar to the terms of comparable stock options.
Restricted Stock Awards.
The Committee may grant restricted stock awards under the Plan either in the form of a restricted
stock purchase right, giving a participant an immediate right to purchase common stock, or in the form of a restricted stock bonus, in which stock is issued in consideration for services to the Company rendered by the participant. The Committee
determines the purchase price payable under restricted stock purchase awards, which may be less than the then current fair market value of our common stock. Restricted stock awards may be subject to vesting conditions based on such service or
performance criteria as the Committee specifies, including the attainment of one or more performance goals similar to those described below in connection with performance awards. Shares acquired pursuant to a restricted stock award may not be
transferred by the participant until vested. Unless otherwise provided by the Committee, a participant will forfeit any shares of restricted stock as to which the vesting restrictions have not lapsed prior to the participants termination of
service. Unless otherwise determined by the Committee, participants holding restricted stock will have the right to vote the shares and to receive any dividends paid, except that dividends or other distributions paid in shares will be subject to the
same restrictions as the original award.
Restricted stock award rights are generally nontransferable by the participant other
than by will or by the laws of descent and distribution, and are generally exercisable during the participants lifetime only by the participant.
Restricted Stock Units.
The Committee may grant restricted stock units under the Plan, which represent rights to receive shares of our common stock at a future date determined in accordance
with the participants award agreement. No monetary payment is required for receipt of restricted stock units or the shares issued in settlement of the award, the consideration for which is furnished in the form of the participants
services to the Company. The Committee may grant restricted stock unit awards subject to the attainment of one or more performance goals similar to those described below in connection with performance awards, or may make the awards subject to
vesting conditions similar to those applicable to restricted stock awards. Unless otherwise provided by the Committee, a participant will forfeit any restricted stock units which have not vested prior to the participants termination of
service. Participants have no voting rights or rights to receive cash dividends with respect to restricted stock unit awards until shares of common stock are issued in settlement of such awards. However, the Committee may grant restricted stock
units that entitle their holders to dividend equivalent rights, which are rights to receive additional restricted stock units for a number of shares whose value is equal to any cash dividends the Company pays.
Restricted stock unit award rights are generally nontransferable by the participant other than by will or by the laws of descent and
distribution, and are generally exercisable during the participants lifetime only by the participant.
Performance
Awards.
The Committee may grant performance awards subject to such conditions and the attainment of such performance goals over such periods as the Committee determines in writing and sets forth in a written agreement between the Company
and the participant. These awards may be designated as performance
- 45 -
shares or performance units, which consist of unfunded bookkeeping entries generally having initial values equal to the fair market value determined on the grant date of a share of common stock
in the case of performance shares, and a monetary value established by the Committee at the time of grant in the case of performance units. Performance awards will specify a predetermined amount of performance shares or performance units that may be
earned by the participant to the extent that one or more performance goals are attained within a predetermined performance period. To the extent earned, performance awards may be settled in cash, shares of common stock (including shares of
restricted stock that are subject to additional vesting) or any combination thereof.
Prior to the beginning of the applicable
performance period or such later date as permitted under Section 162(m) of the Code, the Committee will establish one or more performance goals applicable to the award. Performance goals will be based on the attainment of specified target
levels with respect to one or more measures of business or financial performance of the Company and each subsidiary corporation consolidated with the Company for financial reporting purposes, or such division or business unit of the Company as may
be selected by the Committee. The Committee, in its discretion, may base performance goals on one or more of the following such measures: revenue; sales; expenses; operating income; gross margin; operating margin; earnings before any one or more of:
stock-based compensation expense, interest, taxes, depreciation and amortization; pre-tax profit; net operating income; net income; economic value added; free cash flow; operating cash flow; balance of cash, cash equivalents and marketable
securities; stock price; earnings per share; return on stockholder equity; return on capital; return on assets; return on investment; employee satisfaction; employee retention; market share; customer satisfaction; product development; research and
development expenses; completion of an identified special project; and completion of a joint venture or other corporate transaction.
The target levels with respect to these performance measures may be expressed on an absolute basis or relative to an index, budget or other standard specified by the Committee. The degree of attainment of
performance measures will be calculated in accordance with generally accepted accounting principles, if applicable, but prior to the accrual or payment of any performance award for the same performance period, and, according to criteria established
by the Committee, excluding the effect (whether positive or negative) of changes in accounting standards or any extraordinary, unusual or nonrecurring item occurring after the establishment of the performance goals applicable to a performance award.
Following completion of the applicable performance period, the Committee will certify in writing the extent to which the
applicable performance goals have been attained and the resulting value to be paid to the participant. The Committee retains the discretion to eliminate or reduce, but not increase, the amount that would otherwise be payable on the basis of the
performance goals attained to a participant who is a covered employee within the meaning of Section 162(m) of the Code. However, no such reduction may increase the amount paid to any other participant. The Committee may make
positive or negative adjustments to performance award payments to participants other than covered employees to reflect the participants individual job performance or other factors determined by the Committee. In its discretion, the Committee
may, when making awards of performance shares, provide for participant-awarded performance shares to have dividend equivalent rights with respect to cash dividends paid on the Companys common stock. However, to date the Committee has not
included dividend equivalent rights in awards of performance shares. If any payment relating to performance share awards is to be made on a deferred basis, the Committee may provide for the payment of amounts relating to any dividend equivalent
rights during the deferral period.
Unless otherwise provided by the Committee, if a participants service terminates due
to the participants death or disability prior to completion of the applicable performance period, the final award value will be determined at the end of the performance period on the basis of the performance goals attained during the entire
performance period but will be prorated for the number of months of the participants service during the performance period. If a participants service terminates prior to completion of the applicable performance period for any other
reason, the Plan provides that, unless otherwise determined by the Committee, the performance award will be forfeited. No performance award may be sold or transferred other than by will or the laws of descent and distribution prior to the end of the
applicable performance period.
- 46 -
Cash-Based Awards and Other Stock-Based Awards.
The Committee may grant
cash-based awards or other stock-based awards in such amounts and subject to such terms and conditions as the Committee determines. Cash-based awards will specify a monetary payment or range of payments, while other stock-based awards will specify a
number of shares or units based on shares or other equity-related awards. Such awards may be subject to vesting conditions based on continued performance of service or subject to the attainment of one or more performance goals similar to those
described above in connection with performance awards. Settlement of awards may be in cash, shares of common stock, or any combination thereof, as determined by the Committee. A participant will have no voting rights with respect to any such award
unless and until shares are issued pursuant to the award. The committee may grant dividend equivalent rights with respect to other stock-based awards. The effect on such awards of the participants termination of service will be determined by
the Committee and set forth in the participants award agreement.
Rights under cash-based awards or other stock-based
awards are generally nontransferable by the participant other than by will or by the laws of descent and distribution.
Change-in-Control.
Unless otherwise defined in a participants employment agreement, the Plan provides that a
Change-in-Control occurs upon (a) a person or entity (with certain exceptions described in the Plan) becoming the direct or indirect beneficial owner of more than 50% of the Companys voting stock; (b) a liquidation or
dissolution of the Company; or (c) the occurrence of any of the following events upon which the stockholders of the Company immediately before the event do not retain immediately after the event direct or indirect beneficial ownership of more
than 50% of the voting securities of the Company, its successor or the entity to which the assets of the company were transferred: (i) a sale or exchange by the stockholders in a single transaction or series of related transactions of more than
50% of the Companys voting stock; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange or transfer of all or substantially all of the assets of the Company (other than a sale, exchange or
transfer to one or more subsidiaries of the Company). Employment agreements change-in-control provisions are consistent with the Plans definition of Change-in-Control, and require an actual event to occur before
change-in-control provisions in the employment agreement are triggered.
If a Change-in-Control occurs, the surviving,
continuing, successor or purchasing entity or its parent may, without the consent of any participant, either assume or continue outstanding awards or substitute substantially equivalent awards for its stock. Stock-based awards will be deemed assumed
if, for each share subject to the award prior to the Change-in-Control, its holder is given the right to receive the same amount of consideration that a stockholder would receive as a result of the Change-in-Control. Any awards which are not assumed
or continued in connection with a Change-in-Control or exercised or settled prior to the Change-in-Control will terminate effective as of the time of the Change-in-Control. Subject to the restrictions of Section 409A of the Code, the Committee
may provide for the acceleration of vesting or settlement of any or all outstanding awards upon such terms and to such extent as it determines. The Plan also authorizes the Committee, in its discretion and without the consent of any participant, to
cancel each or any award denominated in shares of stock upon a Change-in-Control in exchange for a payment to the participant with respect each vested share (and each unvested share if so determined by the Committee) subject to the canceled award of
an amount equal to the excess of the consideration to be paid per share of common stock in the Change-in-Control transaction over the exercise price per share, if any, under the award. The vesting of all awards held by non-employee directors will be
accelerated in full upon a Change-in-Control.
Awards Subject to Section 409A of the Code.
Certain awards
granted under the Plan may be deemed to constitute deferred compensation within the meaning of Section 409A of the Code, providing rules regarding the taxation of nonqualified deferred compensation plans, and the regulations and
other administrative guidance issued pursuant to Section 409A. Any such awards will be required to comply with the requirements of Section 409A. Notwithstanding any provision of the Plan to the contrary, the Committee is authorized, in its
sole discretion and without the consent of any participant, to amend the Plan or any award agreement as it deems necessary or advisable to comply with Section 409A.
- 47 -
Amendment, Suspension or Termination.
The Plan will continue in effect until its
termination by the Committee, provided that no awards may be granted under the Plan following the tenth anniversary of the Plans effective date, which will be the date on which it is approved by the stockholders. The Committee may amend,
suspend or terminate the Plan at any time, provided that no amendment may be made without stockholder approval that would increase the maximum aggregate number of shares of stock authorized for issuance under the Plan, change the class of persons
eligible to receive incentive stock options or require stockholder approval under any applicable law. No amendment, suspension or termination of the Plan may affect any outstanding award unless expressly provided by the Committee, and, in any event,
may not adversely affect an outstanding award without the consent of the participant unless necessary to comply with any applicable law, regulation or rule, including, but not limited to, Section 409A of the Code, or unless expressly provided
in the terms and conditions governing the award.
Summary of United States Federal Income Tax Consequences
The following summary is intended only as a general guide to the United States federal income tax consequences of
participation in the Plan and does not attempt to describe all possible federal or other tax consequences of such participation or tax consequences based on particular circumstances.
Incentive Stock Options.
A participant recognizes no taxable income for regular income tax purposes as a result of the grant
or exercise of an incentive stock option qualifying under Section 422 of the Code. Participants who neither dispose of their shares within two years following the date the option was granted nor within one year following the exercise of the
option will normally recognize a capital gain or loss upon the sale of the shares equal to the difference, if any, between the sale price and the purchase price of the shares. If a participant satisfies such holding periods upon a sale of the
shares, we will not be entitled to any deduction for federal income tax purposes. If a participant disposes of shares within two years after the date of grant or within one year after the date of exercise (a disqualifying disposition),
the difference between the fair market value of the shares on the option exercise date and the exercise price (not to exceed the gain realized on the sale if the disposition is a transaction with respect to which a loss, if sustained, would be
recognized) will be taxed as ordinary income at the time of disposition. Any gain in excess of that amount will be a capital gain. If a loss is recognized, there will be no ordinary income, and such loss will be a capital loss. Any ordinary income
recognized by the participant upon the disqualifying disposition of the shares generally should be deductible by us for federal income tax purposes, except to the extent such deduction is limited by applicable provisions of the Code.
In general, the difference between the option exercise price and the fair market value of the shares on the date of exercise of an
incentive stock option is treated as an adjustment in computing the participants alternative minimum taxable income and may be subject to an alternative minimum tax which is paid if such tax exceeds the regular tax for the year. Special rules
may apply with respect to certain subsequent sales of the shares in a disqualifying disposition, certain basis adjustments for purposes of computing the alternative minimum taxable income on a subsequent sale of the shares and certain tax credits
which may arise with respect to participants subject to the alternative minimum tax.
Nonstatutory Stock
Options.
Options not designated or qualifying as incentive stock options are nonstatutory stock options having no special tax status. A participant generally recognizes no taxable income upon receipt of such an option. Upon exercising a
nonstatutory stock option, the participant normally recognizes ordinary income equal to the difference between the exercise price paid and the fair market value of the shares on the date when the option is exercised. If the participant is an
employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of stock acquired by the exercise of a nonstatutory stock option, any gain or loss, based on the difference between the sale price and
the fair market value of the shares on the exercise date, will be taxed as capital gain or loss. We generally should be entitled to a tax deduction equal to the amount of ordinary income recognized by the participant as a result of the exercise of a
nonstatutory stock option, except to the extent such deduction is limited by applicable provisions of the Code.
- 48 -
Stock Appreciation Rights.
A participant recognizes no taxable income upon the
receipt of a stock appreciation right. Upon the exercise of a stock appreciation right, the participant generally will recognize ordinary income in an amount equal to the excess of the fair market value of the underlying shares of common stock on
the exercise date over the exercise price. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. We generally should be entitled to a deduction equal to the amount of ordinary
income recognized by the participant in connection with the exercise of the stock appreciation right, except to the extent such deduction is limited by applicable provisions of the Code.
Restricted Stock.
A participant acquiring restricted stock generally will recognize ordinary income equal to the excess of
the fair market value of the shares on the determination date over the price paid, if any, for such shares. The determination date is the date on which the participant acquires the shares unless the shares are subject to a
substantial risk of forfeiture and are not transferable, in which case the determination date is the earlier of (i) the date on which the shares become transferable or (ii) the date on which the shares are no longer subject to a
substantial risk of forfeiture (e.g., when they become vested). If the determination date follows the date on which the participant acquires the shares, the participant may elect, pursuant to Section 83(b) of the Code, to designate the date of
acquisition as the determination date by filing an election with the Internal Revenue Service no later than 30 days after the date on which the shares are acquired. If the participant is an employee, such ordinary income generally is subject to
withholding of income and employment taxes. Upon the sale of shares acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value of the shares on the determination date,
will be taxed as capital gain or loss. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable
provisions of the Code.
Restricted Stock Unit, Performance, Cash-Based and Other Stock-Based Awards.
A
participant generally will recognize no income upon the receipt of a restricted stock unit, performance share, performance unit, cash-based or other stock-based award. Upon the settlement of such awards, participants normally will recognize ordinary
income in the year of settlement in an amount equal to the cash received and the fair market value of any substantially vested shares of stock received. If the participant is an employee, such ordinary income generally is subject to withholding of
income and employment taxes. If the participant receives shares of restricted stock, the participant generally will be taxed in the same manner as described above under Restricted Stock. Upon the sale of any shares received, any gain or
loss, based on the difference between the sale price and the fair market value of the shares on the determination date (as defined above under Restricted Stock), will be taxed as capital gain or loss. We generally should be entitled to a
deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.
New Plan Benefits
The grant of awards under the
2009 Equity Incentive Plan is discretionary. As of the date of this Proxy Statement, there has been no determination with respect to future awards under the 2009 Equity Incentive Plan. Therefore, it is not possible at present to determine the amount
or form of any award that will be available for future grant to any individual according to the 2009 Equity Incentive Plan, as amended. Please refer to the Grants of Plan-Based Awards Table in this Proxy Statement to review equity awards made to our
named executive officers in 2013.
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information as of December 31, 2013, with respect to shares of our common stock that may
be issued under the 2009 Equity Incentive Plan, which is our only existing equity compensation
- 49 -
plan under which grants can be made. Stockholders approved the original plan on May 6, 2009, and the First Amendment to the 2009 Equity Incentive Plan on May 8, 2012.
