The following discussion provides an overview of the Compensation Committee, the background and objectives of our compensation programs for
current senior management, and the material elements of the compensation of each of the executive officers identified in the following table, to which we refer as our Named Executive Officers:
The companies that comprised our Compensation Peer Group in 2013 included the following:
In 2013, the percentage allocation of compensation elements at target levels for the Companys Named Executive Officers were as
illustrated in the following table:
The table below shows the range of bonus opportunities based on achieving the specified performance measures. Actual Adjusted EBITDA for 2013
was $93.4 million, resulting in a bonus for the program participants between the minimum and target amount. No bonus was awarded under the operating income percentage criteria.
* As described above, a portion of earned value of bonuses took the form of restricted stock if elected by the
executive. Such shares vested upon certification by the Compensation Committee of the Board that performance requirements for vesting were met. The number of shares associated with this election were: John W. Chisholm 18,348 shares; Steven A.
Reeves 6,513 shares; M. Kevin Fisher 6,238 shares; and H. Richard Walton 5,963 shares.
The following table shows the award program available under the 2013 equity grants and the number of units earned as a result of the
Companys 2013 Adjusted EBITDA and operating income percentage.
Compensation Committee Report
The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis with management and, based on
such review and discussion, has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
L.V.
Bud McGuire, Chairman
L. Melvin Cooper
Kenneth
T. Hern
John S. Reiland
Carla S. Hardy
April 18, 2014
21
Summary Compensation Table
The following table sets forth information regarding compensation earned in or with respect to our fiscal years 2013, 2012 and 2011 by:
|
|
|
each person who served as our principal executive officer in 2013, 2012 and 2011;
|
|
|
|
each person who served as our principal financial officer in 2013, 2012 and 2011; and
|
|
|
|
the Companys three most highly compensated executive officers, other than our chief executive officer and chief financial officer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Name and Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
|
|
|
Stock
Awards
|
|
|
|
|
|
Option
Awards
|
|
|
|
|
|
All Other
Compensation
|
|
|
|
|
|
Total
|
|
John W. Chisholm President,
Chief Executive Officer and Chairman of the Board
|
|
|
2013
|
|
|
$
|
48,000
|
|
|
$
|
450,000
|
|
|
|
(1)
|
|
|
$
|
1,612,519
|
|
|
|
(2)
|
|
|
$
|
|
|
|
|
|
|
|
$
|
686,750
|
|
|
|
|
|
|
$
|
2,797,269
|
|
|
|
|
2012
|
|
|
|
48,000
|
|
|
|
1,112,000
|
|
|
|
|
|
|
|
2,540,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
647,000
|
|
|
|
|
|
|
|
4,347,229
|
|
|
|
|
2011
|
|
|
|
48,000
|
|
|
|
772,800
|
|
|
|
|
|
|
|
1,838,000
|
|
|
|
|
|
|
|
2,084,726
|
|
|
|
(3)
|
|
|
|
921,857
|
|
|
|
|
|
|
|
5,665,383
|
|
Steven A. Reeves Executive
Vice President, Operations
|
|
|
2013
|
|
|
|
405,000
|
|
|
|
182,250
|
|
|
|
(1)
|
|
|
|
621,267
|
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
20,109
|
|
|
|
(4)
|
|
|
|
1,228,626
|
|
|
|
|
2012
|
|
|
|
324,500
|
|
|
|
389,400
|
|
|
|
|
|
|
|
965,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,127
|
|
|
|
|
|
|
|
1,686,410
|
|
|
|
|
2011
|
|
|
|
286,667
|
|
|
|
334,675
|
|
|
|
|
|
|
|
459,500
|
|
|
|
|
|
|
|
1,042,363
|
|
|
|
(3)
|
|
|
|
6,954
|
|
|
|
|
|
|
|
2,130,159
|
|
M. Kevin Fisher Executive Vice President, Global Business Development
|
|
|
2013
|
|
|
|
390,000
|
|
|
|
175,500
|
|
|
|
(1)
|
|
|
|
595,026
|
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
17,051
|
|
|
|
(4)
|
|
|
|
1,177,577
|
|
|
|
|
2012
|
|
|
|
305,000
|
|
|
|
366,000
|
|
|
|
|
|
|
|
907,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,178
|
|
|
|
|
|
|
|
1,587,552
|
|
|
|
|
2011
|
|
|
|
25,417
|
|
|
|
100,000
|
|
|
|
|
|
|
|
1,822,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
923
|
|
|
|
|
|
|
|
1,948,340
|
|
Johnna D. Kokenge Vice President and Chief Accounting Officer
|
|
|
2013
|
|
|
|
32,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
691,572
|
|
|
|
|
|
|
|
723,643
|
|
|
|
|
2012
|
|
|
|
277,950
|
|
|
|
305,745
|
|
|
|
(1)
|
|
|
|
590,642
|
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,174,337
|
|
|
|
|
2011
|
|
|
|
231,667
|
|
|
|
279,675
|
|
|
|
|
|
|
|
459,500
|
|
|
|
|
|
|
|
1,051,892
|
|
|
|
(3)
|
|
|
|
5,912
|
|
|
|
|
|
|
|
2,028,646
|
|
H. Richard Walton Executive Vice President and Chief Financial Officer
|
|
|
2013
|
|
|
|
252,161
|
|
|
|
146,250
|
|
|
|
(1)
|
|
|
|
568,735
|
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
971,146
|
|
Joshua A. Snively, Sr. Executive Vice President, Research and Development
|
|
|
2013
|
|
|
|
232,308
|
|
|
|
319,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,819
|
|
|
|
|
|
|
|
379,319
|
|
(*) The Company did not have for the year ended December 31, 2013 any executive officers other than
the President and Chief Executive Officer; Executive Vice President, Operations; Executive Vice President, Global Business Development; Executive Vice President and Chief Financial Officer; and Executive Vice President, Research and Development.
(1) Mr. Chisholm, Mr. Reeves, Mr. Fisher and Mr. Walton received, as part of the 2013 Annual Bonus Plan,
$450,000, $182,250, $175,500 and $146,250 respectively.
(2) Represents the grant date fair value, at the target 100% level,
based on the closing stock price on March 28, 2013, the date of the award. These amounts include awards granted during 2013 and reflect the fair value amount of compensation of the awards and the fair value of the awards on the date of grant. The
restricted stock awards are expensed over a vesting period for each respective grant. The grant date fair value of the restricted stock awards granted to Mr. Chisholm, Mr. Reeves, Mr. Fisher and Mr. Walton on March 28, 2013
as determined pursuant to ASC Topic 718, was $16.35 per share, respectively. See our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 for a description of the ASC Topic 718 valuation. The maximum amount that may be earned,
at the 200% level, by Mr. Chisholm, Mr. Reeves, Mr. Fisher and Mr. Walton as part of the 2013 Long-Term Incentive Program was $3,225,038, $1,242,535, $1,190,051 and $1,137,470, respectively.
(3) Represents the amounts recognized for financial reporting purposes in accordance with ASC Topic 718 for the year ended
December 31, 2011, related to stock options granted pursuant to our 2010 Long-Term Incentive Plan. These amounts include stock options granted during fiscal 2011 and reflect the fair value amount of the awards and the fair value of the awards
on the date of grant. The grant date fair value of the stock option awards granted to Mr. Chisholm and Mr. Reeves on April 11, 2011, as determined pursuant to ASC Topic 718, was $5.21 per share. See our Annual Report on Form 10-K for
the fiscal year ended December 31, 2011 for a description of the ASC Topic 718 valuation.
(4) The expenses for all
Company provided vehicles were determined through averaging the FMV, odometer reading and estimated percentage personal use.
22
The following table details All Other Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
|
Year
|
|
|
|
Company
Provided
Vehicle
|
|
|
|
Company
Provided
Housing
|
|
|
|
Company
Match
401 (k)
|
|
|
|
Services and
Consulting
Contracts
|
|
|
|
Severance
|
|
|
|
All Other
Compensation
|
|
John W. Chisholm President,
Chief Executive Officer and
Chairman of the
Board
|
|
|
2013
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
686,750
|
(a)
|
|
$
|
|
|
|
$
|
686,750
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
647,000
|
|
|
|
|
|
|
|
647,000
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
37
|
|
|
|
921,818
|
|
|
|
|
|
|
|
921,855
|
|
Steven A. Reeves Executive
Vice President, Operations
|
|
|
2013
|
|
|
|
600
|
|
|
|
12,030
|
|
|
|
7,479
|
|
|
|
|
|
|
|
|
|
|
|
20,109
|
|
|
|
|
2012
|
|
|
|
600
|
|
|
|
9,720
|
|
|
|
6,527
|
|
|
|
|
|
|
|
|
|
|
|
16,847
|
|
|
|
|
2011
|
|
|
|
600
|
|
|
|
7,800
|
|
|
|
6,354
|
|
|
|
|
|
|
|
|
|
|
|
14,754
|
|
M. Kevin Fisher Executive
Vice President, Global
Business Development
|
|
|
2013
|
|
|
|
12,000
|
|
|
|
|
|
|
|
5,051
|
|
|
|
|
|
|
|
|
|
|
|
17,051
|
|
|
|
|
2012
|
|
|
|
12,000
|
|
|
|
|
|
|
|
4,954
|
|
|
|
|
|
|
|
|
|
|
|
16,954
|
|
Johnna D. Kokenge
Vice
President and Chief
Accounting Officer
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
642
|
|
|
|
168,000
|
|
|
|
522,930
|
|
|
|
691,572
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
4,280
|
|
|
|
|
|
|
|
|
|
|
|
4,280
|
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
5,912
|
|
|
|
|
|
|
|
|
|
|
|
5,912
|
|
H. Richard Walton Executive
Vice President and Chief
Financial Officer
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
Joshua A. Snively, Sr.
Executive Vice
President, Research
and Development
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
1,819
|
|
|
|
|
|
|
|
|
|
|
|
1,819
|
|
|
(a)
|
Mr. Chisholm received $1,386,750 in 2013 related to his services contract with the Company, including $150,000 paid to CMI and $550,000 paid to
Protechnics as bonus, which is included in the Bonus column on the Summary Compensation table.
|
Equity-Related
Compensation
The following table discloses the number of restricted stock awards and stock options granted during the fiscal year
ended December 31, 2013, to only the named executive officers who were the recipients of such awards, including the grant date fair value of these awards.
2013 Grants of Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date
|
|
|
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
|
|
|
Estimated Future Payouts
Under Equity Incentive
Plan Awards
|
|
|
All Other
Stock
Awards:
Number
of
Shares of
Stock or
Units
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
|
|
|
Exercise
or Base
Price of
Award or
Option
Per Share
|
|
|
Grant
Date
Fair Value
for Stock
and
Option
Awards
(1)
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
(Shares)
|
|
|
Target
(Shares)
|
|
|
Maximum
(Shares)
|
|
|
|
|
|
John W.
Chisholm
|
|
|
3/28/2013
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
49,313
|
|
|
|
98,625
|
|
|
|
197,250
|
|
|
|
|
|
|
|
|
|
|
$
|
16.35
|
|
|
$
|
1,612,519
|
|
|
|
|
3/28/2013
|
|
|
|
300,000
|
|
|
|
600,000
|
|
|
|
1,200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven A.
Reeves
|
|
|
3/28/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,999
|
|
|
|
37,998
|
|
|
|
75,996
|
|
|
|
|
|
|
|
|
|
|
|
16.35
|
|
|
|
621,267
|
|
|
|
|
3/28/2013
|
|
|
|
121,500
|
|
|
|
243,000
|
|
|
|
486,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M. Kevin
Fisher
|
|
|
3/28/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,197
|
|
|
|
36,393
|
|
|
|
72,786
|
|
|
|
|
|
|
|
|
|
|
|
16.35
|
|
|
|
595,026
|
|
|
|
|
3/28/2013
|
|
|
|
117,000
|
|
|
|
234,000
|
|
|
|
468,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H. Richard
Walton
|
|
|
3/28/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,393
|
|
|
|
34,785
|
|
|
|
69,570
|
|
|
|
|
|
|
|
|
|
|
|
16.35
|
|
|
|
568,735
|
|
|
|
|
3/28/2013
|
|
|
|
97,500
|
|
|
|
195,000
|
|
|
|
390,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
This column reports the grant date fair value of each equity award granted in 2013 computed in accordance with ASC Topic 718. The grant date
fair value is based on the target 100% level.
|
23
The following tables provides information relating to outstanding equity-based
awards held by named executive officers as of December 31, 2013.
Outstanding Equity Awards at Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Name
|
|
Year of
Grant Date
|
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
|
|
|
Equity Incentive
Plan Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
|
|
|
Option
Exercise
Price
|
|
|
Option
Expiration
Date
|
|
John W. Chisholm
|
|
|
2004
|
|
|
|
332
|
|
|
|
|
|
|
|
|
|
|
$
|
2.30
|
|
|
|
12/22/2014
|
|
|
|
|
2005
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
9.40
|
|
|
|
12/21/2015
|
|
|
|
|
2008
|
|
|
|
4,628
|
|
|
|
|
|
|
|
|
|
|
|
22.75
|
|
|
|
3/28/2014
|
|
|
|
|
2009
|
|
|
|
26,668
|
|
|
|
|
|
|
|
|
|
|
|
2.51
|
|
|
|
2/16/2015
|
|
|
|
|
2009
|
|
|
|
400,000
|
|
|
|
|
|
|
|
|
|
|
|
1.02
|
|
|
|
12/22/2015
|
|
|
|
|
2010
|
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
2.17
|
|
|
|
11/10/2016
|
|
|
|
|
2011
|
|
|
|
400,000
|
|
|
|
|
|
|
|
|
|
|
|
9.19
|
|
|
|
4/8/2017
|
|
Steven A. Reeves
|
|
|
2008
|
|
|
|
8,680
|
|
|
|
|
|
|
|
|
|
|
|
22.75
|
|
|
|
3/28/2014
|
|
|
|
|
2008
|
|
|
|
7,724
|
|
|
|
|
|
|
|
|
|
|
|
22.75
|
|
|
|
8/9/2014
|
|
|
|
|
2011
|
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
9.19
|
|
|
|
4/8/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Awards
|
|
Name
|
|
Year of
Grant Date
|
|
Number of
Shares or Units of
Stock That
Have Not
Vested
|
|
|
|
|
|
Market Value
of
Shares or Units
of Stock That
Have Not
Vested
(1)
|
|
|
Equity Incentive Plan
Awards: Number of
Unearned Shares, Units
or Other Rights
That Have Not Vested
|
|
|
|
|
|
Equity Incentive Plan
Awards: Market or
Payout Value of
Unearned Shares,
Units or Other Rights
That Have Not
Vested
(1)
|
|
John W. Chisholm
|
|
2012
|
|
|
27,070
|
|
|
|
(4)
|
|
|
$
|
543,295
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
2012
|
|
|
94,744
|
|
|
|
(5)
|
|
|
|
1,901,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,348
|
|
|
|
(7)
|
|
|
|
368,244
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98,625
|
|
|
|
(8)
|
|
|
|
1,979,404
|
|
Steven A. Reeves
|
|
2009
|
|
|
20,000
|
|
|
|
(2)
|
|
|
|
401,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
37,500
|
|
|
|
(3)
|
|
|
|
752,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
10,288
|
|
|
|
(4)
|
|
|
|
206,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
36,007
|
|
|
|
(5)
|
|
|
|
722,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,513
|
|
|
|
(7)
|
|
|
|
130,716
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,998
|
|
|
|
(8)
|
|
|
|
762,620
|
|
M. Kevin Fisher
|
|
2012
|
|
|
9,670
|
|
|
|
(4)
|
|
|
|
194,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
33,843
|
|
|
|
(5)
|
|
|
|
679,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,238
|
|
|
|
(7)
|
|
|
|
125,197
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,393
|
|
|
|
(8)
|
|
|
|
730,408
|
|
H. Richard Walton
|
|
2013
|
|
|
50,000
|
|
|
|
(6)
|
|
|
|
1,003,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,963
|
|
|
|
(7)
|
|
|
|
119,677
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,785
|
|
|
|
(8)
|
|
|
|
698,135
|
|
(1) The dollar value of the unvested shares of restricted stock reported are valued
at the closing price of Floteks Common Stock on December 31, 2013 ($20.07 per share).
(2) The
total number of unvested shares of restricted stock granted on February 16, 2009. These shares vest on February 16, 2014.
(3) The total number of unvested shares of restricted stock granted on November 11, 2010. These shares vest on
May 11, 2014.
(4) The total number of unvested shares of restricted stock granted on March 7,
2012. These shares vest as follows: 50% on March 7,2014 and 50% on March 07, 2015.
(5) The total
number of unvested shares represents the unvested portion of performance shares earned during 2012. These shares vest on March 11, 2014.
24
(6) The total number of unvested shares of restricted stock granted on
March 13, 2013. These shares vest as follows: 50% on March 13, 2014 and 50% on March 13, 2015.
(7)
The total number of unvested shares elected by the named executive as part of the 2013 Management Incentive Plan. These shares are forfeitable to the extent that performance targets are not met for 2013. The bonus amount
actually earned is disclosed in the Summary Compensation Table.
(8) The total number of unearned performance
shares available for 2013, at the target 100% level.
The following table sets forth certain information regarding the value realized
upon the exercise of stock options and upon the vesting of restricted stock awards by each of the named executive officers during the fiscal year ended December 31, 2013.
Option Exercises and Restricted Stock Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Restricted Stock Awards
|
|
Name
|
|
Number of
Shares Acquired
on Exercise
|
|
|
Value Realized on
Exercise
|
|
|
Number of
Shares Acquired
on Vesting
|
|
|
Value Realized
on Vesting
|
|
John W. Chisholm
|
|
|
|
|
|
$
|
|
|
|
|
181,214
|
|
|
$
|
2,813,085
|
|
Steven A. Reeves
|
|
|
41,587
|
|
|
|
727,775
|
|
|
|
87,463
|
|
|
|
1,359,595
|
|
M. Kevin Fisher
|
|
|
|
|
|
|
|
|
|
|
24,233
|
|
|
|
352,665
|
|
Johnna D. Kokenge
|
|
|
54,280
|
|
|
|
799,879
|
|
|
|
|
|
|
|
|
|
25
Potential Payments upon Termination of Employment or Change in Control
The following table describes the circumstances that will trigger acceleration of vesting of certain stock options and restricted stock grants
and quantifies the value of the stock options or restricted stock grants the vesting of which would have accelerated upon the occurrence of the specified events, assuming that such event had occurred on December 31, 2013 and based on the
closing price on our Common Stock on that date $20.07.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Participant Position
|
|
Termination
Event
|
|
Salary
|
|
|
Bonus
|
|
|
Health
|
|
|
Acceleration
of Unvested
Equity
|
|
|
Total
|
|
John W. Chisholm (1)
|
|
Change In Control
|
|
$
|
1,500,000
|
|
|
$
|
1,200,000
|
|
|
$
|
|
|
|
$
|
3,434,499
|
|
|
$
|
6,134,499
|
|
President, Chief Executive Officer and
|
|
Good Reason
|
|
|
1,500,000
|
|
|
|
1,200,000
|
|
|
|
|
|
|
|
543,295
|
|
|
|
3,243,295
|
|
Chairman of the Board
|
|
Without Cause
|
|
|
1,500,000
|
|
|
|
1,200,000
|
|
|
|
|
|
|
|
543,295
|
|
|
|
3,243,295
|
|
|
|
Death
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,434,499
|
|
|
|
3,434,499
|
|
|
|
Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,434,499
|
|
|
|
3,434,499
|
|
M. Kevin Fisher (2)
|
|
Change In Control
|
|
|
260,000
|
|
|
|
156,000
|
|
|
|
|
|
|
|
1,238,493
|
|
|
|
1,654,493
|
|
Executive Vice President,
|
|
Good Reason
|
|
|
260,000
|
|
|
|
156,000
|
|
|
|
8,710
|
|
|
|
194,084
|
|
|
|
618,794
|
|
Global Business Development
|
|
Without Cause
|
|
|
260,000
|
|
|
|
156,000
|
|
|
|
8,710
|
|
|
|
194,084
|
|
|
|
618,794
|
|
|
|
Death
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,238,493
|
|
|
|
1,238,493
|
|
|
|
Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,238,493
|
|
|
|
1,238,493
|
|
Steve A. Reeves (3)
|
|
Change In Control
|
|
|
270,000
|
|
|
|
162,000
|
|
|
|
|
|
|
|
2,464,476
|
|
|
|
2,896,476
|
|
Executive Vice President, Operations
|
|
Good Reason
|
|
|
270,000
|
|
|
|
162,000
|
|
|
|
26,130
|
|
|
|
1,360,512
|
|
|
|
1,818,642
|
|
|
|
Without Cause
|
|
|
270,000
|
|
|
|
162,000
|
|
|
|
26,130
|
|
|
|
1,360,512
|
|
|
|
1,818,642
|
|
|
|
Death
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,464,476
|
|
|
|
2,464,476
|
|
|
|
Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,464,476
|
|
|
|
2,464,476
|
|
H. Richard Walton (4)
|
|
Change In Control
|
|
|
243,750
|
|
|
|
146,250
|
|
|
|
|
|
|
|
1,352,584
|
|
|
|
1,742,584
|
|
Chief Financial Officer
|
|
Good Reason
|
|
|
243,750
|
|
|
|
146,250
|
|
|
|
|
|
|
|
1,003,500
|
|
|
|
1,393,500
|
|
|
|
Without Cause
|
|
|
243,750
|
|
|
|
146,250
|
|
|
|
|
|
|
|
1,003,500
|
|
|
|
1,393,500
|
|
|
|
Death
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,352,584
|
|
|
|
1,352,584
|
|
|
|
Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,352,584
|
|
|
|
1,352,584
|
|
Joshua A. Snively, Sr. (5)
|
|
Change In Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice President, Research and
|
|
Good Reason
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
|
|
Without Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For purposes of awards under our long-term incentive plans, Change-in-Control of the Company
means the first to occur of the following events:
|
(i)
|
Any person (subject to certain exceptions) becomes the beneficial owner, directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the combined voting power of the Companys then outstanding securities;
|
|
(ii)
|
During any period of one (1) year, individuals who at the beginning of such period constitute the Board (and any new Director whose election
by the Corporations stockholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was so
approved) cease for any reason to constitute a majority thereof; or
|
|
(iii)
|
(A) The sale or disposition of all or substantially all the Companys assets, or (B) a merger, consolidation, or reorganization of
the Company with or involving any other entity, other than a merger, consolidation, or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the combined voting power of the securities of the Company (or such surviving entity) outstanding immediately after such merger,
consolidation, or reorganization.
|
For purposes of awards under our long-term incentive plans, Cause
means the termination of an employee for any of the following reasons, as determined by the Compensation Committee:
|
(i)
|
An employee willfully fails to substantially perform the employees duties (other than any such failure resulting from the employees
total and permanent disability) after a written demand for substantial performance has been delivered by the Company to the employee that specifically identifies the manner in which the Company believes that the employee has not substantially
performed the employees duties, and the employee fails to remedy such failure within ten (10) calendar days after receiving such notice;
|
|
(ii)
|
An employee is convicted (by trial, plea of guilty or plea of nolo contendere) for committing an act of fraud, embezzlement, theft, or other act
constituting a felony;
|
|
(iii)
|
An employee willfully engages in gross misconduct or willfully violates a Company or a subsidiary policy which is materially and demonstrably
injurious to the Company and/or a subsidiary after a written demand to cease such misconduct or violation has been delivered by the Company to the employee that specifically identifies the manner in which the Company believes that the employee has
violated this Paragraph (iii), and the employee fails to cease such misconduct or violation and remedy any injury suffered by the Company or the subsidiary as a result thereof within thirty (30) calendar days after receiving such notice.
