UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☒
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
EXTERRAN CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other
than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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Proposed maximum aggregate value of transaction:
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Notice of 2017 Annual Meeting
of Stockholders and Proxy Statement
EXTERRAN CORPORATION
Thursday, April 27, 2017 at 8:30
a.m., Central Daylight Time
4444 Brittmoore Rd., Houston, Texas 77041
Dear Fellow Stockholder:
You are invited to join Exterran Corporation’s
Board of Directors and executive management team at our 2017 Annual Meeting of Stockholders at 8:30 a.m. Central Daylight time
on Thursday, April 27, 2017, at 4444 Brittmoore Road, Houston, Texas 77041.
Enclosed you will find a meeting notice, a related
Proxy Statement, a proxy or voting instructions and our 2016 Annual Report, which includes a more detailed letter regarding the
state of Exterran. The Proxy Statement provides further information on the Company’s performance, corporate governance and
enhanced descriptions of our compensation approach.
The past year was a period of transition for Exterran
as we completed our first full year as a public company. In addition to navigating through an unprecedented downturn in the energy
industry, we went through a financial restatement process which was successfully completed in early 2017.
Despite the external market challenges and the
required internal efforts to complete the restatement, your Board and management team did not lose sight of the need to navigate
Exterran through this period of uncertainty and position the Company to capitalize on the eventual industry recovery and new growth
opportunities.
As highlighted in the Proxy Statement and Annual
Report, we sized the business to manage through the current market challenges, focused on generating and preserving cash as well
as repaying debt. The end result was a stronger balance sheet, leaner organization and an evolving culture emphasizing accountability,
stewardship, oversight, controls and transparency. We believe the seeds of disciplined growth and stockholder value creation are
planted, supported by a compensation philosophy aimed at rewarding financial performance, strategic and operational execution,
and safety.
We encourage you to vote your shares as soon as
possible. Your vote is important to us. You will find instructions in the Proxy Statement on how to vote your shares by proxy and/or
in person if you attend the meeting.
On behalf of the entire Board of Directors and
our employees, I would like thank all of our stockholders for your continued support. As stewards of your Company and your capital,
we remain focused on near-term goals and long-term results.
Thank you for your continued investment in Exterran
Corporation.
Sincerely,
Mark R. Sotir
Executive Chairman of the Board
March 17, 2017
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held at 8:30 a.m. Central Daylight Time on
Thursday, April 27, 2017
The 2017 Annual Meeting of
Stockholders of Exterran Corporation, a Delaware corporation, will be held at 8:30 a.m. Central Daylight Time on Thursday, April
27, 2017, at the corporate offices of Exterran located at 4444 Brittmoore Road, Houston, Texas 77041, for the following purposes:
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to elect eight directors to serve for a term expiring at the next annual meeting of stockholders;
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to ratify the appointment of Deloitte & Touche LLP as Exterran Corporation’s independent
registered public accounting firm for fiscal year 2017;
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3.
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to conduct an advisory vote to approve the compensation of Exterran Corporation’s named executive
officers;
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4.
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to conduct an advisory vote on the frequency of future stockholder advisory votes on the compensation
paid to our named executive officers; and
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5.
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to transact such other business as may properly come before the meeting or any adjournment thereof.
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The Board of Directors of
Exterran Corporation has fixed the close of business on February 27, 2017 as the record date for the meeting. Only holders of our
common stock as of the record date are entitled to notice of and to vote at the annual meeting. Further information regarding voting
rights and the matters to be voted upon is presented in this Proxy Statement.
YOUR VOTE IS IMPORTANT. Whether
or not you plan to attend the Annual Meeting of Stockholders, we urge you to submit your vote by the Internet, telephone or mail.
By Order of the Board of Directors,
Valerie L. Banner
Vice President, General Counsel and Corporate Secretary
Exterran Corporation
Houston, Texas
March 17, 2017
Important Notice Regarding the Availability
of Proxy Materials for the
Annual Meeting of Stockholders to be held
on April 27, 2017:
This Proxy Statement and the Company’s
2016 Annual Report to Stockholders are available
free of charge on the Company’s website at
http://www.proxyvote.com
and also where
indicated on the proxy card that accompanies this notice.
Table Of Contents
QUESTIONS
AND ANSWERS ABOUT THE MEETING AND VOTING
We
are furnishing you this Proxy Statement in connection with the solicitation of proxies by our Board of Directors (“Board”)
to be voted at the 2017 Annual Meeting of Stockholders (“Annual Meeting”) of Exterran Corporation, a Delaware corporation,
sometimes referred to herein as the “Company,” “Exterran,” “us,” “we,” or like
terms. The proxy materials, including this Proxy Statement, proxy card or voting instructions and our 2016 Annual Report on Form
10-K (“Annual Report”), are being distributed and made available on or about March 17, 2017.
We
are making our proxy materials available over the Internet. Accordingly, we will mail most of our stockholders a Notice of Internet
Availability of Proxy Materials (“Notice”) on or about March 17, 2017. The Notice contains instructions on how to
access those documents over the Internet, as well as instructions on how to request a printed copy of our proxy materials. All
stockholders who do not receive a Notice should receive a paper copy of the proxy materials by mail. Stockholders may access the
proxy materials on the Internet or request a printed set of the proxy materials be sent to them by following the instructions
in the Notice.
We
may satisfy Securities and Exchange Commission (“SEC”) rules regarding delivery of the Notice by delivering a single
copy of these documents to an address shared by two or more stockholders. This process is known as “householding.”
To the extent we have done so, we have delivered only one Notice to stockholders who share an address with another stockholder,
unless contrary instructions were received prior to the mailing date.
When
and where will the Annual Meeting be held?
We will
hold our 2017 Annual Meeting of Stockholders at Exterran Corporation, 4444 Brittmoore Road, Houston, Texas 77041, on Thursday,
April 27, 2017, at 8:30 a.m. Central Daylight Time.
Who
may vote?
You
may vote if you were a holder of record of Exterran common stock as of the close of business on February 27, 2017, the record
date for the Annual Meeting. Each share of common stock is entitled to one vote. As of the record date, there were 35,582,110
shares of Exterran common stock outstanding and entitled to vote.
What
am I voting on and how does the Board recommend that I vote?
Proposal
No.
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Description
of Proposal
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Page
No. Where You Can
Find More Information
Regarding the Proposal
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Board
Recommendation
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1
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Election
of eight directors to serve for a term expiring at the next annual meeting of stockholders
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4
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FOR
each nominee
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2
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Ratification
of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2017
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FOR
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3
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Advisory
vote to approve the compensation paid to our named executive officers
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FOR
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4
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Advisory
vote on the frequency of future stockholder advisory votes on the compensation paid to our named executive officers
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45
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1
YEAR
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In
addition, stockholders will be asked to consider at the Annual Meeting such other business as may properly come before the meeting
or any adjournment thereof.
How
do I vote?
You
may vote by any of the following methods:
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Meeting
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In person at the Annual Meeting. If you hold your shares through a broker or other intermediary, you will need proof of your stockholdings
to attend the meeting. A recent account statement, letter or proxy from your broker or other intermediary will suffice.
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Internet
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By Internet at
http://www.proxyvote.com
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card. Online procedures are designed to ensure the authenticity and correctness of your proxy vote instructions.
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Telephone.
If you received a proxy card by mail, by dialing (via touch-tone telephone) the toll-free phone number on your proxy card
under “Vote by Phone” and following the instructions.
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Mail.
If you received a proxy card by mail, by completing, signing and dating your proxy card and returning it promptly in the envelope
provided.
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To
be counted, votes by Internet, telephone or mail must be received by 11:59 p.m. Eastern Daylight Time on April 26, 2017.
Can
I change my vote?
Yes.
You may change your vote or revoke your proxy before the voting polls are closed at the Annual Meeting by the following methods:
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voting
again by telephone or Internet;
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sending
us a signed and dated proxy card dated later than your last vote;
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notifying
the Corporate Secretary of Exterran in writing (in the case of a revocation); or
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voting
in person at the Annual Meeting.
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How
many votes must be present to hold the Annual Meeting?
A
quorum of stockholders is necessary for a valid meeting. The presence in person or by proxy of the holders of a majority of the
outstanding shares of our common stock will constitute a quorum for the Annual Meeting. Under our Amended and Restated Bylaws
(our “Bylaws”) and under Delaware law, abstentions and “broker non-votes” are counted as present in determining
whether the quorum requirement is satisfied.
What
is a broker non-vote?
A
“broker non-vote” occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal
because the broker does not have discretionary voting power for that proposal and has not received instructions from the beneficial
owner. Under the rules of the New York Stock Exchange (“NYSE”), brokers do not have discretionary authority to vote
shares in connection with non-routine matters without instructions from the beneficial owner. Therefore, if you hold your shares
in the name of a bank, broker or other holder of record, for your vote to be counted on any of the proposals other than Proposal
2 (ratification of independent registered public accounting firm), you will need to communicate your voting decisions to your
bank, broker or other holder of record before April 27, 2017.
What
matters will be voted on at the Annual Meeting?
Each
proposal to be voted on at the Annual Meeting is described in this Proxy Statement, as is the vote required to approve each proposal.
For any other matters that may be properly presented for consideration at the Annual Meeting, the persons named as proxies will
have discretion to vote on those matters according to their best judgment to the same extent as the person delivering the proxy
would be entitled to vote. As of the date of this Proxy Statement, we do not anticipate that any other matters will be properly
presented for consideration at the Annual Meeting.
Who
pays for the proxy solicitation related to the Annual Meeting?
We
will pay the cost of soliciting proxies. In addition to sending you these proxy materials or otherwise providing you access to
these proxy materials, some of our officers, as well as management and non-management employees, may contact our stockholders
by telephone, facsimile or in person. None of these officers or employees will receive additional compensation for any such solicitation.
We have also retained Innisfree M&A Incorporated to assist in the solicitation of proxies as well as provide advisory services
to the Company, for a fee of $15,000 plus out-of-pocket expenses which will be paid by the Company. We will also request brokers
and other fiduciaries to forward proxy soliciting materials to the beneficial owners of shares of our common stock that are held
of record by such brokers and fiduciaries, and we will reimburse their reasonable out-of-pocket expenses.
If
you have any questions or require any assistance with voting your shares, please contact Innisfree M&A Incorporated, our proxy
solicitor, toll-free at (888) 750-5834. Banks and brokers may call collect at (212) 750-5833.
INNISFREE
M&A INCORPORATED
501
Madison Avenue, 20th Floor New York, NY 10022
Stockholders
May Call Toll-Free: (888) 750-5834 (from the United States and Canada)
Banks
and Brokers May Call Collect: (212) 750-5833
How
can I view the stockholder list?
A
complete list of stockholders of record entitled to vote at the Annual Meeting will be available for viewing during ordinary business
hours for a period of ten days before the Annual Meeting at our offices at 4444 Brittmoore Road, Houston, Texas 77041.
Who
will tabulate and certify the vote?
Broadridge
Financial Solutions, Inc., an independent third party, will tabulate and certify the vote and will have a representative to act
as the independent inspector of elections for the Annual Meeting.
What
if I want a copy of the Company’s 2016 Annual Report on Form 10-K?
We
will provide to any stockholder or potential investor, without charge, upon written or oral request, by first class mail or other
equally prompt means, a copy of our Annual Report on Form 10-K for the year ended December 31, 2016. Please direct any such requests
to the attention of Investor Relations, Exterran Corporation, 4444 Brittmoore Rd., Houston, Texas 77041, by email to
investor.relations@exterran.com
or by telephone at (281) 836-7000. This document is also available at the SEC’s website, which can be found at
http://www.sec.gov.
PROPOSAL
1
ELECTION
OF DIRECTORS
Director
Nominees
The
Board of Directors has nominated for election as Directors at the Annual Meeting the eight nominees named below. If elected, each
nominee will serve until the 2018 Annual Meeting of Stockholders or until their successors have been elected and qualified or
until their death, resignation or removal.
The
Board of Directors has no reason to believe that any nominee for election as a director will not be a candidate or will be unable
to serve, but if for any reason one or more of these nominees is unavailable as a candidate or unable to serve when election occurs,
the persons designated as proxies on the enclosed proxy card, in the absence of contrary instructions by stockholders, will in
their discretion vote the proxies for the election of any of the other nominees or for a substitute nominee or nominees, if any,
selected by the Board of Directors.
Each
nominee brings a strong and unique background and set of skills to the Board of Directors, giving the Board of Directors as a
whole, competence and experience in a wide variety of areas, including corporate governance and board service, executive management,
corporate finance and financial markets, investment, the oil and gas industry, and civic leadership. Information regarding the
business experience and qualifications of each nominee is provided below. All nominees are currently serving as directors and
are standing for re-election.
Eight
directors are nominated to be elected to the Board at the Annual Meeting, each to serve for a term expiring at our next annual
meeting of stockholders. Each nominee has consented to serve as a director if elected.
Board
of Directors’ Recommendation
The
Board recommends that the stockholders vote
“FOR”
the election of
each of the nominees to the Board as set forth in this proposal.
Vote
Required
A
plurality of the votes cast at the Annual Meeting is required to elect each director nominee; however, our Corporate Governance
Principles require that any nominee who receives a greater number of “withheld” votes than “for” votes
must submit his resignation for consideration by our Board. Abstentions and broker non-votes are not considered to be cast, so
they will not have any effect on the election of directors.
Nominees
for Director
WILLIAM M. GOODYEAR
Mr. Goodyear, 68, served as Executive
Chairman of the board of directors of Navigant Consulting, Inc., a specialized, global consulting firm, from May 2000 to June 2014
and as its Chief Executive Officer from May 2000 to February 2012. Prior to December 1999, Mr. Goodyear served as Chairman and
Chief Executive Officer of Bank of America Illinois and President of Bank of America’s Global Private Bank. Between 1972
and 1999, Mr. Goodyear held a variety of positions with Continental Bank (subsequently Bank of America), specializing in corporate
finance, corporate lending, trading and distribution. During his tenure with Continental Bank, Mr. Goodyear managed the bank’s
European and Asian Operations and served as Vice Chairman of Continental Bank’s board of directors prior to its 1994 merger
with Bank of America. Mr. Goodyear is a member of the board and Chairman of the audit committee of Enova International, Inc., a
multinational provider of online financial services to individual consumers. He is also a member of the board of trustees of the
University of Notre Dame and the Museum of Science and Industry—Chicago and serves as Chairman of the Rush University Medical
Center. Mr. Goodyear received a B.B.A. from the University of Notre Dame and an M.B.A. from the Amos Tuck School of Business at
Dartmouth College.
As the former Chief Executive Officer
and former Executive Chairman of the board of Navigant Consulting, Inc., Mr. Goodyear has significant business consulting experience,
including with operational, risk management, financial, regulatory and dispute advisory services. As a former chief executive officer,
he also has significant experience in management and business strategy, and as a former public company chairman he is familiar
with a full range of board functions.
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Director Since:
October 2015
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Independent
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JAMES C. GOUIN
Mr. Gouin, 57, was appointed President
of Tower International, Inc. (“Tower”) in September 2016 and became Chief Executive Officer and a member of Tower’s
board of directors in January 2017. Mr. Gouin joined Tower in November 2007 as Executive Vice President and Chief Financial Officer.
Prior to joining Tower, Mr. Gouin served in 2007 as a senior managing director of the corporate financial practice of FTI Consulting,
Inc., a business advisory firm. Prior to joining FTI, Mr. Gouin spent 28 years at Ford Motor Company in a variety of senior positions,
including as the Vice President, Finance and Global Corporate Controller from 2003 to 2006 and as the Vice President of Finance,
Strategy and Business Development of Ford Motor Company’s International Operations from 2006 to 2007. Mr. Gouin also served
on the board of directors of Azure Dynamics Corp. from January 2009 until May 2012. He serves on the board of trustees of the University
of Detroit Mercy and he is the Chairman of the board of directors of Vista Maria, a non-profit corporation. Mr. Gouin received
a B.B.A. from the Detroit Institute of Technology and an M.B.A. from the University of Detroit Mercy.
Mr. Gouin brings a wealth of financial
experience to the Board, as well as managerial, manufacturing and global experience through his years of service at Tower and Ford
Motor Company.
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Director Since:
November 2015
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Independent
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JOHN P. RYAN
Mr. Ryan, 65, previously served as
President and Chief Executive Officer of Dresser, Inc., a global provider of flow control products, measurement systems and other
infrastructure technologies to the oil and gas and power generation industries, from May 2007 until February 2011. Mr. Ryan was
President and Chief Operating Officer of Dresser, Inc. from December 2004 to June 2007. From 1987 to 2004, Mr. Ryan was employed
by Dresser Wayne where he served as President from 1996 to 2004 and as Vice President from 1991 to 1996. He previously served on
the board of directors of each of FlexEnergy, LLC, a provider of oil field turbine generators and environmental solutions for power
generation, landfill gas and digester gas applications, from January 2012 to April 2013 and Wayne Fueling Systems, Inc., a privately-held
global supplier of fuel dispensers, payment terminals and other measurement and control solutions to the retail and commercial
fueling industry from April 2014 to November 2016. Mr. Ryan currently serves as a director of Hudson Products, Inc., a company
engaged in the design, manufacture and servicing of heat transfer equipment for the petroleum, chemical, gas processing and electric
utility industries; and as a director of The Village of Hope, a non-profit organization. Mr. Ryan received a B.A. from Villanova
University.
As the former President and Chief Executive
Officer of Dresser, Inc., Mr. Ryan has significant international experience and energy industry knowledge, as well as a combination
of commercial, operational and financial skills. With an early career in engineering, manufacturing and sales, Mr. Ryan also brings
a thorough understanding of these disciplines.
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Director Since:
October 2015
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Independent
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CHRISTOPHER T. SEAVER
Mr. Seaver, 68, served as Chairman
of the board of directors of Hydril Company, an oil and gas service company specializing in pressure control equipment and premium
connections for casing and tubing from 2006 until his retirement in May 2007. Mr. Seaver held a series of domestic and international
management positions at Hydril Company from 1985 to May 2007, including as President since 1993 and Chief Executive Officer and
director since 1997. Prior to joining Hydril Company, Mr. Seaver was a corporate and securities attorney for the law firm of Paul,
Hastings, Janofsky & Walker LLP, and was a Foreign Service Officer in the U.S. State Department with postings in Kinshasa,
Republic of Congo and Bogotá, Colombia. Mr. Seaver currently serves as a director and member of the audit committee of Oil
States International, Inc., an oil service company specializing in manufacturing products for offshore production and drilling,
renting drilling and completion tools, and U.S. land drilling services; and a director and Chairman of McCoy Global Inc., a Canadian
oil service company principally providing power tongs and related equipment. Mr. Seaver has also served as a director and officer
of the Petroleum Equipment Suppliers Association, a director of the American Petroleum Institute, and a director and Chairman of
the National Ocean Industries Association. Mr. Seaver received an A.B. in Economics from Yale University and a J.D. and M.B.A.
from Stanford University.