Equity Compensation Plan Information
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Plan Category
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Number of securities to
be issued upon exercise
of outstanding
awards
(a)
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Weighted Average
exercise price of
outstanding awards
(b)
|
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Number of securities
remaining available for
future issuance under
equity
compensation
plans (excluding
securities reflected in
column(a)) (c)
|
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Equity compensation plans approved by stockholders
|
|
|
463,679
|
(1)
|
|
$
|
39.40
|
|
|
|
417,803
|
(2)
|
Equity compensation plans not approved by stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
463,679
|
|
|
$
|
39.40
|
|
|
|
417,803
|
|
(1)
|
The sum of options to acquire 316,167 shares of common stock and 147,512 shares of restricted stock awarded under the 2009 Equity Incentive Plan.
|
(2)
|
Available as of December 31, 2013.
|
The following table lists each person named in the Summary Compensation Table, each director nominee, all current executive officers as a group, all current directors (other than executive officers) as a
group, each associate of the foregoing persons, each other person who received at least five percent of the options under the 2009 Equity Incentive Plan, and all current employees of the Company (other than executive officers) as a group,
indicating, as of December 31, 2013, the aggregate number of options granted under the 2009 Equity Incentive Plan to each of the foregoing since the inception of the 2009 Equity Incentive Plan in 2009 and the weighted average exercise price of
such options.
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Name and Principal Position
|
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Options Granted
Under the 2009
Equity Incentive
Plan From
Inception
|
|
|
Weighted Average
Exercise Price
|
|
Richard J. Heckmann, Executive Chairman
|
|
|
|
|
|
$
|
|
|
Mark D. Johnsrud, Chief Executive Officer and Vice Chairman
|
|
|
|
|
|
$
|
|
|
Jay C. Parkinson, Executive Vice President and Chief Financial Officer
|
|
|
30,000
|
|
|
$
|
39.90
|
|
W. Christopher Chisholm, Executive Vice President and Chief Accounting Officer
|
|
|
15,000
|
|
|
$
|
64.30
|
|
Christopher E. Kevane, Former Executive Vice President, Chief Legal Officer and Secretary
|
|
|
5,000
|
|
|
$
|
29.10
|
|
Edward A. Barkett
|
|
|
|
|
|
$
|
|
|
Robert B. Simonds, Jr.
|
|
|
50,000
|
|
|
$
|
39.10
|
|
All Executive Officers as a Group (5 persons)
|
|
|
50,000
|
|
|
$
|
46.14
|
|
All Current Directors (other than Executive Officers) as a Group (8 persons)
|
|
|
50,000
|
|
|
$
|
39.10
|
|
Associates of Named Executive Officers, Directors and Director Nominees
|
|
|
|
|
|
$
|
|
|
All Current Employees (other than Executive Officers) as a Group (93 persons)
|
|
|
152,509
|
|
|
$
|
33.16
|
|
Vote Required and Board Recommendation
Approval of this proposal requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote
on this proposal. If you hold your shares in your own name and abstain from voting on
- 50 -
this matter, your abstention will have the same effect as a negative vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker
will not have authority to vote your shares. Broker non-votes will have the same effect as a negative vote. Abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum.
The Board believes that the proposed adoption of the Proposal 4 is in the best interests of the Company and its stockholders.
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL NO. 4.
- 51 -
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Our Board has adopted a written policy regarding the review, approval and ratification of any related party transaction.
Under this policy, our Audit Committee will review the relevant facts and circumstances of each related party transaction, including if the transaction is on terms comparable to those that could be obtained in arms length dealings with an
unrelated third party and the extent of the related partys interest in the transaction, and either approve or disapprove the related party transaction. Any related party transaction may be consummated, and may continue, only if the Audit
Committee has approved or ratified such transaction in accordance with the guidelines set forth in the policy.
A
related party transaction is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we were, are or will be a participant and in which any related party had, has or will
have a direct or indirect interest (other than solely as a result of being a director or a less than five percent beneficial owner of another entity). A related party is any (a) person who is or was (since the beginning of the
companys last fiscal year) an executive officer, director or nominee for election as a director, (b) greater than five percent beneficial owner of any class of the Companys voting securities, or (c) immediate family member of
any of the foregoing, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of such person, and anyone (other than a tenant or employee)
sharing the household of such person.
Richard J. Heckmann, the Executive Chairman of the Board, and Mark D. Johnsrud, the
Companys Chief Executive Officer and Vice Chairman of the Board, are members of an entity that owns an aircraft used periodically by the Company for business-related travel. Reimbursements paid to the entity in exchange for use of the aircraft
were $0.4 million, $1.2 million and $0.9 million for the years ended December 31, 2013, 2012 and 2011, respectively. Amounts payable to the entity were less than $0.1 million at December 31, 2013.
Mr. Johnsrud is the sole member of an entity that owns apartment buildings in North Dakota which are rented to certain of the
Companys employees at rates that are equal to or below market rates. Rent payments are collected from the employees by the Company through payroll deductions and remitted to the entity.
In connection with the Power Fuels Merger, assets received in exchange for the merger consideration excluded accounts receivable
outstanding for more than ninety days as of November 30, 2012. Subsequent collections on these accounts receivable, which are recorded by the Company as restricted cash with an offsetting liability, are required to be periodically remitted to
Mr. Johnsrud. Pursuant to the terms of this agreement, during the year ended December 31, 2013, the Company paid Mr. Johnsrud $3.6 million for such collections, net of a working capital adjustment of approximately $2.1 million.
Amounts payable to Mr. Johnsrud at December 31, 2013 for accounts receivable collections totaled approximately $0.1 million.
The Company periodically purchases fresh water for resale to customers from a sole proprietorship owned by Mr. Johnsrud. Purchases made by the Company during the year ended December 31, 2013
amounted to $0.7 million. Purchases made by Power Fuels prior to its merger with the Company totaled approximately $2.2 million during the year ended December 31, 2012. No amounts were due to the sole proprietorship at
December 31, 2013.
Mr. Johnsrud is the sole member of an entity that owns land in North Dakota on which five of the
Companys saltwater disposal wells are situated. The Company has agreed to pay the entity a per-barrel royalty fee in exchange for the use of the land, which is consistent with rates charged by non-affiliated third parties under similar
arrangements. Royalties paid by the Company were approximately $0.1 million in each of the years ended December 31, 2013 and 2012, respectively. Royalties payable to the entity were less than $0.1 million at December 31, 2013 and 2012.
During 2009, the Company acquired an approximate 7% investment in Underground Solutions, Inc. (UGSI) a supplier
of water infrastructure pipeline products, whose chief executive officer, Andrew D. Seidel,
- 52 -
is a member of the Companys Board. The Companys total investment in UGSI was $7.2 million. During the quarter ended September 30, 2013, management performed an evaluation of
various alternatives for this non-strategic investment, including its potential liquidation. As a result, the Company recorded a $3.8 million charge for the write-down of this investment to its estimated net realizable value. The Companys
interest in UGSI is accounted for as a cost method investment in the Companys consolidated balance sheet as of December 31, 2013 and December 31, 2012. The $3.8 million write-down was classified as a component of other expense, net
in the consolidated statement of operations for the year ended December 31, 2013.
- 53 -
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company regarding the beneficial ownership of its common
stock as of March 3, 2014, by (i) those persons known by management of the Company to beneficially own more than 5% of our outstanding common stock, (ii) each director and director nominee, (iii) each of our named executive
officers, and (iv) all executive officers and directors of the Company serving as of March 3, 2014, as a group.
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Name and Address of Beneficial Owner(1)
|
|
Amount and Nature
of Beneficial
Ownership(2)
|
|
|
Percent of
Class
|
|
Richard J. Heckmann(3)
Executive Chairman
|
|
|
1,192,908
|
|
|
|
4.55
|
%
|
|
|
|
Mark D. Johnsrud(4)
Chief Executive Officer and Vice Chairman
|
|
|
9,626,689
|
|
|
|
36.76
|
%
|
|
|
|
Jay C. Parkinson(5)
Executive Vice President and Chief Financial Officer
|
|
|
43,700
|
|
|
|
*
|
|
|
|
|
W. Christopher Chisholm(6)
Executive Vice President and Chief Accounting Officer
|
|
|
30,453
|
|
|
|
*
|
|
|
|
|
Christopher E. Kevane(7)
Former Executive Vice President, Chief Legal Officer and Corporate Secretary
|
|
|
4,239
|
|
|
|
*
|
|
|
|
|
Edward A. Barkett(8)
Director
|
|
|
17,668
|
|
|
|
*
|
|
|
|
|
Lou Holtz(8)
Director
|
|
|
38,917
|
|
|
|
*
|
|
|
|
|
Alfred E. Osborne, Jr.(8)
Director
|
|
|
23,505
|
|
|
|
*
|
|
|
|
|
J. Danforth Quayle(9)
Director
|
|
|
23,655
|
|
|
|
*
|
|
|
|
|
Andrew D. Seidel(10)
Director
|
|
|
20,594
|
|
|
|
*
|
|
|
|
|
Robert B. Simonds, Jr.(11)
Director
|
|
|
70,194
|
|
|
|
*
|
|
|
|
|
Kevin L. Spence(8)
Director
|
|
|
8,094
|
|
|
|
*
|
|
|
|
|
R. Dan Nelson(12)
Director
|
|
|
5,984
|
|
|
|
*
|
|
|
|
|
Executive officers, directors and director-nominees as a group (13 persons)
|
|
|
11,106,600
|
|
|
|
42.41
|
%
|
*
|
Represents beneficial ownership of less than 1% of the outstanding shares of our common stock.
|
(1)
|
Unless otherwise indicated, the address for each director, director-nominee and officer is c/o Nuverra Environmental Solutions, Inc., 14624 N. Scottsdale Rd., Suite
300, Scottsdale, Arizona 85254. Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. The information in this table is
based on statements in filings with the SEC, or other reliable information available to the Company.
|
- 54 -
(2)
|
Beneficial ownership of shares and percentage ownership are determined in accordance with the rules of the SEC. In calculating the number of shares beneficially owned
by an individual or entity and the percentage ownership of that individual or entity, shares underlying options or warrants held by that individual or entity that are either currently exercisable or exercisable within 60 days from March 3, 2013
are deemed outstanding for the purpose of computing the percentage of shares beneficially owned by the person holding such instruments, but are not deemed outstanding for the purpose of computing the percentage of any other person. Except as
otherwise indicated by footnote, and subject to community property laws where applicable, the persons named in the table have reported that they have sole voting and sole investment power with respect to all shares of common stock shown as
beneficially owned by them. A total of 26,190,704 shares of common stock are considered to be outstanding on March 3, 2013, pursuant to Rule 13d-3(d)(1) under the Exchange Act. No shares of common stock held by a director, director nominee or
officer has been pledged as security. The Company is not aware of any arrangements or pledge of common stock that could result in a change of control of the Company.
|
(3)
|
Includes 900 shares of common stock held by two of Mr. Heckmanns children, each of whom resides with him; and 1,175,473 shares of common stock held by
Heckmann Acquisition, LLC, a Delaware limited liability company, of which Heckmann Enterprises, Inc., a California corporation, is the sole member; Mr. Heckmann is sole shareholder of Heckmann Enterprises, Inc.
|
(4)
|
Includes 655,000 shares held by JPJ LP, a Delaware limited partnership of which Badlands Capital, LLC, a Delaware limited liability company is the general partner;
Mr. Johnsrud is the sole member of Badlands Capital, LLC. Also includes 1,000,000 shares held in escrow pursuant to the terms of the Agreement and Plan of Merger relating to the Power Fuels merger and 398 shares in Mr. Johnsruds
401(k).
|
(5)
|
Includes the receipt of 20,000 shares of restricted stock which are forfeitable until vested (all shares are scheduled to vest on September 10, 2015); and includes
367 shares in Mr. Parkinsons 401(k) plan. Also includes 14,167 vested options and an additional 1,667 options that are scheduled to vest within 60 days of March 3, 2014.
|
(6)
|
Includes 15,000 shares of restricted stock which are forfeitable until vested (all shares are scheduled to vest on November 15, 2014); and includes 369 shares in
Mr. Chisholms 401(k) plan. Also includes 11,250 vested options and an additional 833 options that are scheduled to vest within 60 days of March 3, 2014.
|
(7)
|
Includes two open market purchases of 2,000 shares each on December 10, 2013; and includes 239 shares in Mr. Kevanes 401(k) plan. Both of these
transactions were made prior to Mr. Kevanes resignation on January 20, 2014.
|
(8)
|
Includes the receipt of 5,819 shares of restricted stock which are forfeitable until vested (875 shares scheduled to vest 10/23/14, and 2,472 shares scheduled to vest
on 12/5/2014 and 12/5/2015).
|
(9)
|
Includes the receipt of 5,819 shares of restricted stock which are forfeitable until vested (875 shares scheduled to vest 10/23/14, and 2,472 shares scheduled to vest
on 12/5/2014 and 12/5/2015). Also includes 11,061 shares that are held of record by the James D. Quayle 2000 Irrevocable Trust and 2,500 shares that are held of record by the BTC Inc. Retirement Trust.
|
(10)
|
Includes the receipt of 5,819 shares of restricted stock which are forfeitable until vested (875 shares scheduled to vest 10/23/14, and 2,472 shares scheduled to vest
on 12/5/2014 and 12/5/2015). Also includes 5,300 shares that are held of record by the Andrew D. Seidel Living Trust and 1,300 shares held in an Individual Retirement Account.
|
(11)
|
Includes the receipt of 5,819 shares of restricted stock which are forfeitable until vested (875 shares scheduled to vest 10/23/14, and 2,472 shares scheduled to vest
on 12/5/2014 and 12/5/2015). Also includes an option to purchase 50,000 shares, all of which are vested.
|
(12)
|
Includes the receipt of 4,944 shares of restricted stock which are forfeitable until vested (2,472 shares scheduled to vest on 12/5/2014 and 12/5/2015).
|
- 55 -
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Companys officers and
directors, and persons who own more than ten percent (10%) of a registered class of the Companys equity securities, to file reports of securities ownership and changes in such ownership with the SEC. Officers, directors and greater than
ten percent stockholders also are required by rules promulgated by the SEC to furnish the Company with copies of all Section 16(a) forms they file. Based solely on a review of the copies of such forms in our possession and on written
representations from reporting persons, we believe that during 2013 all of our executive officers and directors filed the required reports on a timely basis under Section 16(a), except that Mr. Nelson filed a late Form 4 reflecting his
December 11, 2013 open market purchase of 1,040 shares of common stock and each of Messrs. Barkett, Holtz, Osborne, Quayle, Seidel, Simonds, Spence and Nelson filed a late Form 4 reflecting the December 5, 2013 grant of 4,944 shares of
restricted stock as annual compensation to serve as members of the Board.
- 56 -
STOCKHOLDER PROPOSALS FOR THE 2015 ANNUAL MEETING
Pursuant to Rule 14a-8 promulgated under the Exchange Act, proposals of stockholders intended for inclusion in the proxy
statement to be furnished to all stockholders entitled to vote at our 2015 annual meeting of stockholders must be received at our principal executive offices not later than December 5, 2014, which is 120 days prior to the first anniversary
of the mailing date of this proxy statement. Any proposal must comply with the requirements as to form and substance established by the SEC for such proposal to be included in our proxy statement.
Our Bylaws require that any stockholder proposal that is not submitted for inclusion in next years proxy statement under SEC
Rule 14a-8, but is instead sought to be presented directly at the 2015 Annual Meeting, must be received at our principal executive offices not earlier than the close of business on the 120th day and not later than the close of business on the 90th
day prior to the first anniversary of the 2014 annual meeting. As a result, proposals, including director nominations, submitted pursuant to these provisions of our Bylaws must be received no earlier than the close of business on January 6,
2015 and no later than the close of business on February 5, 2015.
