UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the
Registrant ☒ Filed by a Party Other than the
Registrant ☐
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.
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NOW Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Persons(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 14-a6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which the transaction applies;
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined.)
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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1)
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Amount Previously Paid:
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2)
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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Table of Contents
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
Wednesday, May, 23, 2018
10:00 a.m. (Houston time)
NOW INC.
7402 N. Eldridge Parkway
Houston, Texas 77041
The 2018 annual meeting of stockholders of NOW Inc. will be held at the Companys corporate headquarters located at 7402 N. Eldridge Parkway, Houston,
Texas on Wednesday, May 23, 2018, at 10:00 a.m. local time, for the following purposes:
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To elect three directors to hold office for a three-year term;
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To consider and act upon a proposal to ratify the appointment of Ernst & Young LLP as independent auditors of the Company for 2018;
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To consider and act upon an advisory proposal to approve the compensation of our named executive officers; and
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To consider and act upon any other matters that may properly come before the annual meeting or any postponement or adjournment thereof.
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The Board of Directors recommends that you vote FOR the election of the three nominees for director (Proposal 1), FOR the proposal
to ratify the appointment of Ernst & Young LLP as independent auditors of the Company for 2018 (Proposal 2), and FOR the approval of the compensation of our named executive officers (Proposal 3).
The Board of Directors has set April 4, 2018 as the record date for the annual meeting of the stockholders (Annual Meeting). If you were a
stockholder of record at the close of business on April 4, 2018, you are entitled to vote at the Annual Meeting. A complete list of these stockholders will be available for examination at the Annual Meeting and during ordinary business hours at
our offices at 7402 N. Eldridge Parkway, Houston, Texas 77041 for a period of ten days prior to the Annual Meeting.
You are cordially invited to join us
at the Annual Meeting. However, to ensure your representation, we request that you return your signed proxy card at your earliest convenience, whether or not you plan to attend the Annual Meeting. You may revoke your proxy at any time if you wish to
attend and vote in person.
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By Order of the Board of Directors
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/s/ Raymond Chang
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Raymond Chang
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Vice President, General Counsel and Secretary
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Houston, Texas
April 13, 2018
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NOW INC.
7402 N. Eldridge Parkway
Houston, Texas 77041
PROXY STATEMENT
Except as otherwise
specifically noted in this Proxy Statement, NOW, the Company, we, our, us, and similar words in this Proxy Statement refer to NOW Inc.
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ANNUAL MEETING:
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Date: Wednesday, May 23, 2018
Time: 10:00 a.m. (Houston time)
Place: DistributionNOW
7402 N. Eldridge Parkway
Houston, Texas 77041
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AGENDA:
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Proposal 1: To elect three nominees as directors of the Company for a term of three years.
Proposal 2: To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company.
Proposal 3:To approve, on an advisory basis, the
compensation of our named executive officers.
The Board of Directors recommends
that you vote FOR the election of the three nominees for director (Proposal 1), FOR the proposal to ratify the appointment of Ernst & Young LLP as independent auditors of the Company for 2018 (Proposal 2), and
FOR the approval of the compensation of our named executive officers (Proposal 3).
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RECORD DATE/
WHO CAN
VOTE:
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All stockholders of record at the close of business on April 4, 2018 are entitled to vote. The only class of securities entitled to vote at the Annual Meeting is NOW common stock. Holders of NOW common stock are entitled to
one vote per share at the Annual Meeting.
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PROXIES SOLICITED BY:
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Your vote and proxy is being solicited by the Board of Directors for use at the Annual Meeting. This Proxy Statement and enclosed proxy card is being sent on behalf of the Board of Directors to all stockholders beginning on or
about April 13, 2018. By completing, signing and returning your proxy card, you will authorize the persons named on the proxy card to vote your shares according to your instructions.
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PROXIES:
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If your properly executed proxy does not indicate how you wish to vote your common stock, the persons named on the proxy card will vote FOR election of the three nominees for director (Proposal 1), FOR the ratification of the
appointment of Ernst & Young LLP as independent auditors (Proposal 2), and FOR the approval of the compensation of our named executive officers (Proposal 3).
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REVOKING YOUR PROXY:
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You can revoke your proxy at any time prior to the time that the vote is taken at the meeting by: (i) filing a written notice revoking your proxy; (ii) filing another proxy bearing a later date; or (iii) casting your vote in person
at the Annual Meeting. Your last vote will be the vote that is counted.
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QUORUM:
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As of April 4, 2018, there were 109,790,782 shares of NOW common stock issued and outstanding. The holders of these shares have the right to cast one vote for each share held by them. The presence, in person or by proxy, of
stockholders entitled to cast at least 54,895,391 votes constitutes a quorum for adopting the proposals at the Annual Meeting. Abstentions will be included in determining the number of shares present at the meeting for the purpose of determining a
quorum, as will broker
non-votes.
A broker
non-vote
occurs when a broker is not permitted to vote on a matter without instructions from the beneficial owner of the
shares and no instruction is given. If you have properly signed and returned your proxy card by mail, you will be considered part of the quorum, and the persons named on the proxy card will vote your shares as you have instructed them.
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VOTE REQUIRED FOR APPROVAL:
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For the proposal to elect the three director nominees (Proposal 1), our bylaws require that each director nominee be elected by the majority
of votes cast with respect to such nominee (i.e., the number of shares voted for a director nominee must exceed the number of shares voted against that nominee). For additional information regarding our majority voting
policy, see page 6 of the proxy statement. You cannot abstain in the election of directors and broker
non-votes
are not counted.
Brokers are not permitted to vote your shares on the election of directors in
the absence of your specific instructions as to how to vote. Please provide your broker with voting instructions so that your vote can be counted.