Through his former roles as President,
Chief Executive Officer and Chairman of the Board of a publicly traded oil and gas services company, Mr. Seaver brings to our Board
both the perspective of an executive officer as well as that of a director. He has both domestic and international management and
operations experience and has been heavily involved in many industry trade and professional organizations. His tenure with the
U.S. State Department makes him well-versed in international cultures and the challenges and opportunities presented by conducting
business in developing countries.
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Director Since:
October 2015
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Independent
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MARK R. SOTIR
Mr. Sotir, 53, has served as director
and Executive Chairman of the Company since October 2015. Mr. Sotir has also served as Co-President of the Equity Group Investments
division of Chai Trust Company, LLC, a private investment firm (“EGI”), since October 2015, and prior to taking his
current position, served as Managing Director since November 2006. While at EGI, he served as the interim president of Tribune
Interactive, a division of Tribune Company, a media conglomerate, from December 2007 until April 2008. Tribune Company filed for
protection under Chapter 11 of the Bankruptcy Code in December 2008. Prior to joining EGI, Mr. Sotir was the Chief Executive Officer
of Sunburst Technology Corporation, an independent distributor of educational software to public schools, from August 2003 to November
2006. Mr. Sotir serves on the board of directors of several EGI portfolio companies, including Rewards Network Inc., a dining rewards
company; SIRVA Inc., a provider of moving and relocation services; and Veridiam, a specialty manufacturer in the nuclear aerospace
and medical industries. Mr. Sotir received a B.A. in Economics from Amherst College and an M.B.A. from Harvard Business School.
Mr. Sotir brings to our Board extensive
operational experience, gained by serving in key management and leadership roles in a wide range of industries. His operational
experience includes brand management, sales, marketing and distribution, as well as finance. In addition, Mr. Sotir serves as a
director for several companies representing a diversity of industries.
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Director Since:
October 2015
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Not Independent -
Management
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RICHARD R. STEWART
Mr. Stewart, 67, previously served
as President and Chief Executive Officer of GE Aero Energy, a division of GE Power Systems, and as an officer of General Electric
Company, from February 1998 until his retirement in 2006. From 1972 to 1998, Mr. Stewart served in various positions at Stewart
& Stevenson Services, Inc., including as Group President and member of the board of directors. Mr. Stewart is vice chairman
of the board of directors of Eagle Materials Inc., a U.S. manufacturer and distributor of building materials; director and Chairman
of the audit committee of Kirby Corporation, a tank barge operator; and director of TAS, a privately held company providing energy
conversion solutions. Mr. Stewart served as a director of Lufkin Industries, Inc., an oilfield equipment and power transmission
products company, from October 2009 until its acquisition by General Electric in July 2013. Mr. Stewart received a B.B.A. in Finance
from the University of Texas.
Mr. Stewart brings business knowledge
and leadership experience, as well as familiarity with corporate governance issues, as a result of his prior service as chief executive
officer of a manufacturing company, as an officer of General Electric and as a member of the boards of other public companies.
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Director Since:
October 2015
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Independent
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ANDREW J. WAY
Mr. Way, 45, is our President and Chief
Executive Officer. He previously served as Vice President and Chief Executive Officer—Drilling and Surface Production of
GE Oil & Gas, a provider of equipment and services in the oil and gas space, from 2012 through June 2015. Mr. Way joined GE
Oil & Gas in October 2007 and previously served as General Manager Operations, Turbo Machinery Services from October 2007 to
December 2008, as General Manager, Global Supply Chain from December 2008 to December 2010, and as Vice President and Chief Executive
Officer—Turbo Machinery Services from December 2010 to June 2012. Prior to joining GE Oil & Gas, Mr. Way served as Operations
Director and Managing Director—GE Equipment Services of GE Capital from 2001 to 2007 and held various positions at GE Aviation
from 1996 to 2001. Mr. Way studied Mechanical Engineering and graduated from the technical leadership program with Lucas Industries
in Wales, U.K.
Mr. Way brings a wealth of global corporate
leadership experience across many aspects of business, including finance, strategy, operations, and supply chain, from his years
of service at GE, culminating in his position as Vice President and Chief Executive Officer-Drilling and Surface Production.
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Director Since:
October 2015
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Not Independent -
Management
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IEDA GOMES YELL
Ms. Gomes Yell, 60, has served as the
Managing Director of Energix Strategy Ltd., an independent oil and gas consultancy firm, since October 2011. Before forming Energix,
she served in a number of positions with BP plc and its subsidiaries from 1998 to 2011, including as President of BP Brazil, Vice
President of Regulatory Affairs and Vice President of Market Development at BP Solar and Vice President of Pan American Energy.
From 1995 until 1998, Ms. Gomes Yell held a number of positions with Companhia de Gás de São Paulo, or Comgás,
a Brazilian natural gas distributor, before being named President and Chief Executive Officer. Ms. Gomes Yell is currently a non-executive
director and member of the audit and risk and strategic committees at Bureau Veritas SA, a global provider of testing, inspection
and certification services; a non-executive director of Compagnie de Saint Gobain SA, a France-based producer, processor and distributor
of construction and high-performance materials and packaging; a director and Chairman of the corporate governance committee at
InterEnergy Holdings, a private power production company; a Councillor of the Brazilian Chamber of Commerce in Great Britain, a
not-for-profit organization; a founding director of WILL Latam—Women in Leadership in Latin America, a not-for-profit organization;
a member of the advisory board of Crystol Energy, an independent consultancy and advisory firm; and a member of the advisory board
of Comgás and of the Infrastructure Department of the São Paulo Federation of Industries. Ms. Gomes Yell is a senior
visiting research fellow at the Oxford Institute for Energy Studies in the United Kingdom and Fundação Getúlio
Vargas Energia in Brazil. Ms. Gomes Yell received her B.S. in Chemical Engineering from the University of Bahia, Brazil, a MSc.
in Environmental Engineering from the Polytechnic School of Lausanne, Switzerland and a MSc. in Energy from the University of São
Paulo, Brazil.
Throughout her career, Ms. Gomes Yell
has cultivated extensive experience in developing projects, restructuring energy businesses and advising domestic and international
oil and gas companies in a variety of operational and governance matters, including developing business strategies, navigating
international markets and creating growth.
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Director Since:
October 2015
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Independent
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CORPORATE
GOVERNANCE
Director
Independence
The Board believes that at least a majority of
the directors should be persons who have no material relationship with our Company and who are otherwise “independent”
under applicable NYSE listing standards. Currently, 75% of our directors are independent. Our Code of Business Conduct also requires
all employees, officers and non-employee directors to avoid situations that may impact their ability to carry out their duties
in an independent and objective fashion. Any circumstance that has the potential to compromise their ability to perform independently
must be disclosed. In addition, we distribute director and officer questionnaires at least annually to elicit related-party information.
The questionnaire requires that responses be updated throughout the year to the extent circumstances change.
The Nominating and Corporate Governance Committee
assesses director independence each year by considering all direct and indirect business relationships between Exterran and each
director (including his or her immediate family), as well as relationships with other for-profit concerns and charitable organizations
and related party transactions, to determine whether any such relationship or transaction would prohibit a director from being
independent under SEC rules, the NYSE listing standards and the Company’s Corporate Governance Principles. With the Nominating
and Corporate Governance Committee’s recommendation, the Board makes a determination relating to the independence of each
member, which is based on applicable laws, regulations, our Corporate Governance Principles and the rules of the NYSE and SEC.
During the Nominating and Corporate Governance
Committee’s most recent review of independence, the Committee was provided information regarding transactions with any related
parties as determined through a search of our accounting records as well as the responses to the director and officer questionnaires;
these relationships were reviewed by the Nominating and Corporate Governance Committee and approved by the Audit Committee, and
none are required to be reported in this Proxy Statement.
Based on the recommendation of the Nominating
and Corporate Governance Committee, the Board determined that the following nominees for director are independent: Messrs. Goodyear,
Gouin, Ryan, Seaver and Stewart and Ms. Gomes Yell.
Mr. Sotir is not independent because he is the
Executive Chairman of the Company, and Mr. Way is not independent because he is the President and Chief Executive Officer of the
Company.
Board Leadership
Structure
We separate the roles of Executive
Chairman of the Board and Chief Executive Officer. We believe this structure is currently in the best interests of our stockholders
because by separating these positions:
|
●
|
our Chief Executive Officer can focus on the
day-to-day operations and management of our business, and
|
|
●
|
the Executive Chairman of the Board can lead
the Board in its fundamental role of providing advice to and oversight of management.
|
The Board recognizes the time, effort and energy
that our Chief Executive Officer is required to devote to his position, as well as the commitment required to serve as our Executive
Chairman. The Board believes this structure is appropriate for the Company because of the size and composition of the Board, the
scope and complexity of our operations and the responsibilities of the Board and management.
The Board has adopted procedures for the timely
and efficient transfer of our Chief Executive Officer’s responsibilities in the event of an emergency or his sudden incapacitation
or departure.
Mr. Sotir serves as Executive Chairman and presides
over the regular sessions of the Board and the executive sessions of the Board, held at every regularly scheduled Board meeting.
Role of Lead
Independent Director
Consistent with industry best practices and in
accordance with the Company’s Corporate Governance Principles, the Board has a Lead Independent Director to ensure that the
Company maintains a corporate governance structure with appropriate independence and balance. The Lead Independent Director is
elected by the independent directors, and presides at the executive sessions of the independent directors which are held in conjunction
with each regularly scheduled meeting of the Board, and any other meetings as determined by the Lead Independent Director. Mr.
Goodyear presently serves as Lead Independent Director.
Communication
with the Board
Stockholders or other interested parties may communicate
with the entire Board or any individual member of the Board by writing to us at the following address: Exterran Corporation, 4444
Brittmoore Road, Houston, Texas 77041, Attention: Corporate Secretary. In addition, any concern or inquiry may be communicated
to the Audit Committee or the Board by calling our compliance hotline at 1-800-281-5439 (North America) or 1-832-554-4859 (outside
North America).
Relevant communications are distributed to the
Board, or to any individual committee, director or directors, as appropriate, depending on the facts and circumstances outlined
in the communication. In that regard, the Board has requested that certain items unrelated to the duties and responsibilities of
the Board should be excluded or redirected, as appropriate, such as: business solicitations or advertisements; junk mail and mass
mailings; resumes and other forms of job inquiries; spam; and surveys. In addition, material that is unduly hostile, threatening,
potentially illegal or similarly unsuitable will be excluded; however, any communication that is excluded will be made available
to any outside director upon request.
Committees
of the Board
The Board has
designated an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee to assist in the discharge
of the Board’s responsibilities. The Board and the committees of the Board are governed by our Code of Business Conduct,
Corporate Governance Principles and the applicable committee charters, each of which are available to the public on our website
at
http://www.exterran.com
or in print by submitting a written request to Exterran Corporation, 4444 Brittmoore Road, Houston,
Texas 77041, Attention: Corporate Secretary. The purpose and composition of each committee is summarized in the table below.
|
Purpose
|
Composition
|
Committee
Report
|
Audit
Committee
|
The
Committee’s purpose is to assist the Board in its oversight of the integrity of our financial statements, our compliance
with legal and regulatory requirements, the independence, qualifications and performance of the independent auditor, the performance
of our internal audit function, and our systems of disclosure controls and procedures and internal controls over financial
reporting.
|
The
Board has determined that each member of the Audit Committee is independent under applicable SEC rules and NYSE listing standards
and possesses the requisite financial literacy to serve on the Audit Committee. The Board has also determined that each member
qualifies as an “audit committee financial expert” as that term is defined by the SEC. No member of the Audit
Committee serves on the audit committee of more than two other public companies.
|
The
Report is included in this Proxy Statement on page 15.
|
Compensation
Committee
|
The
Committee’s purpose is to oversee the development and implementation of our compensation philosophy and strategy with
the goals of attracting, developing, retaining and compensating the senior executive talent required to achieve corporate
objectives, and link pay and performance.
|
The
Board has determined that each member of the Compensation Committee is independent under applicable SEC rules and NYSE listing
standards. The Board has also determined that each member qualifies as an “outside director” for purposes of Section
162(m) of the Internal Revenue Code and as a “non-employee director” for purposes of Section 16 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”).
|
The
Report is included in this Proxy Statement on page 16.
|
Nominating
and Corporate Governance Committee
|
The
Committee’s purpose is to identify qualified individuals to become Board members, determine whether existing Board members
should be nominated for re-election, review the composition of the Board and its committees, oversee the evaluation of the
Board and develop, review and implement our Corporate Governance Principles.
|
The
Board has determined that each member of the Nominating and Corporate Governance Committee is independent under applicable
SEC rules and NYSE listing standards.
|
|
COMMITTEE
MEMBERSHIP
Members of each committee are elected
by the Board at its first meeting following the annual meeting of stockholders to serve for one-year terms. The current members
of our committees are indicated in the following chart:
Director
|
|
|
Independent
Director
|
|
Audit
Committee
|
|
Compensation
Committee
|
|
Nominating
and
Corporate
Governance
Committee
|
William M. Goodyear
|
|
√
|
|
Chair
|
|
Member
|
|
|
James C. Gouin
|
|
√
|
|
Member
|
|
|
|
|
John P. Ryan
|
|
√
|
|
Member
|
|
Chair
|
|
Member
|
Christopher T. Seaver
|
|
√
|
|
Member
|
|
Member
|
|
Chair
|
Mark R. Sotir
|
|
|
|
|
|
|
|
|
Richard R. Stewart
|
|
√
|
|
|
|
Member
|
|
|
Andrew J. Way
|
|
|
|
|
|
|
|
|
Ieda Gomes Yell
|
|
√
|
|
|
|
|
|
Member
|
Attendance
at Meetings
The Board and its committees held the following
number of meetings and acted by unanimous written consent the following number of times during calendar year 2016:
|
|
No. of
Meetings
|
|
|
No. of Actions by
Written Consent
|
Board
|
|
|
9
|
|
|
|
2
|
Audit Committee
|
|
|
23
|
|
|
|
—
|
Compensation Committee
|
|
|
8
|
|
|
|
3
|
Nominating and Corporate Governance Committee
|
|
|
5
|
|
|
|
—
|
We expect members of the Board to attend all meetings.
The directors attended, individually and as a group, at least 75% of the meetings of the Board and Board committees on which they
served during the period described above.
While we do not have a formal requirement relating
to director attendance at our annual meetings of stockholders, all directors are strongly encouraged to attend. The Annual Meeting
will be our first annual meeting as a public company and we currently expect that all directors will be in attendance.
Director
Qualifications, Nominations and Diversity
The Nominating and Corporate Governance Committee
believes that all Board candidates should be selected for their character, judgment, ethics, integrity, business experience, time
commitment and acumen. The Board, as a whole, through its individual members, seeks to have competence in areas of particular importance
to us such as finance, accounting, international business and relevant technical expertise. The Nominating and Corporate Governance
Committee also considers issues of diversity in the director identification and nomination process. While the Nominating and Corporate
Governance Committee does not have a formal policy with respect to diversity, it seeks nominees with a broad diversity of experience,
professions, skills, education and backgrounds. The Nominating and Corporate Governance Committee does not assign specific weights
to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. The Nominating and Corporate
Governance Committee believes that backgrounds and qualifications of the directors, considered as a group, should provide a significant
composite mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities. Nominees are not
discriminated against on the basis of race, color, national origin, gender, religion or disability.
Directors must be committed to enhancing the long-term
interests of our stockholders as a whole and should not be biased toward the interests of any particular segment of the stockholder
or employee population. Board members should also be prepared to travel to personally attend meetings of the Board and its committees
and should be ready to dedicate sufficient time to prepare in advance of such meetings to allow them to make an effective contribution
to the meetings. Further, Board members should ensure that they are not otherwise committed to other activities which would make
a commitment to the Board impractical or unadvisable and should satisfy the independence, qualification and composition requirements
of the Board and its committees, as required by applicable law, regulation and the rules of the NYSE, our Certificate of Incorporation,
our Bylaws and our Corporate Governance Principles.
Our Bylaws describe the procedures a stockholder
must follow when nominating a director for election to the Board. Notice of any director nominee to be considered for election
at the 2018 Annual Meeting of Stockholders must be received by the Corporate Secretary on or after November 17, 2017 and no later
than December 17, 2017. The notice must include certain information about the nominee, including his or her age, address, occupation
and share ownership, as well as the name, address and share ownership of the stockholder giving the notice. Our Bylaw requirements
are in addition to the SEC’s requirements with which a stockholder must comply to have a stockholder proposal included in
our Proxy Statement. Stockholders may obtain a copy of our Bylaws by making a written request to our Corporate Secretary. Any stockholder-recommended
director nominee will be evaluated in the context of our director qualification standards and the existing size and composition
of the Board.
The Board’s
Role in Risk Oversight
The Board has an active role, as a whole and through
its committees, in overseeing management of the Company’s risks. The Board’s role in the risk oversight process includes
receiving regular reports from members of senior management on areas of material risk to us, including operational, financial and
strategic risks. Also, the involvement of the Board in reviewing, approving and monitoring our fundamental financial and business
strategies, as contemplated by our Corporate Governance Principles, is important to the determination of the types and appropriate
levels of risk we undertake. The Board’s committees, all comprised solely of independent directors, assist the Board in fulfilling
its oversight responsibilities in certain areas of risk. The Compensation Committee oversees the management of risks relating to
our executive compensation plans and arrangements. The Nominating and Corporate Governance Committee manages risks associated with
the composition of the Board and other types of risks within its areas of responsibility. The Audit Committee oversees the management
of financial risks and also receives regular quarterly reports from our Director of Internal Audit and our Chief Compliance Officer.
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 such risks. This enables the Board and its committees to coordinate the risk
oversight role, particularly with respect to risk interrelationships.
Risk Assessment
Related to Our Compensation Structure
We believe our
compensation practices reflect sound risk management practices and are not reasonably likely to result in a material adverse effect
on us. For example, our Compensation Committee and management set performance goals in light of past performance, future expectations
and market conditions that they believe do not encourage the taking of unreasonable risks. Our Compensation Committee believes
its practice of considering non-financial and other qualitative factors in determining compensation awards discourages excessive
risk taking and encourages good judgment. In addition, we believe employee compensation is allocated between cash and equity-based
awards, between fixed and variable awards, and between short-term and long-term focused compensation in a manner that encourages
decision-making that balances short-term goals with long-term goals and thereby reduces the likelihood of excessive risk taking.