In addition, Bylaws provide certain requirements that
must be met for business to be properly brought before an annual meeting of stockholders. Pursuant to our Bylaws, only business brought before the 2015 annual meeting in accordance with the following procedures may be transacted. Business may be
brought before an annual meeting of stockholders only (1) if specified in the notice of meeting by or at the direction of the Board or (2) by a stockholder who is a stockholder of record at the time of the giving of the required notice
described below, who is entitled to vote at the meeting, and who complies with the following notice procedures. For business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice of such
business in proper written form to our Corporate Secretary.
Our Bylaws provide that to be timely, a stockholders notice
must be delivered to our Corporate Secretary at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary of the preceding years annual meeting. However, if the date of the annual meeting is
advanced by more than 30 days prior to or more than 60 days after the anniversary of the prior years annual meeting, notice by a stockholder for the current years annual meeting must be delivered (A) not earlier than the close of
business on the 120th calendar day prior to such annual meeting nor (B) later than the close of business on the 10th calendar day following the earlier of (1) the day on which notice of the meeting was mailed or (2) the day on
which we first publicly announce the date of such meeting.
To be in proper written form, our Bylaws provide that a
stockholders notice to the Corporate Secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting (i) the name and record address of such stockholder, (ii) the class or series and number of
shares of capital stock of the Company that are owned beneficially or of record by such stockholder, (iii) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) with
respect to the proposal, (iv) any derivative positions with respect to shares of the Companys capital stock held or beneficially held by or on behalf of such stockholder, the extent to which any hedging or other transaction or series of
transactions has been entered into with respect to shares of the Companys capital stock by or on behalf of such stockholder, and the extent to which any other agreement or understanding has been made, the effect or intent of which is to
mitigate loss, manage risk or benefit share price changes, or increase or decrease the voting power of such stockholder with respect to shares of the Companys capital stock, (v) a representation that such stockholder is a holder of record
entitled to vote at the annual meeting and intends to appear in person or by proxy at the annual meeting to propose such business at the annual meeting, (vi) a representation whether the stockholder intends or is part of a group which intends
(A) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Companys outstanding capital stock required to adopt the proposal and/or (B) otherwise to solicit proxies from stockholders in support
of such proposal, and (vii) any other information relating to such stockholder required to be disclosed in a proxy statement or other filings required to be made in
- 57 -
connection with solicitations of proxies for the proposal pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder.
In addition, the stockholders notice to our Corporate Secretary with respect to any other business (other than the
nomination of persons for the election of directors) must set forth (i) a brief description of the business desired to be brought before the annual meeting (ii) the text of the proposal or business (including the text of any resolutions
proposed for consideration), (iii) the reasons for conducting such business at the annual meeting, and (iv) any material interest in such business of such stockholder.
Stockholders should submit their proposals to Nuverra Environmental Solutions, Inc., 14624 N. Scottsdale Rd., Suite 300, Scottsdale,
Arizona 85254, Attention: Corporate Secretary.
- 58 -
DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS
To reduce the expense of delivering duplicate proxy materials to stockholders who may have more than one account holding
the Companys common stock but sharing the same address, we have adopted a procedure approved by the SEC called householding. Under this procedure, certain stockholders of record who have the same address and last name, and who do
not participate in electronic delivery of proxy materials, will receive only one copy of our Notice of Internet Availability of Proxy Materials and, as applicable, any additional proxy materials that are delivered until such time as one or more of
these stockholders notifies us that they want to receive separate copies. This procedure reduces duplicate mailings and saves printing costs and postage fees, as well as natural resources. Stockholders who participate in householding will continue
to have access to and utilize separate proxy voting instructions.
If you receive a single set of proxy materials as a result
of householding, and you would like to have separate copies of our Notice of Internet Availability of Proxy Materials, annual report, Shareholders Letter or proxy statement mailed to you, please submit a request to Nuverra Environmental Solutions,
Inc., 14624 N. Scottsdale Rd., Suite 300, Scottsdale, Arizona 85254, Attention: Investor Relations or contact the Company at (602) 903-7802, and we will promptly send you what you have requested without charge. However, please note that if you
want to receive a paper proxy or voting instruction form or other proxy materials for purposes of this years Annual Meeting, you should follow the instructions included in the Notice of Internet Availability of Proxy Materials that was sent to
you. You can also contact our Investor Relations department at the phone number above if you received multiple copies of the annual meeting materials and would prefer to receive a single copy in the future, or if you would like to opt out of
householding for future mailings.
OTHER MATTERS
We are not aware of any matters other than those discussed in the foregoing materials contemplated for action at the Annual Meeting. The
persons named in the proxies will vote in accordance with the recommendation of the Board on any other matters incidental to the conduct of, or otherwise properly brought before, the Annual Meeting Discretionary authority for them to do so is
contained in the proxy.
Any stockholder or stockholders representative who, because of a disability, may need special
assistance or accommodation to allow him or her to participate at the Annual Meeting, may request reasonable assistance or accommodation from the Company by contacting the Company by mail at Nuverra Environmental Solutions, Inc., 14624 N. Scottsdale
Rd., Suite 300, Scottsdale, Arizona 85254, or by phone at (602) 903-7802. To provide the Company sufficient time to arrange for reasonable assistance or accommodation, please submit all requests by April 30, 2013.
Whether you intend to attend the live webcast of the Annual Meeting or not, we urge you to return your signed proxy promptly.
By Order of the Board of Directors,
|
|
/s/ Mark D. Johnsrud
|
Mark D. Johnsrud
|
Chief Executive Officer and Vice Chairman
- 59 -
Appendix A
FORM OF
SECOND AMENDMENT
OF THE
HECKMANN CORPORATION 2009 EQUITY INCENTIVE PLAN
WHEREAS, Heckmann Corporation, a Delaware corporation (
Heckmann
) established and sponsors the Heckmann Corporation
2009 Equity Incentive Plan, effective as of May 6, 2009 (the
Plan
);
WHEREAS, Heckmann has
changed its name to Nuverra Environmental Solutions, Inc., a Delaware corporation (the
Company
);
WHEREAS,
5,000,000 shares of Company common stock were originally reserved for issuance pursuant to awards granted under the Plan, as approved by the shareholders on May 6, 2009;
WHEREAS, pursuant to the First Amendment of the Plan (the
First Amendment
), as approved by the shareholders on May 8, 2012, the Plan was amended to increase: (i) the number of
shares reserved for issuance pursuant to Awards granted under the Plan by 5,000,000 shares to 10,000,000 shares, and (ii) the number of shares which may be issued under the Plan pursuant to Full Value Awards by 2,000,000 shares to
4,000,000 shares;
WHEREAS,pursuant to a November, 2013 10:1 reverse stock split and Section 4.3 of the Plan, the
10,000,000 shares reserved for issuance under the Plan were adjusted to be 1,000,000 shares; and the 4,000,000 shares which may be issued under the Plan as Full Value Awards were adjusted to be 400,000 shares;
WHEREAS, pursuant to Section 17 of the Plan, the Compensation Committee of the Board of Directors of the Company has reserved the
right to amend the Plan at any time, provided that approval of Company shareholders is required for any amendment to increase the maximum aggregate number of shares of Stock that may be issued under the Plan;
WHEREAS, the Company now desires to amend the Plan, subject to shareholder approval, to increase the number of shares reserved for
issuance pursuant to Awards granted under the Plan by 2,300,000 shares to a total of 3,300,000 shares;
WHEREAS, the Company
now desires to further amend the Plan, subject to shareholder approval, to increase the number of shares which may be issued under the Plan pursuant to Full Value Awards (which are defined by the Plan as Awards settled in Stock, other
than an Option, Stock Appreciation Right or Restricted Stock Purchase Right or Other Stock-Based Award for which the Company will receive monetary consideration equal to the grant date Fair Market Value of the shares subject to the Award) by 920,000
shares to a total of 1,320,000 shares; and
NOW, THEREFORE, pursuant to the power reserved by Section 17 of the Plan and
subject to approval by the Company shareholders, the Plan be and hereby is amended in the following particulars, effective upon the date approved by the Company shareholders:
|
1.
|
By changing the name of the Plan to the Nuverra Environmental Solutions 2009 Equity Incentive Plan.
|
|
2.
|
By deleting the phrase Award Agreement or by a from the second line of Section 2.1(g) of the Plan.
|
|
3.
|
By substituting the following for Section 2.1(j) of the Plan in its entirety:
|
(j)
Company
means Nuverra Environmental Solutions, Inc., a Delaware corporation, or any
successor corporation thereto.
A-1
|
4.
|
By adding the phrase subject to compliance with Section 3.6, at the beginning of Section 3.5(g).
|
|
5.
|
By substituting the following for Section 4.1 of the Plan in its entirety:
|
4.1
Maximum Number of Shares Issuable.
Subject to adjustment as provided in Section 4.2 and Section 4.3, the maximum aggregate number of shares of Stock that may be issued under the
Plan shall be equal to three million three hundred thousand ( 3,300,0000) and shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof.
|
6.
|
By substituting three million three hundred thousand (3,300,000) for five million (5,000,000) in Section 5.3(a) of the Plan.
|
|
7.
|
By substituting the following for Section 5.4(a) of the Plan in its entirety:
|
(a)
Aggregate Limit on Full Value Awards.
The maximum aggregate number of shares of Stock that may be issued under
the Plan pursuant to the exercise or settlement of Full Value Awards shall not exceed one million three hundred twenty thousand ( 1,320,000), subject to adjustment as provided in Section 4.2 and Section 4.3.
|
8.
|
By inserting the phrase Covered Employee or other before the word Employee in the first and third lines of Section 5.4(b), and by
substituting three hundred forty thousand (330,000) for five hundred thousand (500,000) in Section 5.4(b) of the Plan.
|
|
9.
|
By the addition of the following new Section 5.4(c) to the Plan:
|
(c) Other Limits. Subject to adjustment as provided in Section 4.3, the maximum number of shares of Stock as to which a Participant may receive an Award of (i) Options in any fiscal year
of the Company is three hundred thirty thousand (330,000), and (ii) SARs in any fiscal year of the Company is three hundred thirty thousand (330,000).
IN WITNESS WHEREOF, this Second Amendment, having been first duly authorized, approved and adopted, is hereby executed below by a duly authorized officer of the Company on this
day of , 2014.
|
|
|
NUVERRA ENVIRONMENTAL SOLUTIONS, INC.
|
|
|
By:
|
|
|
Name:
Title:
|
|
|
A-2
Appendix B
FIRST AMENDMENT
OF THE
HECKMANN CORPORATION 2009 EQUITY INCENTIVE PLAN
WHEREAS, Heckmann Corporation, a Delaware corporation (the
Company
) established and sponsors the Heckmann
Corporation 2009 Equity Incentive Plan, effective as of May 6, 2009 (the
Plan
);
WHEREAS,
5,000,000 shares of Company common stock were originally reserved for issuance pursuant to awards granted under the Plan, as approved by the shareholders on May 6, 2009;
WHEREAS, pursuant to Section 17 of the Plan, the Compensation Committee of the Board of Directors of the Company has reserved the right to amend the Plan at any time, provided that approval of
Company shareholders is required for any amendment to increase the maximum aggregate number of shares of stock that may be issued under the Plan;
WHEREAS, the Company now desires to amend the Plan, subject to shareholder approval, to increase the number of shares reserved for issuance pursuant to awards granted under the Plan by 5,000,000 shares to
10,000,000 shares;
WHEREAS, the Company now desires to further amend the Plan, subject to shareholder approval, to increase
the number of shares which may be issued under the Plan pursuant to full value awards (which are defined by the Plan as awards settled in stock other than an option, stock appreciation right or restricted stock or other stock-based award
for which the company will receive monetary consideration equal to the grant date fair market value of the shares subject to the award) by 2,000,000 shares to 4,000,000 shares; and
NOW, THEREFORE, pursuant to the power reserved by Section 17 of the Plan and subject to approval by the Company shareholders, the
Plan be and hereby is amended in the following particulars:
|
1.
|
By substituting the following for Section 4.1 of the Plan in its entirety:
|
4.1
Maximum Number of Shares Issuable.
Subject to adjustment as provided in Section 4.2 and Section 4.3, the maximum aggregate number of shares of Stock that may be issued under the
Plan shall be equal to ten million (10,000,000) and shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof.
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2.
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By substituting the following for Section 5.4(a) of the Plan in its entirety:
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(a)
Aggregate Limit on Full Value Awards.
The maximum aggregate number of shares of Stock that may be issued under the
Plan pursuant to the exercise or settlement of Full Value Awards shall not exceed four million (4,000,000), subject to adjustment as provided in Section 4.2 and Section 4.3.
IN WITNESS WHEREOF, this First Amendment, having been first duly authorized, approved and adopted, is hereby
executed below by a duly authorized officer of the Company on this 8
th
day of May, 2012.
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HECKMANN CORPORATION
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By:
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/s/ Damian C. Georgino
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Its:
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Executive Vice President, Corporate Development, Chief Legal Officer and Corporate Secretary
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HECKMANN CORPORATION 2009 EQUITY INCENTIVE PLAN
TABLE OF CONTENTS
B-2
B-3
B-4
Heckmann Corporation
2009 Equity Incentive Plan
1.
E
STABLISHMENT
, P
URPOSE
AND
T
ERM
OF
P
LAN
.
1.1
Establishment
.
The Heckmann Corporation 2009 Equity Incentive Plan (the
Plan
) is hereby established effective as of May 6, 2009, the date of its approval by the stockholders of the
Company (the
Effective Date
).
1.2
Purpose
.
The purpose of the Plan is to advance the interests of the Participating Company Group and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group. The Plan seeks to achieve this purpose by providing for Awards in the form of Options, Stock Appreciation Rights,
Restricted Stock Purchase Rights, Restricted Stock Bonuses, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards and Other Stock-Based Awards.
1.3
Term of Plan.
The Plan shall continue in effect until its termination by the Committee; provided, however, that all Awards shall be granted, if at all, within ten
(10) years from the Effective Date.
2.
D
EFINITIONS
AND
C
ONSTRUCTION
.
2.1
Definitions.
Whenever used herein, the following terms shall have their respective meanings set forth below:
(a)
Affiliate
means (i) an entity, other than a Parent Corporation, that directly, or indirectly through one or more intermediary entities, controls the
Company or (ii) an entity, other than a Subsidiary Corporation, that is controlled by the Company directly or indirectly through one or more intermediary entities. For this purpose, the term control (including the term
controlled by) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of the relevant entity, whether through the ownership of voting securities, by contract or otherwise;
or shall have such other meaning assigned such term for the purposes of registration on
Form S-8
under the Securities Act.
(b)
Award
means any Option, Stock Appreciation Right, Restricted Stock Purchase
Right, Restricted Stock Bonus, Restricted Stock Unit, Performance Share, Performance Unit, Cash-Based Award or Other Stock-Based Award granted under the Plan.
(c)
Award Agreement
means a written or electronic agreement between the Company and a Participant setting forth the terms, conditions and restrictions of the Award
granted to the Participant.
(d)
Board
means the Board of Directors of
the Company.
(e)
Cash-Based Award
means an Award denominated in cash
and granted pursuant to Section 11.
(f)
Cause
means, unless such
term or an equivalent term is otherwise defined with respect to an Award by the Participants Award Agreement or by a written contract of employment or service, any of the following: (i) the Participants theft, dishonesty, willful
misconduct, breach of fiduciary duty for personal profit, or falsification of any Participating Company documents or records; (ii) the Participants material failure to abide by a Participating Companys code of conduct or other
policies (including, without limitation, policies relating to confidentiality and reasonable workplace conduct); (iii) the Participants unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or
corporate opportunity of a Participating Company (including, without limitation, the Participants improper use or disclosure of a Participating Companys confidential or proprietary information); (iv) any intentional act by the
Participant which has a material detrimental effect on a Participating Companys reputation or business; (v) the Participants repeated failure or inability to perform any reasonable assigned duties after written notice from a
Participating Company of, and a reasonable opportunity to cure, such failure or inability;
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(vi) any material breach by the Participant of any employment, service,
non-disclosure,
non-competition,
non-solicitation
or other similar agreement between the Participant and a Participating Company, which breach is not cured pursuant to the terms of such agreement; or (vii) the Participants conviction
(including any plea of guilty or nolo contendere) of any criminal act involving fraud, dishonesty, misappropriation or moral turpitude, or which impairs the Participants ability to perform his or her duties with a Participating Company.