However, no act or failure to act, on the employees part shall be considered willful unless done, or omitted to be done, by the employee not in good faith and without reasonable belief that the employees action or omission
was in the best interest of the Company or the subsidiary; or
|
|
(iv)
|
An employee commits a material breach of any noncompetition, confidentiality or similar agreement with the Company or a subsidiary, as determined
under such agreement.
|
26
(1) Upon the termination of the engagement of the Chisholm Companies by the Company pursuant to
the Service Agreement and the employment of Mr. Chisholm pursuant to his employment agreement by the Company for Cause or by the Chisholm Companies for Good Reason, (a) the Chisholm Companies would be entitled to receive severance compensation equal
to two hundred percent of base compensation and target bonus in effect for the year in which termination occurs, and (b) Mr. Chisholm will be entitled to accelerated vesting of all unvested stock options and RSAs. Upon the termination of the
engagement of the Chisholm Companies by the Company pursuant to the Service Agreement and the employment of Mr. Chisholm pursuant to his employment agreement by the Company because of Mr. Chisholms death or disability, Mr. Chisholm would be
entitled to receive accelerated vesting of certain unvested stock options and RSAs as provided in the individual grant agreements.
(2) Upon
termination of employment of Mr. Fisher (a) three months before or six months after a Change in Control either without cause or by the employee for good reason, Mr Fisher would be entitled to receive (i) two-thirds of the sum of his
annual base salary and target bonus in effect for the year in which the termination date occurs annualized over the period from the termination date until the expiration date of the contract and (ii) the accelerated vesting of all unvested
stock options and RSAs. If employment of Mr. Fisher were to be terminated (b) by Mr. Fisher for good reason or (c) by the Company without cause, Mr. Fisher would be entitled to receive (i) severance equal two-thirds of
his annual base salary and target bonus in effect for the year in which the termination occurred, (ii) coverage at Company expense under the employee health insurance plan for eight months, as well as (iii) the accelerated vesting of
certain unvested stock options and RSAs as provided in the individual grant agreements. If employment of Mr. Fisher were to be terminated as a result of (d) Mr. Fishers death, Mr. Fishers estate would receive the
accelerated vesting of certain unvested stock options and RSAs as provided in the individual grant agreements. Upon a termination of the contract due to (e) the disability of Mr. Fisher, he would be entitled to receive the accelerated
vesting of certain unvested stock options and RSAs as provided in the individual grant agreements.
(3) Upon termination of employment of
Mr. Reeves (a) three months before or six months after a Change of Control either without cause of by the employee for any reason, Mr. Reeves would be entitled to receive (i) two-thirds the sum of his annual base salary and
target bonus in effect for the year in which the termination date occurs annualized over the period from the termination date until the expiration date of the contract and (ii) accelerated vesting of all unvested stock options and RSAs. If
employment of Mr. Reeves were to be terminated (b) by Mr. Reeves for good reason or (c) by the Company without cause, Mr. Reeves would be entitled to receive (i) severance equal two-thirds of his annual base salary and
target bonus in effect for the year in which the termination occurred, (ii) coverage at Company expense under the employee health insurance plan for twenty four months, as well as (iii) the accelerated vesting of certain unvested stock
options and RSAs as provided in the individual grant agreements. If employment of Mr. Reeves were to be terminated as a result of (d) death, Mr. Reeves estate would receive the accelerated vesting of certain unvested stock
options and RSAs as provided in the individual grant agreements. Upon a termination of the contract due to (e) the disability of Mr. Reeves would be entitled to receive the accelerated vesting of certain unvested stock options and RSAs as
provided in the individual grant agreements.
(4) Upon termination of employment of Mr. Walton (a) by the Company without Cause,
by Mr. Walton for good reason prior to the Expiration date, Mr. Walton is entitled to receive (i) severance compensation equal to 75% of his annual base salary and target bonus in effect for the year in which the termination occurs and
(ii) the accelerated vesting of certain unvested stock options and RSAs as provided in the individual grant agreements or (b) because of his death, or disability, Mr. Walton would be entitled to receive (i) base salary earned payable
through the date of termination, and (ii) the accelerated vesting of certain unvested stock options and RSAs as provided in the individual grant agreements.
(5) Mr. Snively did not have an effective employment agreement on December 31, 2013. He is therefore entitled to no severance payments and
did not have any equity granted as of 12/31/2013 for the purposes of this calculation.
27
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
Meeting Attendance
During 2013, the Board held 10 meetings of the full Board and 17 meetings of committees. The Corporate Governance and Nominating Committee held
3 meetings, the Compensation Committee held 8 meetings and the Audit Committee held 6 meetings. Each director attended at least 75% of the aggregate number of meetings of the Board and committees of the Board on which they served from the respective
dates of their appointments.
The Company does not have a formal policy requiring members of the Board to attend the Annual Meeting,
although all directors are strongly encouraged to attend. Of the Directors then in office, Messrs. Chisholm, Cooper, Hern, McGuire and Reiland attended the last Annual Meeting of Stockholders.
Executive Sessions
Pursuant to the Companys Corporate Governance Guidelines, non-management directors of the Board are required to meet on a regularly
scheduled basis without the presence of management. The Lead Director chairs these sessions. During 2013, the non-management directors met in 5 executive sessions without management present.
Director Independence
The Board has determined that each of the current directors except for Mr. Chisholm is independent as that term is defined by rules of the
NYSE and, in the case of the Audit Committee, the Securities and Exchange Commission (the SEC). Mr. Chisholm is not an independent director since he is currently the President and Chief Executive Officer of the Company.
None of the non-employee directors have any relationship with the Company other than as a director and stockholder, or any transaction or
arrangement that interferes with each directors independence.
Risk Management
The Board has an active role, as a whole and at the committee level, in overseeing management of the Companys risks. The Board regularly
reviews information regarding the Companys credit, liquidity and operations, as well as the risks associated with each. The Companys Compensation Committee is responsible for overseeing the management of risks relating to the
Companys executive compensation plans and arrangements. The Audit Committee oversees management of financial risks. The Corporate Governance and Nominating Committee manages risks associated with Board independence and potential conflicts of
interest. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through committee reports about all identified Company risks.
Board Committees
The Board has established an Audit Committee, a Corporate Governance and Nominating Committee and a Compensation Committee. The Audit,
Corporate Governance and Nominating and Compensation committees are composed entirely of independent directors as defined under the New York Stock Exchange Listed Company Manual and the Companys Corporate Governance Guidelines.
The following table shows the committees on which each director serves. C indicates that the director serves as the chair of the
committee.
|
|
|
|
|
|
|
Director
|
|
Audit
|
|
Corporate
Governance
and
Nominating
|
|
Compensation
|
John S. Reiland
|
|
C
|
|
X
|
|
X
|
Kenneth T. Hern
|
|
X
|
|
C
|
|
X
|
L. Melvin Cooper
|
|
X
|
|
X
|
|
X
|
L.V. Bud McGuire
|
|
|
|
X
|
|
C
|
Carla S. Hardy
|
|
|
|
X
|
|
X
|
Ted D. Brown
|
|
|
|
X
|
|
|
Audit Committee
The Audit Committee held 6 meetings in 2013. The Audit Committees primary functions are to:
Appoint, determine funding for, oversee and replace (subject to stockholder ratification, if applicable) a firm
of independent auditors to audit our financial statements;
Pre-approve all audit and non-audit services
provided by our independent auditors;
Evaluate the qualifications, performance and independence of our
independent auditors, and ensure the rotation of the lead (or concurring) audit partner;
Obtain and review a
report of our independent auditors, at least annually, regarding compliance with their internal quality-control procedures;
Discuss with our independent auditors the overall scope and plans for their respective audits;
Discuss with management and our independent auditors the adequacy and effectiveness of the Companys
accounting and financial controls;
Meet with our independent auditors to discuss the conduct and findings of
their respective audits;
Meet and review with management and our independent auditors the Companys
financial statements and the associated disclosures to be included in quarterly and annual reports to be filed with the SEC;
Discuss with management and our independent auditors significant financial reporting issues and judgments made in
connection with the preparation of the Companys financial statements;
28
Discuss periodically with management the Companys plan with
regards to issuing earnings press releases and providing financial information and earnings guidance to analysts and rating agencies;
Review any disclosures by the Companys officers and other employees regarding significant deficiencies in
the design and operation of the Companys internal controls; and
Establish procedures for receiving and
responding to concerns regarding accounting, internal accounting controls and auditing matters.
Each member of the Audit Committee, as of
the date of this Proxy Statement (Messrs. Reiland, Hern and Cooper) is financially literate and has accounting or financial management expertise. Messrs. Reiland, Hern and Cooper are audit committee financial experts as defined in Item 407
(d)(5) of Regulation S-K under the Exchange Act, rule 10A-3 under the Exchange Act, the New York Stock Exchange Listed Company Manual and the Companys Corporate Governance Guidelines. The Board has adopted a charter for the Audit Committee, a
copy of which is available on our website (
www.flotekind.com
) and in print to any stockholder who requests it.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee met 3 times in 2013. The Corporate Governance and Nominating Committees primary
functions are to:
Review, at least annually, the structure of the Board to assure that the proper skills and
experience are represented on the Board;
Recommend to the full Board candidates to fill vacancies on the
Board as they occur;
Recommend, prior to each annual stockholder meeting, a slate of nominees for election
or reelection as directors by the stockholders at the annual meeting;
Identify individuals qualified to
serve as potential Board members, consistent with criteria approved by the Board;
Select, evaluate, retain,
and where appropriate, terminate any search firm to be used to identify qualified director candidates;
Evaluate current directors for re-nomination to the Board or re-appointment to any Board committees, and assess
the performance of such directors;
Periodically review the composition of the Board and its committees in
light of the current challenges and needs of the Board, the Company and each committee of the Board, and determine whether it may be appropriate to add or remove individuals;
Consider rotation of the Chairman and members of the committees of the Board;
Consider candidates to serve as Board members that are submitted by stockholders of the Company;
Periodically make recommendations to the Board with respect to the size of the Board;
Review criteria and policies relating to director independence, service and tenure;
Recommend to the Board the membership of the Audit and
Compensation Committees, including their Chairpersons;
Periodically make recommendations to the Board with
respect to the compensation of Board members;
Make recommendations to the Board regarding corporate
governance matters and practices, including formulating and periodically reviewing Corporate Governance Guidelines to be adopted by the Board;
Develop and recommend to the Board the Companys Corporate Governance Guidelines and at least annually,
review and reassess the adequacy of such Corporate Governance Guidelines and recommend any proposed changes to the Board;
Be responsible for any tasks assigned to the Corporate Governance and Nominating Committee in the Companys
Corporate Governance Guidelines;
Oversee compliance with the Companys Corporate Governance Guidelines
and Code of Business Conduct and Ethics and report on such compliance to the Board;
Review and consider any
requests for waivers of the Companys Corporate Governance Guidelines or Code of Business Conduct and Ethics for the Companys directors, executive officers and other senior financial officers, and make a recommendation to the Board with
respect to such request for a waiver;
Review potential conflicts of interest involving directors and
determine whether such director or directors may vote on any issue as to which there may be a conflict;
Review all related party transactions and determine whether such transactions are appropriate for the Company to
undertake and, if so, approve such transactions;
Review periodically with the Companys counsel, in
light of changing conditions, new legislation and other
developments, the Companys Code of Business Conduct and Ethics and make
recommendations to the Board for such changes as the Corporate Governance and Nominating Committee shall deem appropriate; and
Review executive development and executive succession plans, including succession planning strategies for the
Companys senior management positions.
When identifying and evaluating candidates, the Corporate Governance and Nominating Committee
first determines whether there are any evolving needs of the Board that require an expert in a particular field. The Corporate Governance and Nominating Committee may retain a third-party search firm to assist the Committee in locating qualified
candidates that meet the needs of the Board at that time. Generally, a retained search firm would provide information on a number of candidates, which the Corporate Governance and Nominating Committee would discuss. The Corporate Governance and
Nominating Committee Chairman and some or all of the members of the Corporate Governance and Nominating Committee will interview potential candidates that meet the needs of the Board, possess the qualifications sought, and meet the independence
standards required by the NYSE and as set
29
forth by the Companys Corporate Governance Guidelines. The Corporate Governance and Nominating Committee will then recommend the nomination of candidates to the Board. Director nominees may
be identified by the Corporate Governance and Nominating Committee through current board members, officers, stockholders or other persons.
Any stockholder desiring to submit a nomination to the Board should send the recommendation in writing, together with appropriate background
and contact information, to the Secretary of the Company at the address of the Companys principal executive offices. The Board has not established formal minimum qualifications for a director nominee and evaluates any nominee, including those
recommended by stockholders, on a case-by-case basis. The Board has adopted a charter for the Corporate Governance and Nominating Committee, a copy of which is available on our website (
www.flotekind.com
) and in print to any stockholder who
requests it.
Compensation Committee
The Compensation Committee held 8 meetings in 2013. The Compensation Committees primary functions are to:
Adopt compensation policies and programs that are consistent with corporate strategy and meet all legal
requirements regarding reporting and administration of compensation matters;
Establish, in conjunction with
executive management, the overall compensation strategy of the Company and review such strategy at least annually for alignment with the Companys business strategy and with similar programs offered by the Companys competitors;
Oversee the compensation and benefits programs applicable to all employees of the Company;
Adopt, amend or terminate corporate incentive programs (including short-term and long-term incentive and other
similar programs), including establishment of performance standards, and determine the funding of such programs relative to previously established performance standards;
Review the Companys employee benefit plans, including retirement and savings plans, and either recommend
plan changes to the Board or amend such plans as appropriate;
Recommend to the Board the adoption of any new
Company employee benefit plan or the termination of any existing employee benefit plan, as appropriate;
Review at least annually the Companys investment strategies around and performance of the Companys
401(k) plans;
Review and approve at least annually corporate goals and objectives relevant to compensation
of the Companys executive officers and evaluate each executive officers performance in light of such goals and objectives;
Either as a Compensation Committee or in conjunction with the other independent directors (as directed by the
Board), adopt a compensation strategy and determine and approve each executive officers salary, bonuses, and other compensation based on the strategy and the evaluation of each executive
officers performance and considering the results of the most recent shareholder advisory vote on executive compensation;
Regarding individual officers compensation, consider a number of factors that include but are not limited
to the Companys financial and operational performance, relative shareholder return, the value of similar incentive awards to executives at comparable companies and awards given in past years and the results of the most recent shareholder
advisory vote on executive compensation;
Annually review and approve the annual base salaries and annual
short-term and long-term incentive opportunities of the executive officers;
Periodically review and approve
the following as they affect executive officers: elements of compensation other than salaries and annual incentives; employment and severance agreements; change-in-control agreements and change-in-control provisions affecting any element of
compensation or benefits; and any special or supplemental compensation and benefits for the executive officers and individuals who formerly served as executive officers;
Award equity-based awards to executive officers and to other employees of the Company pursuant to any plans
approved by the Board which by its terms provide for administration by the Compensation Committee;
Make
recommendations to the Board with respect to the compensation of Board members;
Assure that all compensation
policies and programs comply with applicable laws and regulations;
Review and approve annual performance
goals for performance-based compensation that is intended to be tax deductible under Section 162(m) of the Internal Revenue Code, determine whether the performance goals and objectives are attained and certify the level of attainment as applicable;
Review the Companys compensation policies and practices to determine whether they encourage excessive
risk-taking, discuss annually the relationship between risk management policies and practices and compensation, and evaluate compensation policies and practices that could mitigate any such risk;
Consider the factors affecting independence set forth in Section 303A.05(c)(iv) of the NYSE Listed Company Manual
when selecting or soliciting advice from any external legal counsel, compensation consultants or other advisor, and evaluate whether any compensation consultant retained or to be retained by it has any conflict of interest in accordance with Item
407(e)(3)(iv) of Regulation S-K;
Review and approve the frequency that should be recommended to the
Companys shareholders with respect to how often the Company shall hold a shareholder advisory vote on executive compensation (Say on Pay Vote); review and approve the frequency with which the Company should submit to the
shareholders a Say on Pay Vote, taking into consideration any prior Say on Pay Vote
30
on the frequency with which the Company shall hold a Say on Pay Vote; and review the results of the most recent Say on Pay Vote when considering whether to make any adjustments to the
Companys executive compensation policies and practices;
Review and discuss the Companys
Compensation Discussion and Analysis (CD&A) and the related executive compensation information and recommend that the CD&A and related executive compensation information be included in the Companys proxy statement and
annual report on Form 10-K as required by the rules and regulations of the Securities and Exchange Commission;
Approve the Compensation Committee report on executive officer compensation included in the Companys proxy
statement or annual report on Form 10-K as required by the rules and regulations of the Securities and Exchange Commission;
Receive reports on compensation and benefits applicable to all employees; and
Oversee the Companys compliance with, and take any other actions as may be required from time to time by,
applicable law, the rules of the NYSE, the rules and regulations of the Securities and Exchange Commission, the Bylaws or the Board, including any requirement that shareholders approve equity compensation plans.
The Board has adopted a charter for the Compensation Committee, a copy of which is available on
our website (
www.flotekind.com
) and in print to any stockholder who requests it.
Director Compensation
Compensation of non-employee directors is determined by the Board based upon recommendations prepared by the Compensation Committee. Effective
in March 2012, the compensation program for non-employees directors provides each non-employee director will be paid an annual retainer of $40,000 and receive $2,000 for each meeting of the Board attended and $1,000 for each committee meeting
attended. The Chairman of the Audit Committee is paid an annual retainer of $24,000, the Chairman of the Compensation Committee is paid an annual retainer of $12,000, the Chairman of the Corporate Governance and Nominating Committee is paid an
annual retainer of $12,000 and the Lead Director is paid an annual retainer of $20,000. All directors are reimbursed for reasonable expenses incurred in connection with their service on our Board.
Each non-employee director is also granted restricted stock awards annually with a fair value equal to approximately $120,000 based on a fair
market value as of the date of grant. These shares vest over a one year period.