Finally, our Compensation Committee has established (a) short-term incentives that balance various Company objectives and provide
for maximum payouts, and (b) long-term incentive awards with generally three-year vesting periods, and we believe these program
features further balance short- and long-term objectives and encourage employee behavior designed to deter excessive risk taking
and achieve sustained profitability and growth.
Compensation
Committee Interlocks and Insider Participation
Each of Messrs. Goodyear, Ryan, Seaver and Stewart
served on the Compensation Committee of the Board during 2016. During 2016, there were no compensation committee interlocks or
insider participation matters.
INFORMATION
REGARDING DIRECTOR COMPENSATION
Our
Compensation Committee is responsible for recommending non-employee director compensation to the full Board of Directors for approval.
Non-employee members of the Board are compensated in cash and equity. As Executive Chairman of the Board, Mr. Sotir is an officer,
but not an employee, of the Company. Mr. Way, who is both a director and our President and Chief Executive Officer, does not receive
additional compensation for his service on the Board.
Cash-Based
Compensation
Director
compensation levels are reviewed annually by the Compensation Committee. In February 2016, in light of market conditions, the
Compensation Committee determined to reduce the annual retainers payable to our non-employee directors in respect of their service
as members of the Board in 2016, as follows: (i) each non-employee director received an annual retainer of $45,000 (rather than
$50,000); (ii) the Executive Chairman of the Board received an additional annual retainer of $180,000 (rather than $200,000);
(iii) the chairs of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee each received
additional annual retainers of $13,500, $13,500 and $9,000, respectively (rather than $15,000, $15,000 and $10,000, respectively);
and (iv) the Lead Independent Director received an additional annual retainer of $22,500.
As
reflected in the table below, during 2016, each non-employee director received an annual cash retainer, as well as a payment for
each meeting attended. The Executive Chairman of the Board and the chairs of the Audit Committee, Compensation Committee and Nominating
and Corporate Governance Committee each received an additional retainer for their services. All retainers are paid in equal quarterly
installments. Directors are also reimbursed for reasonable expenses incurred to attend Board and committee meetings.
Description of
Remuneration
|
|
Executive
Chairman
of the
Board
|
|
|
Audit
Committee
Chairman
|
|
|
Compensation
Committee
Chairman
|
|
|
Nominating
and
Corporate
Governance
Committee
Chairman
|
|
|
Lead
Independent
Director
|
|
|
All Other
Directors
|
|
Annual Retainer
|
|
$
|
45,000
|
|
|
$
|
45,000
|
|
|
$
|
45,000
|
|
|
$
|
45,000
|
|
|
$
|
45,000
|
|
|
$
|
45,000
|
|
Other Annual Retainers
|
|
$
|
180,000
|
|
|
$
|
13,500
|
|
|
$
|
13,500
|
|
|
$
|
9,000
|
|
|
$
|
22,500
|
|
|
|
—
|
|
Meeting Attendance Fee
|
|
$
|
1,500
|
|
|
$
|
1,500
|
|
|
$
|
1,500
|
|
|
$
|
1,500
|
|
|
$
|
1,500
|
|
|
$
|
1,500
|
|
(per meeting attended)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Compensation Committee determined in February 2017 to maintain the non-employee directors’ annual retainers at the current
levels for 2017.
We
also maintain the Directors’ Amended and Restated Stock and Deferral Plan (the “Directors’ Plan”), pursuant
to which directors may elect to receive all or a portion of their cash compensation for Board service in the form of phantom units
that become payable in shares of our common stock and may also elect to defer their receipt of common stock. During 2016, Ms.
Gomes Yell elected to defer her compensation pursuant to the Directors’ Plan. Following the completion on January 4, 2017
of its previously announced restatement of financial results, the Company made a grant on January 6, 2017 of phantom units under
the Directors’ Plan representing payment for Ms. Gomes Yell’s retainer and meeting fees for the quarters ended March
31, 2016, June 30, 2016 and September 30, 2016. The phantom units become payable in shares of common stock (or cash in lieu of
any fractional shares) within 30 days following the earliest of (i) a deferral date selected by Ms. Gomes Yell, (ii) Ms. Gomes
Yell’s Separation from Service (as defined in the Directors’ Plan) for any reason or (iii) the date of a Change of
Control (as defined in the Plan) of the Company.
Equity-Based
Compensation
In
February 2016, the Compensation Committee approved an annual grant of fully-vested common stock to non-employee directors valued
at approximately $112,500 on the date of grant in respect of their service in 2016. The number of shares to be awarded will be
based on the market closing price of our common stock on the applicable grant date.
Stock
Ownership Requirements
Our
stock ownership policy requires each director to own an amount of our common stock equal to at least five times the annual retainer
amount (which at December 31, 2016 equals $225,000 of our common stock) within three years of his or her election to the Board.
Both directly-owned shares and unvested restricted stock count toward satisfaction of this policy. We measure the stock ownership
of our directors annually as of October 31. All of our directors were elected to the Board in late 2015, and therefore have until
late 2018 to meet this ownership requirement.
Total
Compensation
The
following table shows the total compensation earned by each non-employee director for their service during 2016.
Name
|
|
Fees Earned in
Cash ($)
(1)
|
|
|
Fees Earned
in Stock
(1)
|
|
|
Equity
Grant ($)
(2)
|
|
|
Total
($)
|
|
William M. Goodyear
|
|
$
|
—
|
|
|
$
|
136,500
|
|
|
$
|
112,500
|
|
|
$
|
249,000
|
|
James C. Gouin
|
|
$
|
87,000
|
|
|
$
|
—
|
|
|
$
|
112,500
|
|
|
$
|
199,500
|
|
John P. Ryan
|
|
$
|
31,125
|
|
|
$
|
88,875
|
|
|
$
|
112,500
|
|
|
$
|
232,500
|
|
Christopher T. Seaver
|
|
$
|
—
|
|
|
$
|
114,000
|
|
|
$
|
112,500
|
|
|
$
|
226,500
|
|
Mark R. Sotir
|
|
$
|
157,875
|
|
|
$
|
98,625
|
|
|
$
|
112,500
|
|
|
$
|
369,000
|
|
Richard R. Stewart
|
|
$
|
89,000
|
|
|
$
|
—
|
|
|
$
|
112,500
|
|
|
$
|
201,500
|
|
Ieda Gomes Yell
|
|
$
|
—
|
|
|
$
|
84,000
|
|
|
$
|
112,500
|
|
|
$
|
196,500
|
|
(1)
|
Messrs.
Goodyear and Seaver, and Ms. Gomes Yell received their retainer and meeting fees in the form of our common stock. Mr. Ryan
received his retainer and meeting fees in the form of our common stock for the period of April 1, 2016 through December 31,
2016 and Mr. Sotir received one-half of his retainer and meeting fees in the form of common stock and one-half in the form
of cash for the period of April 1, 2016 through December 31, 2016.
|
|
|
(2)
|
Annual
grant of fully-vested common stock to non-employee directors valued at approximately $112,500 on the date of grant in respect
of their service in 2016. Represents the grant fair value of our common stock, calculated in accordance with ASC 718.
|
REPORT
OF THE AUDIT COMMITTEE
The
purpose of the Audit Committee is to assist the Board of Directors in its general oversight of Exterran Corporation’s (“Exterran”)
financial reporting, internal controls and audit functions. The Audit Committee Charter describes in greater detail the full responsibilities
of the Audit Committee and is available on Exterran’s website at
http://www.exterran.com
.
The
Audit Committee has reviewed and discussed the audited consolidated financial statements and management’s assessment and
report on internal controls over financial reporting for the year ended December 31, 2016 with management and Deloitte & Touche
LLP (“Deloitte”), Exterran’s independent registered public accounting firm. Exterran published this report in
its Annual Report on Form 10-K for the year ended December 31, 2016, which it filed with the SEC on March 10, 2017. Management
is responsible for the preparation, presentation and integrity of financial statements and the reporting process, including the
system of internal controls. Deloitte is responsible for performing an independent audit of Exterran’s financial statements
and the effectiveness of internal control and financial reporting in accordance with the standards of the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and issuing reports thereon. The Audit Committee monitors these processes.
The
Audit Committee members are not professional accountants or auditors, and their functions are not intended to duplicate or to
certify the activities of management or the independent auditors. The Audit Committee serves a board-level oversight role, in
which it provides advice, counsel and direction to management and the independent auditors on the basis of the information it
receives, discussions with management and the independent auditors, and the experience of the Audit Committee’s members
in business, financial and accounting matters. In accordance with law, the Audit Committee has ultimate authority and responsibility
for selecting, compensating, evaluating, and, when appropriate, replacing Exterran’s independent auditors. The Audit Committee
has the authority to engage its own outside advisers, including experts in particular areas of accounting, as it determines appropriate,
apart from counsel or advisers hired by management.
In
this context, the Audit Committee discussed with Exterran’s internal auditors and Deloitte the overall scope and plans for
their respective audits. The Audit Committee met with the internal auditors and Deloitte, with and without management present,
to discuss the results of their examinations, their evaluations of Exterran’s internal controls, and the overall quality
of Exterran’s financial reporting. Management represented to the Audit Committee that Exterran’s consolidated and
combined financial statements were prepared in accordance with accounting principles generally accepted in the United States,
and the Audit Committee reviewed and discussed the consolidated and combined financial statements with management and Deloitte.
The Audit Committee also discussed with Deloitte the matters required to be discussed by Auditing Standard No. 16 (Communication
with Audit Committees), as currently in effect.
In
addition, the Audit Committee discussed with Deloitte its independence, considered the compatibility of non-audit services with
the auditors’ independence and received the written disclosures and letter required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees), as currently in effect.
Based
on the reviews and discussions referred to above, the Audit Committee recommended to Exterran’s Board of Directors, and
the Board has concurred, that (i) the audited financial statements be included in Exterran’s Annual Report on Form 10-K
for the twelve months ended December 31, 2016, for filing with the Securities and Exchange Commission; (ii) Deloitte meets the
requirements for independence; and (iii) the appointment of Deloitte for 2017 be submitted to the stockholders for ratification.
The
Audit Committee of the Board of Directors
William
M. Goodyear, Chair
James
C. Gouin
John
P. Ryan
Christopher
T. Seaver
The
information contained in this Report of the Audit Committee shall not be deemed to be “soliciting material,” to be
“filed” with the SEC or be subject to Regulation 14A or Regulation 14C or to the liabilities of Section 18 of the
Securities Exchange Act of 1934, and shall not be deemed to be incorporated by reference into any filing of Exterran, except to
the extent that Exterran specifically incorporates it by reference into a document filed under the Securities Act of 1933 or the
Securities Exchange Act of 1934.
REPORT
OF THE COMPENSATION COMMITTEE
The
Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation
S-K with management. Based on such review and discussions, the Compensation Committee recommended to Exterran’s Board of
Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
The
Compensation Committee of the Board of Directors
John
P. Ryan, Chair
William
M. Goodyear
Christopher
T. Seaver
Richard
R. Stewart
EXECUTIVE
OFFICERS
The
following provides information regarding our executive officers as of March 2, 2017. Information concerning the business experience
of Messrs. Way and Sotir is provided under
“— Nominees for Director”
beginning on page 5 of this Proxy
Statement.
Executive
Officer
|
|
Age
|
|
Position
|
Andrew
J. Way
|
|
45
|
|
President,
Chief Executive Officer and Director
|
Mark
R. Sotir
|
|
53
|
|
Executive
Chairman and Director
|
David
A. Barta
|
|
54
|
|
Senior
Vice President and Chief Financial Officer
|
Roger
George
|
|
48
|
|
Senior
Vice President, Global Engineering and Product Lines
|
Girish
K. Saligram
|
|
45
|
|
Senior
Vice President, Global Services
|
David
A. Barta has served as Senior Vice President since November 2016 and Chief Financial Officer since December 2016. Prior to joining
Exterran, Mr. Barta was Senior Vice President and Chief Financial Officer of Accudyne Industries from 2013 to 2016. Mr. Barta
served as Chief Financial Officer of Cooper Industries from 2010 until its sale in 2012 and as Chief Financial Officer of Regal
Beloit Corporation from 2004 to 2010. Prior to 2010, Mr. Barta worked nine years at Newell Rubbermaid, Inc. in financial management
positions, and held various financial positions with Harman International Industries, North American Van Lines and Beatrice Foods.
Roger
George has served as Senior Vice President, Global Engineering and Product Lines since December 2016. Before joining Exterran,
Mr. George held a series of leadership roles with GE from 2005 to 2016. His most recent role with GE was Product Line Leader of
its 50Hz Utility Gas Turbine business. Prior to that, he served as General Manager and as an executive of GE Distributed Power
running Global Sales and Commercial Operations from 2012 to 2016. Earlier in his career Mr. George worked for Optimal CAE, Inc.
and the Ford Motor Company.
Girish
K. Saligram has served as Senior Vice President, Global Services since August 2016. Prior to joining Exterran, Mr. Saligram spent
20 years with GE in positions of increasing responsibility as a functional and business leader in industry sectors across the
globe. His most recent role with GE was General Manager, Downstream Products & Services, for GE Oil & Gas. Prior to that,
Mr. Saligram led the GE Oil & Gas Contractual Services business based in Florence, Italy. Before his nine years in the oil
and gas sector, Mr. Saligram spent 12 years with GE Healthcare in engineering, services, operations and commercial roles.
BENEFICIAL
OWNERSHIP OF COMMON STOCK
Security
Ownership of Certain Beneficial Owners
The
following table provides information about beneficial owners, known by us as of March 2, 2017, of 5% or more of our outstanding
common stock (the 5% Stockholders”). Unless otherwise noted in the footnotes to the table, the 5% Stockholders named in
the table have sole voting and investment power with respect to all shares shown as beneficially owned by them.
Name
and Address of Beneficial Owner
|
|
Number
of
Shares
Beneficially
Owned
|
|
|
Percent
of
Class(1)
|
BlackRock,
Inc.
55
East 52nd Street
New
York, New York 10055
|
|
3,801,906
|
(2)
|
|
11%
|
MTP
Energy Fund Ltd.
1603
Orrington Avenue, 13
th
Floor
Evanston,
Illinois 60201
|
|
3,266,488
|
(3)
|
|
9%
|
Chai
Trust Company LLC
2
North Riverside Plaza, Suite 600
Chicago,
Illinois 60606
|
|
3,213,442
|
(4)
|
|
9%
|
FMR
LLC
245
Summer Street
Boston,
Massachusetts 02210
|
|
3,082,074
|
(5)
|
|
9%
|
The
Vanguard Group, Inc.
100
Vanguard Blvd.
Malvern,
Pennsylvania 19355
|
|
2,859,972
|
(6)
|
|
8%
|
Dimensional
Fund Advisors, L.P.
Palisades
West, Building One
6300
Bee Cave Road
Austin,
Texas 78746
|
|
2,877,035
|
(7)
|
|
8%
|
Carlson
Capital, L.P.
2100
McKinney Avenue, Suite 1800
Dallas,
Texas 75201
|
|
1,816,215
|
(8)
|
|
5%
|
(1)
|
Reflects
shares of common stock beneficially owned as a percentage of 35,528,110 shares of common stock outstanding as of March 2,
2017.
|
|
|
(2)
|
Based
solely on a review of the Schedule 13G filed by BlackRock, Inc. on January 12, 2017. BlackRock, Inc. has sole voting or dispositive
power over 3,801,906 shares.
|
|
|
(3)
|
Based
solely on a review of the Schedule 13G filed by MTP Energy Fund Ltd. (“MTP Fund”) and certain other related reporting
persons on February 14, 2017. Magnetar Financial serves as the sole member of MTP Energy, a Delaware limited liability company.
MTP Energy is a relying adviser of Magnetar Financial, and serves as the investment manager to MTP Fund. Magnetar Financial
is a registered investment adviser under Section 203 of the Investment Advisers Act of 1940, as amended. In such capacity,
MTP Energy exercises voting and investment power over the shares held for the accounts of MTP Fund. Magnetar Capital Partners
serves as the sole member and parent holding company of Magnetar Financial. Supernova Management is the general partner of
Magnetar Capital Partners.
|
|
|
(4)
|
Based
solely on a review of the Schedule 13D filed by Chai Trust Company LLC (“Chai Trust”) and certain other related
reporting persons on March 10, 2016. Chai Trust is the managing member of GI-Fund (05-07) Investors, L.L.C., a Delaware limited
liability company (“Fund 05-07”), EGI-Fund (11-13) Investors, L.L.C., a Delaware limited liability company (“Fund
11-13”), and EGI-Fund B, L.L.C., a Delaware limited liability company (“Fund B”), and is the non-member
manager of EGI-Fund (08-10) Investors, L.L.C., a Delaware limited liability company (“Fund 08-10”). The shares
of common stock beneficially owned by Chai Trust include 447,567 shares of common stock held by Fund 05-07, 332,327 shares
of common stock held by Fund 08-10, 908,742 shares of common stock held by Fund 11-13 and 1,524,806 shares of common stock
held by Fund B.
|
|
|
(5)
|
Based
solely on a review of the Schedule 13G filed by FMR LLC on February 14, 2017. FMR LLC has sole voting or dispositive power
over 3,082,074 shares.
|
(6)
|
Based
solely on a review of the Schedule 13G filed by The Vanguard Group, Inc. (“Vanguard”) on February 10, 2017. Vanguard
Fiduciary Trust Company (“VFTC”) a wholly-owned subsidiary of Vanguard is the beneficial owner of 35,983 shares
as a result of serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd. (“VIA”)
is the beneficial owner of 5,063 shares as a result of serving as investment manager of Australian investment offerings. Vanguard
has sole dispositive power over 2,820,643 shares and shared dispositive power with VFTC over 39,329 shares.
|
|
|
(7)
|
Based
solely on a review of the Schedule 13G filed by Dimensional Fund Advisors LP (“Dimensional”) on February 9, 2017.
Dimensional provides investment advice to four registered investment companies and acts as investment manager or sub-advisor
to certain other commingled funds, group trusts and separate accounts (collectively, the “Funds”). Dimensional
and its subsidiaries may act as an adviser, sub-adviser and/or manager to certain Funds and possess voting or dispositive
power over the 2,877,035 shares held by the Funds and may be deemed to be the beneficial owner of the shares held by the Funds.
However, all shares are owned by the Funds, and Dimensional disclaims beneficial ownership of such shares.
|
|
|
(8)
|
Based
solely on a review of the Schedule 13G filed by Carlson Capital, L.P. on January 30, 2017. Carlson Capital has shared voting
and dispositive power over 1,816,215 shares.
|
Security
Ownership of Management
The
following table provides information, as of March 2, 2017, regarding the beneficial ownership of our common stock by each of our
directors, each of our 2016 Named Executive Officers (as identified beginning on page 21of this Proxy Statement), and all of our
current directors and executive officers as a group. Unless otherwise noted in the footnotes to the table, the persons named in
the table have sole voting and investment power with respect to all shares shown as beneficially owned by them. The address for
each executive officer and director listed below is c/o Exterran Corporation, 4444 Brittmoore Rd, Houston, Texas 77041.