(g)
Change in Control
means, unless such term or an equivalent term is
otherwise defined with respect to an Award by the Participants Award Agreement or by a written contract of employment or service, the occurrence of any of the following:
(i) any person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the
beneficial owner (as such term is defined in
Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent
(50%) of the total Fair Market Value or total combined voting power of the Companys then-outstanding securities entitled to vote generally in the election of Directors; provided, however, that a Change in Control shall not be deemed to
have occurred if such degree of beneficial ownership results from any of the following: (A) an acquisition by any person who on the Effective Date is the beneficial owner of more than fifty percent (50%) of such voting power, (B) any
acquisition directly from the Company, including, without limitation, pursuant to or in connection with a public offering of securities, (C) any acquisition by the Company, (D) any acquisition by a trustee or other fiduciary under an
employee benefit plan of a Participating Company or (E) any acquisition by an entity owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the voting securities of the
Company; or
(ii) an Ownership Change Event or series of related Ownership Change Events (collectively, a
Transaction
) in which the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction direct or indirect beneficial ownership of more than fifty percent
(50%) of the total combined voting power of the outstanding securities entitled to vote generally in the election of Directors or, in the case of an Ownership Change Event described in Section 2.1(dd)(iii), the entity to which the assets
of the Company were transferred (the
Transferee
), as the case may be; or
(iii) a liquidation or dissolution of the Company;
provided, however, that a Change in Control shall be deemed not to include a transaction described in subsections (i) or (ii) of
this Section 2.1(g) in which a majority of the members of the board of directors of the continuing, surviving or successor entity, or parent thereof, immediately after such transaction is comprised of Incumbent Directors. For purposes of the
preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company or the Transferee, as the
case may be, either directly or through one or more subsidiary corporations or other business entities. The Committee shall determine whether multiple sales or exchanges of the voting securities of the Company or multiple Ownership Change Events are
related, and its determination shall be final, binding and conclusive.
(h)
Code
means the Internal Revenue Code of 1986, as amended, and any applicable regulations or administrative guidelines promulgated thereunder.
(i)
Committee
means the Compensation Committee and such other committee or
subcommittee of the Board, if any, duly appointed to administer the Plan and having such powers in each instance as shall be specified by the Board. If, at any time, there is no committee of the Board then authorized or properly constituted to
administer the Plan, the Board shall exercise all of the powers of the Committee granted herein, and, in any event, the Board may in its discretion exercise any or all of such powers.
(j)
Company
means Heckmann Corporation, a Delaware corporation, or any successor
corporation thereto.
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(k)
Consultant
means a person
engaged to provide consulting or advisory services (other than as an Employee or a member of the Board) to a Participating Company, provided that the identity of such person, the nature of such services or the entity to which such services are
provided would not preclude the Company from offering or selling securities to such person pursuant to the Plan in reliance on registration on
Form S-8
under the Securities Act.
(l)
Covered Employee
means, at any time the Plan is subject to Section 162(m), any
Employee who is or may reasonably be expected to become a covered employee as defined in Section 162(m), or any successor statute, and who is designated, either as an individual Employee or a member of a class of Employees, by the
Committee no later than the earlier of (i) the date that is ninety (90) days after the beginning of the Performance Period, or (ii) the date on which twenty-five percent (25%) of the Performance Period has elapsed, as a
Covered Employee under this Plan for such applicable Performance Period.
(m)
Director
means a member of the Board.
(n)
Disability
means the permanent and total disability of the Participant, within the meaning of Section 22(e)(3) of the Code.
(o)
Dividend Equivalent Right
means the right of a Participant, granted at the
discretion of the Committee or as otherwise provided by the Plan, to receive a credit for the account of such Participant in an amount equal to the cash dividends paid on one share of Stock for each share of Stock represented by an Award held by
such Participant.
(p)
Employee
means any person treated as an employee
(including an Officer or a member of the Board who is also treated as an employee) in the records of a Participating Company and, with respect to any Incentive Stock Option granted to such person, who is an employee for purposes of Section 422
of the Code; provided, however, that neither service as a member of the Board nor payment of a directors fee shall be sufficient to constitute employment for purposes of the Plan. The Company shall determine in good faith and in the exercise
of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such individuals employment or termination of employment, as the case may be. For purposes of an individuals rights, if any,
under the terms of the Plan as of the time of the Companys determination of whether or not the individual is an Employee, all such determinations by the Company shall be final, binding and conclusive as to such rights, if any, notwithstanding
that the Company or any court of law or governmental agency subsequently makes a contrary determination as to such individuals status as an Employee.
(q)
Exchange Act
means the Securities Exchange Act of 1934, as amended.
(r)
Fair Market Value
means, as of any date, the value of a share of Stock or other property as determined by the Committee, in its discretion, or by the Company,
in its discretion, if such determination is expressly allocated to the Company herein, subject to the following:
(i) Except as otherwise determined by the Committee, if, on such date, the Stock is listed or quoted on a national or
regional securities exchange or quotation system, the Fair Market Value of a share of Stock shall be the closing price of a share of Stock as quoted on the national or regional securities exchange or quotation system constituting the primary market
for the Stock, as reported in
The Wall Street Journal
or such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or quotation system, the date on
which the Fair Market Value shall be established shall be the last day on which the Stock was so traded or quoted prior to the relevant date, or such other appropriate day as shall be determined by the Committee, in its discretion.
(ii) Notwithstanding the foregoing, the Committee may, in its discretion, determine the Fair Market Value on the basis of
the opening, closing, or average of the high and low sale prices of a share of Stock on such date or the preceding trading day, the actual sale price of a share of Stock received by a Participant, any other reasonable basis using actual transactions
in the Stock as reported on a national
B-7
or regional securities exchange or quotation system, or on any other basis consistent with the requirements of Section 409A. The Committee may vary its method of determination of the Fair
Market Value as provided in this Section for different purposes under the Plan to the extent consistent with the requirements of Section 409A.
(iii) If, on such date, the Stock is not listed or quoted on a national or regional securities exchange or quotation system, the Fair Market Value of a share of Stock shall be as determined by the
Committee in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse, and in a manner consistent with the requirements of Section 409A.
(s)
Full Value Award
means any Award settled in Stock, other than (i) an
Option, (ii) a Stock Appreciation Right, or (iii) a Restricted Stock Purchase Right or an Other Stock-Based Award under which the Company will receive monetary consideration equal to the Fair Market Value (determined on the effective date
of grant) of the shares subject to such Award.
(t)
Incentive Stock
Option
means an Option intended to be (as set forth in the Award Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of the Code.
(u)
Incumbent Director
means a director who either (i) is a member of the
Board as of the Effective Date, or (ii) is elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination, but who was not elected or
nominated in connection with an actual or threatened proxy contest relating to the election of directors of the Company.
(v)
Insider
means an Officer, Director or any other person whose transactions in Stock are subject to Section 16 of the Exchange Act.
(w)
Net-Exercise
means a procedure by which the Participant will be issued a
number of shares of Stock upon the exercise of an Option determined in accordance with the following formula:
N = X*((A-B)/A), where
N = the number of shares of Stock to be issued to the Participant upon exercise of the Option (rounded down to the nearest whole number);
X = the total number of shares with respect to which the Participant has elected to exercise the Option;
A = the Fair Market Value of one (1) share of Stock determined on the exercise date; and
B = the exercise price per share (as defined in the Participants Award Agreement)
(x)
Nonemployee Director
means a Director who is not an Employee.
(y)
Nonemployee Director Award
means an Award granted to a Nonemployee Director.
(z)
Nonstatutory Stock Option
means an Option not intended to be (as
set forth in the Award Agreement) an incentive stock option within the meaning of Section 422(b) of the Code.
(aa)
Officer
means any person designated by the Board as an officer of the Company.
(bb)
Option
means an Incentive Stock Option or a Nonstatutory Stock Option granted
pursuant to the Plan.
(cc)
Other Stock-Based Award
means an Award
denominated in shares of Stock and granted pursuant to Section 11.
(dd)
Ownership
Change Event
means the occurrence of any of the following with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more
than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company (other than
a sale, exchange or transfer to one or more subsidiaries of the Company).
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(ee)
Parent Corporation
means any
present or future parent corporation of the Company, as defined in Section 424(e) of the Code.
(ff)
Participant
means any eligible person who has been granted one or more
Awards.
(gg)
Participating Company
means the Company or any Parent
Corporation, Subsidiary Corporation or Affiliate.
(hh)
Participating Company
Group
means, at any point in time, the Company and all other entities collectively which are then Participating Companies.
(ii)
Performance Award
means an Award of Performance Shares or Performance Units.
(jj)
Performance Award Formula
means, for any Performance Award, a formula or
table established by the Committee pursuant to Section 10.3 which provides the basis for computing the value of a Performance Award at one or more threshold levels of attainment of the applicable Performance Goal(s) measured as of the end of
the applicable Performance Period.
(kk)
Performance-Based Compensation
means
compensation under an Award that satisfies the requirements of Section 162(m) for certain performance-based compensation paid to Covered Employees.
(ll)
Performance Goal
means a performance goal established by the Committee pursuant to Section 10.3.
(mm)
Performance Period
means a period established by the Committee pursuant to
Section 10.3 at the end of which one or more Performance Goals are to be measured.
(nn)
Performance Share
means a right granted to a Participant pursuant to Section 10 to receive a payment equal to the value of a Performance Share, as determined by the Committee, based on performance.
(oo)
Performance Unit
means a right granted to a Participant pursuant
to Section 10 to receive a payment equal to the value of a Performance Unit, as determined by the Committee, based upon performance.
(pp)
Restricted Stock Award
means an Award of a Restricted Stock Bonus or a Restricted Stock Purchase Right.
(qq)
Restricted Stock Bonus
means Stock granted to a Participant pursuant to
Section 8.
(rr)
Restricted Stock Purchase Right
means a right to
purchase Stock granted to a Participant pursuant to Section 8.
(ss)
Restricted Stock
Unit
means a right granted to a Participant pursuant to Section 9 to receive a share of Stock on a date determined in accordance with the provisions of such Sections, as applicable, and the Participants Award
Agreement.
(tt)
Rule
16b-3
means
Rule 16b-3
under the Exchange Act, as amended from time to time, or any successor rule or regulation.
(uu)
SAR
or
Stock Appreciation Right
means a right granted to a Participant pursuant to Section 7 to receive payment,
for each share of Stock subject to such Award, of an amount equal to the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the Award over the exercise price.
(vv)
Section 162(m)
means Section 162(m) of the Code.
(ww)
Section 409A
means Section 409A of the Code.
(xx)
Section 409A Deferred Compensation
means compensation provided pursuant to an
Award that constitutes deferred compensation subject to and not exempted from the requirements of Section 409A.
(yy)
Securities Act
means the Securities Act of 1933, as amended.
(zz)
Service
means a Participants employment or service with the Participating Company Group, whether in the capacity of an Employee, a Director or a
Consultant. Unless otherwise provided by the
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Committee, a Participants Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders such Service or a change in the
Participating Company for which the Participant renders such Service, provided that there is no interruption or termination of the Participants Service. Furthermore, a Participants Service shall not be deemed to have terminated if the
Participant takes any military leave, sick leave, or other bona fide leave of absence approved by the Company. However, unless otherwise provided by the Committee, if any such leave taken by a Participant exceeds ninety (90) days, then on the
ninety-first (91st) day following the commencement of such leave the Participants Service shall be deemed to have terminated, unless the Participants right to return to Service is guaranteed by statute or contract. Notwithstanding
the foregoing, unless otherwise designated by the Company or required by law, an unpaid leave of absence shall not be treated as Service for purposes of determining vesting under the Participants Award Agreement. A Participants Service
shall be deemed to have terminated either upon an actual termination of Service or upon the business entity for which the Participant performs Service ceasing to be a Participating Company. Subject to the foregoing, the Company, in its discretion,
shall determine whether the Participants Service has terminated and the effective date of such termination.
(aaa)
Stock
means the common stock of the Company, as adjusted from time to time in accordance with Section 4.3.
(bbb)
Subsidiary Corporation
means any present or future subsidiary
corporation of the Company, as defined in Section 424(f) of the Code.
(ccc)
Ten
Percent Owner
means a Participant who, at the time an Option is granted to the Participant, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of a Participating
Company (other than an Affiliate) within the meaning of Section 422(b)(6) of the Code.
(ddd)
Trading Compliance Policy
means the written policy of the Company pertaining to the purchase, sale, transfer or other disposition of the Companys equity securities by Directors, Officers, Employees or
other service providers who may possess material, nonpublic information regarding the Company or its securities.
(eee)
Vesting Conditions
mean those conditions established in accordance with the
Plan prior to the satisfaction of which shares subject to an Award remain subject to forfeiture or a repurchase option in favor of the Company exercisable for the Participants monetary purchase price, if any, for such shares upon the
Participants termination of Service.
2.2
Construction.
Captions and titles contained
herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of
the term or is not intended to be exclusive, unless the context clearly requires otherwise.
3.
A
DMINISTRATION
.
3.1
Administration by the Committee.
The Plan shall be administered by the Committee. All questions of interpretation of the Plan, of any Award Agreement or of any other form of agreement or other document employed by the Company in the
administration of the Plan or of any Award shall be determined by the Committee, and such determinations shall be final, binding and conclusive upon all persons having an interest in the Plan or such Award, unless fraudulent or made in bad faith.
Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or Award Agreement or other agreement thereunder (other than determining questions of interpretation pursuant to
the preceding sentence) shall be final, binding and conclusive upon all persons having an interest therein. All expenses incurred in connection in the administration of the Plan shall be paid by the Company.
3.2
Authority of Officers.
Any Officer shall have the authority to act on behalf of the Company with
respect to any matter, right, obligation, determination or election which is the responsibility of or which is
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allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, determination or election.
3.3
Administration with Respect to Insiders.
With respect to participation by Insiders in the Plan, at
any time that any class of equity security of the Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements, if any, of
Rule 16b-3.
3.4
Committee Complying with
Section 162(m).
If the Company is a publicly held corporation within the meaning of Section 162(m), the Board may establish a Committee of outside directors within the meaning of Section 162(m) to approve
the grant of any Award intended to result in the payment of Performance-Based Compensation.
3.5
Powers of the Committee
.
In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Committee shall have the full and final power and authority, in its discretion:
(a) to determine the persons to whom, and the time or times at which, Awards shall be granted and the number of shares of
Stock, units or monetary value to be subject to each Award;
(b) to determine the type of Award granted;
(c) to determine the Fair Market Value of shares of Stock or other property;
(d) to determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and any
shares acquired pursuant thereto, including, without limitation, (i) the exercise or purchase price of shares pursuant to any Award, (ii) the method of payment for shares purchased pursuant to any Award, (iii) the method for
satisfaction of any tax withholding obligation arising in connection with any Award, including by the withholding or delivery of shares of Stock, (iv) the timing, terms and conditions of the exercisability or vesting of any Award or any shares
acquired pursuant thereto, (v) the Performance Measures, Performance Period, Performance Award Formula and Performance Goals applicable to any Award and the extent to which such Performance Goals have been attained, (vi) the time of the
expiration of any Award, (vii) the effect of the Participants termination of Service on any of the foregoing, and (viii) all other terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto not
inconsistent with the terms of the Plan;
(e) to determine whether an Award will be settled in shares of Stock,
cash, or in any combination thereof;
(f) to approve one or more forms of Award Agreement;
(g) to amend, modify, extend, cancel or renew any Award or to waive any restrictions or conditions applicable to any Award
or any shares acquired pursuant thereto;
(h) to accelerate, continue, extend or defer the exercisability or
vesting of any Award or any shares acquired pursuant thereto, including with respect to the period following a Participants termination of Service;
(i) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt
sub-plans
or supplements to, or alternative versions of, the
Plan, including, without limitation, as the Committee deems necessary or desirable to comply with the laws or regulations of or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose citizens may be granted
Awards; and
(j) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any
Award Agreement and to make all other determinations and take such other actions with respect to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with the provisions of the Plan or applicable law.