The following table details the compensation in 2013 of the non-employee directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Board
Retainer (1)
|
|
|
Committee
Chair
Retainer (1)
|
|
|
Meeting Fees
(1)
|
|
|
Restricted
Stock Awards
(2)(3)
|
|
|
Total
|
|
L. Melvin Cooper
|
|
$
|
40,000
|
|
|
$
|
|
|
|
$
|
38,000
|
|
|
$
|
119,983
|
|
|
$
|
197,983
|
|
Kenneth T. Hern
|
|
$
|
62,000
|
|
|
$
|
12,000
|
|
|
$
|
37,000
|
|
|
$
|
119,983
|
|
|
$
|
230,983
|
|
L.V. McGuire
|
|
$
|
40,000
|
|
|
$
|
12,000
|
|
|
$
|
33,000
|
|
|
$
|
119,983
|
|
|
$
|
204,983
|
|
John S. Reiland
|
|
$
|
40,000
|
|
|
$
|
24,000
|
|
|
$
|
38,000
|
|
|
$
|
119,983
|
|
|
$
|
221,983
|
|
Carla Schulz Hardy
|
|
$
|
24,887
|
|
|
$
|
|
|
|
$
|
15,000
|
|
|
$
|
119,983
|
|
|
$
|
159,870
|
|
Ted D. Brown
|
|
$
|
5,333
|
|
|
$
|
|
|
|
$
|
2,000
|
|
|
$
|
119,992
|
|
|
$
|
127,325
|
|
Richard O. Wilson (4)
|
|
$
|
15,220
|
|
|
$
|
|
|
|
$
|
19,000
|
|
|
$
|
|
|
|
$
|
34,220
|
|
(1) Represents non-employee directors fees earned in 2013.
(2) Represents the grant date fair value of restricted stock awards made pursuant to the Companys 2010 Long-Term
Incentive Plan. These amounts are for awards granted during the 2013 fiscal year and reflect the amount of compensation for a full fiscal year based on the vesting terms of the awards and the fair value of the awards on the date of grant. The annual
grants to Messrs. Hern, Reiland, McGuire, Cooper, and Hardy on May 17, 2013 and to Messr. Brown on November 12, 2013 are expensed from the grant date until May 16, 2014.
(3) The following restricted stock awards were outstanding at December 31, 2013: L. Melvin Cooper 13,531;
Kenneth T. Hern 17,447; L.V. McGuire 13,531; John S. Reiland 17,447; Carla Schulz Hardy 6,864; and Ted D. Brown 5,859.
(4) Mr. Wilson retired from the Board during 2013 after 10 years of service to the Company.
Compensation Risk
The role of the Compensation Committee in risk oversight includes review of risks arising from our compensation policies, practices and
programs as well as the mitigating controls, to determine whether any such risks are material to the Company. The Compensation Committee has reviewed these matters and believes that the mix of compensation elements and the design of those elements
along with sound governance practices do not encourage
employees to take excessive risks that might have a material adverse effect on us. Specifically:
The Company has strong internal financial controls that are assessed by the Companys independent public
accountants annually in addition to their audits of the Companys financial statements.
Base salaries
are consistent with market practice and employees responsibility so that employees are not
31
motivated to take excessive risks to attain a reasonable level of financial security.
The determination of incentive awards is based on well-defined financial measures. There is a maximum cash
incentive opportunity for each Named Executive Officer, and the Committee retains discretion to adjust bonuses to eliminate anomalous or inappropriate outcomes.
Long-term incentives are designed to provide appropriate awards for successful long-term outcomes, and
effectively align realized compensation with returns realized by investors.
Other Board and Committee Items
Code of Business Conduct and Ethics
The Code of Business Conduct and Ethics of the Company applies to our directors, executive officers and to all other employees and is available
on our website (
www.flotekind.com
) and in print to any stockholder who requests it.
Compensation Committee Interlocks and
Insider Participation
Messrs. Hern, Reiland, McGuire, Cooper and Hardy served on the Compensation Committee during 2013. No current
member of the Compensation Committee is a current or former officer or employee of the Company or had any relationship requiring disclosure under applicable SEC rules. Additionally, none of the Companys executive officers served as a director
or member of the compensation committee of another entity, one of whose executive officers served as a director or member of the Companys Compensation Committee.
Transactions with Related Persons
The Company recognizes that related person transactions can present potential or actual conflicts of interest and it is the Companys
preference that related person transactions are avoided as a general matter. However, the Company also recognizes that there are situations, including certain transactions negotiated on an arms length basis, where related person transactions
may be in, or may not be inconsistent with, the best interests of the Company and its stockholders. Therefore, the Corporate Governance and Nominating Committee of the Board will review, ratify or approve, as necessary, any related person
transaction prior to the transaction being entered into, or ratify any related person transaction that has not been previously approved, in which a director, executive officer, five percent owner or immediate family member of any such person has a
material interest.
During 2013, the Company did not participate in any transactions in which any of the director nominees, executive
officers, nor any of their immediate family members, had a direct or indirect material interest.
Board Leadership Structure
Mr. Chisholm, the Companys President and Chief Executive Officer, has served as Chairman of the Board since July 13, 2010. The
Chairman is presiding director at each of the Companys Board meetings. The Board believes that the Companys President and Chief Executive Officer is best situated to serve as Chairman because he is the director most familiar with the
Companys business and industry, and most capable of effectively identifying strategic priorities and leading the discussion and execution of strategy. Independent directors and management have different perspectives and roles in strategic
development. The Companys independent directors bring experience, oversight and expertise from outside the company and industry, while the President brings company-specific experience and expertise. The Board believes that the combined role of
Chairman of the Board and President/Chief Executive Officer promotes strategic development and execution, and facilitates information flow between management and the Board, which are essential to effective governance.
One of the key responsibilities of the Board is to develop strategic direction and hold management accountable for the execution of the
strategy developed. The Board believes the combined role of Chairman and President/Chief Executive Officer is consistent with the best interests of stockholders as it provides the appropriate balance between strategic development and independent
oversight of management.
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 (the Exchange Act) and the rules issued thereunder, the
Companys directors and executive officers are required to file with the SEC reports of ownership and changes in ownership of Common Stock. Copies of such forms are required to be filed with the Company. Based solely on its review of copies of
such reports furnished to the Company, the Company believes that the directors and executive officers were in compliance with the filing requirements of Section 16(a) during the most recent fiscal year, except that (1) Mr. Chisholm
did not timely file two Form 4s in 2013 each reflecting one transaction, (2) Mr. Reeves did not timely file two Form 4s in 2013 each reflecting one transaction, (3) Mr. Fisher did not timely file one Form 4 in 2013 reflecting one
transaction, (4) Ms. Kokenge, who resigned as Chief Accounting Officer in January 2013, did not timely file one Form 4 in 2013 reflecting one transaction (5) Ms. Hardy did not timely file one Form 4 in 2013 reflecting one
transaction and inadvertently excluded shares on one Form 3 in 2013 which were included in a subsequent Form 3/A and (6) Mr. Snively inadvertently excluded shares on one Form 3 in 2013 which were included in a subsequent Form 3/A.
32
PROPOSAL 2: APPROVAL OF THE 2014 LONG-TERM INCENTIVE PLAN
On April 14, 2014, our Board of Directors adopted the Companys 2014 Long-Term
Incentive Plan (the Plan), subject to stockholder approval. We are asking you to approve the Plan, which will make 2,700,000 shares of our Common Stock available for the granting of awards under compensatory arrangements and incentives
permitted by the Plan. Based on our historic and projected future usage patterns, the Compensation Committee estimates that the shares available under the Plan will be sufficient to provide grants for the next three years.
The material features of the Plan are more fully described below. In addition to making 2,700,000 shares of our Common Stock available for the
granting of awards, the Plan includes provisions that (i) prohibit repricing of options and stock appreciation rights without stockholder approval, except in connection with an adjustment involving a corporate transaction or similar event,
(ii) specify language regarding clawback or recoupment policies regarding Plan awards, and (iii) prohibit increasing the number of shares available for award for forfeiture or cancellation of awards, shares tendered in payment
of the exercise price of an option, shares tendered to satisfy tax withholding or other obligations, and/or shares repurchased
by the Company, whether with option proceeds or otherwise.
Purpose of the Plan
The purpose of the Plan is to assist us in attracting, retaining and motivating employees, officers, directors and service providers by
rewarding, and providing financial incentives for, individual performance. Additionally, the Plan allows us to offer our employees, officers, directors and service providers the opportunity to acquire and increase their proprietary interest in the
Company, thereby more closely aligning their interests with those of our stockholders.
Prior Stockholder Approvals
The Companys stockholders approved the 2010 Long-Term Incentive Plan with 4,000,000 shares at our 2010 Annual Meeting of Stockholders.
The Companys stockholders approved an amendment to the 2010 Long-Term Incentive Plan, adding 2,000,000 shares available under this plan, at our 2011 Annual Meeting of Stockholders.
Equity Compensation Plan Information
The following table summarizes equity compensation plan information as of December 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan category
|
|
Number of Securities to be
Issued Upon Exercise of
Outstanding Options, Warrants
and Rights
|
|
|
Weighted-
Average Exercise
Price of
Outstanding Options,
Warrants and Rights
|
|
|
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans
(Excluding Securities
Reflected in Column(a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Equity compensation plans approved by security holders (1)
|
|
|
3,107,273
|
|
|
$
|
8.28
|
|
|
|
298,486
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,107,273
|
|
|
$
|
8.28
|
|
|
|
298,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Does not include 2,700,000 shares that will become available for issuance under the 2014 Long-Term Incentive Plan upon stockholder approval of
Proposal 2.
|
At December 31, 2013, 298,486 shares of our Common Stock remain available for future issuance.
33
Historic Usage of Shares for Awards
During 2012 and 2013, shares awarded under the 2010 Long-Term Incentive Plan were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2013
|
|
Participant
|
|
Shares
|
|
|
%
|
|
|
Shares
|
|
|
%
|
|
Named Executive Officers
|
|
|
549,675
|
(1)
|
|
|
46.8%
|
|
|
|
502,664
|
(3)
|
|
|
45.0
|
%
|
Other Officers
|
|
|
44,502
|
(2)
|
|
|
3.8%
|
|
|
|
82,498
|
(4)
|
|
|
7.4
|
%
|
Non-employee Directors
|
|
|
107,530
|
|
|
|
9.2%
|
|
|
|
40,179
|
|
|
|
3.6
|
%
|
Employees
|
|
|
472,321
|
|
|
|
40.2%
|
|
|
|
492,476
|
|
|
|
44.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,174,028
|
|
|
|
100.0%
|
|
|
|
1,117,817
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
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(1)
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Includes 203,341 shares to increase the long-term incentive award from target to maximum shares.
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(2)
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Includes 8,435 shares to increase the long-term incentive award from target to maximum shares.
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(3)
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Includes 207,811 shares to increase the long-term incentive award from target to maximum shares.
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(4)
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Includes 36,540 shares to increase the long-term incentive award from target to maximum shares.
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Burn Rate Commitment
In connection with the approval by stockholders of the 2014 Long-Term Incentive Plan, the Company commits to cap its average annual burn rate
at 2.85% over the next three fiscal years (2014, 2015 and 2016). In calculating compliance with this maximum burn rate commitment, burn rate is defined as the number of shares subject to stock awards granted in a fiscal year divided by
the weighted average number of shares of common stock outstanding (basic) during the fiscal year. For purposes of calculating the number of awards granted in each of the next three fiscal years, (a) awards of stock options and
stock appreciation rights will count as one share, and (b) awards of restricted stock, restricted stock units or other full value awards will count as 1.5 shares.
Any awards that are assumed or substituted in acquisitions will be excluded from the burn rate calculations.
New Plan Benefits
There are an
insufficient number of shares remaining under previously approved long-term incentive plans to provide for competitive long-term incentive awards for the Companys key senior management.
The following table
presents the award of restricted stock units by our Compensation Committee on March 27, 2014.
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Participant
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Number of
Restricted Stock Units
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John W. Chisholm
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74,258
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Steven A. Reeves
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27,857
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H. Richard Walton
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24,311
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Joshua A. Snively, Sr.
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26,164
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Other Officers
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23,537
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Non-employee Directors
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Employees
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Total restricted stock units
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176,127
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Each of the persons in the table above was issued restricted stock units, subject to stockholder
approval of the 2014 Long-Term Incentive Plan. The number of units converts to the same number of shares if the 2014 performance targets are met (176,127 shares), and would double if the maximum award was achieved (352,254 shares).
Stockholder Vote
We are asking
stockholders to approve the adoption of the Flotek Industries, Inc. 2014 Long-Term Incentive Plan (the Plan), the material terms of which are more fully described below. Our Board of Directors approved the Plan
on April 14, 2014, subject to the stockholder approval solicited by this proxy statement.
The named executive officers of the Company have been granted restricted stock units, as presented above, under the Plan, which will be
forfeited unless they become effective upon the stockholder approval solicited by this Proxy Statement.
We currently have grants
outstanding under the 2003 Long-Term Incentive Plan, 2005 Long-Term Incentive Plan, 2007 Long-Term Incentive Plan and 2010 Long-Term Incentive Plan (collectively, the Existing Plans), which
34
will remain in effect in accordance with their terms, and we will continue to grant awards under the Existing Plans. As of March 27, 2014, there were approximately 197,116 shares authorized,
but not subject to outstanding awards, under the Existing Plans. The Existing Plans will remain in place for purposes of governing current outstanding awards and any additional grants made pursuant to the Existing Plans.
The following summary of the material features of the Plan is qualified in its entirety by reference to the full text of the Plan, which is
incorporated herein by reference to
Exhibit A
to this Proxy Statement.
Description of the Plan
Eligibility and Available Awards
The Plan provides for the grant of incentive stock options and non-qualified stock options (collectively, stock options),
restricted stock, restricted stock units, stock appreciation rights, phantom stock, and other stock or performance based awards (each, an Award).
All employees and service providers of the Company or of any affiliate (as defined in the Plan) of the Company and non-employee directors of
the Company are eligible to receive grants of Awards under the Plan. However, incentive stock options may be granted only to employees. Further, non-qualified stock options and stock appreciation rights may only be granted to employees and service
providers of the Company or entities in a chain of corporations in which the Company has a controlling interest and to non-employee directors of the Company. The selection of eligible individuals to whom Awards will be granted is within the
discretion of the Compensation Committee. It is currently expected that all of our employees will participate in the Plan, along with all non-employee directors who serve on the Companys Board of Directors.
Administration
The Plan
is administered by the Compensation Committee of our Board of Directors, unless the Board of Directors appoints another committee for such purpose. No member of the Compensation Committee shall vote or act upon any matter relating solely to himself.
Grants of Awards to members of the Compensation Committee must be ratified by the Board of Directors.
Subject to the provisions of the
Plan, the Compensation Committee will (i) select the eligible individuals to whom Awards may be granted; (ii) determine the type, amount, terms, restrictions and conditions of Awards; (iii) determine the time or times at which Awards
shall be granted and the number of shares of common stock subject to each Award; (iv) amend, modify, extend, cancel or renew any Award or waive any restrictions or conditions applicable to any Award or any shares of common stock
acquired pursuant thereto; (v) interpret the Plan and all Awards under the Plan; (vi) make, amend and rescind such rules as it deems necessary for the proper administration of the Plan;
(vii) correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award under the Plan in the manner and to the extent that it deems desirable to effectuate the Plan; (viii) determine the fair market value
of shares of common stock; (ix) approve one or more forms of Award agreement; (x) determine whether an Award will be settled in shares of common stock, cash, or any combination thereof; (xi) 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; (xii) prescribe, amend or rescind rules, guidelines and policies
relating to the Plan, or adopt sub-plans or supplements to, or alternative versions of, the Plan, including with limitation, as the Compensation Committee deems necessary or desirable to comply with the laws of, or to accommodate the laws,
regulations, tax or accounting effectiveness, accounting principles or custom of, any foreign jurisdiction whose citizens may be granted Awards; and (xiii) make all other determinations necessary or advisable for the administration of the Plan.
Any action taken or determination made by the Compensation Committee or the Board of Directors pursuant to the Plan will be binding on all parties. No member of the Board of Directors or the Compensation Committee will be liable for any action or
determination made in good faith with respect to the Plan or an Award granted thereunder.
Our Board of Directors may amend, suspend or
terminate the Plan at any time without prior notice to or consent of any person; provided, however, except as specifically permitted under the Plan, in connection with a change of control, no amendment (other than any amendment the Board deems
necessary in order to permit Awards to meet the requirements of the Code, or other applicable laws, or to prevent adverse tax consequences to the participants), suspension or termination of the Plan may, without the consent of the holder of an
Award, terminate such Award or adversely affect such persons rights with respect to such Award in any material respect unless or to the extent specified in the Award itself. However, no amendment shall be effective prior to its approval by the
stockholders, to the extent such approval is required by (i) applicable legal requirements or (ii) the requirements of any securities exchange on which the Companys stock may be listed.
Stock Available for Issuance
Upon stockholder approval of the Plan, the maximum number of shares of common stock that may be issued under the Plan will be 2,700,000 shares,
subject to adjustment as provided in the Plan.
Each share of common stock that is the subject of an Award granted under the Plan may be
made available from authorized but unissued shares, treasury stock or shares of
35
common stock acquired in the open market. No fractional shares shall be issued under the Plan. Each share of common stock that is the subject of an Award, including each share underlying an Award
that is measured by shares but that is intended to be settled in cash, shall be charged against the maximum share limitations at the time the Award is granted and may not again be made subject to Awards under the Plan pursuant to such limitations.
Without limiting the generality of the foregoing, the number of shares of common stock remaining available for an Award under the maximum share limitations, as reduced for charges in respect of Awards made from time to time, shall not be increased
(nor shall prior charges be reversed) for, among other things, shares of common stock (i) not issued and that cease to be issuable for any reason, including, but not limited to, forfeiture, revocation, cancellation or amendment of an Award or
the settlement of an Award, in whole or in part, by the payment of cash, (ii) tendered in payment of the exercise price of any stock option, (iii) tendered to, or withheld by, us to satisfy tax withholding or other obligations, and/or
(iv) repurchased by us, whether with stock option proceeds or otherwise.
Award Limits
Upon stockholder approval of the Plan, the maximum number of shares of common stock that may be issued under the Plan pursuant to an exercise
of incentive stock options is 2,700,000 shares. The maximum number of shares of common stock subject to stock options and stock appreciation rights (combined) awarded to any one participant pursuant to the Plan in any calendar year shall not exceed
1,000,000 shares. The maximum number of shares of common stock which may be subject to Awards of restricted stock made to any one participant pursuant to the Plan in any calendar year shall be 500,000 shares. The maximum amount of compensation which
may be paid to any participant in any calendar year pursuant to Awards of restricted stock units shall not exceed $2,000,000. The maximum amount of compensation which may be paid to any participant in any calendar year pursuant to Awards of phantom
stock under the Plan shall not exceed the fair market value (determined as of the date of vesting) of 1,000,000 shares of common stock. The maximum amount of compensation that may be paid to any participant in any calendar year pursuant to other
stock or performance based awards under the Plan, (i) if the compensation under the other stock or performance based awards is denominated under the award agreement only in terms of shares of common stock or a multiple of the fair market value
per share of common stock, shall not exceed the fair market value (determined as of the date of vesting) of 1,000,000 shares of common stock; or (ii) in all other cases, shall not exceed $2,000,000. The maximum amount of compensation any
participant can be paid in any calendar year pursuant to Awards that are intended to comply with the requirements of Section 162(m) of the Code (and are designated as such) shall not exceed $2,000,000. The
foregoing limitations on the numbers of shares of common stock that may be issued and that may be subject to Awards are subject to adjustment, as provided in the Plan.
Adjustments Upon Changes in Capitalization or Reorganization
Upon a merger, recapitalization, reclassification, stock split, payment of stock dividend, consolidation of shares, combination of shares or
the like that results in the outstanding shares being changed into or exchanged for a different kind of shares or other securities, the Board will adjust any or all of the following: (a) the remaining number of authorized shares of common stock
with respect to which Awards may be granted, (b) the number of shares of common stock subject to each and all outstanding Awards, (c) the exercise price, grant price or other similar value with respect to an Award, (d) the performance
goals applicable to any outstanding Awards intended to comply with the requirements of Section 162(m) of the Code (subject to such limitations as appropriate under Section 162(m) of the Code), and (e) any other terms of an Award that
are affected by the event, subject to any required action by our stockholders. The Plan does not permit the Compensation Committee to re-price stock options or stock appreciation rights without stockholder approval.
Types of Awards
Stock Options
. Stock options entitle the holder to purchase a specified number of shares of common stock at an exercise price per
share specified on the date of grant. The Compensation Committee has the authority to grant stock options, specifying the terms and conditions of each stock option (including the time or times at which and the circumstances under which the stock
option is exercisable), subject to the terms of the Plan. The Compensation Committee will also have the authority to determine whether stock options granted to employees will be incentive stock options or non-qualified stock options. Unless
otherwise provided in the Award agreement, stock options will vest such that 25% of the original number of shares of common stock granted shall vest on each anniversary of the date of grant until the stock option fully vests or is forfeited or
expires.