Name
of Beneficial Owner
|
|
Shares
Owned
Directly
|
|
Restricted
Stock(1)
|
|
Right
to
Acquire
Stock(2)
|
|
Indirect
Ownership
|
|
Total
Ownership
|
|
Percent
of Class
|
Non-Employee
Directors
|
|
|
|
|
|
|
|
|
|
|
|
*
|
William
M. Goodyear
|
|
16,423
|
|
—
|
|
—
|
|
—
|
|
16,243
|
|
*
|
James
C. Gouin
|
|
8,676
|
|
—
|
|
—
|
|
—
|
|
8,676
|
|
*
|
John
P. Ryan
|
|
17,207
|
|
—
|
|
—
|
|
—
|
|
17,207
|
|
*
|
Christopher
T. Seaver
|
|
46,714
|
|
—
|
|
—
|
|
—
|
|
46,714
|
|
*
|
Mark
R. Sotir(3)
|
|
22,228
|
|
—
|
|
—
|
|
—
|
|
22,228
|
|
*
|
Richard
R. Stewart
|
|
8,800
|
|
—
|
|
—
|
|
—
|
|
8,800
|
|
*
|
Ieda
Gomes Yell(4)
|
|
11,829
|
|
—
|
|
—
|
|
—
|
|
11,829
|
|
*
|
Named
Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Andrew
J. Way
|
|
50,357
|
|
280,226
|
|
—
|
|
—
|
|
330,583
|
|
*
|
David
A. Barta
|
|
|
|
49,245
|
|
—
|
|
—
|
|
49,245
|
|
*
|
Jon
C. Biro(5)(6)
|
|
42,271
|
|
—
|
|
—
|
|
—
|
|
42,271
|
|
*
|
Steven
W. Muck(6)
|
|
17,629
|
|
37,780
|
|
—
|
|
—
|
|
55,409
|
|
*
|
Girish
K. Saligram
|
|
400
|
|
76,072
|
|
—
|
|
—
|
|
76,472
|
|
*
|
Daniel
K. Schlanger(5)(6)
|
|
59,132
|
|
—
|
|
—
|
|
—
|
|
59,132
|
|
*
|
Christopher
T. Werner(6)
|
|
6,032
|
|
22,163
|
|
—
|
|
—
|
|
28,195
|
|
*
|
All
directors and executive
officers as a group (15 persons)
|
|
|
|
|
|
|
|
|
|
|
|
2.2%
|
(1)
|
Includes
unvested restricted stock awards which generally vest ratably on each anniversary date of grant over a three-year period from
the original date of grant. Officers and directors have voting power and, once vested, dispositive power.
|
|
|
(2)
|
Includes
shares that can be acquired immediately or within 60 days of March 2, 2017 through the exercise of stock options.
|
(3)
|
Mr.
Sotir is Co-President of Equity Group Investments, a division of Chai Trust. Chai Trust is the beneficial owner of approximately
3.2 million shares of our common stock as of March 10, 2016; however, Mr. Sotir disclaims beneficial ownership of such shares.
|
|
|
(4)
|
Includes
2,313 phantom units granted under the Amended and Restated Directors’ Stock and Deferral Plan.
|
|
|
(5)
|
Information
based on Company records and last filed Statement of Changes of Beneficial Ownership (Form 4).
|
|
|
(6)
|
Former
Named Executive Officer during calendar year 2016.
|
Section
16(a) Beneficial Ownership Reporting Compliance
Under
Section 16(a) of the Exchange Act, directors, executive officers and beneficial owners of 10% or more of our common stock (“Reporting
Persons”) are required to report to the SEC on a timely basis the initiation of their status as a Reporting Person and any
changes with respect to their beneficial ownership of our common stock. Based solely on a review of Forms 3, 4 and 5 (and any
amendments thereto) furnished to us, we have concluded that no Reporting Persons were delinquent in 2016 with respect to their
reporting obligations, as set forth in Section 16(a) of the Exchange Act.
COMPENSATION
DISCUSSION AND ANALYSIS
This
Compensation Discussion and Analysis (“CD&A”) provides information about the compensation philosophy and programs
and actual compensation decisions for 2016 related to our principal executive officer, our current and former principal financial
officers, our three other most highly compensated executive officers, and a former executive officer who would have been one of
the three most highly compensated executive officers except he resigned in March 2016. We refer to this group collectively as
our “Named Executive Officers” or “NEOs” throughout this discussion. For 2016, our Named Executive Officers
are: Andrew J. Way, our President and Chief Executive Officer; David A. Barta, our Senior Vice President and Chief Financial Officer;
Girish K. Saligram, our Senior Vice President, Global Services; Steven W. Muck, our former Senior Vice President, Engineering
and Product Lines; Christopher T. Werner, our former Senior Vice President, Global Operations; Jon C. Biro, our former Senior
Vice President and Chief Financial Officer; and Daniel K. Schlanger, our former Senior Vice President, Global Products. Our former
NEOs with the exception of Mr. Schlanger remained employed with us throughout 2016 to support with the leadership transition.
Executive
Summary
Our
executive compensation program is designed to align executive officers’ pay with individual and company performance in order
to achieve growth, profitability and stockholder returns, and to attract and retain talented executives who are critical to short-
and long-term success. Important features of our executive compensation program and practices are provided in the following table:
|
●
|
We
do maintain compensation plans designed to align our executives’ compensation with
long-term stockholder value
|
|
●
|
We
do base our executives’ incentive awards primarily on quantitative metrics
|
|
●
|
We
do deliver one-half (50%) of our executives’ long-term incentive compensation in
the form of performance-based shares
|
|
●
|
We
do retain an independent compensation consultant to advise the Compensation Committee
|
|
●
|
We
do conduct an annual review of our compensation strategy
|
|
●
|
We
do employ our executives at-will
|
|
●
|
We
do maintain double-trigger provisions under our change-of-control agreements
|
|
●
|
We
do maintain stock ownership policies for our executives and directors
|
|
●
|
We
don’t allow our executives to hedge or sell short Company shares
|
|
●
|
We
don’t allow our executives to pledge Company shares
|
|
●
|
We
don’t provide for tax gross-ups in our change-of-control agreements
|
|
●
|
We
don’t provide cash payments for tax equalization
|
|
●
|
We
don’t provide for liberal share counting in our equity plan
|
|
●
|
We
don’t allow for option repricing under our equity plan
|
|
●
|
We
don’t provide any perquisites for our current executives
|
The
Existing Environment
OUR
STRATEGY
Exterran
was spun-off as a separate, publicly-traded corporation (the “Spin-Off”) from Archrock, Inc., formerly known as Exterran
Holdings, Inc. (“Archrock”), effective November 3, 2015. Our first full year of operation as a separate publicly-traded
company was 2016.
We
are a market leader in the provision of midstream infrastructure solutions, including compression, production, and processing
products and services that support the production and transportation of oil and natural gas throughout the world. We provide these
solutions to a global customer base consisting of companies engaged in all aspects of the oil and natural gas industry, including
large integrated oil and natural gas companies, national oil and natural gas companies, independent oil and natural gas producers,
and oil and natural gas processors, gatherers and pipeline operators. We operate in four primary business lines: contract operations,
aftermarket services, oil and gas product sales and Belleli EPC product sales.
To
successfully compete on a global scale, we recruit, attract and retain executives who have experience and knowledge of leading
global energy business operations. This skill set includes, but is not limited to, developing and implementing strategies to gain
market share and generate profitable returns across a wide portfolio of product and service offerings in different countries;
working knowledge of the needs of national oil companies; experience managing and navigating complex national and local laws,
rules and regulations as it pertains to conducting business in different countries; and attracting, leading, and motivating local
leadership who can implement corporate-level strategies, controls, processes and procedures.
In
2016, as part of our strategy to emphasize and strengthen our position on a global scale, we made changes in the Company’s
management team across the organization, including the employment of David A. Barta as our Senior Vice President and Chief Financial
Officer; Girish R. Saligram as our Senior Vice President, Global Services; and Roger George as our Senior Vice President, Global
Engineering and Product Lines to replace Steven W. Muck, who resigned from this positon and separated from the Company in March
2017. Other key individuals have been added in strategic areas across the organization, including Finance, Global Health, Safety
and Environmental (“HSE”), and Aftermarket Services.
Additionally,
following the Spin-Off we appointed a corporate officer reporting to the Chief Executive Officer to oversee the non-core Belleli
operations with the goal of divesting the Belleli Energy Critical Process Equipment S.r.l. (“Belleli CPE”), and implementing
a plan to exit all other non-core business lines of our subsidiary Belleli Energy S.r.l. (“Belleli EPC”; subsequently
renamed Exterran Italy S.r.l.). In August 2016, we completed the sale of Belleli CPE to Tosto S.r.l.
OUR
2016 PERFORMANCE
2016
was a challenging year for the industry, with significantly curtailed customer spending in the face of a multi-year decline in
oil and gas prices. The year started with international oil prices dropping to a low of $26 per barrel, and natural gas production
in the U.S. declining due to low levels of drilling activity. U.S. exploration and production companies continued to focus on
reducing costs, preserving cash and repaying debt, and limited investment to basins where high returns for production growth could
be quickly maximized. Internationally, many national oil companies were focused on lowering internal costs and seeking alternative
sources of capital to develop their projects. These factors led to a sharp reduction in capital spending and project starts across
the global energy industry, resulting in less demand and lower pricing for services, equipment and infrastructure across all subsectors
of the energy service and equipment industry. We navigated the Company through this severe industry downturn while managing a
financial restatement (which is described below).
To
partially offset the reduced revenue and profit opportunities resulting from this challenging market environment, we focused on
maximizing cash flow and prioritizing debt reduction. To accomplish this, we reduced working capital through improved planning,
lowering inventory levels, increasing supply chain efficiencies and improving visibility to cash collections. We also reduced
overall costs through headcount reductions, idling or closing non-strategic manufacturing facilities, and lowering expenses in
several non-compensation cost categories. Merit increases to base pay were suspended and participation in both our short-term
and long-term incentive plans was reduced or eliminated. We also changed our compensation plans to include metrics that would
support cash flow and debt reduction.
Financial
and Operational Highlights
Several
positive outcomes came from our efforts. We increased net cash provided by continuing operating activities by $135 million to
$266 million in 2016 as compared with $131 million in 2015, as working capital was reduced by $231 million from December 31, 2015
levels. We utilized this cash to reduce our debt levels in 2016 by $177 million. Long-term debt at December 31, 2016 was $349
million, a 34% reduction from long-term debt of $526 million at December 31, 2015.
Selling,
general and administrative expense (“SG&A”) in 2016 was reduced by 25% from 2015 levels. Our fourth quarter 2016
SG&A expense of $42 million was 21% lower than fourth quarter 2015 SG&A expense of $53 million. We enter 2017 as a leaner
company.
From
an operational perspective, we maintained a gross margin percentage in the contract operations segment above management’s
stated goal of 60% by recording a gross margin percentage of 63% for the year. This was accomplished by changing the scope and
scale of certain projects despite pricing discounts requested by customers due to market conditions. Despite the difficult market
environment, orders for our oil and gas products increased throughout the year, culminating in oil and gas product sales bookings
of $231 million for fourth quarter 2016, which marked the third consecutive quarter of increased bookings since the first quarter
2016 low of $20 million. We evaluate the performance of our segments based on gross margin, which is defined as revenue less cost
of sales (excluding depreciation and amortization expense).
In
an effort to focus on our core oil and gas business, we began optimizing our product portfolio by completing the sale of Belleli
CPE during the third quarter of 2016, and committing to a plan to exit the non-core Belleli EPC product sales business.
Compensation
Highlights
In
response to the difficult operating environment expected for 2016, the Compensation Committee and the Company made a number of
changes to the executive compensation plans and practices to help control costs and manage through the market downturn. A summary
of these changes, which are more specifically described in this CD&A, is as follows:
|
●
|
Our
executives did not receive any pay increases in 2016 relative to their compensation at
the time of the Spin-Off in November 2015;
|
|
●
|
Our
2016 Short-term Incentive Program (“2016 STI Program”) was suspended for
existing Named Executive Officers;
|
|
●
|
The
performance-based component of our 2016 Long-term Incentive (“LTI”) Awards
was increased from 20% to 50% (“Performance Awards”); and
|
|
●
|
The
financial component of our LTI Awards was changed from EBITDA, as adjusted, to operating
cash flow consistent with our 2016 focus on cash flow and debt reduction.
|
In
response to market volatility the performance period for the 2016 Performance Awards was one year. The goal was to use the long-term
component of the executive pay program to focus and reward the executives for meeting the near-term business objectives of the
Company during a challenging year. As a result of the performance discussed above, the at-risk portion of the LTI Awards was achieved
at 135% of target. See “
Payout of 2016 Performance Awards”
below for more details.
Restatement
Management
accomplished our 2016 initiatives while also working toward the completion of a financial restatement (the “Restatement”).
Subsequent to the filing of our Annual Report on Form 10-K for the year ended December 31, 2015, originally filed with the SEC
on February 26, 2016 (“Original Filing”), senior management identified errors relating to the application of percentage-of-completion
accounting principles to certain Belleli EPC projects. Management promptly reported the matter to our Audit Committee, which immediately
retained counsel, who in turn retained a forensic accounting firm, to initiate an internal investigation. As previously disclosed
in the Current Report on Form 8-K filed with the SEC on April 26, 2016, Exterran’s management and the Audit Committee determined,
based on the preliminary results of the internal investigation, that the financial statements and related report of independent
registered public accounting firm within the Original Filing should no longer be relied upon as a result of errors and possible
irregularities relating to the accounting for certain Belleli EPC projects.
Our
Restatement was completed on January 4, 2017 when we filed our amended Annual Report on Form 10-K/A (“Form 10-K/A”)
for the fiscal year ended December 31, 2015 and our Quarterly Reports on Form 10-Q for the periods ending March 31, 2016, June
30, 2016 and September 30, 2016 (together, the “2016 Form 10Qs”). The Restatement and its effects have been set forth
in our Form 10-K/A and 2016 Form 10-Qs. In addition, the remediation actions the Company has taken and will continue to take,
including those to strengthen and enhance our control culture and environment, are set forth in Item 9A of the Form 10-K/A.
2017
Compensation Decisions
In
February 2017, the Compensation Committee approved 2017 compensation for our Named Executive Officers. Other than Mr. Way,
our anticipated Named Executive Officers for 2017 were hired by the Company during the second half of 2016, and therefore
base salaries for 2017 will remain unchanged. The structure and target levels of the 2017 STI and LTI programs are
substantially similar to the Company’s 2016 programs (had the 2016 STI program not been suspended) and are designed to
focus executives on Company EBITDA, as adjusted, working capital, growth and HSSE, as well as each
executive’s individual performance. The 2017 LTI awards will be 50% performance based for all of our Named Executive
Officers other than Mr. Way, whose LTI award will be approximately 55% performance based.
Compensation
Philosophy and Objectives
Our
executive compensation program reflects the Company’s commitment to align pay with individual and Company performance, while
allowing the Company to attract and retain highly qualified executives. Our program is designed to motivate our executives to
achieve the Company’s business objectives and create long-term value for our stockholders.
The
primary objectives of our executive compensation program are to:
|
●
|
Pay
competitively
— We believe that to attract, retain and motivate an effective
management team with the level of expertise and experience needed to achieve consistent
growth, profitability and returns for stockholders, total compensation should be competitive
with that of comparably-sized companies across a variety of industries and within the
midstream and oilfield services sector, as further described below in “
How We
Determine Executive Compensation
.”
|
|
●
|
Pay
for performance
— Our program’s emphasis on performance-based, variable
compensation is an important component of our overall compensation philosophy. Incentive
awards based on annual performance combined with time-based equity awards that vest over
several years balance short-term and long-term business objectives.
|
|
●
|
Align
management’s interests with stockholders’ interests —
Our program’s
emphasis on equity-based compensation and ownership encourages executives to act strategically
to drive sustainable long-term performance and enhance long-term stockholder value.
|
HOW
WE DETERMINE EXECUTIVE COMPENSATION
Our
Compensation Committee is responsible for establishing and overseeing compensation programs for our Named Executive Officers that
are consistent with our compensation philosophy. In carrying out this role, our Compensation Committee considered the factors
below:
|
●
|
the
Company’s overall results as well as each executive’s impact on Company performance;
|
|
●
|
each
executive’s relative scope of responsibility;
|
|
●
|
each
executive’s individual performance, demonstrated leadership and potential;
|
|
●
|
current
and past total compensation, including a review of base salary, short-term incentive
pay and the value of LTI Awards received;
|
|
●
|
peer
group data, and information and analysis provided by the Compensation Committee’s
independent compensation consultant, as further detailed below;
|
|
●
|
internal
pay equity considerations;
|
|
●
|
stockholder
value creation; and
|
|
●
|
any
other factors that the Compensation Committee deems relevant.
|
No
specific formula is used to determine the weight of any factor; rather, compensation is established based on the Compensation
Committee’s assessment of all relevant information. Using these factors, all elements of compensation, including base salaries
and target percentages for short-term and long-term incentive compensation, are reviewed annually by the Compensation Committee.
Role
of Management
Our
Chief Executive Officer recommends to the Compensation Committee the compensation package for our executive officers other than
himself. Each year, the Chief Executive Officer makes recommendations regarding salary adjustments, targets for annual cash incentives
and LTI Awards. The Chief Executive Officer considers the factors described above, including his subjective analysis of their
performance. The Compensation Committee makes the final determinations regarding executive compensation in light of the Chief
Executive Officer’s recommendations and the Committee’s assessment on the factors described above. Compensation decisions
for our Chief Executive Officer are made by our Compensation Committee.