Approval of the proposal to ratify the appointment of Ernst & Young LLP as independent auditors (Proposal 2), and the proposal to approve the
compensation of our named executive officers (Proposal 3), will require the affirmative vote of a majority of the shares of our common stock entitled to vote and present in person or by proxy. An abstention will have the same effect as a vote
against such proposal.
With respect to Proposal 3, brokers are not permitted to vote your shares in the absence of your specific instructions as to how to vote. Please provide your broker with voting instructions so that your vote can
be counted.
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MULTIPLE
PROXY CARDS:
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If you receive multiple proxy cards, this indicates that your shares are held in more than one account, such as two brokerage accounts, and are registered in different names. You should vote each of the proxy cards to ensure that
all of your shares are voted.
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HOUSEHOLDING:
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The U.S. Securities and Exchange Commission, or SEC, has adopted rules that permit companies and intermediaries, such as brokers, to satisfy the delivery requirements for proxy statements with respect
to
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two or more stockholders sharing the same address by delivering a copy of these materials, other than the Proxy Card, to those stockholders.
This process, which is commonly referred to as householding, can mean extra convenience for stockholders and cost savings for the Company. Beneficial stockholders can request information about householding from their banks, brokers, or
other holders of record. Through householding, stockholders of record who have the same address and last name will receive only one copy of our Proxy Statement and Annual Report, unless one or more of these stockholders notifies us that they wish to
continue receiving individual copies. This procedure will reduce printing costs and postage fees.
Stockholders who participate in householding will continue to receive separate Proxy Cards. If you are eligible for householding, but you and other
stockholders of record with whom you share an address currently receive multiple copies of Proxy Statements and Annual Reports, or if you hold stock in more than one account and wish to receive only a single copy of the Proxy Statement or Annual
Report for your household, please contact Broadridge Householding Department, in writing, at 51 Mercedes Way, Edgewood, New York 11717, or by phone at (800)
542-1061.
If, at any time, you no longer wish to
participate in householding and would prefer to receive a separate Proxy Statement and Annual Report, please notify your broker if you are a beneficial stockholder.
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COST OF PROXY
SOLICITATION:
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We have retained InvestorCom, Inc. to solicit proxies from our stockholders at an estimated fee of $5,500, plus expenses. This fee does not include the costs of preparing, printing, assembling, delivering and mailing the Proxy
Statement. The Company will pay for the cost of soliciting proxies. Some of our directors, officers and employees may also solicit proxies personally, without any additional compensation, by telephone or mail. Proxy materials also will be furnished
without cost to brokers and other nominees to forward to the beneficial owners of shares held in their names.
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Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on
Wednesday,
May 23, 2018.
The Companys 2018 Proxy Statement and the Annual Report to Stockholders for the year ended 2017 are also available at:
http://www.proxyvote.com
For
directions to the Annual Meeting, please contact investor relations at
281-823-4700.
PLEASE VOTE YOUR VOTE IS IMPORTANT
4
ELECTION OF DIRECTORS
PROPOSAL NO. 1 ON THE PROXY CARD
The
Board of Directors of NOW Inc. (the Board) is divided into three classes, each class serving a term of three years. Directors whose terms expire this year include: Terry Bonno, Galen Cobb, and James Crandell.
Terry Bonno, Galen Cobb, and James Crandell are nominees for directors for a three-year term expiring at the Annual Meeting in 2021, or when their successors
are elected and qualified. We believe each of the nominees will be able to serve if elected. However, if any nominee is unable to serve, the remaining members of the Board have authority to nominate another person, elect a substitute, or reduce the
size of the Board. Directors whose terms expire in 2019 and 2020 will continue to serve in accordance with their prior election or appointment. Proxies cannot be voted for a greater number of persons than the number of nominees named.
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Vote Required for Approval
NOWs Bylaws require that each director be elected by the majority of votes cast with respect to such director in uncontested elections (the number of
shares voted for a director nominee must exceed the number of votes cast against that nominee). In a contested election (a situation in which the number of nominees exceeds the number of directors to be elected), the standard
for election of directors would be a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors. Whether an election is contested or not is determined as of a date that is 14 days
in advance of when we file our definitive proxy statement with the SEC. This years election was determined to be an uncontested election, and the majority vote standard will apply.
If a nominee who is serving as a director is not
elected at the annual meeting, Delaware law provides that the director would continue to serve on the Board as a holdover director. However, under our Bylaws and Corporate Governance Guidelines, each director must submit an advance,
contingent, irrevocable resignation that the Board may accept if the director fails to be elected through a majority vote. In that situation, the Nominating/Corporate Governance Committee would make a recommendation to the Board about whether to
accept or reject the resignation, or whether to take other action. The Board will act on the Nominating/Corporate Governance Committees recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date
the election results are certified. If a nominee who was not already serving as a director fails to receive a majority of votes cast at the annual meeting, Delaware law provides that the nominee does not serve on the Board as a holdover
director. In 2018, all director nominees are currently serving on the Board.
Brokers are not permitted to vote your shares on the election of
directors in the absence of your specific instructions as to how to vote. Please provide your broker with voting instructions so that your vote can be counted.
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Information Regarding Nominees for Director for Terms Expiring in 2018:
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Name
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Age
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Expiration
Date of
Current
Term
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Biography
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Year First
Became
Director
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Terry Bonno
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60
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2018
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Ms. Bonno has been a director of the Company since May 2014. Ms. Bonno has served as a Senior Vice President of Industry and Community Relations for Transocean Ltd since 2017. Ms. Bonno previously served as Senior
Vice President of Marketing for Transocean Ltd since 2011 and Vice President of Marketing since 2008 with oversight of Transoceans marketing in 14 countries. Additionally, her role included managing Turnkey/Project Management Organization
(Applied Drilling Technology UK) from 2013 until its recent disposition and sale to private equity. Prior to this role she served in various Director and Management roles at Transocean Ltd leading the Marketing and Contracts efforts for West Africa
and the Americas from 2001 until 2008. Prior to being acquired by Transocean Ltd., she served in a Director Marketing and Contracts role for Turnkey Drilling with RBFalcon and Global Marine (a wholly owned subsidiary of Applied Drilling Technology
Inc. (ADTI)) from 1993 until 2001. During her time with Global Marine from 1982 to 1999 she served in various Accounting Management roles.