3.6
Option or SAR Repricing.
Without the affirmative vote of holders of a majority of the shares of
Stock cast in person or by proxy at a meeting of the stockholders of the Company at which a quorum representing a
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majority of all outstanding shares of Stock is present or represented by proxy, the Board shall not approve a program providing for either (a) the cancellation of outstanding Options or SARs
having exercise prices per share greater than the then Fair Market Value of a share of Stock (
Underwater Awards
) and the grant in substitution therefore of new Options or SARs having a lower exercise price,
Full Value Awards or payments in cash, or (b) the amendment of outstanding Underwater Awards to reduce the exercise price thereof. This Section shall not be construed to apply to issuing or assuming a stock option in a transaction to
which Section 424(a) applies, within the meaning of Section 424 of the Code or to an adjustment pursuant to Section 4.3.
3.7
Indemnification.
In addition to such other rights of indemnification as they may have as members of the Board or the Committee or as officers or employees of the
Participating Company Group, members of the Board or the Committee and any officers or employees of the Participating Company Group to whom authority to act for the Board, the Committee or the Company is delegated shall be indemnified by the Company
against all reasonable expenses, including attorneys fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a
party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross
negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own
expense to handle and defend the same.
4.
S
HARES
S
UBJECT
TO
P
LAN
.
4.1
Maximum Number of Shares Issuable.
Subject to adjustment as provided in Sections 4.2 and 4.3, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be equal to five million (5,000,000) and shall
consist of authorized but unissued or reacquired shares of Stock or any combination thereof.
4.2
Share Counting.
If an outstanding Award for any reason expires or is terminated or canceled without having been exercised or settled in full, or if shares of Stock acquired pursuant to an Award subject to forfeiture or repurchase are
forfeited or repurchased by the Company for an amount not greater than the Participants purchase price, the shares of Stock allocable to the terminated portion of such Award or such forfeited or repurchased shares of Stock shall again be
available for issuance under the Plan. Shares of Stock shall not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash. Upon payment in shares of Stock pursuant to the exercise of an SAR,
the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the SAR is exercised. If the exercise price of an Option is paid by tender to the Company, or attestation to the ownership, of shares
of Stock owned by the Participant, or by means of a
Net-Exercise,
the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the Option is exercised.
Shares withheld or reacquired by the Company in satisfaction of tax withholding obligations pursuant to Section 16.2 shall not again be available for issuance under the Plan.
4.3
Adjustments for Changes in Capital Structure
.
Subject to any required action by the
stockholders of the Company and the requirements of Sections 409A and 424 of the Code to the extent applicable, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation,
reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split,
split-up,
split-off, spin-off, combination of shares, exchange of shares, or similar
change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting normal cash dividends) that has a material effect on the Fair Market
Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number and kind of shares subject to the Plan and to any outstanding Awards, in the Award limits set forth in Section 5.3 and in the exercise or purchase
price per share under any outstanding Award in order to prevent dilution or
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enlargement of Participants rights under the Plan. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as effected without
receipt of consideration by the Company. If a majority of the shares which are of the same class as the shares that are subject to outstanding Awards are exchanged for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change Event) shares of another corporation (the
New Shares
), the Committee may unilaterally amend the outstanding Awards to provide that such Awards are for New Shares. In the event of any such
amendment, the number of shares subject to, and the exercise or purchase price per share of, the outstanding Awards shall be adjusted in a fair and equitable manner as determined by the Committee, in its discretion. Any fractional share resulting
from an adjustment pursuant to this Section shall be rounded down to the nearest whole number, and in no event may the exercise or purchase price under any Award be decreased to an amount less than the par value, if any, of the stock subject to such
Award. The Committee in its discretion, may also make such adjustments in the terms of any Award to reflect, or related to, such changes in the capital structure of the Company or distributions as it deems appropriate, including modification of
Performance Goals, Performance Award Formulas and Performance Periods. The adjustments determined by the Committee pursuant to this Section shall be final, binding and conclusive.
The Committee may, without affecting the number of shares of Stock reserved or available hereunder, authorize the issuance or assumption
of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate, subject to compliance with Section 409A and any other
applicable provisions of the Code.
5.
E
LIGIBILITY
, P
ARTICIPATION
AND
A
WARD
L
IMITATIONS
.
5.1
Persons Eligible for Awards.
Awards may be granted only to Employees, Consultants and Directors.
5.2
Participation in the Plan.
Awards are granted solely at the discretion of the Committee. Eligible persons may be granted more than one Award. However, eligibility in accordance with this Section shall not entitle any person to be
granted an Award, or, having been granted an Award, to be granted an additional Award.
5.3
Incentive Stock Option Limitations.
(a)
Maximum Number of Shares Issuable Pursuant to Incentive
Stock Options.
Subject to adjustment as provided in Sections 4.2 and 4.3, the maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to the exercise of Incentive Stock Options shall not exceed five
million (5,000,000). The maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to all Awards other than Incentive Stock Options shall be the number of shares determined in accordance with Section 4.1, subject to
adjustment as provided in Sections 4.2 and 4.3.
(b)
Persons Eligible.
An Incentive Stock
Option may be granted only to a person who, on the effective date of grant, is an Employee of the Company, a Parent Corporation or a Subsidiary Corporation (each being an
ISO-Qualifying Corporation
). Any
person who is not an Employee of an
ISO-Qualifying
Corporation on the effective date of the grant of an Option to such person may be granted only a Nonstatutory Stock Option.
(c)
Fair Market Value Limitation.
To the extent that options designated as Incentive Stock Options (granted
under all stock option plans of the Participating Company Group, including the Plan) become exercisable by a Participant for the first time during any calendar year for stock having a Fair Market Value greater than One Hundred Thousand Dollars
($100,000), the portion of such options which exceeds such amount shall be treated as Nonstatutory Stock Options. For purposes of this Section, options designated as Incentive Stock Options shall be taken into account in the order in which they were
granted, and the Fair Market Value of stock shall be determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for a limitation different from that set forth in this Section, such different
limitation shall be deemed incorporated herein effective as of the date and with respect to such Options as required or permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock
Option in part by reason of the limitation set forth in this Section, the
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Participant may designate which portion of such Option the Participant is exercising. In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock
Option portion of the Option first. Upon exercise, shares issued pursuant to each such portion shall be separately identified.
5.4
Other Award Limits.
(a)
Aggregate Limit on Full Value Awards.
The maximum aggregate number of shares of Stock that may be issued
under the Plan pursuant to the exercise or settlement of Full Value Awards shall not exceed two million (2,000,000), subject to adjustment as provided in Sections 4.2 and 4.3.
(b)
Section 162(m) Award Limits.
Subject to adjustment as provided in Section 4.3, no Employee
shall be granted within any fiscal year of the Company one or more Awards which in the aggregate are for more than five hundred thousand (500,000) shares or, if applicable, which could result in such Employee receiving more than Two Million
Five Hundred Thousand dollars ($2,500,000) for each full fiscal year of the Company contained in the Performance Period for such Award.
6.
S
TOCK
O
PTIONS
.
Options shall be evidenced by
Award Agreements specifying the number of shares of Stock covered thereby, in such form as the Committee shall from time to time establish. Award Agreements evidencing Options may incorporate all or any of the terms of the Plan by reference and
shall comply with and be subject to the following terms and conditions:
6.1
Exercise Price.
The exercise price for each Option shall be established in the discretion of the Committee; provided, however, that (a) the exercise price per share shall be not less than the Fair Market Value of a share of Stock on the effective date of grant
of the Option and (b) no Incentive Stock Option granted to a Ten Percent Owner shall have an exercise price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective date of grant of
the Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise price lower than the minimum exercise price set forth above if such Option is granted pursuant to
an assumption or substitution for another option in a manner qualifying under the provisions of Section 424(a) of the Code.
6.2
Exercisability and Term of Options.
Options shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions,
performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such Option; provided, however, that (a) no Option shall be exercisable after the expiration of ten (10) years
after the effective date of grant of such Option and (b) no Incentive Stock Option granted to a Ten Percent Owner shall be exercisable after the expiration of five (5) years after the effective date of grant of such Option. Subject to the
foregoing, unless otherwise specified by the Committee in the grant of an Option, each Option shall terminate ten (10) years after the effective date of grant of the Option, unless earlier terminated in accordance with its provisions.
6.3
Payment of Exercise Price.
(a)
Forms of Consideration Authorized.
Except as otherwise provided below, payment of the exercise price for
the number of shares of Stock being purchased pursuant to any Option shall be made (i) in cash, by check or in cash equivalent, (ii) by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Participant
having a Fair Market Value not less than the exercise price, (iii) by delivery of a properly executed notice of exercise together with irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of a sale or
loan with respect to some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System) (a
Cashless Exercise
), (iv) by delivery of a properly executed notice electing a
Net-Exercise,
(v) by such other
consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (vi) by any combination thereof. The Committee may at any time
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or from time to time grant Options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of
consideration.
(b)
Limitations on Forms of Consideration.
(i)
Tender of Stock.
Notwithstanding the foregoing, an Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock to the extent such tender or attestation would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Companys stock. Unless otherwise
provided by the Committee, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Participant for such period of time, if any, as the Company may
require (and not used for another Option exercise by attestation during such period) or were not acquired, directly or indirectly, from the Company.
(ii)
Cashless Exercise.
The Company reserves, at any and all times, the right, in the Companys sole and absolute discretion, to establish, decline to approve or terminate any program or
procedures for the exercise of Options by means of a Cashless Exercise, including with respect to one or more Participants specified by the Company notwithstanding that such program or procedures may be available to other Participants.
6.4
Effect of Termination of Service.
(a)
Option Exercisability.
Subject to earlier termination of the Option as otherwise provided herein and
unless otherwise provided by the Committee, an Option shall terminate immediately upon the Participants termination of Service to the extent that it is then unvested and shall be exercisable after the Participants termination of Service
to the extent it is then vested only during the applicable time period determined in accordance with this Section and thereafter shall terminate.
(i)
Disability.
If the Participants Service terminates because of the Disability of the Participant, the Option, to the extent unexercised and exercisable for vested shares on the date on
which the Participants Service terminated, may be exercised by the Participant (or the Participants guardian or legal representative) at any time prior to the expiration of twelve (12) months after the date on which the
Participants Service terminated, but in any event no later than the date of expiration of the Options term as set forth in the Award Agreement evidencing such Option (the
Option Expiration Date
).
(ii)
Death.
If the Participants Service terminates because of the death of the Participant, the
Option, to the extent unexercised and exercisable for vested shares on the date on which the Participants Service terminated, may be exercised by the Participants legal representative or other person who acquired the right to exercise
the Option by reason of the Participants death at any time prior to the expiration of twelve (12) months after the date on which the Participants Service terminated, but in any event no later than the Option Expiration Date. The
Participants Service shall be deemed to have terminated on account of death if the Participant dies within three (3) months after the Participants termination of Service.
(iii)
Termination for Cause.
Notwithstanding any other provision of the Plan to the contrary, if the
Participants Service is terminated for Cause or if, following the Participants termination of Service and during any period in which the Option otherwise would remain exercisable, the Participant engages in any act that would constitute
Cause, the Option shall terminate in its entirety and cease to be exercisable immediately upon such termination of Service or act.
(iv)
Other Termination of Service.
If the Participants Service terminates for any reason, except Disability, death or Cause, the Option, to the extent unexercised and exercisable for vested
shares on the date on which the Participants Service terminated, may be exercised by the Participant at any time prior to the expiration of three (3) months after the date on which the Participants Service terminated, but in any
event no later than the Option Expiration Date.
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(b)
Extension if Exercise Prevented by Law.
Notwithstanding
the foregoing, other than termination of Service for Cause, if the exercise of an Option within the applicable time periods set forth in Section 6.4(a) is prevented by the provisions of Section 14 below, the Option shall remain
exercisable until the later of (i) thirty (30) days after the date such exercise first would no longer be prevented by such provisions or (ii) the end of the applicable time period under Section 6.4(a), but in any event no later
than the Option Expiration Date.
6.5
Transferability of Options.
During the lifetime of the
Participant, an Option shall be exercisable only by the Participant or the Participants guardian or legal representative. An Option shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participants beneficiary, except transfer by will or by the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Committee, in its
discretion, and set forth in the Award Agreement evidencing such Option, an Option shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to
Form S-8
under the Securities Act or, in the case of an Incentive Stock Option, only as permitted by applicable regulations under Section 421 of the Code in a manner that does not disqualify such
Option as an Incentive Stock Option.
7.
S
TOCK
A
PPRECIATION
R
IGHTS
.
Stock Appreciation Rights shall be evidenced by Award Agreements specifying the number
of shares of Stock subject to the Award, in such form as the Committee shall from time to time establish. Award Agreements evidencing SARs may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:
7.1
Types of SARs Authorized.
SARs may be granted in tandem
with all or any portion of a related Option (a
Tandem SAR
) or may be granted independently of any Option (a
Freestanding SAR
). A Tandem SAR may only be granted concurrently with the grant of the
related Option.
7.2
Exercise Price.
The exercise price for each SAR shall be established
in the discretion of the Committee; provided, however, that (a) the exercise price per share subject to a Tandem SAR shall be the exercise price per share under the related Option and (b) the exercise price per share subject to a
Freestanding SAR shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the SAR.
7.3
Exercisability and Term of SARs.
(a)
Tandem SARs.
Tandem SARs shall be
exercisable only at the time and to the extent, and only to the extent, that the related Option is exercisable, subject to such provisions as the Committee may specify where the Tandem SAR is granted with respect to less than the full number of
shares of Stock subject to the related Option. The Committee may, in its discretion, provide in any Award Agreement evidencing a Tandem SAR that such SAR may not be exercised without the advance approval of the Company and, if such approval is not
given, then the Option shall nevertheless remain exercisable in accordance with its terms. A Tandem SAR shall terminate and cease to be exercisable no later than the date on which the related Option expires or is terminated or canceled. Upon the
exercise of a Tandem SAR with respect to some or all of the shares subject to such SAR, the related Option shall be canceled automatically as to the number of shares with respect to which the Tandem SAR was exercised. Upon the exercise of an Option
related to a Tandem SAR as to some or all of the shares subject to such Option, the related Tandem SAR shall be canceled automatically as to the number of shares with respect to which the related Option was exercised.
(b)
Freestanding SARs.
Freestanding SARs shall be exercisable at such time or times, or upon such event or
events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such SAR; provided, however, that no Freestanding SAR shall be exercisable
after the expiration of ten (10) years after the effective date of grant of such SAR.
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7.4
Exercise of SARs.
Upon the exercise (or deemed
exercise pursuant to Section 7.5) of an SAR, the Participant (or the Participants legal representative or other person who acquired the right to exercise the SAR by reason of the Participants death) shall be entitled to receive
payment of an amount for each share with respect to which the SAR is exercised equal to the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR over the exercise price. Payment of such amount shall be made
(a) in the case of a Tandem SAR, solely in shares of Stock in a lump sum upon the date of exercise of the SAR and (b) in the case of a Freestanding SAR, in cash, shares of Stock, or any combination thereof as determined by the Committee,
in a lump sum upon the date of exercise of the SAR. When payment is to be made in shares of Stock, the number of shares to be issued shall be determined on the basis of the Fair Market Value of a share of Stock on the date of exercise of the SAR.