The
most significant aspects of the Chief Executive Officer’s role in the compensation-setting process for 2016 were:
|
●
|
recommending
executive officers’ compensation programs, policies, incentive opportunities and
compensation levels that are consistent with our business strategy;
|
|
●
|
recommending
corporate performance goals on which performance-based compensation will be based;
|
|
●
|
assisting
in the evaluation of, or evaluating, executive performance; and
|
|
●
|
providing
relevant materials for Compensation Committee review and consideration.
|
Role
of Independent Consultant
Since
November 2015, the Compensation Committee has engaged Semler Brossy Consulting Group (“Semler Brossy”), as its independent
executive compensation consultant to provide information and advise the Committee and management on matters relating to executive
compensation and to assist them in developing and implementing our executive compensation programs. In 2016, Semler Brossy provided
the following services:
|
●
|
analysis
and recommendations on the 2016 peer group, as described below;
|
|
●
|
review
and assistance as requested by the Company in development of new executive officer compensation
packages;
|
|
●
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provision
of information related to trends, new rules and regulations that may impact executive
and director compensation practices and administration; and
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|
●
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input
and advice regarding the incentive compensation plan design for 2016.
|
The
Compensation Committee reviewed the independence of Semler Brossy, employing the independence factors specified in the Corporate
Governance Standards of the NYSE. Based on this assessment, the Compensation Committee determined that Semler Brossy was independent
from the Company’s management and free from any relationships that could raise any conflicts of interest or similar concerns.
Peer
Group Benchmarking
Compensation
levels for 2016, as well as benchmarking for LTI Awards and STI Program targets reflected in our executives’ employment
letters entered into in November 2015, were based upon the peer group established by Exterran Holdings prior to the Spin-Off.
The 2015 peer group included:
Basic
Energy Services, Inc.
|
Key
Energy Services, Inc.
|
Patterson-UTI
Energy, Inc.
|
Cameron
International Corporation
|
McDermott
International, Inc.
|
RPC,
Inc.
|
Dresser-Rand
Group Inc.
|
Oceaneering
International, Inc.
|
Superior
Energy Services, Inc.
|
Flowserve
Corporation
|
Oil
States International, Inc.
|
Willbros
Group, Inc.
|
In
2016, the Compensation Committee engaged Semler Brossy to provide Exterran with an analysis of potential peer companies most similar
to Exterran based on both financial metrics and business characteristics, including global footprint. Semler Brossy considered
four metrics in its analysis: (1) public companies in selected energy equipment and services, machinery and construction and engineering
industries; (2) business fit; (3) meaningful percentage of revenue generated from international sales; and (4) peer company financial
size, based on annual revenues ranging from approximately $0.5 billion to $4.0 billion.
Based
upon a review of the data provided by Semler Brossy, the Compensation Committee approved the following 2016 peer group, which
reflects a mix of energy equipment, well-servicing companies and industrial machinery companies with an oil and gas component:
Archrock,
Inc.
Colfax
Corp.
Dril-Quip,
Inc.
Enerflex
Ltd.
Flowserve
Corporation
|
Forum
Technologies
ITT,
Inc.
McDermott
International
Oceaneering
International
Oil
States International
|
RPC,
Inc.
ShawCor
Ltd.
SPX
Flow, Inc.
Superior
Energy Services
TETRA
Technologies, Inc.
|
The
Compensation Committee considered 2016 peer group data in determining executive compensation design for 2017.
Consideration
of Previous “Say on Pay” Voting
On
March 17, 2016, we filed with the SEC a proxy statement for our 2016 annual meeting (“2016 Annual Meeting”). One of
the proposals to be considered by our stockholders at the 2016 Annual Meeting was a vote, on an advisory basis, to approve the
compensation of our Named Executive Officers for 2015, often referred to as a “say on pay.” As a result of the Restatement,
on April 26, 2016 we filed a Current Report on Form 8-K with the SEC announcing the postponement of the 2016 Annual Meeting. Accordingly,
this Annual Meeting will be the first opportunity for our stockholders to consider a “say on pay” vote on our executive
compensation. See “Proposal 3 – Advisory Vote to Approve the Compensation of our Named Executive Officers.”
Elements
of Our Executive Compensation Program
In
order to achieve the objectives of our executive compensation program, we have developed a balanced compensation package which
includes the following key elements and objectives of each:
Element
|
Objective
|
Base
Salary
|
Attracts
and retains talented executives, recognizes individual roles and responsibilities and provides stable income; targeted to
be at the median
|
Annual
performance-based incentive compensation (“STI”) – suspended during 2016
|
Promotes
achievement of short-term performance objectives and rewards executives for their contributions toward achieving those objectives
|
Long-term
equity incentive compensation (“LTI Awards”)
|
Aligns
executives’ interests with stockholders’ interests, emphasizes long-term financial and operational performance,
and helps retain key executives
|
Retirement
savings, and health and welfare benefits
|
Provides
retirement income and protection against the financial hardship that can result from illness, disability or death consistent
with programs that are generally available to U.S. employees
|
Severance
benefit and change-of-control arrangements
|
Aids
in attracting and retaining executive talent, particularly during any potential transition
|
The
charts below reflect the 2016 mix of compensation elements based on the executive compensation program design, although STI was
suspended in 2016 for our Chief Executive Officer (“CEO”) and Named Executive Officers. Our goal is to enhance the
link between pay and performance and align our executive compensation program with long-term stockholder interests. The mix for
the CEO and the NEOs is more heavily weighted towards compensation that is at-risk and tied to Company performance.
|
|
|
|
|
|
CEO
Compensation Mix
Base:
Annual
Incentive:
Equity
Incentive:
|
16%
16%
68%
|
Other
NEOs Compensation Mix
Base:
Annual
Incentive:
Equity
Incentive:
|
29%
21%
50%
|
BASE
SALARY
The
initial base salary level for each of our Named Executive Officers was set forth in his employment letter. Due to unprecedented
market conditions, the Compensation Committee determined not to make any increases to Named Executive Officers’ base salaries
in 2016.
Generally,
our base pay structure is competitive and allows us to attract new executive talent to the Company. The 2016 annualized base salaries
for our Named Executive Officers were:
Executive
Officer
|
|
Title
|
|
2016
Base
Salary
|
Andrew
J. Way
|
|
President
and Chief Executive Officer
|
|
$750,000
|
David
A. Barta (1)
|
|
Senior
Vice President and Chief Financial Officer
|
|
$435,000
|
Girish
K. Saligram (2)
|
|
Senior
Vice President, Global Services
|
|
$500,000
|
Steven
W. Muck
|
|
Former
Senior Vice President, Engineering and Product Lines
|
|
$350,000
|
Christopher
T. Werner
|
|
Former
Senior Vice President, Global Operations
|
|
$300,000
|
Jon
C. Biro
|
|
Former
Senior Vice President and Chief Financial Officer
|
|
$420,000
|
Daniel
K. Schlanger(3)
|
|
Former
Senior Vice President, Global Products
|
|
$420,000
|
|
(1)
|
Mr.
Barta was named as our Senior Vice President and Chief Financial Officer Designate effective
November 7, 2016 and became our Senior Vice President and Chief Financial Officer effective
December 29, 2016. In connection with Mr. Barta’s commencement of employment in
November 2016, we entered into an employment letter with him which provides for an annual
base salary of $435,000. See “
Executive Employment Letters
” below.
|
|
(2)
|
Mr.
Saligram was named as our Senior Vice President, Global Services effective August 22,
2016. In connection with Mr. Saligram’s commencement of employment, we entered
into an employment letter with him which provides for an annual base salary of $500,000.
See “
Executive Employment Letters
” below.
|
|
(3)
|
Mr.
Schlanger resigned effective March 31, 2016.
|
ANNUAL
PERFORMANCE-BASED INCENTIVE COMPENSATION
The
initial incentive compensation target for each of our Named Executive Officers was set forth in his employment letter and was
the result of arm’s length negotiations. In determining the target incentive opportunity for each Named Executive Officer,
the Compensation Committee considered the factors discussed above under “
How We Determine Executive Compensation
.”
Due to market conditions, the Chief Executive Officer voluntarily requested to suspend his participation in the Company’s
2016 STI Program, and the other Named Executive Officers mutually agreed to suspend participation in the 2016 STI Program.
Had
this program not been suspended, each Named Executive Officer’s 2016 cash incentive target would have been:
Executive
Officer
|
|
Title
|
|
2016
Cash
Incentive
Target
(% of base
salary)
|
|
2016
Cash
Incentive
Target
($)
|
Andrew
J. Way
|
|
President
and Chief Executive Officer
|
|
100
|
|
750,000
|
David
A. Barta
|
|
Senior
Vice President and Chief Financial Officer
|
|
(1)
|
|
(1)
|
Girish
K. Saligram
|
|
Senior
Vice President, Global Services
|
|
(2)
|
|
(2)
|
Steven
W. Muck
|
|
Former
Senior Vice President, Engineering and Product Lines
|
|
70
|
|
245,000
|
Christopher
T. Werner
|
|
Former
Senior Vice President, Global Operations
|
|
60
|
|
180,000
|
Jon
C. Biro
|
|
Former
Senior Vice President and Chief Financial Officer
|
|
70
|
|
294,000
|
Daniel
K. Schlanger
|
|
Former
Senior Vice President, Global Products
|
|
70
|
|
294,000
|
|
(1)
|
Mr.
Barta was appointed Senior Vice President and Chief Financial Officer Designate effective
November 7, 2016. Under the terms of his employment letter, Mr. Barta was not eligible
to participate in the 2016 STI Program but received a cash bonus of $350,000 as a sign-on
bonus under the terms of his employment letter.
|
|
(2)
|
Mr.
Saligram was appointed Senior Vice President, Global Services effective August 22, 2016.
Under the terms of his employment letter, Mr. Saligram was not eligible to participate
in the 2016 STI Program but was guaranteed to receive a minimum cash bonus of $275,000
for 2016, in part to compensate Mr. Saligram for compensation he would have been entitled
to receive from his prior employer had his employment not terminated. In February 2017,
the Compensation Committee determined to award Mr. Saligram $100,000 in addition for
his extraordinary performance in 2016.
|
LONG-TERM
INCENTIVE COMPENSATION
We
believe that awarding a meaningful portion of our Named Executive Officers’ total compensation in the form of LTI Awards
aligns executives’ interests with our stockholders’ interests, emphasizes long-term financial and operational performance
and helps to retain key executives. Under the Company’s 2015 Stock Incentive Plan adopted in November 2015 (the “2015
Plan”), the Compensation Committee has the ability to grant stock options, restricted stock and restricted stock unit awards,
stock appreciation rights and performance units to employees (including our Named Executive Officers and our Chief Executive Officer)
and consultants of our Company and its affiliates, and to our directors.
2016
LTI AWARDS
During
2016, equity-based LTI Awards generally were granted and valued based on the market closing price of our common stock on the date
of approval by our Board or Compensation Committee. LTI Awards granted during 2016 to Named Executive Officers (other than the
awards to Messrs. Barta and Saligram) consisted of time-based restricted stock awards and performance awards that generally vest
one-third per year over a three-year period, subject to continued service through each vesting date and to accelerated vesting
as described below under “Information Regarding Executive Compensation—Potential Payments upon Termination or Change
of Control.” For Messrs. Barta and Saligram, due to the Restatement, LTI Awards made in connection with their employment
(“New Hire LTI Awards”) were based on the market closing price of our common stock on the start date of their employment,
although the actual grants were not made until the Restatement was completed in January 2017. As a result, these awards are not
included in the Summary Compensation Table or the Grant of Plan Based Awards Table in this Proxy Statement.
Under
the 2016 LTI Award program, we granted awards that consisted of restricted stock (50%) and performance awards (50%):
LTI
Award
|
Purpose
|
Metrics
|
Vesting
|
Restricted
stock
(50%)
|
Encourage
retention and incentivize key employees to work toward long-term performance goals by aligning their interests with stockholders’
interests; reduce impact of share price volatility over industry cycles
|
Time-based
only
|
Restricted
stock awards generally vest ratably over three years from date of grant, subject to continued service through the vesting
date
|
Performance
awards (50%)
|
Encourage
achievement of short-term and long-term objectives and initiatives that reward sustained
stockholder value creation
|
One-year
measurement period
Achievement
based on two absolute measures:
● 90%
Operating cash flow
● 10%
HSE improvement
|
Earned
units or shares generally vest ratably over three years from date of grant (including one-year performance period), subject
to continued service through the vesting date
|
Our Compensation Committee establishes its schedule
for making annual LTI Awards several months in advance and does not make such awards based on knowledge of material nonpublic information
or in response to stock price. This practice results in awards typically being granted on a regular, predictable cycle, and in
most cases after earnings information has been disseminated to the marketplace (with certain exceptions, for example upon the hiring
of a new employee or following the promotion of an employee). In some instances, our Compensation Committee may be aware at the
time grants are made of matters or potential developments that are not yet appropriate for public disclosure at that time, but
that may result in public announcement of material information at a later date.
In determining the LTI Awards for each Named Executive
Officer, excluding the New Hire LTI Awards, the Compensation Committee considered the factors discussed above under “
How
We Determine Executive Compensation
.” These LTI Awards were granted in March 2016.
Each Named Executive Officer’s 2016 LTI
Awards, at target, were:
Executive
Officer
|
|
Title
|
|
2016
Restricted Stock Awards (Target)
($)
|
|
2016
Performance Awards
(Target)
($)
|
|
2016
LTI
Awards
Total
($)
|
Andrew
J. Way
|
|
President
and Chief Executive Officer
|
|
$1,650,000
|
|
$1,650,000
|
|
$3,300,000
|
David
A. Barta(1)
|
|
Senior
Vice President and Chief Financial Officer
|
|
$750,000
|
|
—
|
|
$750,000
|
Girish
K. Saligram (2)
|
|
Senior
Vice President, Global Services
|
|
$1,100,000
|
|
—
|
|
$1,100,000
|
Steven
W. Muck
|
|
Former
Senior Vice President, Engineering and Product Lines
|
|
$250,000
|
|
$250,000
|
|
$500,000
|
Christopher
T. Werner
|
|
Former
Senior Vice President, Global Operations
|
|
$200,000
|
|
$200,000
|
|
$400,000
|
Jon
C. Biro
|
|
Former
Senior Vice President and Chief Financial Officer
|
|
$400,000
|
|
$400,000
|
|
$800,000
|
Daniel
K. Schlanger
|
|
Former
Senior Vice President, Global Products
|
|
—
|
|
—
|
|
—
|
|
(1)
|
Mr. Barta was appointed Senior Vice President and Chief Financial Officer
Designate effective November 7, 2016, and his restricted stock award was granted January 6, 2017 and vests annually on November
7 of each year. Under the terms of his employment letter, Mr. Barta received an initial equity award of $750,000 of restricted
stock. See “
Executive Employment Letters
” below.
|
|
(2)
|
Mr. Saligram was appointed Senior Vice President, Global Services effective
August 22, 2016, and his restricted stock award was granted January 6, 2017 and vests annually on August 22 of each year. Under
the terms of his employment letter, Mr. Saligram received an initial equity award of $1,100,000 of restricted stock. See “
Executive
Employment Letters
” below.
|
The initial equity awards granted to Mr. Barta
and Mr. Saligram in 2016 were not able to be awarded until January 6, 2017 as a result of the Restatement. As a result, these awards
will not appear in the Summary Compensation Table until next year.
PAYOUT OF 2016 PERFORMANCE AWARDS
The performance metrics for the performance awards,
as well as 2016 results for each metric, are below:
|
Weighting
|
Threshold
|
Target
|
Maximum
|
2016 Actual
|
Payout Factor
|
—
|
50%
|
100%
|
150%
|
135%
|
Operating Cash Flow (in millions)(1)
|
90%
|
$ 200
|
$ 250
|
$ 275
|
$ 315
|
Health and Safety (2)
|
10%
|
(2)
|
(2)
|
(2)
|
—
|
Performance
below threshold will result in a payout of 0%.
|
(1)
|
Operating cash flow is defined as EBITDA,
as adjusted, plus cash flows from increases or reductions in (i) accounts receivable,
(ii) inventory, (iii) costs in excess and estimated earnings on uncompleted contracts
(“CIE”) net of billings on uncompleted contracts in excess of costs and estimated
earnings (“BIE”), and (iv) accounts payable, less maintenance and other capital
expenditures. “EBITDA, as adjusted” is defined as net income (loss) excluding
income (loss) from discontinued operations (net of tax), cumulative effect of accounting
changes (net of tax), income taxes, interest expense (including debt extinguishment costs
and gain or loss on termination of interest rate swaps), depreciation and amortization
expense, impairment charges, merger and integration expenses, restructuring charges,
and non-cash gains or losses from foreign currency exchange rate changes recorded on
intercompany obligations;
provided, however
, that adjustments to EBITDA, as adjusted,
may be made by the Committee, in its discretion, for acquisitions or dispositions and
unusual items or non-recurring items. Included in the definition of operating cash flow
is EBITDA, as adjusted, which is a non-GAAP financial measure. For additional information
about EBITDA, as adjusted, and a reconciliation to the most comparable GAAP financial
measure, see “
Non-GAAP Financial Measures
” within the Company’s
2016 Form 10-K.
|
|
(2)
|
For purposes of the 2016 STI Program, the HSE component is measured based
on improvement in certain operational safety metrics and is “on” only if those metrics are improved from prior periods.
|
Based upon a review of 2016 results, the operating
cash flow component was achieved at maximum (150%) and we did not achieve the HSE component. On February 15, 2017, the Compensation
Committee certified that the 2016 Performance Awards were deemed earned at 135% of target.
|
The earned 2016 Performance Awards vest one-third
per year over a three-year period from the date of grant (except for Mr. Barta and Mr. Saligram as noted above), subject to continued
service through each vesting date, and are payable in cash based on the market closing price of our common stock on the vesting
date for the first tranche, which becomes vested on March 4, 2017 and in shares for the two remaining tranches, which will vest
on March 4, 2018 and March 4, 2019. See
Grants of Plan-Based Awards for 2016
below for more information about the 2016 Performance
Awards awarded to our Named Executive Officers.
RETIREMENT SAVINGS, HEALTH AND WELFARE BENEFITS
In 2016, our Named Executive Officers participated
in benefit programs sponsored by Exterran. These benefits are designed to provide retirement income and protection against the
financial hardship that can result from illness, disability or death.
Retirement Savings Plan
The Exterran 401(k) Retirement Savings
Plan (“401(k) Plan”) allows certain employees, including our Named Executive Officers in 2016, to defer a portion
of their eligible salary, up to the Code maximum deferral amount on a pre-tax basis or, commencing in 2016, on a post-tax
(Roth) basis. Participants make contributions to an account maintained by an independent trustee and direct how those
contributions are invested. We match 100% of a participant’s contribution to a maximum of 1% of his or her annual
eligible compensation, plus 50% of the participant’s contribution from 2% to a maximum of 6% of his or her annual
eligible compensation, for a total company match of up to 3.5% of annual eligible compensation up to IRS Code limits.
Participants vest in the matching contributions after two years of employment.