Except as described below, the exercise price at which shares of common stock may be purchased upon the exercise of a stock
option will not be less than 100% of the fair market value of our common stock on the date that the stock option is granted. In the case of incentive stock options granted to an employee owning more than ten percent (10%) of the total combined
voting power of us and our affiliates, the exercise price at which shares of common stock may be purchased upon the exercise of such incentive stock option shall not be less than 110% of the fair market value of our common stock on the date of
grant. The aggregate fair market value of shares of common stock
36
granted pursuant to stock options (determined as of the date the stock option is granted under the Plan (or any other stock option plan of ours or our affiliates)) that become exercisable with
respect to an employee for the first time as incentive stock options during any one calendar year cannot exceed $100,000.
Except for
grants of incentive stock options to employees owning more than ten percent (10%) of the total combined voting power of us and our affiliates (which stock options may not be exercised later than five years after the date of grant), no stock
option may be exercised later than the date which is ten years after the date of grant. To exercise a stock option granted under the Plan, the person entitled to exercise the stock option must provide written notice to us, setting forth the number
of shares of common stock with respect to which the stock option is to be exercised, accompanied by full payment for the shares being purchased and any required withholding taxes, unless other arrangements have been made with the Compensation
Committee. The payment must be in cash or certified check or by the Company withholding shares otherwise issuable from the exercise of the stock option.
Restricted Stock
. Restricted stock is common stock that is subject to forfeiture and such other restrictions as the Compensation
Committee may impose, including performance criteria, transfer and repurchase restrictions, and in no event will the term of any such Award exceed ten years. The Compensation Committee has authority and discretion to determine what restrictions
apply to the restricted stock and when and how the restrictions of one Award of restricted stock may differ from those of any other Award of restricted stock.
When granted, restricted stock is registered in the name of the participant and left on deposit with, or held in trust or escrow by, us until
the restrictions lapse. Unless otherwise provided in the Award agreement, holders of restricted stock have all of the rights of a stockholder, including the right to vote and the right to receive dividends or other distributions paid or made with
respect to such shares; provided, however, that unless otherwise provided in the Award agreement, in the case of restricted stock with respect to which vesting is conditioned on performance criteria, other than the continuation of the
participants employment or service for a fixed or specified duration, holders of restricted stock shall not have the right to receive dividends with respect to such restricted stock until the restricted stock vests, at which time the sum of
all dividends on such restricted stock for the restricted period shall be paid without interest. If, prior to the end of the restricted period, the participant forfeits the restricted stock pursuant to the terms of the Plan and of his or her Award
agreement, we will have the right to repurchase the participants restricted stock for the lesser of (i) its fair market value on the date of forfeiture or (ii) the amount of cash paid therefor, if any. If for any reason the
restrictions imposed by the Compensation Committee are not met at
the end of the restricted period, the restricted stock will be forfeited by the participant and reacquired by us.
Stock Appreciation Rights
. A stock appreciation right entitles a participant to receive (either in cash, common stock, or a
combination thereof), upon exercise of the stock appreciation right, the excess of (i) the fair market value per share of common stock on the date of exercise over (ii) an amount equal to the fair market value per share of common stock on
the date of grant. The Compensation Committee may provide that the excess may not exceed a specified amount. The Compensation Committee shall determine, at the date of grant, the number of shares of common stock to which the stock appreciation right
applies, the time or times at which and the circumstances under which a stock appreciation right may vest and be exercised, the term of the stock appreciation right, subject to a ten year maximum term, and such other terms and conditions as the
Compensation Committee may determine.
To exercise a stock appreciation right, the person entitled to exercise the stock appreciation right
must provide written notice to us, setting forth the number of shares of common stock with respect to which the stock appreciation right is to be exercised, accompanied by full payment of any required withholding taxes, unless other arrangements
have been made with the Compensation Committee.
Restricted Stock Units
. An award of a restricted stock unit is a right,
subject to satisfaction of terms and conditions as imposed by the Compensation Committee, to receive upon vesting, the value of the number of notional shares vested. The right to receive payment of an award of restricted stock units may be
conditioned upon continued employment or achievement of performance goals. Restricted stock unit awards may be payable in cash, shares of common stock, or a combination thereof. The Compensation Committee has the authority to determine the periods
of restriction, the amount payable under the award and any other terms and conditions consistent with the Plan. Except as otherwise may be required under Section 409A of the Code, payment of a restricted stock unit award shall occur in a single
lump sum no later than the fifteenth (15th) day of the third (3rd) calendar month following the date the restricted stock unit vests.
Phantom Stock
. An award of phantom stock is a right, subject to satisfaction of terms and conditions as imposed by the
Compensation Committee, to receive, upon vesting, a stated or determinable amount denominated in shares of common stock. The right to receive payment of an award of phantom stock may be conditioned upon continued employment or achievement of
performance goals. Phantom Stock awards may be payable in cash, shares of common stock or a combination thereof. The Compensation Committee has the authority to determine the periods of restriction, the number of notional shares of common stock to
which the phantom stock award pertains and any other terms and conditions consistent with the Plan. Except as otherwise may be required under
37
Section 409A of the Code, payment shall occur in a single lump sum no later than the fifteenth (15th) day of the third (3rd) calendar month following the date the phantom stock
vests.
Other Stock or Performance Based Awards
. An other stock or performance based award is an award the value of which is
based in whole or in part by reference to, or based on or related to, a share of common stock or cash as determined by the Compensation Committee to be consistent with the purposes of the Plan. An other stock or performance based award may be
payable in cash, shares of common stock, or a combination thereof. The Compensation Committee has the authority and discretion to determine the terms and conditions, if any, of other stock or performance based awards, including any performance
criteria covering such Awards, consistent with the Plan. Except as otherwise may be required under Section 409A of the Code, payment or the settlement of other stock or performance based awards shall be made in a single lump sum no later than
the fifteenth (15th) day of the third (3rd) calendar month following the date on which vesting occurs.
Awards intended to
comply with the requirements of Section 162(m) of the Code
. The Plan authorizes the Compensation Committee to grant any Award and provide that such Award shall be granted to comply with the requirements of Section 162(m) of the
Code.
The Compensation Committee shall establish the performance goals for a performance period and the amount and terms, in writing, for
each Award that is intended to comply with the requirements of Section 162(m) of the Code. Each performance goal shall consist of and incorporate (i) one or more designated business criteria, (ii) the quantitatively determinable
level(s), standard(s), degree(s) or range(s) of achievement to be applied to each such business criteria for the performance period, and (iii) the amount of compensation (which shall be objectively determinable under one or more formulas or
pre-determined standards) that shall vest under the performance goal for the achievement of each specified business criteria, at the prescribed level(s), standard(s), degree(s) or range(s). Awards granted to comply with the requirements of
Section 162(m) of the Code will vest and be paid only if and to the extent vested under the performance goals.
Performance goals may
be based on any one or more business criteria on an absolute or relative basis or as compared to the performance of a published index deemed by the Compensation Committee to be applicable to the Company, including, but not limited to, the
Standard & Poors 500 Standard Index or a group of comparable companies. Performance goals will be established, Awards will be granted and the Award agreement will be provided to the participant and shall become binding at a time when
the achievement of or outcome under each applicable
performance goal is substantially uncertain (within the meaning of Section 162(m) of the Code), and in all events by no later than the earlier of the 90th day of the performance
period or the lapse of 25 percent (25%) of the performance period, unless otherwise required or permitted for performance-based compensation under Section 162(m) of the Code. Performance goals may differ among participants and
Awards.
The business criteria are as follows: (i) stock price; (ii) earnings per share; (iii) increase in revenues;
(iv) increase in cash flow; (v) cash flow per share; (vi) increase in cash flow return; (vii) return on net assets; (viii) return on assets; (ix) return on investment; (x) return on capital; (xi) return on
equity; (xii) economic value added; (xiii) gross margin; (xiv) net income; (xv) pretax earnings; (xvi) pretax earnings before interest; (xvii) pretax earnings before interest, depreciation and amortization;
(xviii) pretax operating earnings after interest expense and before incentives, service fees and extraordinary or special items; (xix) operating income; (xx) total stockholder return; (xxi) debt reduction; (xxii) successful
completion of an acquisition, initial public offering, private placement of equity or debt; or (xxiii) reduction of expenses.
The
Compensation Committee shall have the discretion to reduce the amount payable under such Award (even if it has otherwise vested under the applicable performance goal) for a participants negative conduct or other activities or factors as the
Compensation Committee may determine, but it shall not have the authority to either increase the amount payable under such Award above the amount which vests under the performance goals or pay or provide compensation in lieu of the portion of Award
that does not so vest. After the end of each performance period, the Compensation Committee will determine and certify, in writing, the amount, if any, of performance awards payable to each participant based upon the achievement of certain
established business criteria.
Withholding
We are generally required to withhold tax on the amount of income recognized by a participant with respect to an Award. The Compensation
Committee may make such provision for the withholding of taxes as it deems necessary. Withholding requirements may be satisfied by (a) tender of a cash payment to us or (b) withholding of cash payable or of shares of common stock otherwise
issuable under an Award.
Amendment of Awards
The Compensation Committee may amend an Award; provided, however, except in the case of a change of control, no amendment of an Award may,
without the consent of the participant, adversely affect the participants rights with respect to such Award in any material respect.
38
Clawback
The Plan provides that any Award granted pursuant to the Plan shall be subject to mandatory repayment by the participant to the Company to the
extent the participant is, or in the future becomes, subject to any Company clawback or recoupment policy implemented by the Company, including any clawback or recoupment policy adopted to comply with the requirements of any applicable
law, rule or regulation, or otherwise.
Term of the Plan
The Plan shall terminate ten years after the date of the adoption of the Plan by the Board of Directors, unless earlier terminated by the Board
of Directors. No Award may be granted under the Plan after its termination.
Change of Control
Unless otherwise provided in an Award, upon the occurrence of a change in control (defined generally as certain reorganizations, mergers,
consolidations, sales of all or substantially all of our assets or liquidations), the Board of Directors may, but is not required to take any one or more of the following actions with respect to Awards: (i) accelerate vesting and the time at
which all stock options and stock appreciation rights then outstanding may be exercised; (ii) waive, alter and/or amend the performance criteria and other restrictions and conditions of Awards then outstanding, with the result that the affected
Awards may be deemed vested, and any applicable restricted period or other limitations on payment in full with respect thereto shall be deemed to have expired, as of the date of the change of control or such other date as may be determined by the
Board of Directors; (iii) cause any acquirer to assume the Plan and the Awards or exchange the Awards for the acquirers stock; (iv) terminate the Plan; and (v) terminate and cancel all outstanding unvested or unexercised Awards
as of the date of the change of control on such terms and conditions as it deems appropriate.
The Board of Directors will, in connection
with a change of control, have the right to require all participants to transfer and deliver to us all Awards previously granted to the participants in exchange for an amount equal to the cash value of the Awards. The cash value of an Award will
equal the sum of (i) the cash value of all benefits to which the participant would be entitled upon settlement or exercise of any Award that is not a stock option or restricted stock, and (ii) in the case of a stock option or restricted
stock, the excess of the market value per share (as defined in the Plan) over the option price, or the market value per share of restricted stock, as applicable, multiplied by the number of shares as to which such Award is vested.
Termination of the Participant
Except as otherwise provided in an Award agreement, upon a participants termination for cause (as defined in the Plan), all unpaid
Awards, whether vested or not, shall terminate and be immediately forfeited. Unless otherwise provided in an Award agreement, upon a participants termination for any reason other than for cause, including termination due to the
participants death or disability, any unvested Award outstanding at the time of termination shall terminate and be immediately forfeited. The Board of Directors or Compensation Committee may provide for the continuation of certain Awards,
except if such continuation would cause certain adverse tax consequences.
Summary of Certain Federal Income Tax Considerations
The following summary is based on certain applicable provisions of the Code, as currently in effect, and the income tax regulations and
proposed income tax regulations issued thereunder. This summary does not purport to cover all federal income tax consequences or any federal employment tax or other federal tax consequences that may be associated with the Plan, nor does it cover
state, local or foreign taxes.
Status of Stock Options
. Stock options granted under the Plan may be either incentive stock
options or non-qualified stock options. Under certain circumstances, an incentive stock option may be treated as a non-qualified stock option. The tax consequences, both to the option holder and to us, differ depending on whether a stock option is
an incentive stock option or a non-qualified stock option.
Non-qualified Options
. Generally, no federal income tax is
imposed on the option holder upon the grant of a non-qualified stock option. If the shares of common stock received by an option holder upon the exercise of a non-qualified stock option are not subject to certain restrictions in the hands of the
option holder, then the option holder will be treated as receiving compensation, taxable as ordinary income in the year of exercise. The amount recognized as ordinary income upon such an exercise is the excess of the fair market value of the shares
of common stock at the time of exercise over the exercise price paid for such common stock. Subject to the application of Section 162(m) of the Code, as discussed below, we may claim a deduction for compensation paid at the same time and in the
same amount as compensation is treated as being received by the option holder.
Incentive Stock Options
. No federal income
tax is imposed on the option holder upon the grant of an incentive stock option. The option holder will recognize no ordinary income for federal income tax purposes upon disposition of stock acquired pursuant to the exercise of an incentive
39
stock option, if the option holder (i) does not dispose of the shares of common stock acquired pursuant to the exercise of an incentive stock option within two years from the date the option
was granted or within one year after the shares of common stock were transferred to the option holder (the Holding Period), and (ii) is an employee of either (a) the corporation granting the option, (b) the parent
corporation or a subsidiary corporation of the granting corporation, or (c) a corporation (or the parent corporation or a subsidiary corporation of such corporation) that has assumed such option of another corporation as a result of a corporate
reorganization, merger, or similar transaction. Such employment must continue for the entire time from the date the option was granted until three months before the date of exercise, or twelve months before the date of exercise if employment ceases
due to permanent and total disability (as defined in Section 22(e)(3) of the Code). If common stock received upon exercise of an incentive stock option is disposed of after completion of the Holding Period, any difference between the exercise
price paid for such common stock and the amount realized on the disposition will be treated as a capital gain or loss. The gain, if any, realized upon such a disposition will be treated as a long-term capital gain. Any loss realized upon such a
disposition will be treated as a long-term capital loss. In the case of disposition of shares of common stock following expiration of the Holding Period, we would not be entitled to any deduction in connection with the grant or exercise of the
incentive stock option or the disposition of the shares of common stock so acquired.
If, however, an option holder disposes of shares of
common stock acquired pursuant to the exercise of an incentive stock option before expiration of the Holding Period (a Disqualifying Disposition), the option holder would be treated as having received, at the time of disposition,
compensation taxable as ordinary income. In such event, subject to the application of Section 162(m) of the Code, as discussed below, we may claim a deduction for compensation paid at the same time and in the same amount as compensation is
treated as being received by the option holder. The amount treated as compensation is the lesser of (i) the excess of the fair market value of the common stock at the time of exercise over the exercise price, or (ii) the excess of the
amount realized on disposition over the exercise price. The balance of the gain, if any, realized upon such a disposition will be treated as a long-term or short-term capital gain depending on the holding period. If the amount realized at the time
of the disposition is less than the exercise price, the option holder will not be required to treat any amount as ordinary income, provided that the disposition is of a type that would give rise to a recognizable loss. In such event, the loss will
be treated as a long-term or short-term capital loss depending upon the holding period. A disposition generally includes a sale, exchange, gift or a transfer of legal title, but does not include certain other transfers, such as by reason of death or
a pledge or an exchange of shares described in Section 424(c) of the Code.
Although the exercise of an incentive stock option does not result in current taxable income,
there are implications with regard to the Alternative Minimum Tax (AMT). The excess of the fair market value of shares of common stock acquired upon exercise of an incentive stock option over the exercise price paid for such shares of
common stock is an adjustment to AMT income for the option holders taxable year in which such exercise occurs (unless the shares of common stock are disposed of in the same taxable year and the amount realized is less than the fair market
value of the shares on the date of exercise, in which event the amount included in AMT income will not exceed the amount realized on the disposition over the adjusted basis of the shares).
Restricted Stock
. Generally, the grant of restricted stock will not be a taxable event to the participant, and we will not
receive a deduction. Absent an 83(b) election (described below), the participant will be taxed at ordinary income rates when the stock vests (an amount equal to the difference between the fair market value of the stock on the vesting date and the
consideration paid, if any, for the shares), and we will receive a corresponding deduction. However, the participant may elect to make an 83(b) election not later than 30 days after the grant of the restricted stock. An 83(b) election is an election
permitted under Section 83(b) of the Code that allows the participant to recognize compensation income on the restricted stock at the time of the grant equal to the difference between the fair market value of the stock on the date of grant and
the
amount paid, if any, for the shares. If the participant makes an 83(b) election, we receive a corresponding deduction at the time of the grant, and the participant is not taxed, nor do we receive any deduction received, upon
vesting of the shares. Subject to the application of Section 162(m) of the Code, as discussed below, we may claim a deduction for compensation paid at the same time and in the same amount as compensation is treated as being received by the
participant.
When the participant sells the shares following vesting, he or she may realize a capital gain if the sales
price is greater than his or her basis in the shares. The participants basis for this purpose is the fair market value at the time of vesting (if no 83(b) election is made) or at the time of grant (if an 83(b) election is made). We do not
receive a deduction upon disposition of the stock by the participant. If, following vesting, the participant sells the shares and the amount realized is more than the participants basis in the stock, the participant will recognize a capital
gain. If, following vesting, the participant sells the shares and the amount realized is less than the participants basis in the stock, the participant will recognize a capital loss. The capital gain or loss will be either short-term or
long-term, depending on the holding period of the shares. The holding period commences upon vesting (if no 83(b) election is made) or upon grant (if an 83(b) election is made).
40
Stock Appreciation Rights
. Upon the exercise of a stock appreciation right, if
shares are received in settlement of the stock appreciation right, the fair market value of those shares received is recognized as income for federal income tax purposes at the time of exercise of the stock appreciation right. If a participant
receives cash upon the exercise of a stock appreciation right, the excess of the fair market value of the number of shares of common stock with respect to which the stock appreciation is exercised over the fair market value of the corresponding
number of shares of common stock on the date of grant is recognized as income for federal income tax purposes at the time of exercise. Subject to the application of Section 162(m) of the Code, as discussed below, we may claim a deduction for
compensation paid at the same time and in the same amount as compensation is treated as being received by the participant.
Restricted Stock Units
. In general, a participant who receives a restricted stock unit award will not be taxed on receipt of the
Award; instead, upon vesting, the amount paid to the participant (whether in cash, shares, or a combination thereof) denominated in cash will be taxable as compensation to the participant. Subject to the application of Section 162(m) of the
Code, as discussed below, we may claim a deduction for compensation paid at the same time and in the same amount as compensation is treated as being received by the participant.
Phantom Stock
. In general, a participant who receives a phantom stock award will not be taxed on receipt of the
Award; instead, upon vesting, the amount paid to the participant (whether in cash, shares, or a combination thereof) equal to fair market value of a share of common stock multiplied by the specified number of notional shares of common stock
that have vested will be taxable as compensation to the participant. Subject to the application of Section 162(m) of the Code, as discussed below, we may claim a deduction for compensation paid at the same time and in the same amount as
compensation is treated as being received by the participant.
Other Tax Considerations
In the event of a change of control of the Company, certain payments in the nature of compensation to certain individuals, if contingent on the
change in control, could be nondeductible to us and subject to an additional 20% tax to the participant. Awards under the Plan that are made or that vest or become payable in connection with a change in control may be required to be taken into
account in determining whether these penalties apply.
Section 162(m) of the Code places a $1,000,000 cap on the deductible compensation that may
be paid to certain executives of publicly traded corporations. Amounts that qualify as performance based compensation under Section 162(m)(4)(C) of the Code are exempt from the cap and do not count toward the $1,000,000 limit.
Generally, stock options and stock appreciation rights granted with an exercise or grant price at least equal to the fair market value of the
stock on the date of grant will qualify as performance based compensation. Other Awards may or may not so qualify, depending on their terms.
Some Awards granted under the Plan may be considered non-qualified deferred compensation that is subject to special rules and an additional 20%
tax to the participant under Section 409A of the Code. The Compensation Committee will generally design and administer such Awards either to be exempt from or to comply with Section 409A of the Code and avoid the imposition of any
additional tax under Section 409A of the Code, but is not required to do so. There is no commitment or guarantee that any federal, state, local or foreign tax treatment will apply or be available to any participant with respect to any Award.
Inapplicability of ERISA
Based on current law and published interpretations, we do not believe that the Plan is subject to any of the provisions of the Employee
Retirement Income Security Act of 1974, as amended (ERISA).
Notwithstanding the foregoing, the Plan expressly provides that
there is no commitment or guarantee that any federal, state or local tax treatment will apply or be available to any person who participates or is eligible to participate in the Plan.