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2014
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Galen Cobb
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2018
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Mr. Cobb has been a director of the Company since May 2014. Mr. Cobb has served as Vice President Industry Relations for Halliburton since 2002, and is responsible for Halliburtons industry relations global
activities, energy trade policy issues, executive client relations, and trade organization oversight. He has worked for Halliburton for over forty years serving in various executive management positions in operations, marketing, sales and business
development. From 1991 to 1994, he was Director CIS and China with oversight in establishing Halliburtons presence and operations in these emerging markets. Later he was named Director Executive Sales and Business Development with expanded
responsibilities for the worldwide development and promotion of Halliburtons services and products.
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2014
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Name
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Age
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Expiration
Date of
Current
Term
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Biography
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Year First
Became
Director
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James Crandell
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64
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2018
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Mr. Crandell has been a director of the Company since May 2014. Mr. Crandell served as Managing Director of Cowen and Company from 2013 to 2016. Mr. Crandell served as Managing Director of Dahlman Rose from 2011
until its acquisition by Cowen and Company in 2013. Previously, he served as Managing Director at Barclays Capital plc from 2008 until 2011. Mr. Crandell was Managing Director for Lehman Brothers starting in 1999 until its acquisition by
Barclays Capital in 2008. From 1981 until 1998, he held various posts at Salomon Brothers, including managing director, senior oil services analyst and director of U.S. equity research, before his promotion to global coordinator of equity research
in 1994. Mr. Crandell has more than 30 years of experience as a Wall Street analyst focusing on oilfield services & equipment. He currently serves as a director of Independence Contract Drilling, Inc.
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2014
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YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE ELECTION OF THE THREE NOMINEES FOR
DIRECTOR.
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Information Regarding Continuing Directors:
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Name
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Age
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Expiration
Date of
Current
Term
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Biography
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Year First
Became
Director
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Richard Alario
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63
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2020
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Mr. Alario has been a director of the Company since May 2014. Mr. Alario served as Chief Executive Officer and director of Key Energy Services, Inc., a provider of a complete range of well intervention services, since 2004
until his retirement in March 2016. Prior to joining Key Energy Services, Mr. Alario was employed by BJ Services Company, an oilfield services company, where he served as Vice President from 2002 after OSCA, Inc. was acquired by BJ Services.
Prior to joining BJ Services, Mr. Alario had over 21 years of service in various capacities with OSCA, an oilfield services company, most recently having served as its Executive Vice President. He currently serves as
ex-officio
chairman and executive committee member of the National Ocean Industries Association. He is also a director of Kirby Corporation, serving as its presiding director and chairman of its Corporate Governance
Committee.
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2014
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Paul Coppinger
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2020
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Mr. Coppinger has been a director of the Company since December 2017. Mr. Coppinger has served as Division President of Weir Oil & Gas, which is part of Weir Group PLC, a publicly traded company listed on the
London Stock Exchange, since 2014. From 2012 to 2014, Mr. Coppinger served as President, Pressure Pumping, for the Weir Group, and from 2011 to 2012 as President Weir SPM. Prior to that, Mr. Coppinger was Group President of the
Energy Segment of CIRCOR International, Inc. from 2001 to 2011. Mr. Coppinger has served on the board of directors of Petroleum Equipment & Services Association (PESA) since 2007.
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2017
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9
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Name
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Age
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Expiration
Date of
Current
Term
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Biography
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Year First
Became
Director
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Rodney Eads
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67
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2020
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Mr. Eads has been a director of the Company since May 2014. Mr. Eads has served as President of Eads Holdings, LLC, a wholly owned private investment firm since 2009. Mr. Eads provides advisory and due diligence
services for numerous private equity entities, and served as a director from 2010 to 2015 for private equity owned Nautronix UK Limited. Mr. Eads previously served as Chief Operating Officer and Executive Vice President of Pride International
Inc. from 2006 until 2009, where he was responsible for operations and regulatory compliance for offshore operations and South American and Eastern Hemisphere land assets operating in 15 countries. He also managed a public company
spin-off
in 2009 of Seahawk Drilling Company. He served as Senior Vice President of Worldwide Operations for Diamond Offshore Drilling Inc. from 1997 until 2006, with responsibility for operations and regulatory
compliance in 12 countries. From 1977 to 1997, he served in several executive and operations management positions with Exxon Corporation, primarily in international assignments spanning 11 countries.
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2014
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Michael Frazier
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68
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2019
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Mr. Frazier has been a director of the Company since May 2014. Mr. Frazier has been with Simmons & Company International, an independent investment bank specializing in the energy industry, since 1992, and has
served as its President and Chief Executive Officer since 2002 and 2005, respectively, and as its Chairman since 2009, until its acquisition by Piper Jaffray Companies in February 2016. He serves on the board of Energy Opportunities Capital
Management. Prior to joining Simmons, Mr. Frazier was actively involved in the exploration and production of oil and gas as an independent operator. Mr. Frazier also serves as a director of Piper Jaffray Companies, a leading investment
bank and asset management firm.
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2014
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10
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Name
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Age
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Expiration
Date of
Current
Term
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Biography
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Year First
Became
Director
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J. Wayne Richards
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58
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2019
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Mr. Richards has been a director of the Company since May 2014, and has served as the Companys independent Chairman of the Board since August 2017. Mr. Richards has served as President and Chief Executive Officer of
GR Energy Services, Inc., an oilfield products and services company focused primarily on onshore production and downhole completion services in North America, since 2013. Previously, he was President and Chief Executive Officer of Global Oilfield
Services, a privately held oilfield products and services company focused on the artificial lift sector, from 2008 until 2011 when it was purchased by Halliburton. Mr. Richards served as Vice President of Artificial Lift for Halliburton from
2011 to 2013. Earlier in his career, Mr. Richards spent 25 years in various senior operational and sales and marketing positions at Schlumberger.