Deferred Compensation Plan
We maintain the Exterran Corporation Deferred
Compensation Plan, which allows certain key employees, including our Named Executive Officers, to defer receipt of their compensation,
including up to 100% of their salaries and bonuses, and which also may be credited with Company contributions designed to serve
as a make-up for the portion of the employer-matching contribution that cannot be made under the Exterran 401(k) Plan
due to Code limits. Participants generally must make elections relating to compensation deferrals and plan distributions in the
year preceding that in which the compensation is earned. Contributions to the Company’s Deferred Compensation Plan are self-directed
investments in the various funds available under the plan. There are no interest calculations or earnings measures other than the
performance of the investment funds selected by the participant. Participants direct how their contributions are invested and may
change these elections at any time, provided that such changes in elections comply with Section 409A of the Code. Due to the market
downturn, the Company did not contribute to the Company’s Deferred Compensation Plan during 2016.
Health and Welfare Benefit Plans
We maintain a standard complement of health and
welfare benefit plans for our employees, including our Named Executive Officers. In 2016, we provided medical, dental and vision
benefits, flexible spending accounts, short-term and long-term disability insurance, accidental death and dismemberment insurance
and life insurance coverage. These benefits were provided to our Named Executive Officers on the same terms and conditions as they
are provided to our other employees.
Perquisites
In 2016, the Company provided a limited perquisite
to one former NEO for tax advice and preparation services. Our policies prohibit tax gross-ups.
EXECUTIVE EMPLOYMENT LETTERS
We are parties to letters with each of
our Named Executive Officers which set forth the material terms and conditions of their employment with us. Each executive employment
letter provides for an initial annual base salary, and initial target short-term and long-term incentive the Named Executive Officer
is eligible to receive. The base salary and incentive targets are subject to annual review, with future salary levels and incentive
target rates subject to the discretion of the Compensation Committee. In addition, certain of the executive employment letters
provide for one-time cash payments or equity awards. Each executive employment letter also provides that the applicable executive
is eligible to participate in all employee benefit plans maintained by the Company for the benefit of its employees and executives
generally.
SEVERANCE BENEFIT AND CHANGE-OF-CONTROL AGREEMENTS
Pursuant to the letters between our Named Executive
Officers and the Company referred to above, we entered into severance benefit and change-of-control agreements with each of our
Named Executive Officers. See “
Information Regarding Executive Compensation—Potential Payments upon Termination
or Change-of-Control
” below, for a description of the terms of the severance benefit and change-of-control agreements,
as well as estimates of the potential payouts under those agreements. Our Compensation Committee believes these severance benefit
agreements and change-of-control agreements are necessary to attract and retain executive talent and are, therefore, a customary
part of executive compensation. The change-of-control agreements are structured as “double-trigger” agreements. In
other words, the change of control alone does not trigger benefits; rather, benefits are paid only if the executive incurs a qualifying
termination of employment within 18 months following a change of control. These agreements also contain standard non-disparagement
restrictions as well as other customary provisions.
Stock Incentive Plan
Our 2015 Plan permits the accelerated vesting
of outstanding equity awards upon a change of control. The award agreements for all awards granted to our NEOs under the 2015 Plan
are structured as “double-trigger” agreements and do not provide for accelerated vesting upon a change of control alone;
rather, the awards accelerate only if the grantee incurs a qualifying termination of employment within 18 months following the
change of control (in which case the award will vest in full upon such termination). See “
Information Regarding Executive
Compensation—Potential Payments upon Termination or Change-of-Control
” below, for more information about equity
vesting under various circumstances.
401(k) Plan
The Exterran Corporation 401(k) Plan provides
for accelerated vesting of any unvested employer matching contributions following a change of control.
OTHER POLICIES AND CONSIDERATIONS
Stock Ownership Requirements
Our Named Executive Officers are
required to hold an amount of our common stock with a market value of at least three times their annual base salary (or, for
the Chief Executive Officer, five times his annual base salary) under our stock ownership policy. Executive officers
generally have five years from their date of hire or promotion, respectively, to meet this stock ownership requirement. Our
Compensation Committee believes that stock ownership requirements closely align our executive officers’ interests with
those of its stockholders by ensuring its executive officers have a meaningful ownership stake in the Company. Our
Compensation Committee measures the stock ownership of our Named Executive Officers annually as of October 31. As of October
31, 2016, our Chief Executive Officer met the stock ownership guideline, and our other Named Executive Officers were in
compliance with our stock ownership requirements as they have up to five years from their date of hire or promotion to reach
the required ownership level.
Prohibition on Hedging
We maintain a policy prohibiting all employees
and directors from entering into any transaction designed to hedge or offset any decrease in the market value of our equity securities,
including purchasing financial instruments (such as variable forward contracts, equity swaps, collars or exchange funds), or otherwise
trading in market options (such as puts or calls), warrants, or other derivative instruments of our equity securities.
Prohibition on Pledging
We instituted a policy effective in February 2017
that prohibits senior executives and directors from pledging our equity securities as collateral for a loan, purchasing our equity
securities on margin, or borrowing against our equity securities held in a margin account.
TAX AND ACCOUNTING CONSIDERATIONS
Section 162(m) of the Code
Section 162(m) of the Code generally disallows
the deductibility of certain compensation expenses in excess of $1,000,000 paid to any one executive officer within a fiscal year.
Compensation that is “performance-based” is excluded from this limitation. For compensation to be “performance-based,”
it must meet certain criteria, including performance goals approved by our stockholders and, in certain cases, objective targets
based on performance goals approved by
stockholders. We believe that maintaining the
discretion to evaluate the performance of its Named Executive Officers through the use of performance-based compensation is an
important part of our responsibilities and benefits our stockholders, even if it may be non-deductible under Section 162(m) of
the Code. The Compensation Committee, in coordination with management, intends to periodically assess the potential application
of Section 162(m) of the Code on incentive compensation awards and other compensation decisions.
Section 280G of the Code
Section 280G of the Code disallows a tax deduction
for excess parachute payments to certain executives of companies that undergo a change of control. In addition, Section 4999 of
the Code imposes a 20% excise tax on the individual with respect to the excess parachute payment. Parachute payments are compensation
linked to or triggered by a change of control and may include, but are not limited to, bonus payments, severance payments, certain
fringe benefits, and payments and acceleration of vesting from LTI plans including stock options and other equity-based compensation.
Excess parachute payments are parachute payments that exceed a threshold determined under Section 280G of the Code based on the
executive’s prior compensation. It is our policy not to provide any executives with a gross-up payment to make up for these
taxes, if any.
Section 409A of the Code
Section 409A of the Code requires that “nonqualified
deferred compensation” be deferred and paid under plans or arrangements that satisfy the requirements of the statute with
respect to the timing of deferral elections, timing of payments and certain other matters. Failure to satisfy these requirements
can expose employees and directors to accelerated income tax liabilities, substantial additional taxes and interest on their vested
compensation under such plans. Accordingly, as a general matter, it is our intention to design and administer our respective compensation
and benefit plans and arrangements for all of our employees and directors, including our Named Executive Officers, so that they
are either exempt from, or satisfy the requirements, of Section 409A of the Code.
Accounting for Stock-Based Compensation
We have followed Financial Accounting Standards
Board Accounting Standards Codification 718, “Stock Compensation” (“ASC 718”) in accounting for stock-based
compensation awards. ASC 718 requires companies to calculate the grant date “fair value” of their stock-based awards
using a variety of assumptions.
ASC 718 also requires companies to recognize the
compensation cost of their stock-based awards in their income statements over the period that an employee is required to render
service in exchange for the award. We expect that we will regularly consider the accounting implications of significant compensation
decisions, especially in connection with decisions that relate to our equity incentive award plans and programs. As accounting
standards change, we may revise certain programs to appropriately align accounting expenses of our equity awards with our overall
executive compensation philosophy and objectives.
Information
Regarding Executive Compensation
The tables below set forth certain compensation
information paid or awarded by us, as applicable, during the year ended December 31, 2016.
SUMMARY COMPENSATION
TABLE FOR 2016
The following table shows the compensation awarded,
earned or paid during the years shown to our Named Executive Officers by us.
Name
and Title
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
|
Stock
Awards ($)(1)
|
|
Option
Awards
($)
|
|
Non-Equity
Incentive Plan Compensation
($)(2)
|
|
|
All
Other Compensation
($)(3)
|
|
|
Total
($)
|
Andrew
J. Way, President and Chief Executive Officer
|
|
2016
2015(4)
|
|
750,000
369,231
|
|
—
2,000,000
|
|
|
3,300,000
3,999,996
|
|
—
—
|
|
—
750,000
|
|
|
9,775
9,087
|
|
|
4,059,775
7,128,314
|
David
A. Barta, Senior Vice President and Chief Financial Officer
|
|
2016
|
|
58,557
|
|
350,000(5)
|
|
|
—
|
|
—
|
|
—
|
|
|
250
|
|
|
408,807
|
Girish
K. Saligram, Senior Vice President, Global Services
|
|
2016
|
|
173,077
|
|
2,275,962(6)
|
|
|
—
|
|
—
|
|
—
|
|
|
731
|
|
|
2,449,770
|
Steven
W. Muck, Former Senior Vice President, Engineering and Product Lines
|
|
2016
2015
2014
|
|
350,000
350,000
334,718
|
|
—
132,000(7)
—
|
|
|
500,000
767,983
632,646
|
|
—
—
—
|
|
—
170,000
425,000
|
|
|
13,519
42,909
35,155
|
|
|
863,519
1,462,892
1,427,519
|
Christopher
T. Werner, Former Senior Vice President, Global Operations
|
|
2016
2015
2014
|
|
300,000
298,751
285,717
|
|
75,000(8)
75,000(8)
—
|
|
|
400,000
399,987
232,626
|
|
—
—
—
|
|
—
91,500
133,258
|
|
|
11,398
19,310
20,510
|
|
|
786,398
884,548
672,111
|
Jon
C. Biro, Former Senior Vice President and Chief Financial Officer
|
|
2016
2015
2014
|
|
420,000
420,000
113,077
|
|
—
—
—
|
|
|
800,000
1,199,995(9)
499,974
|
|
—
—
—
|
|
—
213,000
100,000
|
|
|
12,578
35,723
5,151
|
|
|
1,232,578
1,868,718
718,202
|
Daniel
K. Schlanger, Former Senior Vice President, Global Products
|
|
2016
2015
2014
|
|
115,439
420,000
407,308
|
|
—
600,000(10)
—
|
|
|
—
1,400,005
511,980
|
|
—
—
279,995
|
|
—
110,000
600,000
|
|
|
804,016
97,150
64,447
|
|
|
919,455
2,627,155
1,863,730
|
|
(1)
|
The amounts in this column represent the grant date fair value of (a) restricted
shares of Exterran’s common stock (which are set forth in the table below) and (b) 2016 Performance Awards at
target. The grant date fair values of the 2016 Performance Awards at maximum level were as follows: Mr. Way: $2,475,000; Mr. Muck:
$375,000; Mr. Werner: $300,000; and Mr. Biro: $600,000. The grant date fair value of these awards was calculated in accordance
with ASC 718. For a discussion of valuation assumptions, see Note
18 to the consolidated and combined financial statements in Exterran Corporation’s Annual Report on Form 10-K for the year
ended December 31, 2016.
|
|
(2)
|
In February 2016, Mr. Way voluntarily requested to suspend his participation
in the 2016 STI program and the other NEOs employed at that time mutually agreed to suspend participation in the 2016 STI program.
|
|
(3)
|
The amounts in this column for 2016 include the following:
|
Name
|
401(k)
Plan
Company
Contribution
($)(a)
|
Tax
Preparation
and Planning
Services ($)
|
DERs
/ Dividends
($)(b)
|
Other
($)(c)
|
Total
($)
|
Andrew
J. Way
|
9,275
|
—
|
—
|
500
|
9,775
|
David
A. Barta
|
—
|
—
|
—
|
250
|
250
|
Girish
K. Saligram
|
481
|
—
|
—
|
250
|
731
|
Steven
W. Muck
|
9,275
|
—
|
3,744
|
500
|
13,519
|
Christopher
T. Werner
|
9,275
|
—
|
1,623
|
500
|
11,398
|
Jon
C. Biro
|
9,275
|
—
|
3,303
|
—
|
12,578
|
Daniel
K. Schlanger
|
6,257
|
8,613
|
1,548
|
787,598
|
804,016
|
|
(a)
|
The amounts shown represent matching Company contributions for 2016.
|
|
(b)
|
Represents cash payments pursuant to dividend equivalents which were paid
on unvested 2014 Archrock shares awarded under the Archrock 2013 Plan which were bifurcated at the time of the Spin-Off.
|
|
(c)
|
Represents contributions made to employee health savings accounts, and in
the case of Mr. Schlanger, also represents severance payments paid pursuant to the severance benefit agreement.
|
|
(4)
|
Mr. Way’s letter provided for a one-time cash signing bonus of $2,000,000, which was
intended, in part, to compensate Mr. Way for the value of the expatriate compensation package that he would have
been entitled to receive from his prior employer during 2015 had his employment not terminated. Mr. Way must repay the
signing bonus in full in the event that he voluntarily terminates employment prior to July 1, 2017. Mr. Way’s
employment letter also provided for a one-time grant to Mr. Way of $3,999,996 in restricted
stock pursuant to the
2015 Plan which vests one-third per year
over three years
beginning on November 4, 2016.
|
|
(5)
|
Under the terms of Mr. Barta’s employment offer, he received a one-time
cash payment of $350,000 in connection with his commencement of employment and subject to continued service.
|
|
(6)
|
Under the terms of Mr. Saligram’s employment offer, certain one-time cash payments
were negotiated as to make him whole for compensation and
benefits he was forfeiting for leaving his prior employer and
paid in
connection with his commencement of employment and subject to continued service. In addition, the Compensation Committee determined
to award him
$100,000 in
February 2017 for extraordinary performance in 2016.
|
|
(7)
|
Mr. Muck’s employment letter in connection with the Spin-Off provided for a retention
incentive with
an aggregate
value of
$400,000, 33% of which was paid in cash on the date of the
Spin-Off, and the remaining was made in the form of a restricted
stock award granted which vests 33% and 34% per year over the next two years on the anniversary date of the
Spin-Off.
|
|
(8)
|
Mr. Werner’s employment letter in connection with the Spin-Off provided for a cash
retention payment of $150,000 which $75,000 was paid on the date of the Spin-Off and $75,000 on the first anniversary of the
Spin-Off.
|
|
(9)
|
Mr. Biro’s employment letter in connection with the Spin-Off provided for a restricted
stock award equal to $400,000 which vests 33% on the date of
Spin-Off, and 33% and 34% per year over the next two years on the anniversary date of the
Spin-Off.
|
|
(10)
|
Mr. Schlanger’s employment letter provided for a retention incentive
with an aggregate value equal to $1,200,000, one-half of which was paid in cash on the date of Spin-Off, and one-half of which
was made in the form of a restricted stock award which was accelerated due to his severance agreement.
|
GRANTS
OF PLAN-BASED AWARDS FOR 2016
The following table shows the short- and long-term incentive plan awards
granted to the Named Executive Officers in 2016.
|
|
Estimated
Possible
Payouts
Under
Non-Equity
Incentive
Plan
Awards
(1)
|
|
Estimated
Possible
Payouts
Under
Equity
Incentive
Plan
Awards
(2)
|
|
All
other Stock Awards: Number of Shares of Stock or Units (#)(3)
|
|
All
other Option Awards: Number of Securities Under-lying Options
(#)
|
|
Exer-cise
or Base Price of Option Awards ($/SH)
|
|
Grant
Date Fair Value of Stock and Option Awards ($)(4)
|
Name
|
Grant
Date
|
Thresh-old
($)
|
Target
($)
|
Maxi-mum
($)
|
|
Thresh-old
(#)
|
Target
(#)
|
Maxi-mum
(#)
|
|
|
|
|
Andrew
J. Way
|
3/4/2016
3/4/2016
|
—
—
|
—
—
|
—
—
|
|
—
—
|
106,728
|
160,092
—
|
|
—
106,728
|
|
—
—
|
|
—
—
|
|
1,650,000
1,650,000
|
David
A. Barta(5)
|
—
|
—
|
—
|
—
|
|
—
|
—
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
Girish
K. Saligram(5)
|
—
|
—
|
—
|
|
|
—
|
—
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
Steven
W. Muck
|
3/4/2016
3/4/2016
|
—
—
|
—
—
|
—
—
|
|
—
—
|
16,171
—
|
24,257
—
|
|
—
16,171
|
|
—
—
|
|
—
—
|
|
250,000
250,000
|
Christopher
T. Werner
|
3/4/2016
3/4/2016
|
—
—
|
—
—
|
—
—
|
|
—
—
|
12,937
—
|
19,406
—
|
|
—
12,937
|
|
—
—
|
|
—
—
|
|
200,000
200,000
|
Jon
C. Biro
|
3/4/2016
3/4/2016
|
—
—
|
—
—
|
—
—
|
|
—
—
|
25,874
—
|
38,811
—
|
|
—
25,874
|
|
—
—
|
|
—
—
|
|
400,000
400,000
|
Daniel
K. Schlanger
|
—
|
—
|
—
|
—
|
|
—
|
—
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1)
|
In February 2016, Mr. Way voluntarily requested to suspend his participation in the 2016 STI program
and the other NEOs employed at that time mutually agreed to suspend participation in the 2016 STI program.
|
|
(2)
|
The amounts in these columns show the range of potential payouts of 2016 Performance Awards
awarded as part of the 2016 LTI Award. “Target” is the number of 2016 Performance Awards at Plan.
“Threshold” as used in this table is the lowest possible payout (0% of the grant), and “Maximum” is
the highest
possible payout (150%
of the grant). See “
Long-Term Incentive
Compensation—2016 Performance Awards
” for a
description of the 2016 Performance Awards.
|
|
(3)
|
Shares of restricted stock awarded under our 2015 Plan that vest one-third per year over a three-year
period, subject to continued service through each vesting date.
|
|
(4)
|
The grant date fair value of performance awards and restricted stock is calculated in accordance
with ASC 718. For a discussion of valuation assumptions, see Note 18 to the consolidated and combined financial statements in our
Annual Report on Form 10-K for the year ended December 31, 2016. 2016 Performance Award units are shown at target value.
|
|
(5)
|
In connection with their employment in 2016, Mr. Barta and Mr. Saligram were entitled to receive
equity awards subject to Committee approval. These awards were not approved and issued until 2017 as a result of the Restatement
and therefore do not appear in the Grants of Plan-Based Awards Table or the Summary Compensation Table.
|
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END FOR 2016
The following table shows our Named Executive Officers’ equity
awards and equity-based awards denominated in our common stock outstanding at December 31, 2016.