Plan Benefits
Except as
set forth above in the table in the section titled New Plan Benefits, information cannot be provided with respect to the number of Awards that will be received by any particular individual employee or group of employees pursuant to the
Plan, since the grant of such Awards is within the discretion of the Compensation Committee. All other future grants under the Plan are within the discretion of our Board of Directors or the Compensation Committee and, as such, the benefits of such
grants are not currently determinable.
41
No other incentive compensation has been awarded under the Plan to date. All such awards of
restricted stock units made under the Plan will be forfeited unless they become effective upon the stockholder approval solicited by this proxy statement.
Vote Required and Recommendation of the Board of Directors
The affirmative vote of at least a majority of the shares of Common Stock represented at the Meeting is required to approve the Flotek
Industries, Inc. 2014 Long-Term Incentive Plan.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY ADOPTED A RESOLUTION SEEKING STOCKHOLDER APPROVAL OF,
AND RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF, THE FLOTEK INDUSTRIES, INC. 2014 LONG-TERM INCENTIVE PLAN, WHICH IS DESIGNATED AS PROPOSAL NO. 2 ON THE ENCLOSED PROXY.
42
PROPOSAL 3: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
We are providing our stockholders with an opportunity to vote to approve, on an advisory,
non-binding basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the SECs rules. This proposal, which may be referred to as a say-on-pay proposal, is required by the
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act).
Our executive compensation program is
designed to attract, motivate, and retain our executive officers, who are critical to our success. As described in the Summary Compensation Table and Outstanding Equity Awards at Fiscal Year-End 2013 tables above, as well as
our accompanying narrative disclosure to such tables, our executive compensation program contains elements of cash and equity-based compensation. We believe our program is designed to align the interests of our named executive officers with those of
our stockholders and to reward our named executive officers for the achievement of our near-term and longer-term financial and strategic goals.
The Board of Directors is asking our stockholders to approve a non-binding advisory vote on the following resolution:
RESOLVED, that the compensation paid to the Companys named executive officers, as disclosed pursuant to the compensation disclosure rules
of the Securities and Exchange Commission under the headings Summary Compensation Table and Outstanding Equity Awards at Fiscal Year-End 2013, including the related footnotes and accompanying narrative disclosure, is hereby
approved.
Though this proposal calls for a non-binding advisory vote, our Board and Compensation Committee
value the opinions of our stockholders and will consider the outcome of the vote when making future compensation decisions for our named executive officers.
Vote Required and Recommendation of the Board of Directors
The affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote on the matter is required to
approve this Proposal 3. In determining whether this proposal has received the requisite number of affirmative votes, abstentions will not be counted and will have the same effect as a vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RESOLUTION APPROVING THE COMPENSATION OF THE COMPANYS NAMED EXECUTIVE
OFFICERS.
43
PROPOSAL 4: RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected Hein & Associates LLP (Hein) as the
independent registered public accounting firm to perform the audit of our consolidated financial statements for the year ending December 31, 2014. Hein acted as our independent registered public accounting firm in 2013. A representative of Hein
is expected to attend the 2014 Annual Meeting. Such representative will have the opportunity to make a statement if he or she desires to do so, and will be available to respond to appropriate questions. The Board recommends that the stockholders
ratify the selection of Hein as our independent registered public accounting firm.
Audit Fees
Hein & Associates LLP billed the Company and its subsidiaries fees as set forth in the table below for (i) the audits of the
Companys 2012 and 2013 annual financial statements, reviews of quarterly financial statements, and review of other documents filed with the Securities and Exchange Commission, (ii) assurance and other services reasonably related to the
audit or review of the Companys financial statements, including due diligence services and (iii) services related to tax compliance. There were no other fees billed by such independent registered public accounting firms during such years.
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Audit Fees
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Audit-Related
Fees
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All Other Fees
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Tax Fees
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Fiscal Year 2012
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$
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799,397
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$
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35,000
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$
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$
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6,135
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Fiscal Year 2013
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$
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697,751
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$
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35,000
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$
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$
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4,883
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The Audit Committee of the Board has adopted a policy requiring pre-approval of all services
provided by our independent registered public accounting firm. All of the services provided by Hein during fiscal years 2012 and 2013 were approved by the Audit Committee.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR PROPOSAL NO. 4 TO RATIFY THE
SELECTION OF HEIN & ASSOCIATES LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2014.
44
OTHER MATTERS
The Board is not aware of any other matters that may come before the Meeting. However, the proxies may be voted with discretionary authority
with respect to any other matters that may properly come before the Meeting.
ANNUAL REPORT
An Annual Report to Stockholders of the Company for the fiscal year ended December 31, 2013 is enclosed herewith.
This report does not form any part of the material for solicitation of proxies.
FUTURE STOCKHOLDER
PROPOSALS AND STOCKHOLDER COMMUNICATIONS
Stockholders are entitled to submit proposals on matters appropriate for stockholder action consistent with regulations of the SEC and the
Companys bylaws.
In order for a stockholder nomination or proposal to be properly brought before next years annual meeting,
written notice of the proposal that complies with the Companys bylaws must be received by the Companys secretary (at the address below) not more than 150 days and not less than 90 days prior to the meeting, which is expected to be held
in May 2015.
In addition to the foregoing, should a stockholder wish to have a proposal appear in the Companys proxy statement
and form of proxy for next years annual meeting of stockholders, under regulations of the SEC, such proposal must be received by the Companys secretary at 10603 W. Sam Houston Pkwy. N., Suite 300, Houston, Texas 77064 on or before
December 20, 2014.
Stockholders and interested parties who wish to communicate with the Board, or with any individual director, may
do so by (1) calling Lighthouse Services Inc., a third party call center, at (800) 785-1003 or (2) correspondence addressed to the Board, or to an individual director, at the principal executive offices of the Company. All
communications received from stockholders are sent directly to Board members.
HOUSEHOLDING
The SEC permits a single set of notices, annual reports and proxy statements to be sent to any household at which two or more stockholders
reside if they appear to be members of the same family. Each stockholder continues to receive a separate proxy card. This procedure, referred to as householding, reduces the volume of duplicate information stockholders receive and reduces mailing
and printing expenses. A number of brokerage firms have instituted householding.
As a result, if you hold your shares through a broker and
you reside at an address at which two or more stockholders reside, you will likely be receiving only one notice, annual report and proxy statement unless any stockholder at that address has given the broker contrary instructions. However, if any
beneficial stockholder residing at an address of which two or more stockholders reside wishes to receive a separate notice, annual report or proxy statement in the future, or if any beneficial stockholder that elected to continue to receive separate
notice, annual reports or proxy statements wishes to receive a single notice, annual report or proxy statement in the future, that stockholder should contact his or her broker or send a request to our Corporate Secretary at our principal executive
offices, 10603 W. Sam Houston Pkwy. N., Suite 300, Houston, Texas 77064, telephone number (713) 849-9911. We will deliver, promptly upon written or oral request to our Corporate Secretary, a separate copy of the notice, 2013 annual report and this
proxy statement to a beneficial stockholder at a shared address to which a single copy of the documents was delivered.
45
EXHIBIT A
FLOTEK INDUSTRIES, INC.
2014 LONG-TERM INCENTIVE PLAN
A-1
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TABLE OF CONTENTS
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ARTICLE I. INTRODUCTION
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1.1
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Purpose
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1
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1.2
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Definitions
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1
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1.3
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Shares Subject to the Plan
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7
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1.4
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Prohibition of Repricing Without Stockholder Approval
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8
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1.5
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Administration of the Plan
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8
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1.6
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Granting of Awards to Participants
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10
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1.7
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Term of Plan
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10
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1.8
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Amendment and Discontinuance of the Plan
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10
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ARTICLE II. NON-QUALIFIED OPTIONS
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10
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2.1
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Eligibility
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10
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2.2
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Exercise Price
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10
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2.3
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Award Agreement
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10
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2.4
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Terms and Conditions of Non-Qualified Options
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11
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2.5
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Exercisability and Vesting
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11
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2.6
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Option Repricing Prohibited
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11
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ARTICLE III. INCENTIVE STOCK OPTIONS
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11
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3.1
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Eligibility
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12
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3.2
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Exercise Price
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12
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3.3
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Dollar Limitation
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12
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3.4
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10% Stockholder
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12
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3.5
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Incentive Stock Options Not Transferable
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12
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3.6
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Compliance with Section 422 of the Code
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12
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3.7
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Limitations on Exercise
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12
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3.8
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Notification of Disqualifying Disposition
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12
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3.9
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Option Repricing Prohibited
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12
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ARTICLE IV. STOCK APPRECIATION RIGHTS
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13
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4.1
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Eligibility
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13
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4.2
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Grant Price
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13
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4.3
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Terms
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13
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4.4
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Payment of Stock Appreciation Rights
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13
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4.5
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Repricing Prohibited
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13
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ARTICLE V. PHANTOM STOCK
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13
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5.1
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Eligibility and Awards
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13
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5.2
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Terms
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13
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5.3
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Lapse of Restrictions/Payment
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13
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5.4
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Performance Goals
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14
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i
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ARTICLE VI. RESTRICTED STOCK
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14
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6.1
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Eligibility
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14
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6.2
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Terms
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14
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6.3
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Restrictions, Restricted Period and Vesting
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14
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6.4
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Delivery of Shares of Common Stock
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15
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6.5
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Performance Goals
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15
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ARTICLE VII. RESTRICTED STOCK UNITS
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15
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7.1
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Eligibility and Awards
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15
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7.2
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Terms
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15
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7.3
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Payment/Settlement of Restricted Stock Units
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15
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7.4
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Performance Goals
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15
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ARTICLE VIII. OTHER STOCK OR PERFORMANCE-BASED AWARDS
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16
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ARTICLE IX. PERFORMANCE-BASED COMPENSATION
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16
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9.1
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Awards of Performance-Based Compensation
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16
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9.2
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Performance Goals
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16
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ARTICLE X. CERTAIN PROVISIONS APPLICABLE TO ALL AWARDS
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18
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10.1
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General
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18
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10.2
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Stand-Alone, Additional and Tandem Awards
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18
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10.3
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Term of Awards
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18
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10.4
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Securities Requirements
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18
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10.5
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Transferability
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19
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10.6
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No Rights as a Stockholder
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19
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10.7
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Listing and Registration of Shares of Common Stock
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19
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10.8
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Termination
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19
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10.9
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Change of Control
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20
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10.10
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Payment or Settlement of Awards
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20
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10.11
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Lock-Up Agreement
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21
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10.12
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Stockholder Agreements/Investment Representations
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21
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10.13
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Exemptions from Section 16(b) Liability
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21
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ARTICLE XI. WITHHOLDING FOR TAXES
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21
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ARTICLE XII. MISCELLANEOUS
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22
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12.1
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No Rights to Awards or Uniformity Among Awards
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22
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12.2
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Conflicts with Plan
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22
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12.3
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Rights as Employee, Service Provider or Director
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22
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12.4
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Governing Law
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22
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12.5
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Gender, Tense and Headings
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22
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12.6
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Severability
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22
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12.7
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Other Laws
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22
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12.8
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Unfunded Obligations
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22
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12.9
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No Guarantee of Tax Consequences
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23
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12.10
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Stockholder Agreements
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23
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ii
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12.11
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Specified Employee under Section 409A of the Code
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23
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12.12
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No Additional Deferral Features
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23
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12.13
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Compliance with Section 409A of the Code
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23
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12.14
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Claw-back Policy
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23
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iii
FLOTEK INDUSTRIES, INC.
2014 LONG-TERM INCENTIVE PLAN
ARTICLE I
INTRODUCTION
1.1 Purpose
. The Flotek Industries, Inc. 2014 Long-Term
Incentive Plan is intended to promote the interests of Flotek Industries, Inc., a Delaware corporation, and its stockholders by encouraging Employees, Service Providers and Non-Employee Directors of the Company or its Affiliates (as defined below)
to acquire or increase their equity interests in the Company, thereby giving them an added incentive to work toward the continued growth and success of the Company. The Board also contemplates that through the Plan, the Company and its Affiliates
will be better able to compete for the services of the individuals needed for the continued growth and success of the Company. The Plan provides for payment of various forms of incentive compensation, and accordingly, is not intended to be a plan
that is subject to ERISA, and shall be administered accordingly.
1.2 Definitions.
As used in the Plan, the following terms shall have the
meanings set forth below:
Affiliate
means (i) any entity in which the Company, directly or
indirectly, owns 50% or more of the combined voting power, as determined by the Committee and (ii) any trades or businesses, whether or not incorporated, which are members of controlled group or are under common control (as defined in Sections
414(b) or (c) of the Code) with the Company;
provided
,
however
, that with respect to Incentive Stock Options, the term Affiliate shall mean only a parent corporation of the Company or a subsidiary
corporation of the Company or of any such parent corporation (as such terms are defined in Sections 424 (e) and (f) of the Code and determined in accordance with Section 421 of the Code);
and provided further
, that with
respect to grants of Non-Qualified Options or Stock Appreciation Rights, the term Affiliate shall mean only a corporation or other entity in a chain of corporations and/or other entities in which the Company has a controlling
interest within the meaning of Treas.
Reg. §1.414(c)-2(b)(2)(i),
but using the threshold of 50% ownership wherever 80% appears.
Award Agreement
means the written agreement pursuant to the Plan between the Company and a
Participant evidencing the grant of an Award and the terms and conditions thereof.
Awards
means, collectively, Options, Stock Appreciation Rights, Phantom Stock, Restricted Stock, Restricted Stock Unit Awards, and Other Stock or Performance-Based Awards.
Board
means the Board of Directors of the Company;
provided
,
however
, that to the
extent necessary with respect to any Award intended to comply with and result in Performance-Based Compensation, the term Board shall mean the Committee.
Business Criteria
means those criteria set forth in
Section 9.2(b)
as the standards for
measurement of the performance of the Company in connection with Performance Goals.
Cash Value
of an Award means the sum of (i) in the case of any Award which is not an Option or an Award of Restricted Stock, the value of all benefits to which the Participant would be entitled as if the Award were vested and settled or exercised and
(ii) (A) in the case of any Award that is an Option, the excess of the Market Value Per Share over the Exercise Price or (B) in the case of an Award of Restricted Stock, the Market Value Per Share of Restricted Stock, multiplied by
the number of shares subject to such Award, all as determined by the Board as of the date of the Change of Control or such other date as may be determined by the Board.
1
Cause
, unless otherwise defined in the applicable Award
Agreement, means, with respect to the termination of a Participant: (i) any act or omission that constitutes a material breach by the Participant of any of his or her obligations under any agreement with the Company or any of its Affiliates;
(ii) the willful and continued failure or refusal of the Participant substantially to perform the duties required of him or her as an Employee, Non-Employee Director or Service Provider, or performance significantly below the level required or
expected of the Participant, as determined by the Committee; (iii) the Participants willful misconduct, gross negligence or breach of fiduciary duty that, in each case or in the aggregate, results in material harm to the Company or any of
its Affiliates; (iv) any willful violation by the Participant of any federal, state or foreign law or regulation applicable to the business of the Company or any of its Affiliates, or the Participants commission of any felony or other
crime involving moral turpitude, or the Participants commission of an act of fraud, embezzlement or misappropriation; or (v) any other misconduct by the Participant that is materially injurious to the financial condition or business
reputation of, or is otherwise materially injurious to, the Company or any of its Affiliates. The Committee shall determine whether Cause exists and whether a termination is or was for Cause, and each Participant shall agree, by acceptance of the
grant of an Award and the execution of an Award Agreement, that the Committees determinations are conclusive and binding on all persons for all purposes of the Plan.
Change of Control
shall be deemed to have occurred upon any of the following events:
(a)
any person or persons (as defined in Section 3(a)(9) of the Exchange Act, and as modified in Sections 13(d) and 14(d) of
the Exchange Act) other than and excluding (i) the Company or any of its subsidiaries, (ii) any employee benefit plan of the Company or any of its subsidiaries, (iii) any Affiliate of the Company, (iv) an entity owned, directly
or indirectly, by stockholders of the Company in substantially the same proportions as their ownership of the Company or (v) an underwriter temporarily holding securities pursuant to an offering of such securities, becomes the beneficial
owner (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the shares of voting stock of the Company then outstanding;
(b)
the consummation of any merger, organization, business combination or consolidation of the Company or one of its subsidiaries with or into any other
entity, other than a merger, reorganization, business combination or consolidation which would result in the holders of the voting securities of the Company outstanding immediately prior thereto and their respective Affiliates holding securities
which represent immediately after such merger, reorganization, business combination or consolidation more than 50% of the combined voting power of the voting securities of the Company or the surviving company or the parent of such surviving company;
(c)
the consummation of a sale or disposition by the Company of all or substantially all of the Companys assets, other than a sale or disposition
if the holders of the voting securities of the Company outstanding immediately prior thereto and their respective Affiliates hold securities immediately thereafter which represent more than 50% of the combined voting power of the voting securities
of the acquiror, or parent of the acquiror, of such assets;
(d)
the stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company; or
(e)
the Incumbent Board ceases for any reason to constitute at least a majority of the Board;
provided
,
however
, that any individual
becoming a director subsequent to the Effective Date whose election by the Board was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption
2
of office occurs as a result of an election contest with respect to the election or removal of directors or other solicitation of proxies or consents by or on behalf of a person other than the
Board.
Further, in the case of any item of income under an Award to which the foregoing definition would otherwise apply
with the effect that the income tax under Section 409A of the Code would apply or be imposed on income under that Award, but where such tax would not apply or be imposed if the meaning of the term Change of Control met the
requirements of Section 409A(a)(2)(A)(v) of the Code, then the term Change of Control herein shall mean, but only with respect to the income so affected, a transaction, circumstance or event that constitutes a Change of
Control (as defined above) and that also constitutes a change in control event within the meaning of Treas. Reg. §1.409A-3(i)(5).
Code
means the Internal Revenue Code of 1986, as amended from time to time, and the regulations and
administrative guidance thereunder.
Committee
means the Compensation Committee of the Board;
provided, however
, if the Compensation Committee is not comprised of two or more members of the Board, each of whom qualifies as both an outside director (within the meaning of Section 162(m)(4)(C)(i) of the Code) and a
non-employee director (within the meaning of Rule 16b-3 under the Exchange Act), then the Board shall appoint a committee (which shall constitute the Committee) of two or more members of the Board, each of whom qualifies as
both an outside director (within the meaning of Section 162(m)(4)(C)(i) of the Code) and a
non-employee
director (within the meaning of Rule 16b-3 under the Exchange Act).
Common Stock
means the common stock, par value $.0001 per share, of the Company.
Company
means Flotek Industries, Inc., a Delaware corporation, or any successor thereto which
assumes and continues the Plan.
Covered Employee
means the Chief Executive Officer of the
Company and any other person who is, or who is designated by the Committee at the time of grant of an Award as likely to be, a covered employee within the meaning of Section 162(m)(3) of the Code, or any successor provision thereto.
Disability
means the condition of being unable to perform the Employees or Non-Employee
Directors material services for the Company for a period of 90 consecutive days or a total of 180 days, during any 365-day period, in either case as a result of incapacity due to mental or physical illness, which is determined to be total and
permanent. A determination of Disability shall be made by a physician reasonably satisfactory to both the Participant (or his or her guardian) and the Company,
provided
that if the Employee or Non-Employee Director (or his or her guardian)
and the Company do not agree on a physician, the Employee or Non- Employee Director (or his or her guardian) and the Company shall each select a physician and these two together shall select a third physician, whose determination as to Disability
shall be final, binding and conclusive with respect to all parties. Eligibility for disability benefits under any policy for long-term disability benefits provided to the Participant by the Company shall conclusively establish the Participants
Disability. Notwithstanding the foregoing, (i) with respect to any item of income under an Award to which the foregoing definition would apply with the effect that the income tax under Section 409A of the Code would apply or be imposed on
income under that Award, but where such tax would not apply or be imposed if the meaning of the term Disability included and met the requirements of a disability within the meaning of Treas. Reg. §1.409A-3 (i)(4), then
the term Disability shall mean, but only with respect to the income so affected, (a) the inability of the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve months or (b) the receipt of income replacements by the Participant, by reason of any medically determinable physical
or mental impairment that can be expected to result in death or can be
3
expected to last for a continuous period of not less than twelve (12) months, for a period of not less than three months under the Companys accident and health plan; and (ii) with
respect to an Incentive Stock Option, Disability shall mean the inability of the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to
result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months, determined in accordance with Sections 22(e)(3) and 422(c)(6) of the Code.
Disabled
means being in a condition or state that constitutes Disability.
Disqualifying Disposition
means, with respect to shares of Common Stock acquired by the exercise of
an Incentive Stock Option, a disqualifying disposition within the meaning of Section 422 of the Code.
Effective Date
means, with respect to the Plan, the date that the Plan is adopted by the Board, but
only if the Plan as so adopted is approved by the stockholders of the Company not more than one year after the date of such adoption. The Effective Date, as so defined, is April 14, 2014.
Employee
means any employee of the Company or an Affiliate, including any such employee who is an
officer or director of the Company or of an Affiliate.