For purposes of Section 7, an SAR shall be deemed exercised on the date on which the Company receives notice of exercise from the Participant or as otherwise provided in Section 7.5.
7.5
Deemed Exercise of SARs.
If, on the date on which an SAR would otherwise terminate or expire, the
SAR by its terms remains exercisable immediately prior to such termination or expiration and, if so exercised, would result in a payment to the holder of such SAR, then any portion of such SAR which has not previously been exercised shall
automatically be deemed to be exercised as of such date with respect to such portion.
7.6
Effect of Termination of Service.
Subject to earlier termination of the SAR as otherwise provided herein and unless otherwise provided by the Committee, an SAR shall be exercisable after a Participants termination of Service only to the
extent and during the applicable time period determined in accordance with Section 6.4 (treating the SAR as if it were an Option) and thereafter shall terminate.
7.7
Transferability of SARs.
During the lifetime of the Participant, an SAR shall be exercisable only by the Participant or the Participants guardian or legal
representative. An SAR shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participants beneficiary, except transfer
by will or by the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Award, a Tandem SAR related to a Nonstatutory Stock
Option or a Freestanding SAR shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to
Form S-8
under the Securities Act.
8.
R
ESTRICTED
S
TOCK
A
WARDS
.
Restricted Stock Awards shall be evidenced by Award Agreements specifying whether the Award is a Restricted Stock Bonus or a Restricted
Stock Purchase Right and the number of shares of Stock subject to the Award, in such form as the Committee shall from time to time establish. Award Agreements evidencing Restricted Stock Awards may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and conditions:
8.1
Types
of Restricted Stock Awards Authorized.
Restricted Stock Awards may be granted in the form of either a Restricted Stock Bonus or a Restricted Stock Purchase Right. Restricted Stock Awards may be granted upon such conditions as the Committee shall
determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 10.4. If either the grant of or satisfaction of Vesting Conditions applicable to a Restricted Stock Award is to be contingent
upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 10.3 through 10.5(a).
8.2
Purchase Price.
The purchase price for shares of Stock issuable under each Restricted Stock
Purchase Right shall be established by the Committee in its discretion. No monetary payment (other than applicable tax withholding) shall be required as a condition of receiving shares of Stock pursuant to a Restricted Stock Bonus, the consideration
for which shall be services actually rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable state corporate law, the Participant shall furnish consideration in the form of cash or past
services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock subject to a Restricted Stock Award.
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8.3
Purchase Period.
A Restricted Stock Purchase Right
shall be exercisable within a period established by the Committee, which shall in no event exceed thirty (30) days from the effective date of the grant of the Restricted Stock Purchase Right.
8.4
Payment of Purchase Price.
Except as otherwise provided below, payment of the purchase price for
the number of shares of Stock being purchased pursuant to any Restricted Stock Purchase Right shall be made (a) in cash, by check or in cash equivalent, (b) by such other consideration as may be approved by the Committee from time to time
to the extent permitted by applicable law, or (c) by any combination thereof.
8.5
Vesting
and Restrictions on Transfer.
Shares issued pursuant to any Restricted Stock Award may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance
criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. During any period in which shares acquired pursuant to
a Restricted Stock Award remain subject to Vesting Conditions, such shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of other than pursuant to an Ownership Change Event or as provided in Section 8.8. The
Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Award that, if the satisfaction of Vesting Conditions with respect to any shares subject to such Restricted Stock Award would otherwise occur on a day on
which the sale of such shares would violate the provisions of the Trading Compliance Policy, then satisfaction of the Vesting Conditions automatically shall be determined on the next trading day on which the sale of such shares would not violate the
Trading Compliance Policy. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all
certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.
8.6
Voting Rights; Dividends and Distributions.
Except as provided in this Section, Section 8.5 and any Award Agreement, during any period in which shares acquired
pursuant to a Restricted Stock Award remain subject to Vesting Conditions, the Participant shall have all of the rights of a stockholder of the Company holding shares of Stock, including the right to vote such shares and to receive all dividends and
other distributions paid with respect to such shares; provided, however, that if so determined by the Committee and provided by the Award Agreement, such dividends and distributions shall be subject to the same Vesting Conditions as the shares
subject to the Restricted Stock Award with respect to which such dividends or distributions were paid. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital
structure of the Company as described in Section 4.3, any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant is entitled by reason of the Participants Restricted
Stock Award shall be immediately subject to the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which such dividends or distributions were paid or adjustments were made.
8.7
Effect of Termination of Service.
Unless otherwise provided by the Committee in the Award
Agreement evidencing a Restricted Stock Award, if a Participants Service terminates for any reason, whether voluntary or involuntary (including the Participants death or disability), then (a) the Company shall have the option to
repurchase for the purchase price paid by the Participant any shares acquired by the Participant pursuant to a Restricted Stock Purchase Right which remain subject to Vesting Conditions as of the date of the Participants termination of Service
and (b) the Participant shall forfeit to the Company any shares acquired by the Participant pursuant to a Restricted Stock Bonus which remain subject to Vesting Conditions as of the date of the Participants termination of Service. The
Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company.
8.8
Nontransferability of Restricted Stock Award Rights.
Rights to acquire shares of Stock pursuant to
a Restricted Stock Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer,
B-18
assignment, pledge, encumbrance or garnishment by creditors of the Participant or the Participants beneficiary, except transfer by will or the laws of descent and distribution. All rights
with respect to a Restricted Stock Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participants guardian or legal representative.
9.
R
ESTRICTED
S
TOCK
U
NIT
A
WARDS
.
Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying the number of Restricted Stock Units
subject to the Award, in such form as the Committee shall from time to time establish. Award Agreements evidencing Restricted Stock Units may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:
9.1
Grant of Restricted Stock Unit Awards.
Restricted Stock
Unit Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 10.4. If either the grant of a Restricted Stock Unit
Award or the Vesting Conditions with respect to such Award is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 10.3
through 10.5(a).
9.2
Purchase Price.
No monetary payment (other than applicable tax
withholding, if any) shall be required as a condition of receiving a Restricted Stock Unit Award, the consideration for which shall be services actually rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if
required by applicable state corporate law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock
issued upon settlement of the Restricted Stock Unit Award.
9.3
Vesting.
Restricted Stock
Unit Awards may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in
Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Unit Award that, if the
satisfaction of Vesting Conditions with respect to any shares subject to the Award would otherwise occur on a day on which the sale of such shares would violate the provisions of the Trading Compliance Policy, then the satisfaction of the Vesting
Conditions automatically shall be determined on the first to occur of (a) the next trading day on which the sale of such shares would not violate the Trading Compliance Policy or (b) the later of (i) last day of the calendar year in
which the original vesting date occurred or (ii) the last day of the Companys taxable year in which the original vesting date occurred.
9.4
Voting Rights, Dividend Equivalent Rights and Distributions.
Participants shall have no voting rights with respect to shares of Stock represented by Restricted Stock
Units until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion, may provide in the Award
Agreement evidencing any Restricted Stock Unit Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date such Award is granted and
ending, with respect to each share subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated. Such Dividend Equivalent Rights, if any, shall be paid by crediting the Participant with additional whole
Restricted Stock Units as of the date of payment of such cash dividends on Stock. The number of additional Restricted Stock Units (rounded to the nearest whole number) to be so credited shall be determined by dividing (a) the amount of cash
dividends paid on such date with respect to the number of shares of Stock represented by the Restricted Stock Units previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date. Such additional Restricted
Stock Units shall be subject to the same terms and conditions and shall be settled in the same manner and at the same time as the Restricted Stock Units originally subject to the Restricted Stock Unit Award. In the event of a dividend or
distribution paid in shares of Stock or
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other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.3, appropriate adjustments shall be made in the Participants
Restricted Stock Unit Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant would be entitled by reason of
the shares of Stock issuable upon settlement of the Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Vesting Conditions as are applicable to the Award.
9.5
Effect of Termination of Service.
Unless otherwise provided by the Committee and set forth in the
Award Agreement evidencing a Restricted Stock Unit Award, if a Participants Service terminates for any reason, whether voluntary or involuntary (including the Participants death or disability), then the Participant shall forfeit to the
Company any Restricted Stock Units pursuant to the Award which remain subject to Vesting Conditions as of the date of the Participants termination of Service.
9.6
Settlement of Restricted Stock Unit Awards.
The Company shall issue to a Participant on the date on which Restricted Stock Units subject to the Participants
Restricted Stock Unit Award vest or on such other date determined by the Committee, in its discretion, and set forth in the Award Agreement one (1) share of Stock (and/or any other new, substituted or additional securities or other property
pursuant to an adjustment described in Section 9.4) for each Restricted Stock Unit then becoming vested or otherwise to be settled on such date, subject to the withholding of applicable taxes, if any. If permitted by the Committee, the
Participant may elect, consistent with the requirements of Section 409A, to defer receipt of all or any portion of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section, and such deferred issuance
date(s) and amount(s) elected by the Participant shall be set forth in the Award Agreement. Notwithstanding the foregoing, the Committee, in its discretion, may provide for settlement of any Restricted Stock Unit Award by payment to the Participant
in cash of an amount equal to the Fair Market Value on the payment date of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section.
9.7
Nontransferability of Restricted Stock Unit Awards.
The right to receive shares pursuant to a
Restricted Stock Unit Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participants beneficiary, except
transfer by will or by the laws of descent and distribution. All rights with respect to a Restricted Stock Unit Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the
Participants guardian or legal representative.
10.
P
ERFORMANCE
A
WARDS
.
Performance Awards shall be evidenced by Award Agreements in such form as the Committee
shall from time to time establish. Award Agreements evidencing Performance Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
10.1
Types of Performance Awards Authorized.
Performance Awards may be granted in the form of either
Performance Shares or Performance Units. Each Award Agreement evidencing a Performance Award shall specify the number of Performance Shares or Performance Units subject thereto, the Performance Award Formula, the Performance Goal(s) and Performance
Period applicable to the Award, and the other terms, conditions and restrictions of the Award.
10.2
Initial Value of Performance Shares and Performance Units.
Unless otherwise provided by the
Committee in granting a Performance Award, each Performance Share shall have an initial monetary value equal to the Fair Market Value of one (1) share of Stock, subject to adjustment as provided in Section 4.3, on the effective date of
grant of the Performance Share, and each Performance Unit shall have an initial monetary value established by the Committee at the time of grant. The final value payable to the Participant in settlement of a Performance Award determined on the basis
of the applicable Performance Award Formula will depend on the extent to which Performance Goals established by the Committee are attained within the applicable Performance Period established by the Committee.
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10.3
Establishment of Performance Period, Performance Goals
and Performance Award Formula.
In granting each Performance Award, the Committee shall establish in writing the applicable Performance Period, Performance Award Formula and one or more Performance Goals which, when measured at the end of the
Performance Period, shall determine on the basis of the Performance Award Formula the final value of the Performance Award to be paid to the Participant. Unless otherwise permitted in compliance with the requirements under Section 162(m) with
respect to each Performance Award intended to result in the payment of Performance-Based Compensation, the Committee shall establish the Performance Goal(s) and Performance Award Formula applicable to each Performance Award no later than the earlier
of (a) the date ninety (90) days after the commencement of the applicable Performance Period or (b) the date on which 25% of the Performance Period has elapsed, and, in any event, at a time when the outcome of the Performance Goals
remains substantially uncertain. Once established, the Performance Goals and Performance Award Formula applicable to a Covered Employee shall not be changed during the Performance Period. The Company shall notify each Participant granted a
Performance Award of the terms of such Award, including the Performance Period, Performance Goal(s) and Performance Award Formula.
10.4
Measurement of Performance Goals.
Performance Goals shall be established by the Committee on the basis of targets to be attained (
Performance
Targets
) with respect to one or more measures of business or financial performance (each, a
Performance Measure
), subject to the following:
(a)
Performance Measures.
Performance Measures shall have the same meanings as used in the Companys
financial statements, or, if such terms are not used in the Companys financial statements, they shall have the meaning applied pursuant to generally accepted accounting principles, or as used generally in the Companys industry.
Performance Measures shall be calculated with respect to the Company and each Subsidiary Corporation consolidated therewith for financial reporting purposes or such division or other business unit as may be selected by the Committee. For purposes of
the Plan, the Performance Measures applicable to a Performance Award shall be calculated in accordance with generally accepted accounting principles, if applicable, but prior to the accrual or payment of any Performance Award for the same
Performance Period and excluding the effect (whether positive or negative) of any change in accounting standards or any extraordinary, unusual or nonrecurring item, as determined by the Committee, occurring after the establishment of the Performance
Goals applicable to the Performance Award. Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of Performance Measures in order to prevent the dilution or
enlargement of the Participants rights with respect to a Performance Award. Performance Measures may be one or more of the following, as determined by the Committee:
|
(vii)
|
earnings before any one or more of: stock-based compensation expense, interest, taxes, depreciation and amortization;
|
|
(ix)
|
net operating income;
|
|
(xi)
|
economic value added;
|
B-21
|
(xiii)
|
operating cash flow;
|
|
(xiv)
|
balance of cash, cash equivalents and marketable securities;
|
|
(xvi)
|
earnings per share;
|
|
(xvii)
|
return on stockholder equity;
|
|
(xviii)
|
return on capital;
|
|
(xx)
|
return on investment;
|
|
(xxi)
|
employee satisfaction;
|
|
(xxii)
|
employee retention;
|
|
(xxiv)
|
customer satisfaction;
|
|
(xxv)
|
product development;
|
|
(xxvi)
|
research and development expenses;
|
|
(xxvii)
|
completion of an identified special project; and
|
|
(xxviii)
|
completion of a joint venture or other corporate transaction.
|
(b)
Performance Targets.
Performance Targets may include a minimum, maximum, target level and intermediate levels of performance, with the final value of a Performance Award determined under
the applicable Performance Award Formula by the level attained during the applicable Performance Period. A Performance Target may be stated as an absolute value or as a value determined relative to an index, budget or other standard selected by the
Committee.
10.5
Settlement of Performance Awards.
(a)
Determination of Final Value.
As soon as practicable following the completion of the Performance Period
applicable to a Performance Award, the Committee shall certify in writing the extent to which the applicable Performance Goals have been attained and the resulting final value of the Award earned by the Participant and to be paid upon its settlement
in accordance with the applicable Performance Award Formula.
(b)
Discretionary Adjustment of Award
Formula.
In its discretion, the Committee may, either at the time it grants a Performance Award or at any time thereafter, provide for the positive or negative adjustment of the Performance Award Formula applicable to a Performance Award
granted to any Participant who is not a Covered Employee to reflect such Participants individual performance in his or her position with the Company or such other factors as the Committee may determine. If permitted under a Covered
Employees Award Agreement, the Committee shall have the discretion, on the basis of such criteria as may be established by the Committee, to reduce some or all of the value of the Performance Award that would otherwise be paid to the Covered
Employee upon its settlement notwithstanding the attainment of any Performance Goal and the resulting value of the Performance Award determined in accordance with the Performance Award Formula. No such reduction may result in an increase in the
amount payable upon settlement of another Participants Performance Award that is intended to result in Performance-Based Compensation.
(c)
Effect of Leaves of Absence.
Unless otherwise required by law or a Participants Award Agreement, payment of the final value, if any, of a Performance Award held by a Participant
who has taken in excess of thirty (30) days in unpaid leaves of absence during a Performance Period shall be prorated on
B-22
the basis of the number of days of the Participants Service during the Performance Period during which the Participant was not on an unpaid leave of absence.
(d)
Notice to Participants.
As soon as practicable following the Committees determination and
certification in accordance with Sections 10.5(a) and (b), the Company shall notify each Participant of the determination of the Committee.