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2014
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Robert Workman
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49
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2019
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Mr. Workman has been a director of the Company since May 2014. Mr. Workman was elected President and Chief Executive Officer of the Company in February 2014. Mr. Workman served as National Oilwell Varcos
President Distribution Services from January 2001 until the Companys
spin-off
in May 2014. He previously served National Oilwell Varco starting in 1991 in various managerial positions with the
distribution business group. He also previously served as the Chairman of the Petroleum Equipment Suppliers Association.
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2014
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11
COMMITTEES AND MEETINGS OF THE BOARD
Committees
The Board of Directors appoints committees to
help carry out its duties. The Board of Directors has the following standing committees: Audit, Compensation, and Nominating/Corporate Governance. Last year, the Board of Directors met 4 times and the committees met a total of 12 times.
Mr. Workman does not serve on any committees. The following table sets forth the committees of the Board of Directors and their members as of the date of this proxy statement, as well as the number of meetings each committee held during 2017:
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Director
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Audit Committee
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Compensation
Committee
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Nominating/Corporate
Governance Committee
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Robert Workman
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Richard Alario
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Terry Bonno
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Galen Cobb
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Paul Coppinger
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James Crandell
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Rodney Eads
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+
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Michael Frazier
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J. Wayne Richards
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Number of Meetings Held in 2017
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8
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2
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2
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Attendance at Meetings
Each incumbent director attended at least 75% of the meetings of the Board and committees of which that director was a member in 2017, except for Paul
Coppinger who joined the Board of Directors on December 27, 2017.
Audit Committee
Messrs. Eads (Chairman), Cobb, Richards and Ms. Bonno are the current members of the Audit Committee. All members of this committee are
independent within the meaning of the rules governing audit committees by the New York Stock Exchange, or NYSE.
The Audit Committee is
appointed by the Board of Directors to assist the Board in fulfilling its oversight responsibilities. The Committees primary duties and responsibilities are to:
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monitor the integrity of the Companys financial statements, financial reporting processes, systems of internal controls regarding finance, and disclosure controls and procedures;
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select and appoint the Companys independent auditors,
pre-approve
all audit and
non-audit
services to be provided, consistent with
all applicable laws, to the Company by the Companys independent auditors, and establish the fees and other compensation to be paid to the independent auditors;
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monitor the independence and performance of the Companys independent auditors and internal audit function;
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establish procedures for the receipt, retention, response to and treatment of complaints, including confidential, anonymous submissions by the Companys employees, regarding accounting, internal controls,
disclosure or auditing matters, and provide an avenue of communication among the independent auditors, management, the internal audit function and the Board of Directors;
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prepare an audit committee report as required by the Securities and Exchange Commission (the SEC) to be included in the Companys annual proxy statement; and
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monitor the Companys compliance with legal and regulatory requirements.
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A copy of the Audit Committee
Charter is available on the Companys website,
www.distributionnow.com
, under the Investor Relations/Corporate Governance section.
Audit
Committee Financial Expert
The Board of Directors has determined that all members of the Audit Committee meet the NYSE standard of having accounting
or related financial management expertise and meet the SECs criteria of an Audit Committee Financial Expert.
Compensation Committee
Messrs. Alario (Chairman), Coppinger, Crandell and Frazier are the current members of the Compensation Committee. All members of the Compensation Committee are
independent as defined by the applicable NYSE listing standards.
The Compensation Committee is appointed by the Board of Directors to assist the Board in
fulfilling its oversight responsibilities. The Committees primary duties and responsibilities are to:
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discharge the Boards responsibilities relating to compensation of the Companys directors and executive officers;
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approve and evaluate all compensation of directors and executive officers, including salaries, bonuses, and compensation plans, policies and programs of the Company; and
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administer all plans of the Company under which shares of common stock may be acquired by directors or executive officers of the Company.
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A copy of the Compensation Committee Charter is available on the Companys website,
www.distributionnow.com
, under the Investor
Relations/Corporate Governance section.
Compensation Committee Interlocks and Insider Participation
Messrs. Alario, Coppinger, Crandell, and Frazier served on the Compensation Committee during 2017. None of these members is a former or current officer or
employee of the Company or any of its subsidiaries, is involved in a relationship requiring disclosure as an interlocking executive officer/director, or had any relationship requiring disclosure under Item 404 of Regulation
S-K.
Nominating/Corporate Governance Committee
Messrs. Frazier (Chairman), Alario, Coppinger and Crandell are the current members of the Nominating/Corporate Governance Committee. All members of the
Nominating/Corporate Governance Committee are independent as defined by the applicable NYSE listing standards.
The Nominating/Corporate Governance
Committee is appointed by the Board of Directors to assist the Board in fulfilling its oversight responsibilities. The Committees primary duties and responsibilities are to:
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ensure that the Board and its committees are appropriately constituted so that the Board and directors may effectively meet their fiduciary obligations to stockholders and the Company;
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identify individuals qualified to become Board members and recommend to the Board director nominees for each annual meeting of stockholders and candidates to fill vacancies in the Board;
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recommend to the Board annually the directors to be appointed to Board committees;
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13
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monitor, review, and recommend, when necessary, any changes to the Corporate Governance Guidelines; and
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monitor and evaluate annually the effectiveness of the Board and management of the Company, including their effectiveness in implementing the policies and principles of the Corporate Governance Guidelines.
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A copy of the Nominating/Corporate Governance Committee Charter is available on the Companys website,
www.distributionnow.com
,
under the Investor Relations/Corporate Governance section.