Employment
includes any period in which
a Participant is an Employee of the Company or an Affiliate.
ERISA
means the Employee
Retirement Income Security Act of 1974, as amended.
Exchange Act
means the Securities Exchange
Act of 1934, as amended.
Exercise Price
means the purchase price of shares (or, of each share,
as the context requires) of Common Stock under an Option, as specified in the applicable Award Agreement. The Exercise Price under an Option shall be not less than the FMV Per Share on the date of grant (or not less than 110 percent of such FMV Per
Share, if so required under
Section 3.4
.
Fair Market Value
and
FMV Per
Share
mean, with respect to shares of Common Stock, the average of the closing prices of the Common Stock on all national securities exchanges on which such shares are trading for the date of the determination, or if there are no sales
of shares of Common Stock on such exchanges on such date, for the most recent preceding day as of which sales of shares of Common Stock have occurred on such exchanges. If shares of the Common Stock are not listed or admitted to trading on any
exchange as of the determination date, the Board shall, in good faith, determine the fair market value of such shares using a reasonable application of any reasonable valuation method selected by the Board in its discretion.
Forfeit
(and variations thereof, whether or not capitalized) means to lose a Participants
rights under an Award prior to its vesting (or, in the case of an Option or a Stock Appreciation Right, prior to its exercise, even if such Option or Stock Appreciation Right has vested) as a result of cancellation, revocation, lapse or expiration
of the Award in accordance with the Plan and the terms of the Award Agreement; and forfeiture means the loss of the rights that are so forfeited.
Grant Price
means the value (which value shall be not less than the FMV Per Share on the date of
grant) assigned to a Stock Appreciation Right under the applicable Award Agreement and used in the determination of the Spread for such Stock Appreciation Right.
Incentive Stock Option
means any option that satisfies the requirements of Section 422 of the
Code and is granted pursuant to
ARTICLE III
of the Plan.
4
Incumbent Board
means individuals who, as of the
Effective Date, constitute the Board.
Market Value Per Share
means the higher of the FMV Per
Share and the price per share of Common Stock, if any, payable pursuant to the Change of Control. Market Value Per Share shall apply only if Cash Value is to be determined and paid pursuant to
Section 10.9
.
Non-Employee Director
means a person who is a member of the Board but who is neither an Employee nor
a Service Provider of the Company or any Affiliate.
Non-Qualified Option
means an Option not
intended to satisfy the requirements of Section 422 of the Code and which is granted pursuant to
ARTICLE II
of the Plan.
Option
means an option to acquire Common Stock granted pursuant to the provisions of the Plan, and
refers to either an Incentive Stock Option or a Non-Qualified Option, or both, as applicable.
Option
Expiration Date
means the date determined by the Committee and set forth in the Award Agreement relating to an Option, as the latest date on which that Option may be exercised under any circumstance, which shall not be more than ten
(10) years (or, in the case of certain Incentive Stock Options, five (5) years, as provided in
Section 3.4
) after the date of grant of an Option.
Optionee
means a Participant who holds an Option that has not terminated by forfeiture, expiration
or otherwise, and the guardian of the Participant or the estate of a deceased Participant to the extent exercise thereby is permitted under the Plan.
Other Stock or Performance-Based Award
means an Award granted pursuant to
ARTICLE VIII
that
provides a Participant the right to receive shares of Common Stock, or a right, subject to the satisfaction of the Performance Criteria and other terms and conditions as set forth in the applicable Award Agreement, to receive upon vesting a stated
or determinable amount denominated in cash or shares of Common Stock or both.
Participant
means
an eligible Non-Employee Director, Employee or Service Provider who has been granted and holds an Award that has neither been forfeited nor settled in connection with its vesting or exercise, as applicable.
Pay
,
paid
,
payment
,
payable
, and variations thereof, and
settle
,
settled
,
settlement
and variations thereof, shall, unless the context clearly indicates otherwise,
mean the settlement and satisfaction of an Award, in whole or in part, whether by the payment of cash, the delivery of shares of Common Stock, or any combination of the foregoing by the Company.
Performance-Based Compensation
means performance-based compensation within the meaning
of Section 162(m) of the Code.
Performance Criteria
means the conditions and requirements
specified in the Award Agreement and in accordance with the Plan relating to a given Award, which may constitute a substantial risk of forfeiture within the meaning of Sections 83 and/or 409A of the Code, as applicable, and which shall
require:
(i) the future performance of substantial
services by the Participant to the Company or its Affiliates, and/or
(ii) the occurrence or attainment of one or more conditions
that are related to the purpose of the Award and the compensation that may be earned thereunder,
the timely attainment or fulfillment of
which shall constitute a precondition for vesting of the Award.
5
Performance Goal(s)
means Performance Criteria based on
Business Criteria and established and determined in accordance with
ARTICLE IX
.
Performance
Period
means a period of not less than twelve (12) months and not more than sixty (60) months with respect to which the Committee may establish Performance Goals.
Phantom Stock
means an Award granted pursuant to
ARTICLE V
that provides a Participant the
right, subject to the satisfaction of the Performance Criteria and other terms and conditions as set forth in the applicable Award Agreement, to receive upon vesting a stated or determinable amount denominated in shares of Common Stock.
Phantom Stock Award
means an Award of Phantom Stock, granted pursuant to
ARTICLE V
.
Plan
means the Flotek Industries, Inc. 2014 Long-Term Incentive Plan.
Restricted Period
means the period during which an Award is subject to forfeiture and/or is not
exercisable.
Restricted Stock
means one or more shares of Common Stock granted under
ARTICLE
VI
of the Plan that are not vested and remain subject to forfeiture.
Restricted Stock Unit
means an Award granted pursuant to
ARTICLE VII
that provides a Participant the right, subject to the satisfaction of the Performance Criteria and other terms and conditions as set forth in the applicable Award Agreement, to receive upon
vesting, the value of the number of notional shares vested in shares of Common Stock, cash or a combination of both.
Restricted Stock Unit Award
means an Award of Restricted Stock Units, granted pursuant to
ARTICLE
VII
.
Service Provider
means any individual, other than a Non-Employee Director or an
Employee, who renders services to the Company or an Affiliate, whose participation in the Plan is determined to be in the best interests of the Company by the Committee.
Securities Act
means the Securities Act of 1933, as amended.
Spread
means, in the case of a Stock Appreciation Right, the excess of (i) the FMV Per Share on
the date of exercise of the Stock Appreciation Right over (ii) an amount not less than the Grant Price of the Stock Appreciation Right.
Stock Appreciation Rights
means an Award granted pursuant to
ARTICLE IV
that provides a
Participant the right, subject to the satisfaction of the Performance Criteria and other terms and conditions as set forth in the applicable Award Agreement, to receive upon vesting an amount equal to the Spread.
Taxable year
unless otherwise indicated, means the taxable year of the Company.
Termination
(whether or not capitalized) means the end of the Participants Employment, status
as a member of the Board, or engagement or relationship as a Service Provider, as the case may be, which is intended and reasonably anticipated by the Company to result in the permanent cessation of services by the Participant to the Company and its
Affiliates in such capacity. Further, in the case of any item of income under an Award to which the foregoing definition would otherwise apply with the effect that the income tax under Section 409A of the Code would apply or be imposed on
income under an Award, but where such tax would not apply or be imposed if the meaning of the term termination included and met
6
the requirements of a separation from service within the meaning of Treas. Reg. §1.409A-1(h), then the term termination herein shall mean, but only with respect to
the income so affected, an event, circumstance or condition that constitutes both a termination as defined in the preceding sentence and a separation from service within the meaning of Treas. Reg. §1.409A-1(h). In the
case of an Incentive Stock Option, termination shall mean the cessation of the requisite employment relationship determined in accordance with Section 421 of the Code.
Vest
,
vesting
and variations thereof (whether or not capitalized), means
(i) with respect to an Award other than an Option, the lapsing or elimination of the Participants risk of forfeiture with respect to such Award, and (ii) with respect to an Option, such Option becoming exercisable, in each such case
by reason of the timely satisfaction, as determined by the Committee (or, if otherwise provided in this Plan, by the Board), of the Performance Criteria for such Award.
1.3 Shares Subject to the Plan.
(a)
Authorized Shares
. The maximum number of shares of Common Stock that may be issued under the Plan shall be 2,700,000 shares. The maximum
number of shares of Common Stock that may be issued under the Plan pursuant to the exercise of Incentive Stock Options is 2,700,000 shares. The foregoing limitations on the number of shares of Common Stock that may be issued and that may be subject
to Awards are subject to adjustment as provided in
Section 1.3(c)
. The shares of Common Stock to be delivered under the Plan shall be fully paid and nonassessable and may be made available from authorized but unissued shares of Common
Stock, treasury stock or shares of Common Stock acquired in the open market. No fractional shares shall be issued under the Plan. Payment for any fractional shares that would otherwise be issuable hereunder in the absence of the immediately
preceding sentence shall be made in cash. Each share of Common Stock that is the subject of an Award, including each share underlying an Award that is measured by shares but that is intended to be settled in cash, shall be charged against the
foregoing maximum share limitations at the time the Award is granted and may not again be made subject to Awards under the Plan pursuant to such limitations. Without limiting the generality of the foregoing, the number of shares of Common Stock
remaining available for Award under the foregoing maximum share limitations, as reduced for charges in respect of Awards made from time to time, shall not be increased (nor shall prior charges be reversed) for, among other things, shares of Common
Stock (i) not issued and that cease to be issuable for any reason, including but not limited to forfeiture, revocation, cancellation or amendment of an Award or the settlement of an Award, in whole or in part, by the payment of cash,
(ii) tendered in payment of the Exercise Price of any Option, (iii) tendered to or withheld by the Company to satisfy tax withholding or other obligations, and/ or (iv) repurchased by the Company, whether with Option proceeds or
otherwise.
(b)
Certain Limitations on Awards
. The maximum number of shares of Common Stock subject to Options and Stock Appreciation Rights (combined)
awarded to any one Participant pursuant to this Plan in any calendar year shall not exceed 1,000,000 shares. The maximum number of shares of Common Stock which may be subject to Awards of Restricted Stock made to any one Participant pursuant to this
Plan in any calendar year shall be 500,000 shares. The maximum amount of compensation which may be paid to any Participant in any calendar year pursuant to Awards of Restricted Stock Units shall not exceed $2,000,000. The maximum amount of
compensation which may be paid to any Participant in any calendar year pursuant to Awards of Phantom Stock under this Plan shall not exceed the Fair Market Value (determined as of the date of vesting) of 1,000,000 shares of Common Stock. The maximum
amount of compensation that may be paid to any Participant in any calendar year pursuant to Other Stock or Performance-Based Awards under this Plan, (i) if the compensation under the Other Stock or Performance-Based Awards is denominated under
the Award Agreement only in terms of shares of Common Stock or a multiple of the FMV Per Share of Common
7
Stock, shall not exceed the Fair Market Value (determined as of the date of vesting) of 1,000,000 shares of Common Stock; or (ii) in all other cases, shall not exceed $2,000,000. The maximum
amount of compensation any Participant can be paid in any calendar year pursuant to Awards that are intended to comply with the requirements for Performance-Based Compensation (and are designated as such) shall not exceed $2,000,000. The foregoing
limitations on the number of shares of Common Stock that may be issued and that may be subject to Awards are subject to adjustment as provided in Section 1.3(c).
(c)
Share Adjustments
. Notwithstanding the above, in the event that at any time after the Effective Date the outstanding shares of Common Stock
are changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of a merger, consolidation, recapitalization, reclassification, stock split, stock dividend, combination of shares or the like, the
aggregate number and class of securities available under the Plan shall be ratably adjusted by the Board. Upon the occurrence of any of the events described in the immediately preceding sentence, in order to preserve the fair value of Awards subject
to the Plan, the Board shall adjust any or all of the following so that the fair value of the Award immediately after the event is equal to the fair value of the Award immediately prior to the event: (a) the remaining number of authorized
shares of Common Stock with respect to which Awards may be granted, (b) the number of shares of Common Stock subject to each and all outstanding Awards, (c) the Exercise Price, Grant Price or other similar value with respect to an Award,
(d) the Performance Goals applicable to any outstanding Awards intended to qualify as Performance-Based Compensation (subject to such limitations as appropriate under Section 162(m) of the Code), and (e) any other terms of an Award
that are affected by the event. Any adjustments to an outstanding Option or Stock Appreciation Right shall be made (i) without change in the total Exercise Price applicable to the Option or Grant Price applicable to the Stock Appreciation Right
or any unexercised portion of the Option or Stock Appreciation Right (except for any change in such aggregate price resulting from rounding-off of share quantities or prices) and (ii) with any necessary corresponding adjustment in Exercise
Price and/or Grant Price per share. Notwithstanding the foregoing, all such adjustments, if any, shall be made in a manner consistent with the requirements of Section 409A of the Code in the case of an Award to which Section 409A of the
Code is applicable or would be so as a result of or in connection with any actual or proposed adjustment(s), in a manner consistent with the requirements of Section 424(a) of the Code in the case of Incentive Stock Options, and in a manner
consistent with Section 162(m) of the Code in the case of any Award held by a Covered Employee and intended to constitute Performance-Based Compensation. The Boards determinations shall be final, binding and conclusive with respect to the
Company and all other interested persons.
1.4 Prohibition of
Repricing Without Stockholder Approval
. Notwithstanding anything in this Plan to the contrary, no amendment or modification may be made to an outstanding Option or Stock Appreciation Right, including, without limitation, by replacement of
Options or Stock Appreciation Rights with cash or other award type, that would be treated as a repricing under the rules of the stock exchange on which the Common Stock is listed, in each case, without the approval of the stockholders of the
Company, provided that appropriate adjustments may be made to outstanding Options and Stock Appreciation Rights pursuant to
Section 1.3(c)
and may be made to make changes to achieve compliance with applicable law, including
Section 409A of the Code.
1.5 Administration of the Plan
. The
Plan shall be administered by 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 interpret the Plan and all Awards under the Plan;
(b)
to make, amend and rescind such rules as it deems necessary for the proper administration of the Plan;
8
(c)
to make all other determinations necessary or advisable for the administration of the Plan;
(d)
to correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Award under the Plan in the manner and to the extent that the Committee deems desirable
to effectuate the Plan;
(e)
to determine the persons to whom, and the time or times at which, Awards shall be granted and the number of shares of Common Stock to be subject to each Award;
(f)
to determine the type of Award granted and to designate Options as Incentive Stock Options or Non-Qualified Options;
(g)
to determine the Fair Market Value of shares of Common Stock or other property;
(h)
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 Price or purchase price of shares of Common Stock purchased pursuant to any Award, (ii) the method of payment for shares of Common Stock purchased pursuant to any Award, (iii) the method for satisfaction of any tax
withholding obligation arising in connection with Award, including by the withholding of shares of Common Stock, (iv) the timing, terms and conditions of the exercisability or vesting of any Award or any shares acquired pursuant thereto,
(v) the Business Criteria and Performance Goals applicable to an Award intended to qualify as Performance-Based Compensation and the extent to which such Performance Goals have been achieved, (vi) the time of the expiration of any Award,
(vii) the effect of the Participants termination 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;
(i)
to determine whether an Award will be settled in shares of Common Stock, cash, or in any combination thereof;
(j)
to approve one or more forms of Award Agreement;
(k)
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;
(l)
to accelerate, continue, extend or defer the exercisability or vesting of any Award or any shares of Common Stock acquired pursuant thereto, including with respect to the period
following a Participants termination; and
(m)
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 of or to accommodate the laws, regulations, tax or accounting effectiveness, accounting
principles or custom of, foreign jurisdictions whose citizens may be granted Awards.
Any action taken or
determination made by the Committee (or, where applicable, the Board) pursuant to this and the other sections of the Plan shall be final, binding and conclusive on all affected persons, including, without limitation, the Company, any Affiliate, any
Participant, holder or beneficiary of an Award, any stockholder and any Employee, Service Provider or Non-Employee Director. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to
the Plan or any Award granted hereunder, and the members of the Board and the Committee shall be entitled to indemnification to the fullest extent permitted by law and reimbursement by the Company and its Affiliates in respect of any claim, loss,
damage or expense (including legal fees) arising from or 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.
9
1.6 Granting of Awards to
Participants
. The Committee shall have the authority to grant, prior to the expiration date of the Plan, Awards to such Employees, Service Providers and Non-Employee Directors as may be selected by it, subject to the terms and conditions set
forth in the Plan. In selecting the persons to receive Awards, including the type and size of the Award, the Committee may consider the contribution the recipient has made and/or may make to the growth of the Company or its Affiliates and any other
factors that it may deem relevant. No member of the Committee shall vote or act upon any matter relating solely to himself/herself. Grants of Awards to members of the Committee must be ratified by the Board. In no event shall any Employee, Service
Provider or Non-Employee Director, nor his, her or its legal representatives, heirs, legatees, distributees or successors have any right to participate in the Plan, except to such extent, if any, as permitted under the Plan and as the Board or the
Committee may determine.
1.7 Term of Plan
. The Plan shall become
effective on the Effective Date. No Award shall be granted under the Plan prior to the date on which the Plan is approved by the stockholders of the Company, unless its grant, vesting and settlement are expressly conditioned upon the approval of the
Plan by the stockholders of the Company within twelve (12) months of the date the Plan was adopted by the Board. If the Plan is not approved by the stockholders of the Company within twelve (12) months of the date the Plan was adopted by
the Board, all Awards, if any, granted under the Plan shall be automatically cancelled without any action required by the Company, the Board or the Committee and without any payment or consideration. If the Plan is timely approved by the
stockholders of the Company and becomes effective, neither Awards properly granted under the Plan nor the authority of the Board or the Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award or to waive any conditions
or rights under such Award, shall terminate by reason of the expiration of the term of the Plan. If not sooner terminated under the provisions of
Section 1.8
, the Plan shall terminate upon, and no further Awards shall be made, after the
tenth (10th) anniversary of the Effective Date.
1.8 Amendment and
Discontinuance of the Plan
. The Board may amend, suspend or terminate the Plan at any time without prior notice to or consent of any person;
provided
,
however
, that, except as permitted under
Section 10.9
in connection
with a Change of Control, no amendment (other than any amendment the Board deems necessary in order to permit Awards to meet the requirements of the Code or other applicable laws, or to prevent adverse tax consequences to the Participants),
suspension or termination of the Plan may without the consent of the holder of an Award, terminate such Award or adversely affect such persons rights with respect to such Award in any material respect unless or to the extent specified in the
Award itself; and
provided further
that, no amendment shall be effective prior to its approval by the stockholders of the Company, to the extent such approval is required by (a) applicable legal requirements or (b) the requirements
of any securities exchange on which the Companys stock may be listed.
ARTICLE II
NON-QUALIFIED OPTIONS
2.1 Eligibility
. The Committee may grant Non-Qualified Options to
purchase shares of Common Stock to any Employee, Service Provider and Non-Employee Directors according to the terms set forth below.
2.2 Exercise Price.
The Exercise Price to be paid for each share of
Common Stock deliverable upon exercise of each Non-Qualified Option granted under this
ARTICLE II
shall not be less than one hundred percent (100%) of the FMV Per Share on the date of grant of such Non-Qualified Option.
2.3 Award Agreement
. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Exercise Price, the Option Expiration Date, the number of shares of Common Stock to which the Option pertains, the time or times at which such Option shall vest and be exercisable and such other terms and conditions
not inconsistent with this
ARTICLE II
as the Committee shall determine.
10
2.4 Terms and Conditions of
Non-Qualified Options
.
(a)
Option Period and Conditions and Limitations on Exercise
. No Non-Qualified Option shall be exercisable prior to vesting, after forfeiture or later than the Option Expiration
Date.
(b)
Exercise
. Options granted under this Plan shall be exercised by the delivery of a written notice of exercise to the Company, setting forth the number of shares of Common Stock
with respect to which the Option is to be exercised, accompanied by full payment for the shares being purchased and, unless other arrangements have been made with the Committee, any required withholding taxes. The payment of the Exercise Price for
each Option shall be made (i) in cash or by certified check payable and acceptable to the Company, or (ii) subject to such conditions and requirements as the Committee may specify, at the written request of the Optionee, by the
Companys withholding from shares otherwise deliverable pursuant to the exercise of the Option shares of Common Stock having an aggregate Fair Market Value as of the date of exercise that is not greater than the full Exercise Price for the
shares with respect to which the Option is being exercised and by paying any remaining amount of the Exercise Price as provided in (i) above. If the Committee so requires, Optionee shall also deliver written representation that all shares being
purchased are being acquired for investment and not with a view to, or for resale in connection with, any distribution of such shares. The exercise shall be effective only upon the satisfaction of the foregoing requirements, as applicable. Delivery
of the shares of Common Stock subject to the exercise shall be effected within ten (10) business days of the date of exercise.
(c)
Listing and Registration of Shares
. Each Option shall be subject to the requirement that if at any time the Board or the Committee determines, in its discretion, that the
listing, registration or qualification of the shares subject to such Option under any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of,
or in connection with, the issue or purchase of shares thereunder, such Option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained and the same shall
have been free of any conditions not acceptable to the Board.