Option
Awards
|
|
Stock
Awards
|
Name
|
Number
of Securities Underlying Unexercised Options (#) Exercisable (1)
|
Number
of Securities Underlying Unexercised Options (#) Unexercisable
|
Option
Exercise Price ($)
|
Option
Expiration Date
|
Number
of Shares or Units of Stock That Have Not Vested (#)(3)
|
|
Market
Value of Shares or Units of Stock That Have Not Vested ($)(4)
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Yet Vested (#)(5)
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Yet Vested
($)(4)
|
Andrew
J. Way
|
—
|
—
|
—
|
—
|
280,226
|
|
6,697,401
|
106,728
|
2,550,799
|
David
A. Barta
|
—
|
—
|
—
|
—
|
—
|
|
—
|
—
|
—
|
Girish
K. Saligram
|
—
|
—
|
—
|
—
|
—
|
|
—
|
—
|
—
|
Steven
W. Muck
|
—
|
—
|
—
|
—
|
40,606
|
|
970,483
|
16,171
|
386,487
|
Christopher
T. Werner
|
5,418(2)
|
—
|
17.96
|
2/28/2017
|
24,459
|
|
584,570
|
12,937
|
309,194
|
Jon
C. Biro
|
—
|
—
|
—
|
—
|
57,774
|
|
1,380,799
|
25,874
|
618,389
|
Daniel
K. Schlanger
|
—
|
—
|
—
|
—
|
—
|
|
—
|
—
|
—
|
|
(1)
|
Messrs. Way, Barta, Saligram, Muck, and Biro have not been granted stock options.
|
|
(2)
|
Stock options awarded under the Archrock 2007 Plan that vested at the rate of one-third per year,
subject to continued service through each vesting date, and with a term of seven years following the grant date.
|
|
(3)
|
Includes shares of restricted stock and units
awarded under the Archrock 2013 Plan or our 2015 Plan.
|
Name
|
|
Unvested
Share/Units
|
|
Initial
Vesting
Date
|
|
Vesting
Increments
|
Andrew
J. Way
|
|
173,498
106,728
|
|
11/03/2016
03/04/2017
|
|
One-third
over 3 years
One-third
over 3 years
|
|
|
|
|
|
|
|
Steven
W. Muck
|
|
942
|
|
03/04/2015
|
|
One-third
over 3 years
|
|
|
1,549
|
|
04/29/2015
|
|
One-third
over 3 years
|
|
|
13,226
|
|
03/04/2016
|
|
One-third
over 3 years
|
|
|
8,718
|
|
11/03/2016
|
|
33%
(cash) on 11/4/2015; 33% (restricted stock) on 11/3/16; 34% (restricted stock) on 11/3/17
|
|
|
16,171
|
|
03/04/2017
|
|
One-third
over 3 years
|
|
|
|
|
|
|
|
Christopher
T. Werner
|
|
942
|
|
03/04/2015
|
|
One-third
over 3 years
|
|
|
10,580
12,937
|
|
03/04/2016
03/04/2017
|
|
One-third
over 3 years
One-third
over 3 years
|
|
|
|
|
|
|
|
Jon
C. Biro
|
|
1,888
|
|
09/22/2015
|
|
One-third
over 3 years
|
|
|
21,162
8,850
25,874
|
|
03/04/2016
11/04/2015
03/04/2017
|
|
One-third
over 3 years
33%
on 11/4/15; 33% on 11/3/16; 34% on 11/3/17
One-third
over 3 years
|
|
|
|
|
|
|
|
|
|
(4)
|
Based on the market closing price of our common stock on December 30, 2016, $23.90.
|
|
(5)
|
Amounts shown are the unearned and unvested number of 2016 Performance Award units at target. One-third
of the performance units awarded in 2016 under our 2015 Plan vest one-third per year on each anniversary of the grant date.
|
OPTION
EXERCISES AND STOCK VESTED FOR 2016
The following table shows the value realized by the Named Executive
Officers upon vesting of restricted stock awards and exercised stock options during 2016.
|
|
Option
Awards
|
|
Stock
Awards
|
Name
|
|
Number
of Shares Acquired on Exercise (#)(1)
|
|
Value
Realized on
Exercise
($)(2)
|
|
Number
of Shares and Units Acquired on Vesting (#)(1)
|
|
Value
Realized
on
Vesting
($)(2)
|
Andrew
J. Way
|
|
—
|
|
—
|
|
86,749
|
|
1,282,150
|
David
A. Barta
|
|
—
|
|
—
|
|
—
|
|
—
|
Girish
K. Saligram
|
|
—
|
|
—
|
|
—
|
|
—
|
Steven
W. Muck
|
|
—
|
|
—
|
|
17,568
|
|
265,425
|
Christopher
T. Werner
|
|
5,209
|
|
8,598
|
|
6,244
|
|
96,532
|
Jon
C. Biro
|
|
—
|
|
—
|
|
18,940
|
|
285,878
|
Daniel
K. Schlanger(3)
|
|
22,522
|
|
96,189
|
|
60,098
|
|
929,115
|
|
(1)
|
Includes stock options exercised by Messrs. Schlanger and Werner and our restricted stock that
vested during 2016.
|
|
(2)
|
The value realized for vested awards was determined by multiplying the fair market value of the
restricted stock (market closing price of Exterran’s common stock on the vesting date) by the number of shares
or awards that vested. Shares vested on various dates throughout the year; therefore, the value listed represents the aggregate
value of all shares that vested for each Named Executive Officer in 2016.
|
|
(3)
|
Stock awards include March 4, 2016 vesting and March 31, 2016 acceleration of equity vesting within
the 12 months of separation date for Mr. Schlanger.
|
NONQUALIFIED DEFERRED COMPENSATION FOR 2016
The following table shows our Named Executive Officers’ compensation
for 2016 under our nonqualified deferred compensation plan.
Name
|
|
Executive
Contributions in
Last Fiscal Year ($)
|
|
|
Company
Contributions in
Last Fiscal Year ($)(1)
|
|
|
Aggregate
Earnings
(Losses) in Last
Fiscal Year ($)
|
|
|
Aggregate
Withdrawals/
Distributions ($)
|
|
|
Aggregate
Balance
at Last Fiscal Year
End ($)
|
|
Andrew
J. Way
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
David
A. Barta
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Girish
K. Saligram
|
|
|
100,961
|
|
|
|
—
|
|
|
|
381
|
|
|
|
—
|
|
|
|
101,342
|
|
Steven
W. Muck
|
|
|
7,000
|
|
|
|
—
|
|
|
|
29,045
|
|
|
|
—
|
|
|
|
277,137
|
|
Christopher
T. Werner
|
|
|
—
|
|
|
|
—
|
|
|
|
462
|
|
|
|
—
|
|
|
|
9,523
|
|
Jon
C. Biro
|
|
|
12,780
|
|
|
|
—
|
|
|
|
6,931
|
|
|
|
—
|
|
|
|
66,569
|
|
Daniel
K. Schlanger (2)
|
|
|
—
|
|
|
|
—
|
|
|
|
4,327
|
|
|
|
98,303
|
|
|
|
—
|
|
|
(1)
|
The Company suspended its contributions to the Deferred Compensation Plan.
|
|
(2)
|
Distribution was made 6 months following separation date due to 409A regulations.
|
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
Pursuant
to the agreements we entered into with Archrock at the time of the Spin-Off, each outstanding Exterran Holdings stock option,
restricted stock award, restricted stock unit award and performance unit award granted prior to calendar year 2015, was split
into two awards of the same type as the underlying pre-Spin-Off award, consisting of an Archrock award and an Exterran Corporation
award. In the case of outstanding non-qualified options, the exercise price was also adjusted to preserve the spread between the
exercise price and the applicable market closing price immediately prior to and following the Spin-Off. Adjusted equity awards
generally remain subject to the same vesting schedules and other terms and conditions as applied to the underlying Exterran Holdings
awards immediately prior to the Spin-Off.
Severance
Benefit Agreements
We
entered into severance benefit agreements with Messrs. Way, Biro, Muck and Werner in November 2015, with Mr. Saligram in
August 2016 and with Mr. Barta in November 2016. The terms and conditions of these severance benefit agreements were
substantially similar.
Each
severance benefit agreement provides that if the executive’s employment is terminated by us without cause or by the
executive with good reason at any time through the term of the agreement which is one year, to be automatically renewed for
successive one-year periods, until 365 days’ (for Messrs. Way, Biro, Muck and Werner) or 90 days’ (for Messrs.
Saligram and Barta) prior notice is given by either party, he would receive a lump sum payment in cash on the 60th day after
the termination date equal to the sum of:
|
●
|
his
annual base salary then in effect;
|
|
●
|
his
target annual incentive bonus opportunity for the termination year;
|
|
●
|
a
pro-rated portion of his target annual incentive bonus opportunity for the termination
year based on the length of time during which he was employed during such year; and
|
|
●
|
any
earned but unpaid annual incentive award for the fiscal year ending prior to the termination
date (collectively, the “Non-CoC Cash Severance”).
|
In
addition, the executive would be entitled to:
|
●
|
accelerated
vesting as of the termination date of all his outstanding unvested equity, equity-based and cash awards based in Exterran
common
stock, or where applicable the common stock of Archrock, in any case that were
scheduled
to
vest within 12 months following the termination date (the “Non-CoC
Accelerated
Vesting”), provided that, if the achievement of the performance period
goals for unearned performance award units has not yet been measured as of the separation date, the achievement of such goals
will be measured following the conclusion of the performance period and paid in accordance with the applicable award
agreement (for Messrs Way, Biro, Muck and Werner), and will be measured at target (for Mr. Saligram and Mr.
Barta); and
|
|
●
|
continued
coverage under our medical benefit plans for him and his eligible dependents for up to
one year subject to executive’s payment of the employee premium (for Messrs. Way, Biro, Muck and Werner), or a cash
payment
equal to 18
months of employer premium payments (for Messrs. Saligram and Barta) following the
termination date.
|
Each
executive’s entitlement to the payments and benefits under his severance benefit agreement is subject to his execution of
a waiver and release for Exterran’s benefit. In addition, all severance benefit agreements contain non-disparagement restrictions,
and Messrs. Saligram’s and Barta’s severance benefit agreements also contain non-competition and non-solicitation
or hire provisions.
Change
of Control Agreements
We
entered into change-of-control agreements with Messrs. Way, Biro, Muck and Werner in November 2015, with Mr. Saligram in August
2016 and with Mr. Barta in November 2016. The terms and conditions of these change-of-control agreements were substantially similar.
Each
change-of-control agreement provides that if the executive’s employment is terminated by us other than for cause,
death or disability, or by the executive for good reason (in each case, a “Qualifying Termination”), within 18
months following a change of control of Exterran (as defined in the change of control agreements), he would receive a cash
payment not later than 60 days after the termination date equal to:
|
●
|
two
times (or, for Mr. Way, three times) his current annual base salary plus two times (or,
for Mr. Way, three times) his target annual incentive bonus opportunity for that year;
and (i) a pro-rated portion of his target annual incentive bonus opportunity for the
termination year based on the length of time during which he was employed during such
year and (ii) any earned but unpaid annual incentive award for the fiscal year ending
prior to the termination date; (the “CoC Cash Severance”); and
|
|
●
|
two
times (for Messrs. Way, Biro, Muck and Werner) the total of the Company contributions
that would have been credited to him under the Exterran 401(k) Plan and any
other deferred compensation plan had he made the required amount of elective deferrals
or contributions during the 12 months immediately preceding the termination month.
|
In
addition, the executive would be entitled to:
|
●
|
Company
provided medical coverage for him and his eligible dependents subject to executive’s payment of the employee premium
for up to
two
years
(for Messrs. Way, Biro, Muck and Werner) or a cash payment equal to 18 months of
employer premium payments (for Messrs. Saligram and Barta) following the
termination
date;
|
|
●
|
the
accelerated vesting of all his unvested stock options, restricted stock, restricted stock
units and other stock-based awards based in Exterran common stock or where applicable
the common stock of Archrock, and all cash-based incentive awards (collectively, the
“CoC Accelerated Vesting”); and
|
|
●
|
a
Section 280G “best pay” provision pursuant to which in the event any payments
or benefits received by the executive would be subject to an excise tax under Section
4999 of the Code, the executive will receive either the full amount of his payments or
a reduced amount such that no portion of the payments is subject to the excise tax (whichever
results in the greater after-tax benefit to the executive).
|
Each
executive’s entitlement to the payments and benefits under his change-of-control agreement is also subject to his execution
of a waiver and release for Exterran’s benefit. In addition, in the event an executive received payments under his change-of-control
agreement, such executive is subject to confidentiality, non-solicitation and non-competition restrictions
for two years following a termination of his employment, and for Messrs. Saligram and Barta a non-disparagement provision.
Vesting
of Equity-Based Incentives
Pursuant
to the agreements we entered into with Archrock at the time of the Spin-Off, a change of control of us will be treated as
a change of control of Archrock for purposes of outstanding stock options, restricted stock, restricted stock units,
and performance awards that continue to cover Archrock common stock and are held by our employees (including any of our
Named Executive Officers) following the Spin-Off (collectively, “Archrock Awards”). In addition, upon death
or disability, notwithstanding anything to the contrary in the applicable award agreements, all Archrock Awards will vest in
full (to the extent then-unvested) upon a change in control of Archrock.
The
outstanding award agreements for all Archrock and Exterran stock options, restricted stock and restricted stock units
provide that, upon a termination due to death or disability, the award will accelerate in full. In addition, upon death or
disability, the outstanding award agreements for performance awards provide that the award will accelerate in full based on
(i) the achievement of the applicable performance goals if such goals have been determined as of the date of termination or
(ii) achievement at the target performance level if the applicable performance goals have not been determined as of the
date of termination.
2016
Termination Payments
During
2016, we entered into separation agreements with each of Mr. Biro and Mr. Schlanger, which are described below.
Mr.
Schlanger.
On March 7, 2016, we entered into a separation letter with Mr. Schlanger pursuant to which, in connection with
his separation of employment, Mr. Schlanger received the payments and benefits set forth in his severance benefit agreement, which
consisted of: (i) a lump sum cash payment equal to the sum of (a) his annual base salary, (b) his target annual incentive bonus
opportunity for 2016 and (c) his target annual incentive bonus opportunity for 2016, prorated based on the length of his employment
during 2016; and (ii) the accelerated vesting of any then-outstanding equity, equity-based and cash awards held by Mr. Schlanger
that were denominated in shares of our common stock or Archrock common stock and would have otherwise vested during the twelve
(12)-month period following his separation date. Pursuant to his severance benefit agreement and his separation letter, Mr. Schlanger
is also subject to certain customary non-disparagement restrictions.
Mr.
Biro.
On December 23, 2016, we entered into a separation letter with Mr. Biro pursuant to which, in connection with his
separation of employment in January 2017, Mr. Biro received the payments and benefits set forth in his severance benefit
agreement, which consisted of: (i) a lump sum cash payment equal to the sum of (a) his annual base salary, and (b) his target
annual incentive bonus opportunity, and (c) his target annual incentive bonus opportunity for 2017, prorated based on the
length of his employment during 2017, (ii) the accelerated vesting of any then-outstanding equity, equity-based and cash
awards held by Mr. Biro that were denominated in shares of our common stock or Archrock common stock and would have otherwise
vested during the twelve (12)-month period following his separation date; and (iii) Company provided medical coverage under
our medical benefit plans for him and his eligible dependents for up to one year following his separation date. Pursuant to
his severance benefit agreement and his separation letter, Mr. Biro is also subject to certain customary
non-disparagement restrictions.
Potential
Payments
The
following table shows the potential payments to the Named Executive Officers (other than Mr. Schlanger) upon a theoretical termination
of employment or change of control occurring on December 31, 2016. The amounts shown assume a common stock value of $23.90 per
share of our common stock (the December 30, 2016 market closing prices). The actual amount paid out to an executive upon an actual
termination or change of control can only be determined at the time of such event. Amounts shown for Mr. Schlanger reflect amounts
paid pursuant to his separation agreement dated March 7, 2016.
Name
|
Termination
Due to Death
or Disability
($)(1)
|
Termination
Without Cause
or Resignation
with Good
Reason
($)(2)(3)
|
Change
of
Control
Without a
Qualifying
Termination
($)
|
Change
of
Control with a Qualifying
Termination
($)(4)
|
Andrew
J. Way
Cash
Severance
Stock
Option(5)
Restricted
Stock(6)
Performance
Awards(7)
Other
Benefits (8)
Total
Pre-Tax Benefit
|
—
—
6,697,401
2,550,799
—
9,248,200
|
2,250,000
—
2,923,568
850,266
10,617
6,034,451
|
NA
|
5,250,000
—
6,697,401
2,550,799
39,783
14,537,983
|
David
A. Barta
Cash
Severance
Stock
Option(5)
Restricted
Stock(6)
Performance
Awards(7)
Other
Benefits (9)
Total
Pre—Tax Benefit
|
—
—
—
—
—
—
|
1,087,500
—
—
—
13,758
1,101,258
|
NA
|
1,848,750
—
—
—
13,758
1,862,508
|
Girish
K. Saligram
Cash
Severance
Stock
Option(5)
Restricted
Stock(6)
Performance
Awards(7)
Other
Benefits (9)
Total
Pre—Tax Benefit
|
—
—
—
—
—
—
|
1,200,000
—
—
—
15,925
1,215,925
|
NA
|
2,050,000
—
—
—
15,925
2,065,925
|
Steven
W. Muck
Cash
Severance
Stock
Option(5)
Restricted
Stock(6)
Performance
Awards(7)
Other
Benefits (8)
Total
Pre-Tax Benefit
|
—
—
963,913
458,794
—
1,422,707
|
840,000
—
579,804
169,540
7,754
1,597,098
|
NA
|
1,435,000
—
963,913
458,794
34,057
2,891,764
|
Christopher
T. Werner
Cash
Severance
Stock
Option(5)
Restricted
Stock(6)
Performance
Awards(7)
Other
Benefits (8)
Total
Pre-Tax Benefit
|
—
—
549,786
368,834
—
918,620
|
660,000
—
242,492
137,442
10,617
1,050,551
|
NA
|
1,140,000
—
549,786
368,834
39,783
2,098,403
|
Jon
C. Biro
Cash
Severance
Stock
Option(5)
Restricted
Stock(6)
Performance
Awards(7)
Other
Benefits (8)
Total
Pre-Tax Benefit
|
—
—
1,279,654
719,533
—
1,999,187
|
1,008,000
—
665,089
256,702
12,061
1,941,852
|
NA
|
1,722,000
—
1,279,654
719,533
42,672
3,763,859
|
Daniel
K. Schlanger
Cash
Severance
Stock
Option(5)
Restricted
Stock(6)
Performance
Awards(7)
Other
Benefits (8)
Total
Pre-Tax Benefit
|
—
—
—
—
—
—
|
787,098
—
770,040
52,076
—
1,609,214
|
NA
|
—
—
—
—
—
—
|
|
(1)
|
“Disability”
is defined in our 2015 Plan for awards granted since November 3, 2015.
|
|
(2)
|
“Cause”
and “Good Reason” are defined in the severance benefit and change of control
agreements with us.
|
|
(3)
|
If
the executive had been terminated without Cause or resigned with Good Reason on December
31, 2016, under his severance benefit agreement his cash severance would consist of (i)
the sum of his base salary and his target annual incentive bonus (calculated as a percentage
of his annual base salary for 2016), plus (ii) his target annual incentive bonus (calculated
as a percentage of his annual base salary for 2016).
|
|
(4)
|
If
the executive had been subject to a change of control followed by a qualifying termination
(as defined in his change of control agreement) on December 31, 2016, under his change
of control agreement, his cash severance would consist of (i) two times (three times
for Mr. Way) the sum of his base salary and his target annual incentive bonus (calculated
as a percentage of his annual base salary for 2016), plus (ii) his target annual incentive
bonus (calculated as a percentage of his annual base salary for 2016).
|
|
(5)
|
As
of December 31, 2016, Mr. Werner’s vested options to purchase Exterran Corporation
common stock were both outstanding and in-the-money. No other executives have stock options
(vested or unvested) at this time.
|
|
(6)
|
The
amounts in this row represent the value of the accelerated vesting of the executive’s
unvested restricted stock of Exterran Corporation and Archrock, based on the December
30, 2016 market closing prices of Exterran Corporation and Archrock common stock.
|
|
(7)
|
The
amounts in this row represent the value of the accelerated vesting of the executive’s
unvested performance awards of Exterran Corporation and Archrock, based on the December
30, 2016 market closing prices of Exterran Corporation and Archrock common stock.
|
|
(8)
|
The
amounts in this row represent each executive’s right to the payment, as applicable,
of (i) continued coverage under our medical benefit plans for him and his eligible dependents for up to one year in the event
of a termination without Cause or voluntary resignation for Good Reason. COBRA
benefit
premiums
for
a
one-year
period in
the
event
of a
termination
without Cause or voluntary resignation for Good Reason, or (ii) medical benefit
premiums and Exterran Corporation contributions under the 401(k) Plan and deferred
compensation plan for a two-year period in the event of a change of control
followed
by a Qualifying Termination.
|
|
(9)
|
The
amounts in this row represent each executive’s right to an amount equal to eighteen
(18) months of (A) premium payments for continuation coverage pursuant to Section 4980B
of the Code for Executive and Executive’s eligible dependents following the Separation
Date minus (B) the cost to Executive of premium payments for healthcare coverage for
Executive and Executive’s eligible dependents during Executive’s employment
with the Company (calculated based on Executive’s elections as in effect on the
Date of Termination).