14
BOARD OF DIRECTORS
Director Nomination Process and Diversity Considerations
The Nominating/Corporate Governance Committee has the responsibility of identifying candidates for election as directors, reviewing background information
relating to candidates for director, and recommending to the Board of Directors nominees for directors to be submitted to stockholders for election. It is the policy of the Committee to consider director candidates recommended by stockholders.
Nominees to be evaluated by the Nominating/Corporate Governance Committee are selected by the Committee from candidates recommended by multiple sources, including other directors, management, stockholders, and candidates identified by independent
search firms (which firms may be paid by the Company for their services), all of whom will be evaluated based on the same criteria. As of April 4, 2018, we had not received any recommendations from stockholders for potential director
candidates. All of the current nominees for director are standing members of the Board that are proposed by the entire Board for
re-election.
Written suggestions for nominees should be sent to the Secretary of
the Company at the address listed below.
The Board of Directors believes that nominees should reflect the following characteristics:
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have a reputation for integrity, honesty, candor, fairness and discretion;
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be knowledgeable, or willing to become so quickly, in the critical aspects of the Companys businesses and operations;
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be experienced and skillful in serving as a competent overseer of, and trusted advisor to, the senior management of at least one substantial enterprise; and
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have a range of talent, skill and expertise sufficient to provide sound and prudent guidance with respect to the full scope of the Companys operations and interests.
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The Board considers diversity in identifying nominees for director. The Board seeks to achieve a mix of directors that represents a diversity of background
and experience, including with respect to gender and race. The Board considers diversity in a variety of different ways and in a fairly expansive manner. The Board not only considers diversity concepts such as race and gender, but also diversity in
the sense of differences in viewpoint, professional experience, education, skill and other qualities and attributes that contribute to board heterogeneity. Also considered as part of the diversity analysis is whether the individual has work
experience in the Companys industry, or in the broader energy or industrial market. The Company believes the Board can benefit from different viewpoints and experiences by having a mix of members of the Board who have experience in its
industry and those who may not have such experience.
The Nominating/Corporate Governance Committee reviews Board composition annually to ensure that the
Board reflects the knowledge, experience, skills, expertise, and diversity required for the Board to fulfill its duties. There are currently no directorship vacancies to be filled on the Board. If and when the need arises for the Company to add a
new director to the Board, the Nominating/Corporate Governance Committee will take every reasonable step to ensure that diverse candidates (including, without limitation, women and minority candidates) are in the pool from which nominees are chosen
and strive to obtain diverse candidates by searching in traditional corporate environments, as well as government, academia, and
non-profit
organizations.
Director Qualifications
The Company believes that each
member of its Board of Directors possess the basic attributes of being a director of the Company, namely having a reputation for integrity, honesty, candor, fairness and discretion. Each director has also become knowledgeable in major aspects of the
Companys business and
15
operations, which has allowed the Board to provide better oversight functions to the Company. In addition to the experience, qualifications, and skills of each director set forth in their
biographies starting on page 7 of this proxy statement, the Company also considered the following factors in determining that the board member should serve on the Board:
Mr. Alario has served as the chief executive officer and chairman of a publicly traded company for 12 years, prior to his
retirement. Mr. Alario has extensive experience in the oil service business, having worked in that industry for over 30 years. Mr. Alario has gained valuable board experience from his tenure as a director of Kirby Corporation,
including from his service on its audit committee, as the chairman of its nominating/corporate governance committee, and as presiding director. Through service in these roles, Mr. Alario has gained extensive experience in assessing the risks
associated with various energy industry cycles.
Ms. Bonno provides valuable service and experience to the Audit Committee, due to her past and
current experience serving on the financial committee, enterprise risk management committee, and disclosure committee at Transocean Ltd. Ms. Bonno has extensive experience in the oil service industry and a background in accounting with
approximately 30 years of being a certified public accountant and experience overseeing the Sox Compliance Global Marketing Function. Ms. Bonno has dealt with all facets of potential risk areas for a global energy company and brings that
experience and perspective to the Board.
Mr. Cobb provides valuable service and experience to the Audit Committee, due to his over 40 years of
serving in various management positions for Halliburton. Mr. Cobb has developed experience and expertise in warehouse management and distribution, international operations, especially in emerging markets, as well as marketing and business
development in a large corporate environment. As a result of this extensive experience, Mr. Cobb is very familiar with the strategic and project planning processes that impact the Companys business and continued development for growth.
Mr. Coppinger has over 33 years of experience in the petroleum equipment and service, process equipment and flow control businesses, as well as
experience in the industrial markets and manufacturing, and has held various positions of increasing responsibility, including managing domestic and international operations. Mr. Coppinger has extensive operational and strategic planning
experience from his long career in manufacturing and distribution. Mr. Coppinger also has extensive mergers and acquisitions experience of over 20 years on a global basis. Mr. Coppinger has dealt with all facets of potential risk areas for
a global energy service company, and brings that experience to the Company.
Mr. Crandell has over 30 years of experience as a Wall Street analyst
focusing on oilfield services and equipment. He has held positions of increasing importance at multiple investment firms, including serving as managing director of global oilfield services equity research. Given Mr. Crandells extensive
experience as an analyst covering the oilfield services sector, he is able to provide the Company useful and impactful information from a shareholder perspective. As such, Mr. Crandells experience as an analyst of the energy industry
helps provide a different perspective for the Company.
Mr. Eads provides valuable service and experience to the Audit Committee, due to his MBA
degree and 40 years of experience in the energy industry and in his previous roles in senior executive management where he worked to help mitigate risk. Mr. Eads has also been an active member of the National Association of Corporate Directors
(NACD) since 2010, achieving the NACDs Governance Fellow recognition, the highest standard of credentialing for directors and governance professionals. Mr. Eads significant international experience and deep expertise in drilling,
supply chain management and construction projects, together with his 12 years of experience as an executive officer of two public companies, makes him well qualified to serve as a director of the Company.