(e)
Payment in Settlement of Performance Awards.
As soon as practicable following the Committees determination and certification in accordance with Sections 10.5(a) and (b), but
in any event within the Short-Term Deferral Period described in Section 15.1 (except as otherwise provided below or consistent with the requirements of Section 409A), payment shall be made to each eligible Participant (or such
Participants legal representative or other person who acquired the right to receive such payment by reason of the Participants death) of the final value of the Participants Performance Award. Payment of such amount shall be made in
cash, shares of Stock, or a combination thereof as determined by the Committee. Unless otherwise provided in the Award Agreement evidencing a Performance Award, payment shall be made in a lump sum. If permitted by the Committee, the Participant may
elect, consistent with the requirements of Section 409A, to defer receipt of all or any portion of the payment to be made to Participant pursuant to this Section, and such deferred payment date(s) elected by the Participant shall be set forth
in the Award Agreement. If any payment is to be made on a deferred basis, the Committee may, but shall not be obligated to, provide for the payment during the deferral period of Dividend Equivalent Rights or interest.
(f)
Provisions Applicable to Payment in Shares.
If payment is to be made in shares of Stock, the number of
such shares shall be determined by dividing the final value of the Performance Award by the Fair Market Value of a share of Stock determined by the method specified in the Award Agreement. Shares of Stock issued in payment of any Performance Award
may be fully vested and freely transferable shares or may be shares of Stock subject to Vesting Conditions as provided in Section 8.5. Any shares subject to Vesting Conditions shall be evidenced by an appropriate Award Agreement and shall be
subject to the provisions of Sections 8.5 through 8.8 above.
10.6
Voting Rights; Dividend
Equivalent Rights and Distributions.
Participants shall have no voting rights with respect to shares of Stock represented by Performance Share Awards until the date of the issuance of such shares, if any (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Performance Share Award that the Participant shall be entitled to Dividend
Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date the Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date on which the Performance
Shares are settled or the date on which they are forfeited. Such Dividend Equivalent Rights, if any, shall be credited to the Participant in the form of additional whole Performance Shares as of the date of payment of such cash dividends on Stock.
The number of additional Performance Shares (rounded to the nearest whole number) to be so credited shall be determined by dividing (a) the amount of cash dividends paid on the dividend payment date with respect to the number of shares of Stock
represented by the Performance Shares previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date. Dividend Equivalent Rights may be paid currently or may be accumulated and paid to the extent that
Performance Shares become nonforfeitable, as determined by the Committee. Settlement of Dividend Equivalent Rights may be made in cash, shares of Stock, or a combination thereof as determined by the Committee, and may be paid on the same basis as
settlement of the related Performance Share as provided in Section 10.5. Dividend Equivalent Rights shall not be paid with respect to Performance Units. In the event of a dividend or distribution paid in shares of Stock or other property or any
other adjustment made upon a change in the capital structure of the Company as described in Section 4.3, appropriate adjustments shall be made in the Participants Performance Share Award so that it represents the right to receive upon
settlement any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of the Performance Share
Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Performance Goals as are applicable to the Award.
B-23
10.7
Effect of Termination of Service.
Unless otherwise
provided by the Committee and set forth in the Award Agreement evidencing a Performance Award, the effect of a Participants termination of Service on the Performance Award shall be as follows:
(a)
Death or Disability.
If the Participants Service terminates because of the death or Disability of
the Participant before the completion of the Performance Period applicable to the Performance Award, the final value of the Participants Performance Award shall be determined by the extent to which the applicable Performance Goals have been
attained with respect to the entire Performance Period and shall be prorated based on the number of months of the Participants Service during the Performance Period. Payment shall be made following the end of the Performance Period in any
manner permitted by Section 10.5.
(b)
Other Termination of Service.
If the
Participants Service terminates for any reason except death or Disability before the completion of the Performance Period applicable to the Performance Award, such Award shall be forfeited in its entirety; provided, however, that in the event
of an involuntary termination of the Participants Service, the Committee, in its discretion, may waive the automatic forfeiture of all or any portion of any such Award and determine the final value of the Performance Award in the manner
provided by Section 10.7(a). Payment of any amount pursuant to this Section shall be made following the end of the Performance Period in any manner permitted by Section 10.5.
10.8
Nontransferability of Performance Awards.
Prior to settlement in accordance with the provisions
of the Plan, no Performance Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participants beneficiary, except
transfer by will or by the laws of descent and distribution. All rights with respect to a Performance Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participants
guardian or legal representative.
11.
C
ASH
-B
ASED
A
WARDS
AND
O
THER
S
TOCK
-B
ASED
A
WARDS
.
Cash-Based Awards and Other Stock-Based Awards shall be evidenced by Award Agreements in such form as the Committee shall from time to
time establish. Award Agreements evidencing Cash-Based Awards and Other Stock-Based Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
11.1
Grant of Cash-Based Awards
.
Subject to the provisions of the Plan, the Committee, at any
time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms and conditions, including the achievement of performance criteria, as the Committee may determine.
11.2
Grant of Other Stock-Based Awards
.
The Committee may grant other types of equity-based or
equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted securities, stock-equivalent units, stock appreciation units, securities or debentures convertible into common stock or
other forms determined by the Committee) in such amounts and subject to such terms and conditions as the Committee shall determine. Such Awards may involve the transfer of actual shares of Stock to Participants, or payment in cash or otherwise of
amounts based on the value of Stock and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
11.3
Value of Cash-Based and Other Stock-Based Awards
.
Each Cash-Based Award shall specify a
monetary payment amount or payment range as determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of shares of Stock or units based on such shares of Stock, as determined by the Committee. The Committee may require
the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be established by the Committee and set forth in the Award
Agreement evidencing such Award. If the Committee exercises its discretion to establish performance criteria, the final value of Cash-Based Awards or Other Stock-Based Awards that will be paid to the Participant will depend on the extent to which
the performance criteria are met. The establishment of performance criteria with respect to the grant or vesting of any Cash-Based Award or
B-24
Other Stock-Based Award intended to result in Performance-Based Compensation shall follow procedures substantially equivalent to those applicable to Performance Awards set forth in
Section 10.
11.4
Payment or Settlement of Cash-Based Awards and Other Stock-Based
Awards
.
Payment or settlement, if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash, shares of Stock or other securities or any combination thereof as
the Committee determines. The determination and certification of the final value with respect to any Cash-Based Award or Other Stock-Based Award intended to result in Performance-Based Compensation shall comply with the requirements applicable to
Performance Awards set forth in Section 10. To the extent applicable, payment or settlement with respect to each Cash-Based Award and Other Stock-Based Award shall be made in compliance with the requirements of Section 409A.
11.5
Voting Rights; Dividend Equivalent Rights and Distributions.
Participants shall have no voting
rights with respect to shares of Stock represented by Other Stock-Based Awards until the date of the issuance of such shares of Stock (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the
Company), if any, in settlement of such Award. However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Other Stock-Based Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to
the payment of cash dividends on Stock during the period beginning on the date such Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated.
Such Dividend Equivalent Rights, if any, shall be paid in accordance with the provisions set forth in Section 9.4. Dividend Equivalent Rights shall not be granted with respect to Cash-Based Awards. In the event of a dividend or distribution
paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.3, appropriate adjustments shall be made in the Participants Other Stock-Based Award so
that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable
upon settlement of such Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Vesting Conditions and performance criteria, if any, as are applicable to the Award.
11.6
Effect of Termination of Service
.
Each Award Agreement evidencing a Cash-Based Award or
Other Stock-Based Award shall set forth the extent to which the Participant shall have the right to retain such Award following termination of the Participants Service. Such provisions shall be determined in the discretion of the Committee,
need not be uniform among all Cash-Based Awards or Other Stock-Based Awards, and may reflect distinctions based on the reasons for termination, subject to the requirements of Section 409A, if applicable.
11.7
Nontransferability of Cash-Based Awards and Other Stock-Based Awards.
Prior to the payment or
settlement of a Cash-Based Award or Other Stock-Based Award, the Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the
Participants beneficiary, except transfer by will or by the laws of descent and distribution. The Committee may impose such additional restrictions on any shares of Stock issued in settlement of Cash-Based Awards and Other Stock-Based Awards
as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such shares of Stock are then
listed and/or traded, or under any state securities laws or foreign law applicable to such shares of Stock.
12.
S
TANDARD
F
ORMS
OF
A
WARD
A
GREEMENT
.
12.1
Award
Agreements
.
Each Award shall comply with and be subject to the terms and conditions set forth in the appropriate form of Award Agreement approved by the Committee and as amended from time to time. No Award or purported Award shall
be a valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement, which execution may be evidenced by electronic means. Any Award Agreement may consist of an appropriate form of Notice of Grant and a form of
Agreement incorporated therein
B-25
by reference, or such other form or forms, including electronic media, as the Committee may approve from time to time.
12.2
Authority to Vary Terms
.
The Committee shall have the authority from time to time to vary the terms of any standard form of Award Agreement either in
connection with the grant or amendment of an individual Award or in connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of any such new, revised or amended standard form or forms of
Award Agreement are not inconsistent with the terms of the Plan.
13.
C
HANGE
IN
C
ONTROL
.
13.1
Effect of Change in Control on Awards.
Subject to the requirements and limitations of Section 409A, if applicable, the Committee may provide for any one or more of the following:
(a)
Accelerated Vesting.
In its discretion, the Committee may provide in the grant of any Award or at any
other time may take such action as it deems appropriate to provide for acceleration of the exercisability, vesting and/or settlement in connection with a Change in Control of each or any outstanding Award or portion thereof and shares acquired
pursuant thereto upon such conditions, including termination of the Participants Service prior to, upon, or following such Change in Control, and to such extent as the Committee shall determine.
(b)
Assumption, Continuation or Substitution.
In the event of a Change in Control, the surviving,
continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the
Acquiror
), may, without the consent of any Participant, either assume or continue the
Companys rights and obligations under each or any Award or portion thereof outstanding immediately prior to the Change in Control or substitute for each or any such outstanding Award or portion thereof a substantially equivalent award with
respect to the Acquirors stock, as applicable. For purposes of this Section, if so determined by the Committee in its discretion, an Award denominated in shares of Stock shall be deemed assumed if, following the Change in Control, the Award
confers the right to receive, subject to the terms and conditions of the Plan and the applicable Award Agreement, for each share of Stock subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other
securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled; provided, however, that if such consideration is not solely common stock of the Acquiror, the
Committee may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise or settlement of the Award, for each share of Stock subject to the Award, to consist solely of common stock of the Acquiror equal in Fair
Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control. Any Award or portion thereof which is neither assumed or continued by the Acquiror in connection with the Change in Control nor exercised or
settled as of the time of consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control.
(c)
Cash-Out
of Outstanding Stock-Based Awards.
The Committee may,
in its discretion and without the consent of any Participant, determine that, upon the occurrence of a Change in Control, each or any Award denominated in shares of Stock or portion thereof outstanding immediately prior to the Change in Control and
not previously exercised or settled shall be canceled in exchange for a payment with respect to each vested share (and each unvested share, if so determined by the Committee) of Stock subject to such canceled Award in (i) cash, (ii) stock
of the Company or of a corporation or other business entity a party to the Change in Control, or (iii) other property which, in any such case, shall be in an amount having a Fair Market Value equal to the Fair Market Value of the consideration
to be paid per share of Stock in the Change in Control, reduced (but not below zero) by the exercise or purchase price per share, if any, under such Award. In the event such determination is made by the Committee, an Award having an exercise or
purchase price per share equal to or greater than the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control may be canceled without payment of consideration to the holder thereof. Payment pursuant to this
Section (reduced by applicable withholding taxes, if any) shall be made to
B-26
Participants in respect of the vested portions of their canceled Awards as soon as practicable following the date of the Change in Control and in respect of the unvested portions of their
canceled Awards in accordance with the vesting schedules applicable to such Awards.
13.2
Effect of Change in Control on Nonemployee Director Awards.
Subject to the requirements and limitations of Section 409A, if applicable, including as provided by Section 15.4(e), in the event of a Change in Control, each outstanding
Nonemployee Director Award shall become immediately exercisable and vested in full and, except to the extent assumed, continued or substituted for pursuant to Section 13.1(b), shall be settled effective immediately prior to the time of
consummation of the Change in Control.
13.3
Federal Excise Tax Under Section 4999 of the
Code.
(a)
Excess Parachute Payment.
In the event that any acceleration of vesting pursuant
to an Award and any other payment or benefit received or to be received by a Participant would subject the Participant to any excise tax pursuant to Section 4999 of the Code due to the characterization of such acceleration of vesting, payment
or benefit as an excess parachute payment under Section 280G of the Code, the Participant may elect to reduce the amount of any acceleration of vesting called for under the Award in order to avoid such characterization.
(b)
Determination by Independent Accountants.
To aid the Participant in making any election called for under
Section 13.3(a), no later than the date of the occurrence of any event that might reasonably be anticipated to result in an excess parachute payment to the Participant as described in Section 13.3(a), the Company shall request
a determination in writing by independent public accountants selected by the Company (the
Accountants
). As soon as practicable thereafter, the Accountants shall determine and report to the Company and the
Participant the amount of such acceleration of vesting, payments and benefits which would produce the greatest
after-tax
benefit to the Participant. For the purposes of such determination, the Accountants may
rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Participant shall furnish to the Accountants such information and documents as the Accountants may reasonably
request in order to make their required determination. The Company shall bear all fees and expenses the Accountants charge in connection with their services contemplated by this Section.
14.
C
OMPLIANCE
WITH
S
ECURITIES
L
AW
.
The grant of Awards and the issuance of shares of Stock pursuant to any Award shall be subject to compliance with all applicable
requirements of federal, state and foreign law with respect to such securities and the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, no Award may be exercised or shares issued pursuant to
an Award unless (a) a registration statement under the Securities Act shall at the time of such exercise or issuance be in effect with respect to the shares issuable pursuant to the Award, or (b) in the opinion of legal counsel to the
Company, the shares issuable pursuant to the Award may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Companys legal counsel to be necessary to the lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such shares
as to which such requisite authority shall not have been obtained. As a condition to issuance of any Stock, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any
applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
15.
C
OMPLIANCE
WITH
S
ECTION
409A
.
15.1
Awards Subject to Section 409A.
The Company intends that Awards granted pursuant to the Plan shall either be exempt from or comply with Section 409A, and
the Plan shall be so construed. The provisions of
B-27
this Section 15 shall apply to any Award or portion thereof that constitutes or provides for payment of Section 409A Deferred Compensation. Such Awards may include, without limitation:
(a) A Nonstatutory Stock Option or SAR that includes any feature for the deferral of compensation other than
the deferral of recognition of income until the later of (i) the exercise or disposition of the Award or (ii) the time the stock acquired pursuant to the exercise of the Award first becomes substantially vested.
(b) Any Restricted Stock Unit Award, Performance Award, Cash-Based Award or Other Stock-Based Award that either
(i) provides by its terms for settlement of all or any portion of the Award at a time or upon an event that will or may occur later than the end of the Short-Term Deferral Period (as defined below) or (ii) permits the Participant granted
the Award to elect one or more dates or events upon which the Award will be settled after the end of the Short-Term Deferral Period.
Subject to the provisions of Section 409A, the term
Short-Term Deferral Period
means the 2
1
/
2
month period ending on the later of (i) the 15th day of the third month following the end of the Participants taxable year in which the right to payment under applicable portion of the Award
is no longer subject to a substantial risk of forfeiture or (ii) the 15th day of the third month following the end of the Companys taxable year in which the right to payment under the applicable portion of the Award is no longer subject
to a substantial risk of forfeiture. For this purpose, the term substantial risk of forfeiture shall have the meaning provided by Section 409A.
15.2
Deferral and/or Distribution Elections.