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
We
recognize that transactions with related persons can present potential or actual conflicts of interest and create the appearance
that decisions are based on considerations other than the best interests of us and our stockholders. Therefore, our Audit Committee
has adopted a written policy on related party transactions to provide guidance and set standards for the approval and reporting
of transactions between us and individuals with a direct or indirect affiliation with us and to ensure that those transactions
are in our best interest. Any proposed related-party transaction must be submitted to the Audit Committee for approval prior to
entering into the transaction. Additionally, our policy requires that our subsidiaries report all related party transactions to
the Financial Reporting Department on a quarterly basis. In the event a senior officer becomes aware of any pending or ongoing
related party transaction that has not been previously approved or ratified, the transaction must be promptly submitted to the
Audit Committee or its Chair for ratification, amendment or termination of the related party transaction. If a related party transaction
is ongoing, the Audit Committee may establish guidelines for management and will annually assess the relationship with such related
party.
In
reviewing a proposed or ongoing related-party transaction, the Audit Committee will consider, among other things, the following
factors to the extent relevant to the related-party transaction:
|
●
|
whether
the terms of the transaction are fair to the Company and would apply on the same basis
if the transaction did not involve a related party;
|
|
●
|
whether
there are any compelling business reasons for the Company to enter into the transaction;
|
|
●
|
whether
the transaction would impair the independence of an otherwise independent director; and
|
|
●
|
whether
the transaction would present an improper conflict of interest for any director or executive
officer of the Company, taking into account, among other factors the Audit Committee
deems relevant, the size of the transaction, the overall financial position of the director,
executive officer or other related party, that person’s interest in the transaction
and the ongoing nature of any proposed relationship.
|
There
were no related party transactions during 2016 that are required to be reported in this Proxy Statement.
PROPOSAL
2
RATIFICATION
OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte
& Touche LLP (“Deloitte”) served as our independent registered public accounting firm for the fiscal year ended
December 31, 2016. The Audit Committee has selected Deloitte as our independent registered public accounting firm for the fiscal
year ending December 31, 2017. We are submitting the selection of Deloitte for stockholder ratification at the Annual Meeting.
Representatives
of Deloitte attended all regularly scheduled meetings of the Audit Committee in 2016. For additional information concerning the
Audit Committee and its activities with Deloitte, see “
Report of the Audit Committee
” contained in this Proxy
Statement and “
Pre-Approval Policy
” following this proposal description. We expect that a representative of
Deloitte will attend the Annual Meeting, and the representative will have an opportunity to make a statement if he or she so chooses.
The representative will also be available to respond to appropriate questions from stockholders.
Board
of Directors’ Recommendation
The
Board recommends that the stockholders vote
“
FOR
”
the ratification
of the reappointment of Deloitte & Touche LLP.
Vote
Required
Ratification
requires the affirmative vote of the holders of a majority of the votes cast in favor of or against the proposal. This proposal
is considered a “routine” matter, and therefore, if a brokerage firm holds your shares and you do not provide any
voting instructions, your brokerage firm will have discretionary authority to vote your shares on this matter. Abstentions will
have no effect on the outcome of the vote.
Our
organizational documents do not require that our stockholders ratify the selection of our independent registered public accounting
firm. We are requesting such ratification because we believe it is a matter of good corporate practice. If our stockholders do
not ratify the selection, the Audit Committee will reconsider whether to retain Deloitte. Even if the selection is ratified, the
Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change
would be in the best interests of us and our stockholders.
Fees
Paid to the Independent Registered Public Accounting Firm
The
following table presents fees for professional services rendered by Deloitte and its member firms and respective affiliates on
our behalf during calendar years 2016 and 2015.
Types of Fees
|
|
|
|
2016
|
|
|
2015
|
|
Audit fees(a)
|
|
|
$
|
3,163,241
|
|
|
$
|
2,857,524
|
|
Audit-related fees(b)
|
|
|
|
2,145,000
|
|
|
|
440,435
|
|
Tax fees(c)
|
|
|
|
37,550
|
|
|
|
55,200
|
|
Other(d)
|
|
|
|
—
|
|
|
|
3,000
|
|
Total fees:
|
|
|
|
$
|
5,345,791
|
|
|
$
|
3,356,159
|
|
|
(a)
|
Audit
fees include fees billed by our independent registered public accounting firm related
to audits and reviews of financial statements we are required to file with the SEC, statutory
audits of certain of our subsidiaries’ financial statements as required under local
regulations and other services, including assistance with and review of documents filed
with the SEC.
|
|
(b)
|
Audit-related
fees for 2016 include fees billed by our independent registered public accounting firm
for audit work and reviews of financial statements undertaken in connection with our
Restatement of certain of our historical financial results as described in Note 13 to
the consolidated and combined financial statements in our Annual Report on Form 10-K
for the year ended December 31, 2016. Audit-related fees primarily consisted of fees
for 2015 for services rendered by our independent registered public accounting firm in
connection with the preparation of our Form 10 registration statement, including issuance
of comfort letters, which were incurred prior to the completion of the Spin-off and paid
by Archrock.
|
|
(c)
|
Tax
fees include fees billed by our independent registered public accounting firm primarily
related to tax compliance and consulting services.
|
|
(d)
|
All
other fees include fees billed by our independent registered public accounting firm related
to software licensing agreements.
|
In
considering the nature of the services provided by Deloitte, the Audit Committee determined that such services are compatible
with the provision of independent audit services. The Audit Committee discussed these services with Deloitte and our management
to determine that they are permitted under the rules and regulations concerning auditor independence promulgated by (i) the SEC
to implement the Sarbanes-Oxley Act of 2002 and (ii) the American Institute of Certified Public Accountants.
Pre-Approval
Policy
The
Audit Committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be
performed by our independent registered public accounting firm. This policy generally provides that we will not engage our independent
registered public accounting firm to render audit or non-audit services, and will not engage any other independent registered
public accounting firm to render audit services, unless the service is specifically approved in advance by the Audit Committee.
The
Audit Committee’s practice is to consider for approval, at its regularly scheduled meetings, all audit and non-audit services
proposed to be provided by our independent registered public accounting firm. In situations where a matter cannot wait until the
next regularly scheduled committee meeting, the chair of the Audit Committee has been delegated authority to consider and, if
appropriate, approve audit and non-audit services. Approval of services and related fees by the Audit Committee chair is reported
to the full Audit Committee at the next regularly scheduled meeting. All services performed by our independent registered public
accounting firm in 2016 were pre-approved by our Audit Committee.
PROPOSAL
3
ADVISORY
VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
The
Dodd-Frank Wall Street Reform and Consumer Protection Act added Section 14A to the Exchange Act, which requires that we provide
our stockholders with the opportunity to vote to approve, on a nonbinding, advisory basis, the compensation of our Named Executive
Officers as disclosed in this Proxy Statement in accordance with the compensation disclosure rules of the SEC. This proposal gives
stockholders the opportunity to approve, reject or abstain from voting with respect to the compensation provided to our Named
Executive Officers for 2016, as described in this Proxy Statement.
As
discussed in the Compensation Discussion and Analysis section of this Proxy Statement, our executive compensation program is designed
to attract and retain individuals with the level of expertise and experience needed to help achieve the business objectives intended
to drive both short- and long-term success and stockholder value. You are encouraged to read the detailed information concerning
our executive compensation program and policies contained in the Compensation Discussion and Analysis section of this Proxy Statement
as well as the compensation-related tabular and other disclosure following the Compensation Discussion and Analysis.
Board
of Directors’ Recommendation
The
Board recommends that stockholders vote
“
FOR
”
the following resolution:
“RESOLVED,
that the stockholders of Exterran Corporation approve, on an advisory basis, the compensation paid to its Named Executive Officers
for 2016, as disclosed in this Proxy Statement, including the Compensation Discussion and Analysis, the Summary Compensation Table
and the other related tables and disclosure.”
Vote
Required
Approval
of Proposal 3 requires the affirmative vote of the holders of a majority of the votes cast in favor of or against the proposal.
Abstentions and broker non-votes will have no effect on the outcome of the vote.
Because
the vote on this proposal is advisory in nature, the outcome will not be binding on the Company, the Board or the Compensation
Committee and will not affect compensation already paid or awarded. However, the Board and the Compensation Committee value the
opinions of our stockholders and will take into account the outcome of the vote when considering future compensation arrangements
for our Named Executive Officers.
PROPOSAL
4
ADVISORY
VOTE ON THE FREQUENCY OF FUTURE STOCKHOLDER VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
Section
14A of the Securities Exchange Act of 1934 requires that we provide stockholders with the opportunity to vote, on a non-binding,
advisory basis, for their preference as to how frequently we should conduct advisory votes on the compensation of our Named Executive
Officers. Stockholders may indicate whether they would prefer that we conduct advisory votes on executive compensation every year,
every two years or every three years. Stockholders also may abstain from casting a vote on this proposal.
After
careful consideration, the Board believes that a frequency of “every year” for the advisory vote on executive compensation
is the preferable interval for conducting and responding to a “say on pay” vote, so that stockholders may annually
express their views on our executive compensation programs.
Board
of Directors’ Recommendation
The
Board recommends that
stockholders
vote
for the option of
“
EVERY YEAR
”
on
the following resolution:
“RESOLVED,
that the
stockholders
of
Exterran Corporation determine, on an advisory basis, whether the preferred frequency of an advisory vote on the executive compensation
of the Company’s Named Executive Officers as set forth in the Company’s proxy statement should be every year, every
two years or every three years.”
Vote
Required
The
frequency option (every year, every two years or every three years) that receives a plurality of votes cast on this proposal will
be deemed the preferred option of our stockholders. Abstentions and broker non-votes will have no effect on the outcome of the
vote.
Because
the vote on this proposal is advisory in nature and non-binding on the Company, the Board may decide to hold advisory votes on
Named Executive Officer compensation more or less frequently than the deemed preferred option, except that these votes must be
held at least every three years. However, the Board and the Compensation Committee value the opinions expressed by stockholders
regarding the frequency of these votes and will take into account the outcome of the vote when considering how often to submit
these matters for stockholder input.
ADDITIONAL
INFORMATION
2018
Annual Meeting of Stockholders
Any
stockholder proposal that is intended for inclusion in our Proxy Statement for our 2018 annual meeting of stockholders must be
received by our Corporate Secretary no later than November 17, 2017.
Our
Bylaws establish an advance-notice procedure for stockholder proposals or director nominations to be brought before an annual
meeting but not included in our Proxy Statement. Under these bylaw provisions, we must receive written notice of a stockholder
proposal or director nomination to be brought before the 2018 annual meeting of stockholders on or after November 17, 2017 and
no later than December 17, 2017 for that proposal or nomination to be considered timely. Stockholder proposals and director nominations
brought under these Bylaw provisions must include the information required under our Bylaws, including the following:
|
●
|
a
description of the material terms of certain derivative instruments to which the stockholder
or the beneficial owner, if any, on whose behalf the nomination or proposal is being
made is a party, a description of the material terms of any proportionate interest in
our shares or derivative instruments held by a general or limited partnership in which
such person is a general partner or beneficially owns an interest in a general partner,
and a description of the material terms of any performance-related fees to which such
person is entitled based on any increase or decrease in the value of our shares or derivative
instruments; and
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with
respect to a nomination of a director, a description of the material terms of all direct
and indirect compensation and other material monetary arrangements during the past three
years, and any other material relationships between or among the proponent of the nomination
and his or her affiliates, on the one hand, and each proposed nominee and his or her
affiliates, on the other hand, including all information that would be required to be
disclosed pursuant to Rule 404 promulgated under the SEC’s Regulation S-K if the
proposing person were the “registrant” for purposes of such rule and the
nominee were a director or executive officer of such registrant.
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A
stockholder submitting a proposal or director nomination under our Bylaw provisions must, among other things:
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include
the name and address of the stockholder, and the number of our shares that are, directly
or indirectly, owned beneficially and of record by the stockholder;
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state
whether the stockholder intends to deliver a proxy statement and form of proxy to holders
of a sufficient number of voting shares to carry the proposal or to elect the nominee
or nominees, as applicable;
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be
a stockholder of record as of the time of giving the notice and at the time of the meeting
at which the proposal or nomination will be considered and include a representation to
that effect; and
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update
and supplement the required information 10 business days prior to the date of the meeting.
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These
requirements in our Bylaws are in addition to the SEC’s requirements with which a stockholder must comply to have a stockholder
proposal included in our Proxy Statement. Stockholders may obtain a copy of our Bylaws by making a written request to our Corporate
Secretary.
Stockholder
proposals and nominations of directors must be delivered to our principal executive office at 4444 Brittmoore Road, Houston, Texas
77041, Attention: Corporate Secretary.
If you have any questions or require any
assistance with voting your shares, please contact Innisfree M&A Incorporated, our proxy solicitor, toll-free at (888) 750-5834.
Banks and brokers may call collect at (212) 750-5833.
INNISFREE M&A INCORPORATED
501 Madison Avenue, 20th Floor New York,
NY 10022
Stockholders May Call Toll-Free: (888)
750-5834 (from the United States and Canada)
Banks and Brokers May Call Collect:
(212) 750-5833
Exterran Corporation
www.exterran.com
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EXTERRAN
CORPORATION
4444 BRITTMOORE ROAD
HOUSTON, TX 77041
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VOTE
BY INTERNET -
www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern
Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow
the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC
DELIVERY OF FUTURE PROXY MATERIALS
If
you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all
future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic
delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree
to receive or access proxy materials electronically in future years.
VOTE
BY PHONE - 1-800-690-6903
Use
any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off
date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE
BY MAIL
Mark,
sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing,
c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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E19763-P86024
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KEEP
THIS PORTION FOR YOUR RECORDS
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THIS PROXY
CARD IS VALID ONLY WHEN SIGNED AND DATED.
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DETACH AND RETURN
THIS PORTION ONLY
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EXTERRAN CORPORATION
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For
All
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Withhold
All
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For All
Except
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To withhold authority to
vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line
below.
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The Board of Directors
recommends you vote FOR the election of the following eight
director nominees:
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☐
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☐
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1.
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Election of Directors:
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01) William M. Goodyear
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05) Mark R. Sotir
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02) James C. Gouin
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06) Richard R. Stewart
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03) John P. Ryan
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07) Andrew J. Way
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04) Christopher T. Seaver
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08) Ieda Gomes Yell
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The Board of Directors recommends you vote FOR proposals
2 and 3:
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For
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Against
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Abstain
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2.
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Ratification of the appointment of Deloitte & Touche
LLP as Exterran Corporation’s independent registered public accounting firm for 2017.
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☐
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3.
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Advisory, non-binding vote to approve the compensation
of our named executive officers.
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☐
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☐
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The Board of Directors recommends you vote 1 YEAR
on the following proposal:
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1 Year
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2 Years
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3 Years
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Abstain
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4.
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Advisory, non-binding vote on the frequency of future
stockholder advisory votes on the compensation of our named executive officers.
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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 or postponement thereof.
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Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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V.1.1
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice
and Proxy Statement and Annual Report are available at www.proxyvote.com.
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EXTERRAN
CORPORATION
Annual Meeting of Stockholders
April 27, 2017 8:30 AM CDT
This proxy is solicited by the Board of Directors
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The
stockholder(s) hereby appoint(s) Andrew J. Way, William M. Goodyear and Valerie L. Banner, or any of them, as proxies, each with
the power to appoint his or her substitute, and hereby authorizes each of them to represent and to vote, as designated on the
reverse side of this ballot, all of the shares of common stock of EXTERRAN CORPORATION that the stockholder(s) is/are entitled
to vote at the Annual Meeting of Stockholder(s) to be held at 8:30 AM CDT on April 27, 2017, at the offices of EXTERRAN CORPORATION
located at 4444 Brittmoore Road, Houston, Texas 77041, USA, and any adjournment or postponement thereof.
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This proxy, when properly executed, will be
voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of
Directors’ recommendations.
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Continued and to be signed on reverse side
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V.1.1
Exterran (NYSE:EXTN)
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