16
Mr. Frazier has over 35 years of experience in investment banking specializing in the energy industry. He
has served as president and chief executive officer of a private investment firm focused on the energy sector. Mr. Frazier has gained valuable outside board experience from serving on the boards of Simmons & Company International,
Simmons & Company International Limited, Energy Opportunities Capital Management, and Piper Jaffray Companies.
Mr. Richards provides
valuable service and experience to the Audit Committee, due to his over 30 years of experience in the oilfield products and services industry. Mr. Richards experience serving as the chief executive officer of several companies and his
experience in growing energy companies organically and through acquisitions, makes him well qualified to serve as a director of the Company. Mr. Richards has dealt with many facets of potential risk areas for an energy service company, as a
current and former chief executive officer, and brings that experience and perspective to the Board.
Mr. Workman has been an officer of a publicly
traded company since 2001. Mr. Workmans
27-year
career in the distribution business includes positions of increasing importance, from sales manager, to Vice President, to Business Group President.
Mr. Workman has extensive experience with the Company and the oil service industry. Mr. Workmans extensive experience in the Companys business and the industry, his MBA degree, and his unparalleled knowledge of the Company
makes him uniquely and well qualified to serve as a director of the Company.
17
AUDIT COMMITTEE REPORT
Composition
The Audit Committee is currently
comprised of four members: Rodney Eads, Committee Chairman, Terry Bonno, Galen Cobb and Wayne Richards. The Board of Directors has determined that all of the members of the Audit Committee are independent based on the guidelines set forth by the
NYSE and SEC rules for the independence of Audit Committee members. The Board of Directors has also determined that all members of the Audit Committee meet the NYSE standard of having accounting or related financial management expertise and meet the
SECs criteria of an Audit Committee Financial Expert.
Oversight Responsibilities
Under the Audit Committee Charter, which is available for review on the Companys website at
www.distributionnow.com
, under the Investor
Relations/Corporate Governance section, the Audit Committees primary purpose is to assist the Board of Directors in fulfilling its oversight responsibilities. In that regard, the Audit Committees primary purposes and functions are:
(i) monitoring the integrity of the Companys financial statements, financial reporting processes, systems of internal controls regarding finance, and disclosure controls and procedures; (ii) selecting and appointing the
Companys independent auditors,
pre-approving
all audit and
non-audit
services to be provided, consistent with all applicable laws, to the Company by the
Companys independent auditors, and establishing the fees and other compensation to be paid to the independent auditors; (iii) monitoring the independence and performance of the Companys independent auditors and internal audit
function; (iv) establishing procedures for the receipt, retention, response to and treatment of complaints, including confidential, anonymous submissions by the Companys employees, regarding accounting, internal controls, disclosure or
auditing matters, and providing an avenue of communication among the independent auditors, management, the internal audit function and the Board; and (v) monitoring the Companys compliance with legal and regulatory requirements.
Specifically, with respect to oversight of accounting, internal controls and disclosure matters, as well as oversight of the Companys compliance with various legal and regulatory requirements, the Audit Committee, as appropriate, but at least
on a quarterly basis, reviews all reports generated by the Companys independently administered employee hotline and other corporate governance hotline systems. The Audit Committee also reviews on a quarterly basis reports from the
Companys enterprise risk management system and cybersecurity monitoring system.
Notwithstanding the foregoing, it is not the Audit Committees
duty to determine that the Companys financial statements are complete and accurate and are in accordance with generally accepted accounting principles (GAAP) or to conduct audits. Our management is responsible for establishing a
system of internal controls, assessing such controls and for preparing our consolidated financial statements in accordance with GAAP. Management is also responsible for assuring compliance with laws and regulations and the Companys corporate
policies. Our independent registered public accountants are responsible for auditing our consolidated financial statements and the effectiveness of our internal control over financial reporting in accordance with standards of the Public Company
Accounting Oversight Board (the PCAOB) and issuing their reports based on those audits.
The Audit Committee, in carrying out its role, relies
on the Companys senior management, including senior financial management. However, the Audit Committee, at each regularly scheduled quarterly meeting in 2017, met separately in executive session with both the internal audit director and the
independent audit partner, without management being present.
18
Oversight of Independent Auditor
In connection with the selection and appointment of the independent auditors, each year the Audit Committee reviews and evaluates the qualifications,
performance and independence of the independent auditors and lead partner, including taking into account the opinions of management and our internal auditor. In doing so, the Audit Committee considers a number of factors including, but not limited
to: quality of services provided; technical expertise and knowledge of the industry; effective communication; objectivity; independence; and the potential impact of changing independent auditors. Based on this evaluation, the Audit Committee has
retained Ernst & Young LLP (EY) as our independent auditors for 2018. EY has been our independent auditors since 2013, and the current lead partner has been engaged since 2014 and will rotate off after completion of the 2018
audit.
The Audit Committee and Board of Directors believe that it is in the best interests of the Company and its stockholders to continue retention of
EY to serve as our independent auditors. Although the Audit Committee has the sole authority to appoint the independent auditors, the Audit Committee will continue to recommend that the Board of Directors request the stockholders, at the Annual
Meeting, to ratify the appointment of the independent auditors.
Further, the Audit Committee reviews in advance and
pre-approves
audit and
non-audit
services provided to us by our independent auditors. The Audit Committee is also directly responsible for reviewing with the independent
registered public accountants the plans and scope of the audit engagement and providing an open venue of communication between our management, the internal audit function, the independent registered public accountants and the Board.
2017 Audited Financial Statements
The Audit
Committee reviewed and discussed with senior management the audited financial statements included in the Companys Annual Report on Form
10-K.