Except as otherwise permitted or required by Section 409A, the following rules shall apply to any compensation deferral
and/or payment elections (each, an
Election
) that may be permitted or required by the Committee pursuant to an Award providing Section 409A Deferred Compensation:
(a) Elections must be in writing and specify the amount of the payment in settlement of an Award being deferred, as well
as the time and form of payment as permitted by this Plan.
(b) Elections shall be made by the end of the
Participants taxable year prior to the year in which services commence for which an Award may be granted to such Participant.
(c) Elections shall continue in effect until a written revocation or change in Election is received by the Company, except that a written revocation or change in Election must be received by the Company
prior to the last day for making the Election determined in accordance with paragraph (b) above or as permitted by Section 15.3.
15.3
Subsequent Elections
.
Except as otherwise permitted or required by Section 409A, any Award providing Section 409A Deferred Compensation
which permits a subsequent Election to delay the payment or change the form of payment in settlement of such Award shall comply with the following requirements:
(a) No subsequent Election may take effect until at least twelve (12) months after the date on which the subsequent Election is made.
(b) Each subsequent Election related to a payment in settlement of an Award not described in Section 15.4(a)(ii),
15.4(a)(iii) or 15.4(a)(vi) must result in a delay of the payment for a period of not less than five (5) years from the date on which such payment would otherwise have been made.
(c) No subsequent Election related to a payment pursuant to Section 15.4(a)(iv) shall be made less than twelve
(12) months before the date on which such payment would otherwise have been made.
(d) Subsequent
Elections shall continue in effect until a written revocation or change in the subsequent Election is received by the Company, except that a written revocation or change in a subsequent Election must be received by the Company prior to the last day
for making the subsequent Election determined in accordance the preceding paragraphs of this Section 15.3.
B-28
15.4
Payment of Section 409A Deferred
Compensation
.
(a)
Permissible Payments.
Except as otherwise permitted or
required by Section 409A, an Award providing Section 409A Deferred Compensation must provide for payment in settlement of the Award only upon one or more of the following:
(i) The Participants separation from service (as such term is defined by Section 409A);
(ii) The Participants becoming disabled (as such term is defined by Section 409A);
(iii) The Participants death;
(iv) A time or fixed schedule that is either (i) specified by the Committee upon the grant of an Award and set forth
in the Award Agreement evidencing such Award or (ii) specified by the Participant in an Election complying with the requirements of Section 15.2 or 15.3, as applicable;
(v) A change in the ownership or effective control or the Company or in the ownership of a substantial portion of the
assets of the Company determined in accordance with Section 409A; or
(vi) The occurrence of an
unforeseeable emergency (as such term is defined by Section 409A).
(b)
Required Delay
in Payment to Specified Employee Pursuant to Separation from Service.
Notwithstanding any provision of the Plan or an Award Agreement to the contrary, except as otherwise permitted by Section 409A, no payment pursuant to
Section 15.4(a)(i) in settlement of an Award providing for Section 409A Deferred Compensation may be made to a Participant who is a specified employee (as such term is defined by Section 409A) as of the date of the
Participants separation from service before the date (the
Delayed Payment Date
) that is six (6) months after the date of such Participants separation from service, or, if earlier, the date of
the Participants death. All such amounts that would, but for this paragraph, become payable prior to the Delayed Payment Date shall be accumulated and paid on the Delayed Payment Date.
(c)
Payment Upon Disability.
All distributions payable by reason of a Participant becoming disabled shall be
paid in a lump sum or in periodic installments as established by the Participants Election. If the Participant has made no Election with respect to distributions upon becoming disabled, all such distributions shall be paid in a lump sum upon
the determination that the Participant has become disabled.
(d)
Payment Upon Death
.
If a
Participant dies before complete distribution of amounts payable upon settlement of an Award subject to Section 409A, such undistributed amounts shall be distributed to his or her beneficiary under the distribution method for death established
by the Participants Election upon receipt by the Committee of satisfactory notice and confirmation of the Participants death. If the Participant has made no Election with respect to distributions upon death, all such distributions shall
be paid in a lump sum upon receipt by the Committee of satisfactory notice and confirmation of the Participants death.
(e)
Payment Upon Change in Control.
Notwithstanding any provision of the Plan or an Award Agreement to the contrary, to the extent that any amount constituting Section 409A Deferred
Compensation would become payable under this Plan by reason of a Change in Control, such amount shall become payable only if the event constituting a Change in Control would also constitute a change in ownership or effective control of the Company
or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A. Any Award which constitutes Section 409A Deferred Compensation and which would vest and otherwise become payable upon a
Change in Control as a result of the failure of the Acquiror to assume, continue or substitute for such Award in accordance with Section 13.1(b) shall vest to the extent provided by such Award but shall be converted automatically at the
effective time of such Change in Control into a right to receive, in cash on the date or dates such award would have been settled in accordance with its then existing settlement schedule (or as required by Section 15.4(b)), an amount or amounts
equal in the aggregate to the intrinsic value of the Award at the time of the Change in Control.
(f)
Payment Upon Unforeseeable Emergency.
The Committee shall have the authority to provide in the Award Agreement evidencing any Award providing for Section 409A Deferred Compensation for
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payment in settlement of all or a portion of such Award in the event that a Participant establishes, to the satisfaction of the Committee, the occurrence of an unforeseeable emergency. In such
event, the amount(s) distributed with respect to such unforeseeable emergency cannot exceed the amounts reasonably necessary to satisfy the emergency need plus amounts necessary to pay taxes reasonably anticipated as a result of such
distribution(s), after taking into account the extent to which such emergency need is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Participants assets (to the extent the liquidation
of such assets would not itself cause severe financial hardship) or by cessation of deferrals under the Award. All distributions with respect to an unforeseeable emergency shall be made in a lump sum as soon as practicable following the
Committees determination that an unforeseeable emergency has occurred. The Committees decision with respect to whether an unforeseeable emergency has occurred and the manner in which, if at all, the payment in settlement of an Award
shall be altered or modified, shall be final, conclusive, and not subject to approval or appeal.
(g)
Prohibition of Acceleration of Payments.
Notwithstanding any provision of the Plan or an Award Agreement to the contrary, this Plan does not permit the acceleration of the time or schedule of any payment under an Award providing
Section 409A Deferred Compensation, except as permitted by Section 409A.
16.
T
AX
W
ITHHOLDING
.
16.1
Tax
Withholding in General.
The Company shall have the right to deduct from any and all payments made under the Plan, or to require the Participant, through payroll withholding, cash payment or otherwise, to make adequate provision for, the federal,
state, local and foreign taxes (including social insurance), if any, required by law to be withheld by any Participating Company with respect to an Award or the shares acquired pursuant thereto. The Company shall have no obligation to deliver shares
of Stock, to release shares of Stock from an escrow established pursuant to an Award Agreement, or to make any payment in cash under the Plan until the Participating Company Groups tax withholding obligations have been satisfied by the
Participant.
16.2
Withholding in Shares.
The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable to a Participant upon the exercise or settlement of an Award, or to accept from the Participant the tender of, a number of whole shares of Stock having a Fair Market Value, as determined by the
Company, equal to all or any part of the tax withholding obligations of any Participating Company. The Fair Market Value of any shares of Stock withheld or tendered to satisfy any such tax withholding obligations shall not exceed the amount
determined by the applicable minimum statutory withholding rates.
17.
A
MENDMENT
,
S
USPENSION
OR
T
ERMINATION
OF
P
LAN
.
The Committee may amend, suspend or terminate the Plan at any time. However, without the approval of the Companys stockholders, there shall be (a) no increase in the maximum aggregate number of
shares of Stock that may be issued under the Plan (except by operation of the provisions of Section 4.3), (b) no change in the class of persons eligible to receive Incentive Stock Options, and (c) no other amendment of the Plan that
would require approval of the Companys stockholders under any applicable law, regulation or rule, including the rules of any stock exchange or quotation system upon which the Stock may then be listed or quoted. No amendment, suspension or
termination of the Plan shall affect any then outstanding Award unless expressly provided by the Committee. Except as provided by the next sentence, no amendment, suspension or termination of the Plan may adversely affect any then outstanding Award
without the consent of the Participant. Notwithstanding any other provision of the Plan to the contrary, the Committee may, in its sole and absolute discretion and without the consent of any Participant, amend the Plan or any Award Agreement, to
take effect retroactively or otherwise, as it deems necessary or advisable for the purpose of conforming the Plan or such Award Agreement to any present or future law, regulation or rule applicable to the Plan, including, but not limited to,
Section 409A.
18.
M
ISCELLANEOUS
P
ROVISIONS
.
18.1
Repurchase Rights
.
Shares issued under the Plan may be subject to
one or more repurchase options, or other conditions and restrictions as determined by the Committee in its discretion at the time the Award is
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granted. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the
Company. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates
representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.
18.2
Forfeiture Events.
(a)
The Committee may specify in an Award Agreement that the Participants rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of specified events, in
addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of Service for Cause or any act by a Participant, whether before or after termination of Service,
that would constitute Cause for termination of Service.
(b) If the Company is required to prepare an
accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, any Participant who knowingly or through gross negligence engaged in the
misconduct, or who knowingly or through gross negligence failed to prevent the misconduct, and any Participant who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, shall reimburse
the Company for (i) the amount of any payment in settlement of an Award received by such Participant during the
twelve-
(12-)
month period following the first
public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document embodying such financial reporting requirement, and (ii) any profits realized by such Participant from the
sale of securities of the Company during such
twelve-
(12-)
month period.
18.3
Provision of Information.
Each Participant shall be given access to information concerning the Company equivalent to that information generally made available to
the Companys common stockholders.
18.4
Rights as Employee, Consultant or Director.
No person, even though eligible pursuant to Section 5, shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. Nothing in the Plan or any Award granted under the Plan shall confer
on any Participant a right to remain an Employee, Consultant or Director or interfere with or limit in any way any right of a Participating Company to terminate the Participants Service at any time. To the extent that an Employee of a
Participating Company other than the Company receives an Award under the Plan, that Award shall in no event be understood or interpreted to mean that the Company is the Employees employer or that the Employee has an employment relationship
with the Company.
18.5
Rights as a Stockholder.
A Participant shall have no rights as a
stockholder with respect to any shares covered by an Award until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall
be made for dividends, distributions or other rights for which the record date is prior to the date such shares are issued, except as provided in Section 4.3 or another provision of the Plan.
18.6
Delivery of Title to Shares.
Subject to any governing rules or regulations, the Company shall
issue or cause to be issued the shares of Stock acquired pursuant to an Award and shall deliver such shares to or for the benefit of the Participant by means of one or more of the following: (a) by delivering to the Participant evidence of book
entry shares of Stock credited to the account of the Participant, (b) by depositing such shares of Stock for the benefit of the Participant with any broker with which the Participant has an account relationship, or (c) by delivering such
shares of Stock to the Participant in certificate form.
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18.7
Fractional Shares.
The Company shall not be required
to issue fractional shares upon the exercise or settlement of any Award.
18.8
Retirement and
Welfare Plans
.
Neither Awards made under this Plan nor shares of Stock or cash paid pursuant to such Awards may be included as compensation for purposes of computing the benefits payable to any Participant under any
Participating Companys retirement plans (both qualified and
non-qualified)
or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in
computing a Participants benefit.
18.9
Beneficiary Designation.
Subject to local
laws and procedures, each Participant may file with the Company a written designation of a beneficiary who is to receive any benefit under the Plan to which the Participant is entitled in the event of such Participants death before he or she
receives any or all of such benefit. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company
during the Participants lifetime. If a married Participant designates a beneficiary other than the Participants spouse, the effectiveness of such designation may be subject to the consent of the Participants spouse. If a
Participant dies without an effective designation of a beneficiary who is living at the time of the Participants death, the Company will pay any remaining unpaid benefits to the Participants legal representative.
18.10
Severability
.
If any one or more of the provisions (or any part thereof) of this Plan
shall be held invalid, illegal or unenforceable in any respect, such provision shall be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions (or any part thereof) of the
Plan shall not in any way be affected or impaired thereby.
18.11
No Constraint on Corporate
Action.
Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise affect the Companys or another Participating Companys right or power to make adjustments, reclassifications, reorganizations, or changes of its
capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or another Participating Company to take any action
which such entity deems to be necessary or appropriate.
18.12
Unfunded Obligation.
Participants shall have the status of general unsecured creditors of the Company. Any amounts payable to Participants pursuant to the Plan shall be considered unfunded and unsecured obligations for all purposes, including, without limitation,
Title I of the Employee Retirement Income Security Act of 1974. No Participating Company shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such
obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any
trust or any Participant account shall not create or constitute a trust or fiduciary relationship between the Committee or any Participating Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or the
Participants creditors in any assets of any Participating Company. The Participants shall have no claim against any Participating Company for any changes in the value of any assets which may be invested or reinvested by the Company with
respect to the Plan.
18.13
Choice of Law.
Except to the extent governed by applicable
federal law, the validity, interpretation, construction and performance of the Plan and each Award Agreement shall be governed by the laws of the State of California, without regard to its conflict of law rules.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the foregoing sets forth the Heckmann Corporation 2009 Equity
Incentive Plan as duly adopted by the Board on May 6, 2009.
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/s/ Damian C. Georgino
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Damian C. Georgino, Corporate Secretary
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NUVERRA ENVIRONMENTAL SOLUTIONS, INC.
14624 N. SCOTTSDALE ROAD
SUITE 300
SCOTTSDALE, AZ 85254
VOTE BY INTERNET
Before The Meeting
- Go to
www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before
the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
During The Meeting
- Go to
www.virtualshareholdermeeting.com/NES2014
You may attend the Meeting via the Internet and vote during the Meeting. Have the information that is printed in the box marked by the arrow
available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting
date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge,
51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK
INK AS FOLLOWS:
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M71662-P49330
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KEEP THIS PORTION FOR YOUR RECORDS
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED
AND DATED.
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DETACH AND RETURN THIS PORTION ONLY
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NUVERRA ENVIRONMENTAL SOLUTIONS, INC.
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For
All
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Withhold
All
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For All
Except
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To withhold authority to vote for any individual nominee(s), mark For All Except and write the number(s) of the nominee(s) on the line
below.
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The Board of Directors
recommends you vote FOR
the following:
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1. Election of Directors
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Nominees:
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01)
Edward A. Barkett
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02) Robert B. Simonds, Jr.
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The Board of Directors recommends you vote FOR the following proposals:
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For
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Against
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Abstain
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2. To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year
ending December 31, 2014;
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3. To hold an advisory vote to approve executive compensation;
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4. To approve an amendment to the 2009 Equity Incentive Plan to (i) increase the shares authorized, (ii) continue
compliance with Internal Revenue Code section 162(m) and (iii) make other administrative changes; and
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NOTE:
Such other business as may properly come before the meeting or
any adjournment thereof.
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Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor,
administrator, or other fiduciary, please give full title as such. Joint owners should each
sign personally. All holders must sign. If a corporation or partnership, please sign in full
corporate or partnership name by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement, Annual Report and
Shareholder Letter are available at www.proxyvote.com.
M71663-P49330
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NUVERRA ENVIRONMENTAL SOLUTIONS, INC.
Annual Meeting of Shareholders
May 6, 2014 at 9:00 AM PT
This proxy is solicited by the Board of Directors
The shareholder(s) hereby appoint(s) Mark D. Johnsrud and Jay C. Parkinson, or either of them, as proxies, each with the
power to appoint (his/her) substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of (Common/Preferred) stock of NUVERRA ENVIRONMENTAL SOLUTIONS, INC. that the
shareholder(s) is/are entitled to vote at the Annual Meeting of Shareholders to be held at 9:00 AM, PT on May 6, 2014, at the www.virtualshareholdermeeting.com/NES2014 and any adjournment or postponement thereof.
This proxy, when properly executed,
will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors recommendations.
Continued and to be signed on reverse side
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