2.5 Exercisability and Vesting
. Subject to
Sections 10.8
and
10.9
, unless otherwise provided in the Award Agreement, each Option shall vest such that 25% of the original number of shares of Common Stock subject to an Option granted to a Participant shall become purchasable by exercise as of each
anniversary of the date of grant of such Option until the Option is fully exercisable or the Option is forfeited or expires. Unless otherwise specified in the Award Agreement relating to an Option, all shares of Common Stock purchased by the
exercise of an Option shall be fully vested from the time of their acquisition by exercise of the Option.
2.6 Option Repricing Prohibited
. Except in connection with an adjustment
involving a corporate transaction or similar event, the Board or Committee may not authorize the amendment of any outstanding Non-Qualified Option to reduce the Exercise Price, and no outstanding Non-Qualified Option may be cancelled in exchange for
other awards, or cancelled in exchange for Non-Qualified Options having a lower Exercise Price, or cancelled in exchange for cash, without stockholder approval.
ARTICLE III
INCENTIVE
STOCK OPTIONS
The terms specified in this
ARTICLE III
shall be applicable to all Incentive Stock Options.
Except as modified by the provisions of this
ARTICLE III
, all the provisions of
ARTICLE II
shall be applicable to Incentive Stock Options. Options which are specifically designated as Non-Qualified Options shall not be subject to the
terms of this
ARTICLE III
.
11
3.1 Eligibility.
Incentive
Stock Options may only be granted to Employees.
3.2 Exercise Price.
Subject to
Section 3.4
, the Exercise Price per share shall not be less than one hundred percent (100%) of the FMV Per Share on the date of grant of the Incentive Stock Option.
3.3 Dollar Limitation
. The aggregate Fair Market Value (determined as of
the respective date or dates of grant) of shares of Common Stock for which one or more Options granted to any Employee under the Plan (plus the fair market value of shares determined as of the respective date or dates of grant) of all options under
any other option plan of the Company or any Affiliate that become exercisable for the first time as Incentive Stock Options during any one (1) calendar year shall not exceed the sum of $100,000. To the extent the Employee holds two (2) or
more such Options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such Options as Incentive Stock Options shall be determined in accordance with Section 422 of the Code.
3.4 10% Stockholder
. If any Employee to whom an Incentive Stock
Option is granted owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Affiliate, then the Exercise Price per share under such Incentive Stock Option shall not be
less than one hundred ten percent (110%) of the FMV Per Share on the date of grant, and the Option Expiration Date shall not be later than the fifth anniversary of the date of grant of such Option. For purposes of the immediately preceding
sentence, the attribution rules under Section 424(d) of the Code shall apply for purposes of determining an Employees ownership.
3.5 Incentive Stock Options Not Transferable
. No Incentive Stock Option
granted hereunder (a) shall be transferable other than by will or by the laws of descent and distribution and (b) except as provided in the Award Agreement permitted under Section 422 of the Code, shall be exercisable during the
Optionees lifetime by any person other than the Optionee (or his or her guardian).
3.6 Compliance with Section 422 of the Code
. All Options that are
intended to be Incentive Stock Options described in Section 422 of the Code shall be designated as such in the Award Agreement for such Option, shall be granted on or before the tenth anniversary of the Effective Date, shall have an Option
Expiration Date not later than the tenth anniversary of the date of grant of such Option, and shall, in all respects, be issued in compliance with Section 422 of the Code.
3.7 Limitations on Exercise
. No Incentive Stock Option shall be
exercisable more than three (3) months after the Optionee ceases to be an Employee for any reason other than death or Disability, or more than one (1) year after the Optionee ceases to be an Employee due to death or Disability.
3.8 Notification of Disqualifying Disposition
. Any Employee who receives
an Incentive Stock Option grant shall be required to notify the Committee of any Disqualifying Disposition of any shares of Common Stock issued pursuant to the exercise of the Incentive Stock Option within ten (10) days of such Disqualifying
Disposition.
3.9 Option Repricing Prohibited.
Except in connection
with an adjustment involving a corporate transaction or similar event, the Board or Committee may not authorize the amendment of any outstanding Incentive Stock Option to reduce the Exercise Price, and no outstanding Incentive Stock Option may be
cancelled in exchange for other awards, or cancelled in exchange for Incentive Stock Options having a lower Exercise Price, or cancelled in exchange for cash, without stockholder approval.
12
ARTICLE IV
STOCK APPRECIATION RIGHTS
4.1 Eligibility.
The Committee is authorized to grant Stock Appreciation
Rights to Employees, Service Providers and Non-Employee Directors in accordance with the following terms and conditions.
4.2 Grant Price
. Each Stock Appreciation Right granted hereunder shall
have a Grant Price equal to 100% of the Fair Market Value of a share of Common Stock on the date of grant.
4.3 Terms.
Each Stock Appreciation Right Award shall be evidenced by an
Award Agreement that shall specify the Grant Price, the term of the Stock Appreciation Right, the number of shares of Common Stock to which the Stock Appreciation Right Award pertains, the time or times at which the Stock Appreciation Right shall
vest (including based on achievement of performance goals and/or future service requirements) and such other terms and conditions as the Committee shall determine;
provided
,
however
, a Stock Appreciation Right shall not be granted in
tandem or in combination with any other Award if that would (i) cause application of Section 409A of the Code to the Award or (ii) result in adverse tax consequences under Section 409A of the Code should that Code section apply
to the Award.
4.4 Payment of Stock Appreciation Rights
. Stock
Appreciation Rights granted under this Plan shall be exercised by delivery of a written notice of exercise to the Company, setting forth the number of shares with respect to which the Stock Appreciation Right is to be exercised, accompanied by full
payment of all required withholding taxes, unless other arrangements have been made with the Committee. Upon exercise of the Stock Appreciation Right, the Participant shall be entitled to receive payment from the Company (in cash or shares of Common
Stock or a combination of both) equal to the Spread. Payment of the Spread shall be made within ten (10) business days of the date of exercise. Notwithstanding the foregoing, the Committee may provide in the Award Agreement, in its sole
discretion, that the Spread covered by a Stock Appreciation Right may not exceed a specified amount.
4.5 Repricing Prohibited
. Except in connection with an adjustment
involving a corporate transaction or similar event, the Board or Committee may not authorize the amendment of any outstanding Stock Appreciation Right to reduce the Grant Price, and no outstanding Stock Appreciation Right may be cancelled in
exchange for other awards, or cancelled in exchange for Stock Appreciation Rights having a lower Grant Price, or cancelled in exchange for cash, without stockholder approval.
ARTICLE V
PHANTOM STOCK
5
.1 Eligibility and Awards
. The Committee is authorized
to grant Phantom Stock Awards to Employees, Service Providers and Non-Employee Directors, which are rights to receive cash or Common Stock (or a combination of both) equal to the Fair Market Value of a specified number of shares of Common Stock upon
vesting, subject to the terms and conditions of this
ARTICLE V
.
5.2 Terms
. Each Phantom Stock Award shall be evidenced by an Award
Agreement that shall specify the number of shares of Common Stock to which the Phantom Stock Award pertains. The Performance Criteria upon which vesting of the Phantom Stock shall be conditioned and such other terms, conditions and requirements as
the Committee shall determine shall be set forth in the Award Agreement.
5.3 Lapse of Restrictions/Payment
. Upon vesting, subject to the
provisions of
ARTICLE XI
and the terms of the Award Agreement, the Company shall pay to the Participant one share of Common Stock or cash (or a combination of both) equal to the Fair Market Value of a share of Common Stock (as provided in the
applicable Award Agreement) for each share of vested Phantom Stock. Except as
13
otherwise may be required under Section 409A of the Code, such payment shall be made in a single lump sum no later than the fifteenth (15th) day of the third (3rd) calendar month
following the date on which vesting occurs. Should the Participant die before receiving all vested amounts payable hereunder, the balance shall be paid to the Participants estate by such date.
5.4 Performance Goals
. If the Committee determines that an Award of
Phantom Stock to a Covered Employee shall meet the requirements for Performance-Based Compensation, the applicable Award Agreement shall so state and it and the Award shall be subject to and comply with
ARTICLE IX
.
ARTICLE VI
RESTRICTED
STOCK
6.1 Eligibility
. All Employees, Service Providers and
Non-Employee Directors shall be eligible for grants of Restricted Stock.
6.2 Terms
. Each grant of Restricted Stock shall be evidenced by an Award
Agreement that shall specify the period(s) of restriction (the Restricted Period(s)), the number of Restricted Stock granted, the applicable Performance Criteria and vesting conditions, and such other terms and conditions as the Committee shall
determine.
6.3 Restrictions, Restricted Period and Vesting
.
(a)
Restrictions
. The Restricted Stock shall be subject to such Performance Criteria (including, without limitation, limitations that qualify as a substantial risk of forfeiture
within the meaning given to that term under Section 83 of the Code) and to the right of repurchase by the Company as the Committee, in its sole discretion, shall determine. Prior to vesting, any transfer attempted of Restricted Stock shall be
prohibited, ineffective and void. The Company shall have the right to repurchase or recover such forfeited shares of Restricted Stock for the lesser of (i) the amount of cash paid by the Participant to the Company therefor, if any, or
(ii) the Fair Market Value of an equivalent number of the shares of Common Stock determined on the date the Restricted Stock is forfeited.
(b)
Immediate Transfer Without Immediate Delivery of Restricted Stock
. Each certificate representing Restricted Stock awarded under the Plan shall be registered in the name of the Participant
and, unless and until such Restricted Stock vests, shall be left on deposit with the Company, or in trust or escrow pursuant to an agreement satisfactory to the Committee, along with a stock power endorsed in blank, until such time as the
restrictions on transfer have lapsed. Unless otherwise provided in the Award Agreement, the Participant holding Restricted Stock shall have all the rights of a stockholder with respect to such shares including the right to vote and the right to
receive dividends or other distributions when paid or made with respect to such shares;
provided
,
however
, that unless otherwise provided in the Award Agreement in the case of Restricted Stock with respect to which vesting is
conditioned on Performance Criteria other than the continuation of the Participants Employment or status as a Non-Employee Director or Service Provider for a Restricted Period of a fixed or specified duration, the Participant shall not have
the right to receive dividends with respect to such Restricted Stock until the Restricted Stock vests, at which time the sum of all dividends on such Restricted Stock for the Restricted Period shall be paid to the Participant without interest. Any
certificate or certificates representing shares of Restricted Stock shall bear a legend similar to the following:
The shares represented by this certificate have been issued pursuant to the terms of the Flotek
Industries, Inc. 2014 Long-Term Incentive Plan, and may not be sold, pledged, transferred, assigned or otherwise encumbered in any manner except as is set forth in the terms of such award dated
, 20 .
14
In addition, during any periods when Awards of Restricted Stock are made and the
Company does not have in place an effective registration statement on Form S-8 or other available form permitted by the Securities and Exchange Commission, any certificate or certificates representing shares of Restricted Stock (vested or unvested)
shall bear a legend similar to the following:
The shares represented by this certificate have
not been registered under the Securities Act of 1933, as amended (the Act), or any other securities law. No sale, transfer or other disposition of such securities, or of any interest therein, may be made or shall be recognized unless in
the satisfactory written opinion of counsel for, or other counsel satisfactory to, the issuer such transaction would not violate or require registration under the Act or other law.
6.4 Delivery of Shares of Common. Stock
. After the satisfaction of all
of the terms and conditions set by the Committee with respect to an Award of Restricted Stock (including the withholding requirements and other requirements of
ARTICLE XI
), a certificate for the number of shares that are no longer subject to
such restrictions, terms and conditions shall be delivered to the Participant.
6.5 Performance Goals
. If the Committee determines that an Award of
Restricted Stock to a Covered Employee shall meet the requirements for Performance-Based Compensation, the applicable Award Agreement shall so state and it and the Award shall be subject to and comply with
ARTICLE IX
.
ARTICLE VII
RESTRICTED
STOCK UNITS
7.1 Eligibility and Awards
. The Committee is
authorized to grant Restricted Stock Unit Awards to all Employees, Service Providers and Non-Employee Directors (Restricted Stock Unit Awards), subject to the terms and conditions of this
ARTICLE VII
.
7.2 Terms
. Restricted Stock Unit Awards shall be subject to such
restrictions (which may include a risk of forfeiture), if any, as the Committee may impose, which restrictions may lapse at the expiration of the Restricted Period or at earlier specified times (including based on achievement of performance goals
and/or future service requirements), separately or in combination, installments or otherwise, as the Committee may determine. Each grant of Restricted Stock Units shall be evidenced by an Award Agreement that shall specify the period(s) of
restriction, the number of notional shares of Common Stock to which the Restricted Stock Unit Award pertains, and such other terms and conditions as the Committee shall determine.
7.3 Payment/Settlement of Restricted Stock Units
. Subject to the
withholding and other requirements of
ARTICLE XI
and provisions of the Restricted Stock Unit Award, the Company shall pay to the Participant an amount, in shares of Common Stock, cash or a combination of both, an amount equal to the number of
notional shares of Common Stock that have vested multiplied by the Fair Market Value of a share of Common Stock as of the date of vesting. Except as otherwise may be required under Section 409A of the Code, such payment shall occur in a single
lump sum no later than the fifteenth (15th) day of the third (3rd) calendar month following the date the Restricted Stock Unit vests. Should the Participant die before receiving all vested amounts payable hereunder, the balance shall be
paid to the Participants estate by this date.
7.4 Performance
Goals
. If the Committee determines that an Award of Restricted Stock Units to a Covered Employee shall meet the requirements for Performance-Based Compensation, the applicable Award Agreement shall so state and it and the Award shall be subject
to and comply with
ARTICLE IX
.
15
ARTICLE VIII
OTHER STOCK OR PERFORMANCE-BASED AWARDS
The Committee is hereby authorized to grant to Employees, Service Providers and Non-Employee Directors
Other Stock
or Performance-Based Awards
, which shall consist of a right which (a) is not an Award described in any other Article of this Plan and (b) is denominated or payable in, valued in whole or in part by reference to, or otherwise
based on or related to, shares of Common Stock or cash as deemed by the Committee to be consistent with the purposes of this Plan. Subject to the terms of this Plan, the Committee shall determine the terms and conditions of any such Other Stock or
Performance-Based Awards, including the applicable Performance Criteria (if any) which shall be contained in an Award Agreement covering such Awards. Notwithstanding any other provisions of the Plan, to the extent any Other Stock or
Performance-Based Awards are subject to vesting, except as otherwise may be required under Section 409A of the Code, upon the vesting of Other Stock or Performance-Based Awards, payment or the settlement of such Award shall be made (whether in
cash or shares of Common Stock or a combination of both) in a single lump sum no later than the fifteenth (15th) day of the third (3rd) calendar month following the date on which vesting occurs. If the Committee determines that an Other
Stock or Performance-Based Award to a Covered Employee shall meet the requirements for Performance-Based Compensation, the applicable Award Agreement shall so state and it and the Award shall be subject to and comply with
ARTICLE IX
.
ARTICLE IX
PERFORMANCE-BASED COMPENSATION
9.1 Awards of Performance-Based Compensation
. Award Agreements for
Awards that are intended and designated by the Committee as subject to the requirements for Performance-Based Compensation, other than Awards of Options and Stock Appreciation Rights, shall so state, shall specify Performance Criteria, each of which
shall constitute a Performance Goal, and shall, along with the Award, be subject to and comply with this
ARTICLE IX
.
9.2 Performance Goals
.
(a)
General
. Performance Goals shall be established by the Committee for each Performance Period and set forth in each Award Agreement. Each Performance Goal shall consist of and incorporate
(i) one or more designated Business Criteria, (ii) the quantitatively determinable level(s), standard(s), degree(s) or range(s) of achievement to be applied to each such Business Criteria for the Performance Period, and (iii) the
amount of compensation (which shall be objectively determinable under one or more formulas or pre-determined standards) that shall vest under the Performance Goal for the achievement of each specified Business Criteria at the prescribed level(s),
standard(s), degree(s) or range(s). Performance-Based Compensation shall vest and shall be paid only if and to the extent vested under the Performance Goals. Performance Goals may be based on any one or more Business Criteria, on an absolute or
relative basis or as compared to the performance of a published index deemed by the Committee to be applicable to the Company, including but not limited to, the Standard & Poors 500 Stock Index or a group of comparable companies.
Performance Goals shall be established, Award shall be granted and the Award Agreement shall be provided to Participant and shall become binding at a time when the achievement of or outcome under each applicable Performance Goal is
substantially uncertain (within the meaning of Section 162(m) of the Code), and in all events by no later than the earlier of the 90th day of the Performance Period or the lapse of 25 percent (25%) of the Performance Period,
unless otherwise required or permitted for performance-based compensation under Section 162(m) of the Code. Performance Goals may differ among Awards granted to any one Participant or for Awards granted to different Participants.
The Committee shall have the discretion to reduce the amount of Performance-Based Compensation payable under an Award (even if it has
16
otherwise vested under the applicable Performance Goal) for a Participants negative conduct or other activities or factors as the Committee may determine, but it shall not have the
authority to increase Performance-Based Compensation above the amount which vests under the Performance Goals or to pay or provide compensation in lieu of Performance-Based Compensation which does not so vest.
(b)
Business Criteria
. The Business Criteria are as follows:
|
iii.
|
increase in revenues;
|
|
iv.
|
increase in cash flow;
|
|
vi.
|
increase in cash flow return;
|
|
vii.
|
return on net assets;
|
|
ix.
|
return on investment;
|
|
xii.
|
economic value added;
|
|
xvi.
|
pretax earnings before interest;
|
|
xvii.
|
pretax earnings before interest, depreciation and amortization;
|
|
xviii.
|
pretax operating earnings after interest expense and before incentives, service fees and extraordinary or special items;
|
|
xx.
|
total stockholder return;
|
|
xxii.
|
successful completion of an acquisition, initial public offering, private placement of equity or debt; or
|
|
xxiii.
|
reduction of expenses.
|
(c)
Written Determinations
. All determinations by the Committee as to the establishment of Performance Goals and the amount and terms of each Award shall be made in writing. In addition,
the Committee shall certify in writing prior to the payment of any compensation under any Award designated as intended to comply with the requirements of Performance-Based Compensation the results under each Business Criteria on which any
Performance Goal is based, whether (and, if applicable, the degree to which) each Performance Goal and each other material term of the Award were satisfied, and the resulting amount of compensation vested and payable under such Award. The Committee
may not delegate any responsibility relating to Awards subject to this
ARTICLE IX
.
(d)
Status of Awards under Section 162(m) of the Code
. It is the intent of the Company that Awards granted to
Covered Employees and designated as intended to comply with the requirements for Performance-Based Compensation shall comply with the requirements necessary to constitute Performance-Based Compensation under Section 162(m)(4)(c) of the Code.
Accordingly, the terms of this
ARTICLE IX
shall be interpreted in a manner consistent with Section 162(m) of the Code. If any provision of this Plan otherwise applicable to an Award that is designated as intended to comply with the
requirements for Performance-Based Compensation does not so comply or is inconsistent with the provisions of this
ARTICLE IX
, with the effect that such Award would not comply with the requirements for Performance-Based Compensation, such
other provision shall be construed or deemed
17
amended to the extent necessary to conform to such requirements and the provisions of this
ARTICLE IX
shall prevail with respect to such Award, but only to the extent necessary to
prevent that Award from failing to comply with the requirements for Performance-Based Compensation.
ARTICLE X
CERTAIN PROVISIONS APPLICABLE TO ALL AWARDS
10.1. General
. Awards shall be evidenced by an Award Agreement between the Company
and the Participant in such forms as the Committee shall provide and may be granted on the terms and conditions set forth herein. In addition, the Committee may impose on any Award or the exercise thereof, such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee shall determine. The terms, conditions and/or restrictions contained in an Award may differ from the terms, conditions and restrictions contained in any other Award. The Committee may
amend an Award;
provided
,
however
, that, subject to
Section 10.9
, no amendment of an Award may, without the consent of the holder of the Award, adversely affect such persons rights with respect to such Award in any
material respect. (Adjustments pursuant to
Section 1.3(c)
shall not be considered as adversely affecting a persons rights.) The Board or the Committee shall retain full power and discretion to accelerate or waive, at any time, any
term or condition of an Award that is not mandatory under the Plan;
provided
,
however
, that subject to
Section 10.9
, the Board or the Committee shall not have the discretion to accelerate or waive any term or condition of
an Award, to increase the amount, if any, otherwise payable in accordance with the terms of the Award, or to pay any amount in lieu of an amount not earned or vested under the terms of an Award if such Award is intended to qualify as
Performance-Based Compensation and such discretion would cause the Award not to so qualify. Except in cases in which the Board or the Committee is authorized to require other forms of consideration under the Plan, or to the extent other forms of
consideration must be paid to satisfy the requirements of the Delaware General Corporation Law, no consideration other than services may be required for the grant of any Award.