Management has confirmed to the Audit Committee that such
financial statements have been prepared with integrity and objectivity and in conformity with GAAP.
The Audit Committee discussed with EY, the
Companys independent auditors, the matters required to be discussed under the PCAOB standards.
The Audit Committee has received the written
disclosures and the letter from EY required by applicable requirements of PCAOB regarding EYs communication with the Audit Committee concerning independence and has discussed EYs independence with EY.
Based on the foregoing, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Companys 2017
Annual Report on Form
10-K.
Members of the Audit Committee
Rodney Eads, Committee Chairman
Terry Bonno
Galen Cobb
Wayne Richards
19
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
PROPOSAL NO. 2 ON THE PROXY CARD
Information Regarding our Independent Auditors
The Audit
Committee of the Board of Directors has reappointed Ernst & Young LLP as independent auditors for 2018. Stockholders are being asked to vote upon the ratification of the appointment. Representatives of Ernst & Young will attend the
Annual Meeting, where they will be available to respond to appropriate questions and have the opportunity to make a statement if they desire.
Vote
Required for Approval
The proposal to ratify the appointment of Ernst & Young LLP as independent auditors will require approval of a majority
of the shares of our common stock entitled to vote and present in person or by proxy. In accordance with NYSE rules, a proposal to ratify independent auditors is considered to be a discretionary item. This means that brokerage firms may
vote in their discretion on this matter on behalf of beneficial owners who have not furnished voting instructions within the time period specified in the voting instructions submitted by such brokerage firms. Abstentions, which will be counted as
votes present for the purpose of determining a quorum, will have the effect of a vote against the proposal. Your shares will be voted as you specify on your proxy. If your properly executed proxy does not specify how you want your shares voted, we
will vote them for the ratification of the appointment of Ernst & Young LLP as independent auditors.
Audit Fees
The Audit Committee
pre-approves
all services provided by the Companys independent auditors to the Company and
its subsidiaries. Consideration and approval of such services generally occurs in the regularly scheduled quarterly meetings of the Audit Committee. The Audit Committee has delegated the Chairman of the Audit Committee to
pre-approve
allowed
non-audit
services, subject to review by the full committee at the next regularly scheduled meeting. The Audit Committee has considered whether the
provision of all services other than those rendered for the audit of the Companys financial statements is compatible with maintaining Ernst & Youngs independence and has concluded that their independence is not compromised.
The following table sets forth Ernst & Young LLPs fees for services rendered during 2016 and 2017. All services provided by Ernst &
Young LLP were
pre-approved
by the Audit Committee.
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2017
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2016
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Audit Fees
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$
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2,080,990
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$
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1,882,825
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Audit Related Fees
(1)
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$
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87,000
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$
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87,000
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Tax Fees
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$
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122,262
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$
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114,000
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All Other Fees
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Total
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$
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2,290,252
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$
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2,083,825
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(1)
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Consists primarily of fees for audits of employee benefit plans.
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Your Board of Directors
recommends that you vote FOR the proposal to ratify the appointment of Ernst & Young LLP.
20
APPROVAL OF COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
PROPOSAL NO. 3 ON THE PROXY CARD
A proposal will be presented at the meeting asking stockholders to approve on an advisory basis the compensation of
the Companys named executive officers as described in this proxy statement.
Why You Should Approve our Executive Compensation Program
The Companys compensation philosophy is designed to attract and retain executive talent and emphasize pay for performance, including the creation of
stockholder value. The Company encourages its stockholders to read the Executive Compensation section of this proxy statement, including the compensation tables, as well as the Compensation Discussion and Analysis (CD&A) section of this proxy
statement, for a more detailed discussion of our compensation programs and policies. The Company believes its compensation programs and policies are appropriate and effective in implementing its compensation philosophy and in achieving its goals and
that they are aligned with stockholder interests and worthy of stockholder support.
We believe that stockholders should consider the following in
determining whether to approve this proposal:
Compensation Program is Closely Linked to Stockholder Value
An important and significant portion of each executives compensation at the Company is in the form of long-term incentive awards, which are directly
linked to the Companys performance and the creation of stockholder value. The Companys long-term incentive awards, starting with its first annual grant in 2015, consists of: stock options, time-based restricted stock and
performance-based share awards. We believe this mix appropriately motivates long-term performance and rewards executives for absolute gains in share price, performance against designated metrics and relative financial performance against a
designated peer group.
Strong
Pay-for-Performance
Orientation
The Companys annual and long-term incentive programs established in 2015, the Companys first full year in existence, pay its named executive
officers only if certain performance metrics (absolute and/or relative) are achieved. Thus, two of the three components of an executives pay at the Company are based on performance.
Compensation Program Has Appropriate Long-term Orientation
Minimum three-year vesting for equity awards:
The Company encourages a long-term orientation by its executives through the use of three-year
vesting requirements for annual grants of stock options, restricted stock and performance-based awards.
Summary of Good Governance and Risk Mitigating
Factors
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Limited Bonus payouts:
Bonus awards cannot exceed 200% of target, limiting excessive awards for short-term performance.
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Balanced pay mix:
The mix of pay is balanced between annual and long-term compensation.
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Multiple year vesting of long-term incentives:
Long-term incentive awards do not fully vest until a minimum of three years after the grant.
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21
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CEO Pay:
CEO base salary level during 2017 was well below the competitive peer median (below the market 25
th
percentile) and actual total direct compensation
is also below the competitive peer median.
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Clawback Policy:
Awards of long-term equity compensation and compensation under the Companys annual cash incentive plan can be terminated by the Compensation Committee if it determines that the recipient of
such award has engaged in material misconduct.
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In 2017, approximately 94% of the votes cast on our
say-on-pay
proposal were in favor of our executive compensation program and policies.