10.2 Stand-Alone, Additional and Tandem Awards
. Awards granted under the Plan may,
in the discretion of the Board or the Committee, be granted either alone or in addition to, or in tandem with, any other Award or any award granted under another plan of the Company, any Affiliate or any business entity to be acquired by the Company
or an Affiliate, or any other right of a Participant to receive payment from the Company or any Affiliate. Any such additional or tandem Awards may be granted at any time. In addition, Awards may be granted in lieu of cash compensation, including in
lieu of cash amounts payable under other plans of the Company or any Affiliate. Any action contemplated or otherwise permitted under this
Section 10.2
shall be allowed and effective only to the extent that such action would not cause or
otherwise result in adverse consequences under Section 409A of the Code.
10.3 Term of Awards
. Term or Restricted Period of each Award that is an Option,
Stock Appreciation Right, Phantom Stock, Restricted Stock, Restricted Stock Unit or Other Stock or Performance-Based Award shall be for such period as may be determined by the Board or the Committee;
provided
,
however
, that in no event
shall the term of any such Award exceed a period of ten (10) years (or such shorter terms as may be required in respect of an Incentive Stock Option under Section 422 of the Code).
10.4 Securities Requirements
. No exercise of any Option or any Stock Appreciation
Right shall be effective, and no payment of cash or transfer of shares of Common Stock will be made unless and until all then-applicable requirements imposed by federal and state securities and other laws, rules and regulations and by any regulatory
agencies having jurisdiction and by any stock market or exchange upon which the Common Stock may be listed, have been fully met and the Company may require the Participant to take any reasonable action to meet such requirements. Company shall not be
obligated to take any affirmative action in order to cause the issuance or transfer of shares pursuant to an Award to comply with any law or regulation described in the second preceding sentence.
18
10.5 Transferability
.
(a)
Non-Transferable Awards and Options
. Except as otherwise specifically provided in the Plan, no Award and no right under the Plan, contingent or otherwise, other than Restricted
Stock which has vested, will be (i) assignable, saleable or otherwise transferable by a Participant except by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order or (ii) subject to any
encumbrance, pledge or charge of any nature. No transfer by will or by the laws of descent and distribution shall be effective to bind the Company unless the Committee shall have been furnished with a copy of the deceased Participants will or
such other evidence as the Committee may deem necessary to establish the validity of the transfer. Any attempted transfer in violation of this Section shall be void and ineffective for all purposes.
(b)
Ability to Exercise Rights
. Except as otherwise specifically provided under the Plan, only the Participant or his or her guardian (if the Participant becomes Disabled), or in the
event of his or her death, his or her legal representative or beneficiary, may exercise Options or Stock Appreciation Rights, receive cash payments and deliveries of shares or otherwise exercise rights under the Plan. The executor or administrator
of the Participants estate, or the person or persons to whom the Participants rights under any Award will pass by will or the laws of descent and distribution, shall be deemed to be the Participants beneficiary or beneficiaries of
the rights of the Participant hereunder and shall be entitled to exercise such rights as are provided hereunder.
10.6 No Rights as a Stockholder
. Except as otherwise provided in
Section 6.3(b)
, a Participant who has received a grant of an Award or a transferee of such Participant shall have no rights as a stockholder with respect to any shares of Common Stock until such person becomes the holder of record.
Except as otherwise provided in
Section 6.3(b)
, no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued.
10.7 Listing and
Registration of Shares of Common Stock
. The Company, in its discretion, may postpone the issuance and/or delivery of shares of Common Stock upon any exercise of an Award until completion of such stock exchange listing, registration or other
qualification of such shares under any state and/or federal law, rule or regulation as the Company may consider appropriate, and may require any Participant to make such representations and furnish such information as it may consider appropriate in
connection with the issuance or delivery of the shares in compliance with applicable laws, rules and regulations.
10.8 Termination
.
(a)
Termination for Cause
. Except as otherwise provided in the applicable Award Agreement, upon a Participants termination for Cause, all unpaid Awards of that Participant,
whether or not vested, shall terminate and be immediately forfeited. Shares of Restricted Stock so forfeited shall be subject to the provisions of
Section 6.3(a)
.
(b)
Termination for any reason Other than for Cause
. Except as otherwise provided in
Section 10.8(c)
or the applicable Award Agreement, upon the termination of
Participant for any reason other than for Cause, any unvested Award granted pursuant to the Plan outstanding at the time of such termination and all rights thereunder shall be forfeited and shall wholly and completely terminate and no further
vesting shall occur.
(c)
Continuation
. The Board or the Committee, in its discretion, may provide for the continuation of any Award beyond a Participants termination for such period and upon such
terms and conditions as the Board or the Committee may determine, except to the extent that such continuation
19
would cause the Award to become subject to the provisions of Section 409A of the Code or cause adverse tax consequences under Section 409A, if the Award is subject to the provisions of
Section 409A. This
Section 10.8(c)
shall not apply to any Award intended to qualify as Performance-Based Compensation.
10.9 Change of Control
.
(a)
Change of Control
. Unless otherwise provided in the Award, in connection with a Change of Control, the Board shall have the authority in its sole discretion to take any one or more of
the following actions with respect to the Awards:
(i)
the Board may accelerate vesting and the time at which all Options and Stock Appreciation Rights then outstanding may
be exercised so that those types of Awards may be exercised in full for a limited period of time on or before a specified date fixed by the Board or the Committee, after which specified date all unexercised Options and Stock Appreciation Rights and
all rights of Participants thereunder shall terminate, or the Board or the Committee may accelerate vesting and the time at which Options and Stock Appreciation Rights may be exercised so that those types of Awards may be exercised in full for their
then remaining term;
(ii)
the Board may waive, alter and/or amend the Performance Criteria and other restrictions and conditions of Awards then outstanding, with the result that the affected Awards may be deemed
vested, and the Restricted Period or other limitations on payment in full with respect thereto shall be deemed to have expired, as of the date of the Change of Control or such other date as may be determined by the Board;
(iii)
the Board may cause the acquirer to assume the Plan and the Awards or exchange the Awards for awards for the acquirors stock;
(iv)
the Board may terminate the Plan; and
(v)
the Board may terminate and cancel all outstanding unvested or unexercised Awards as of the date of the Change of Control on such terms and conditions as it deems appropriate.
Notwithstanding the above provisions of this
Section 10.9
, the Board shall not be required to take any
action described in the preceding provisions of this
Section 10.9
, and any decision made by the Board, in its sole discretion, not to take some or all of the actions described in the preceding provisions of this
Section 10.9
shall be final, binding and conclusive with respect to the Company and all other interested persons.
(b)
Right to Cash-Out
. The Board shall, in connection with a Change of Control, have the right to require all, but not
less than all, Participants to transfer and deliver to the Company all Awards previously granted to the Participants in exchange for an amount equal to the Cash Value of the Awards. Such right shall be exercised by written notice to all affected
Participants. The amount payable to each Participant by the Company pursuant to this
Section 10.9(b)
shall be in cash or by certified check paid within five (5) days following the transfer and delivery of such Award (but in no event
later than fifty (50) days following the date of the Change of Control) and shall be reduced by any taxes required to be withheld.
10.10 Payment or Settlement of Awards
. Unless otherwise specified in an Award Agreement, any
Award may be settled in cash, shares of Common Stock, or a combination of cash and Common Stock. For this purpose, the withholding of shares of Common Stock otherwise issuable upon settlement of an Award in order to satisfy withholding taxes or to
make payment for the Exercise Price of an Award shall be treated as settled in cash.
20
10.11 Lock-Up Agreement
. In the event of any
underwritten public offering of the Companys securities made by the Company pursuant to an effective registration statement filed under the Securities Act, the Board and the Committee shall have the right to impose market stand-off
restrictions on each Award recipient whereby such Participant shall not offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any shares of stock of the Company or any
rights to acquire stock of the Company for such period of time from and after the effective date of such registration statement as may be established by the underwriter for such public offering;
provided
,
however
, that such period of
time shall not exceed one hundred eighty (180) days from the effective date of the registration statement to be filed in connection with such public offering. The foregoing limitation shall not apply to shares registered in the public offering
under the Securities Act.
10.12 Stockholder Agreements/Investment Representations
. As a
condition to the exercise of an Option or the issuance of Common Stock hereunder, the Committee or the Board may require the Participant to enter into such agreements (including but not limited to a buy/sell or voting trust agreement) with respect
to the shares as may be required of other stockholders of the Company. In addition, the Committee or the Board may require the Participant to represent and warrant at the time of any such exercise or issuance that the shares are being purchased only
for investment and without any present intention to sell or distribute such shares, if, in the opinion of counsel for the Company, such a representation is required by any relevant provisions of law.
10.13 Exemptions from Section 16(b
)
Liability
. It is the intent of the Company that
the grant of any Awards to or other transaction by a Participant who is subject to Section 16 of the Exchange Act shall be exempt from Section 16(b) of the Exchange Act pursuant to an applicable exemption (except for transactions
acknowledged by the Participant in writing to be non-exempt). Accordingly, if any provision of this Plan or any Award Agreement does not comply with the requirements of Rule 16b-3 under the Exchange Act as then applicable to any such transaction,
such provision shall be construed or deemed amended to the extent necessary to conform to the applicable requirements of Rule 16b-3 so that such Participant shall avoid liability under Section 16(b) of the Exchange Act.
ARTICLE XI
WITHHOLDING
FOR TAXES
Any issuance of Common Stock pursuant to the exercise of an Option or a Stock Appreciation Right (if
applicable) or in payment of any other Award under the Plan shall not be made until appropriate arrangements satisfactory to the Company have been made for the payment of any tax amounts (federal, state, local or other) that may be required to be
withheld or paid by the Company with respect thereto at the minimum statutory rate. Such arrangements may, at the discretion of the Committee, include allowing the Participant to request the Company to withhold shares of Common Stock being acquired
pursuant to the Award, whether through the exercise of an Option or as a distribution pursuant to the Award, which have an aggregate Fair Market Value as of the date of such withholding that is not greater than the sum of all tax amounts required to
be withheld with respect thereto, together with payment of any remaining portion of such tax amounts in cash or by certified check payable and acceptable to the Company. Notwithstanding the foregoing, if on the date of an event giving rise to a tax
withholding obligation on the part of the Company the person is an officer or individual subject to Rule 16b-3 under the Exchange Act, such person may direct that such tax withholding be effectuated by the Company withholding the necessary number of
shares of Common Stock (at the tax rate required by applicable law) from such Award payment or exercise.
21
ARTICLE XII
MISCELLANEOUS
12.1 No Rights to Awards or Uniformity Among Awards
. No Participant or other person
shall have any claim to be granted any Award; there is no obligation for uniformity of treatment of Participants, or holders or beneficiaries of Awards; and the terms and conditions of Awards need not be the same with respect to each recipient.
12.2 Conflicts with Plan
. In the event of any inconsistency or conflict between the
terms of the Plan and an Award, the terms of the Plan shall govern.
12.3 Rights as
Employee, Service Provider or Director
. No person, even though eligible under this Plan, 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, Service Provider or Director, or interfere with or limit in any way any right of the Company or its Affiliates to terminate the Participants Employment or
service at any time. To the extent that an Employee of an Affiliate other than the Company receives an Award under the Plan, the Award can 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.
12.4 Governing Law
.
The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with applicable federal law and the laws of the State of Delaware, without regard to any principles of conflicts
of law.
12.5 Gender, Tense and Headings
. Whenever the context requires such,
words of the masculine gender used herein shall include the feminine and neuter, and words used in the singular shall include the plural. Section headings as used herein are inserted solely for convenience and reference and constitute no part of the
Plan.
12.6 Severability
. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as to any Participant or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Board or the Committee, such provision shall be
construed or deemed amended as necessary to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Board or the Committee, materially altering the intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction, Participant or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.
12.7 Other Laws
. The Board or the Committee may refuse to issue or transfer any
shares or other consideration under an Award if, acting in its sole discretion, it determines that the issuance or transfer of such shares or such other consideration might violate any applicable law.
12.8 Unfunded Obligations
. Any amounts payable to Participants pursuant to the Plan
shall be unfunded and unsecured obligations for all purposes. Except as provided under
ARTICLE VI
of the Plan with respect to the delivery of stock certificates, no provision of the Plan shall require or permit the Company or any Affiliates,
for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company nor any Affiliates maintain
separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Participants shall have no rights under the Plan other than as general unsecured creditors of
the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other Employees, Service Providers or
22
Non-Employee Directors under general law. 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 nor constitute a trust or fiduciary relationship between the Committee or any Affiliate and a Participant, nor
otherwise create any vested or beneficial interest in any Participant nor the Participants creditors in any assets of the Company or any Affiliate. The Participants shall have no claim against any Affiliate for any changes in the value of any
assets which may be invested or reinvested by the Company with respect to the Plan. The Plan shall not constitute an employee benefit plan for purposes of Section 3(3) of ERISA.
12.9 No Guarantee of Tax Consequences.
The Participant shall be solely responsible for and
liable for any tax consequences (including but not limited to any interest or penalties) as a result of participation in the Plan. Neither the Board, nor the Company nor the Committee makes any commitment or guarantee that any federal, state or
local tax treatment will apply or be available to any person participating or eligible to participate hereunder and assumes no liability whatsoever for the tax consequences to the Participants.
12.10 Stockholder Agreements
. The Board or the Committee may, from time to time, condition the
grant, exercise or payment of any Award upon such Participant entering into a stockholders agreement, voting agreement, repurchase agreement or lockup or market standoff agreement in such form or forms as approved from time to time by the
Board.
12.11 Specified Employee under Section 409A of the Code
. Subject to any other
restrictions or limitations contained herein, in the event that a specified employee (as defined under Section 409A of the Code) becomes entitled to a payment under the Plan that is subject to Section 409A of the Code on
account of a separation from service (as defined under Section 409A of the Code), such payment shall not occur until the date that is six months plus one day from the date of such separation from service.
12.12 No Additional Deferral Features
. No Award shall contain or reflect, or be amended or
affected or supplemented by any other agreement (including, but not limited to, employment agreements, other plan or arrangements of deferred compensation) so as to contain, include or be subject to, a deferral feature or an
additional deferral feature within the meaning and usage of those terms under Section 409A of the Code.
12.13 Compliance with Section 409A of the Code
. Certain items of compensation paid pursuant
to this Plan are or may be subject to Section 409A of the Code. In such instances, this Plan is intended to comply and shall be administered in a manner that is intended to comply with Section 409A of the Code and shall be construed and
interpreted in accordance with such intent.
12.14 Claw-back Policy.
All Awards (including
any proceeds, gains or other economic benefit actually or constructively received by the Participant upon any receipt or exercise of any Award or upon the receipt or resale of any Common Stock underlying the Award) shall be subject to the provisions
of any claw-back policy implemented by the Company, including, without limitation, any claw-back policy adopted to comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated
thereunder, to the extent set forth in such claw-back policy and/or in the applicable Award Agreement.
23
PROXY
FLOTEK INDUSTRIES, INC.
2014 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AT THE FLOTEK CORPORATE OFFICE
10603 W. SAM HOUSTON PARKWAY N., SUITE 300, HOUSTON, TEXAS 77064
ON FRIDAY, MAY 16, 2014 AT 2:00 P.M. LOCAL TIME
THE UNDERSIGNED STOCKHOLDER OF FLOTEK INDUSTRIES, INC. (the Company) HEREBY APPOINTS John W. Chisholm, President and CEO of the
Company, or failing this person, Casey Doherty, Corporate Secretary of the Company, or in the place of the foregoing, , (print the name), as proxyholder
for and on his behalf, with full power of substitution, to attend, act and vote for and on behalf of the undersigned at the Annual Meeting of Stockholders of the Company (the Meeting) to be held on Friday, May 16, 2014, and at every
adjournment thereof, to the same extent and with the same powers as if the undersigned were present at the Meeting, or any adjournment thereof. The stockholder hereby directs the proxyholder to vote the securities of the Company registered in the
name of the undersigned as specified herein.
(Continued and to be signed on the reverse side.)
ANNUAL MEETING OF STOCKHOLDERS OF
FLOTEK INDUSTRIES, INC.
May 16, 2014
NOTICE
OF INTERNET AVAILABILITY OF PROXY MATERIAL
:
The Notice of Meeting, proxy statement and proxy card
are available at www.flotekind.com/proxymaterials.
Please sign, date and mail
your
proxy card in the
envelope provided as soon
as possible.
i
Please detach along perforated line and mail in the envelope provided.
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20630300000000000000 0
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051713
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS
SHOWN HERE
x
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PROPOSAL 1: Election of the seven directors to serve until next annual meeting of stockholders of the Company or
until their successors are duly elected and qualified, or until their earlier resignation or removal.
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NOMINEES:
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FOR ALL NOMINEES
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f
John W. Chisholm
f
L. Melvin Cooper
f
Kenneth T. Hern
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WITHHOLD AUTHORITY
FOR ALL NOMINEES
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f
L.V. Bud McGuire
f
John S. Reiland
f
Carla S. Hardy
f
Ted D. Brown
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¬
FOR ALL EXCEPT
(See instructions below)
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INSTRUCTIONS:
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To withhold authority to vote for any individual nominee(s), mark
FOR ALL EXCEPT
and fill in the circle next to each nominee you
wish to withhold, as shown here:
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To change the address on your account, please check the box
at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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FOR
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AGAINST
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ABSTAIN
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PROPOSAL 2:
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Approval of the 2014 Long-Term Incentive Plan.
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FOR
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AGAINST
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ABSTAIN
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PROPOSAL 3:
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Approval of Non-Binding Advisory Vote on Executive Compensation.
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FOR
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AGAINST
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ABSTAIN
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PROPOSAL 4:
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Ratification of the selection of the independent registered public accounting firm, HEIN & ASSOCIATES LLP, as the Companys auditors for the year ending
December 31, 2014.
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*Note* Such other business as may properly come before the meeting or any adjournment thereof.
The undersigned hereby votes shares that each of the undersigned is entitled to vote at the 2014 Annual Meeting of Stockholders of Flotek
Industries, Inc. as follows. All prior proxies are hereby revoked.
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Signature of
Stockholder
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Date:
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Signature of
Stockholder
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Date:
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as
such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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ANNUAL MEETING OF STOCKHOLDERS OF
FLOTEK INDUSTRIES, INC.
May 16, 2014
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PROXY VOTING INSTRUCTIONS
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TELEPHONE - Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States or 1-718-921-8500 from foreign
countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call.
Vote online/phone until 11:59 PM EST the day before the meeting.
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COMPANY NUMBER
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MAIL - Sign, date and mail your proxy card in the
envelope provided as soon as possible.
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ACCOUNT NUMBER
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IN PERSON - You may vote your shares in person by
attending the Annual Meeting.
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NOTICE OF INTERNET AVAILABILITY OF PROXY
MATERIAL:
The Notice of Meeting, proxy statement and proxy card
are available at www.flotekind.com/proxymaterials.
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i
Please detach along perforated line and mail in the envelope provided
IF
you are not voting via telephone or the Internet.
i
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¢
20630300000000000000 0
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051713
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK
AS SHOWN HERE
x
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PROPOSAL 1: Election of the seven directors to serve until next annual meeting of stockholders of the Company or until their successors are duly
elected and qualified, or until their earlier resignation or removal.
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NOMINEES:
|
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|
|
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|
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¬
FOR ALL NOMINEES
|
|
f
John W. Chisholm
f
L. Melvin Cooper
f
Kenneth T. Hern
|
|
|
¬
WITHHOLD AUTHORITY
FOR ALL NOMINEES
|
|
f
L.V. Bud McGuire
f
John S. Reiland
f
Carla S. Hardy
f
Ted D. Brown
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¬
FOR ALL EXCEPT
(See instructions below)
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INSTRUCTIONS:
|
|
To withhold authority to vote for any individual nominee(s), mark
FOR ALL EXCEPT
and fill in the circle next to each nominee you
wish to withhold, as shown here:
|
|
|
|
|
|
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To change the address on your account, please check
the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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¬
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FOR
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AGAINST
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ABSTAIN
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PROPOSAL 2:
|
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Approval of the 2014 Long-Term Incentive Plan.
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¨
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¨
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¨
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FOR
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AGAINST
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ABSTAIN
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PROPOSAL 3:
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Approval of Non-Binding Advisory Vote on Executive Compensation.
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¨
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¨
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¨
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FOR
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AGAINST
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ABSTAIN
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PROPOSAL 4:
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Ratification of the selection of the independent registered public accounting firm, HEIN & ASSOCIATES LLP, as the Companys auditors for the year ending
December 31, 2014.
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¨
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¨
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¨
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*Note* Such other business as may properly come before the meeting or any adjournment thereof.
The undersigned hereby votes shares that each of the undersigned is entitled to vote at the 2013 Annual Meeting of Stockholders of Flotek Industries, Inc. as
follows. All prior proxies are hereby revoked.
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Signature of
Stockholder
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Date:
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Signature of
Stockholder
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Date:
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
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