The Companys
compensation program for its named executive officers has been thoughtfully designed to support the Companys long-term business strategies and drive creation of stockholder value. The program does not encourage excessive risk-taking by
management. It is aligned with the competitive market for talent, and highly sensitive to Company performance. The Company believes its program will deliver reasonable pay that is strongly linked to Company performance over time.
The following resolution will be submitted for a stockholder vote at the 2018 annual meeting:
RESOLVED, that the stockholders of the Company approve, on an advisory basis, the compensation of the Companys named executive
officers listed in the 2017 Summary Compensation Table included in the proxy statement for this meeting, as such compensation is disclosed pursuant to Item 402 of
Regulation S-K
in this proxy
statement under the section entitled Executive Compensation, including the compensation tables and other narrative executive compensation disclosures set forth under that section, as well as the section in the proxy statement entitled
Compensation Discussion and Analysis.
This advisory vote on the compensation of the Companys named executive officers
gives stockholders another mechanism to convey their views about the Companys compensation programs and policies. Although your vote on executive compensation is not binding on the Company, the Board values the views of stockholders. The Board
and Compensation Committee will review the results of the vote and take them into consideration in addressing future compensation policies and decisions.
Your Board of Directors recommends that you vote FOR the proposal to approve the compensation of our named executive officers.
22
CORPORATE GOVERNANCE
NOWs Board of Directors is committed to promoting transparency in reporting information about the Company, complying with the spirit as well as the
literal requirements of applicable laws, rules and regulations, and corporate behavior that conforms to corporate governance standards that substantially exceed the consensus view of minimum acceptable corporate governance standards. The Board of
Directors adopted Corporate Governance Guidelines which established provisions for the Boards composition and function, Board committees and committee membership, evaluation of director independence, the roles of the independent Chairman of
the Board and the Chief Executive Officer, the evaluation of the Chief Executive Officer, regular meetings of
non-employee
directors, board conduct and review, selection and orientation of directors, director
compensation, access to management and independent advisors, and annual review of the Corporate Governance Guidelines. A copy of the Corporate Governance Guidelines is available on the Companys website,
www.distributionnow.com
, under
the Investor Relations/Corporate Governance section. The Company will furnish print copies of the Corporate Governance Guidelines, as well as its Committee charters, to interested stockholders without charge, upon request. Written requests for such
copies should be addressed to: Raymond Chang, Secretary, NOW Inc., 7402 N. Eldridge Parkway, Houston, Texas 77041.
Highlights
We maintain a strong and proactive approach to corporate governance, as follows:
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Active Board and committees of the Board oversight of risk of the Company;
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Independent Chairman of the Board serving as Lead Director;
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Independent committee chairs and members;
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Clawback policy to recover executive compensation;
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Annual Board and committee self-evaluations and assessments;
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Directors meet in executive sessions without management present
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Director Independence
The Corporate Governance Guidelines address, among other things, standards for evaluating the independence of the Companys directors. The Board
undertakes an annual review of director independence and considers transactions and relationships during the prior year between each director or any member of his or her immediate family and the Company and its affiliates, including those reported
under Certain Relationships and Related Transactions in this Proxy Statement. In February 2018, as a result of this annual review, the Board affirmatively determined that a majority of the members of the Board of Directors are
independent of the Company and its management under the standards set forth in the Corporate Governance Guidelines. The following directors were affirmed as independent: Richard Alario, Terry Bonno, Galen Cobb, Paul Coppinger, James Crandell, Rodney
Eads, Michael Frazier, and J. Wayne Richards.
Board Leadership Independent Chairman of the Board
Currently, the roles of Chairman of the Board and Chief Executive Officer are not combined at the Company. The Company believes the current leadership
structure delineates the separate roles of managers and directors. Our Chief Executive Officer sets the strategic direction for the Company, working with the Board, and provides
day-to-day
leadership. Our independent Chairman of the Board leads the Board in the performance of its duties and serves as the principal liaison between the independent
directors and the Chief Executive Officer.
23
To assist with providing independent oversight of management and the Companys strategy, the
non-employee
members of the Board of Directors have appointed J. Wayne Richards, an independent director, as the independent Chairman of the Board and Lead Director (the Independent Chair). The
Independent Chair is responsible for: (1) chairing all meetings of the Board at which the Chair is present, (2) working with the Chief Executive Officer on the scheduling of Board meetings and the preparation of agendas and materials for
Board meetings, (3) define the quality, quantity and timeliness of the flow of information between senior management and the Board, (4) approve, in consultation with the other directors, the retention of consultants who report directly to
the Board, (5) developing the agenda for, and presiding over the executive sessions of, the Boards
non-management
directors, (6) facilitating communications among the Chairman of the Board, the
Chief Executive Officer and other members of the Board, (7) coordinating, with the Chief Executive Officer, the assessment of the committee structure, organization, and charters, and evaluating the need for any changes, (8) acting as
principal liaison between the
non-management
directors and the Chief Executive Officer on matters dealt with in executive session, and (9) assuming such further tasks as the independent directors may
determine.
The Board also holds executive sessions on a quarterly basis at which only
non-employee
directors are
present. In addition, the committees of the Board provide independent oversight of management. Each of the committees of the Board is composed entirely of independent directors.
The Board has concluded that this structure is in the best interest of stockholders because it provides an appropriate balance between our independent
Chairmans ability to lead the Board and to provide independent objective oversight of our management, and the Chief Executive Officers ability to provide strategic direction for the Company and lead the Company on a
day-to-day
basis.
Board Role in Risk Oversight
The Board of Directors and its committees help conduct certain risk oversight functions for the Company. The Board is periodically advised on the status of
various factors that could impact the business and operating results of the Company, including oil and gas prices. The full Board is also responsible for reviewing the Companys strategy, business plan, and capital expenditure budget at least
annually. Through these various functions, the Board is able to monitor these risks and assist the Company in determining whether certain mitigating actions, if any, need to be taken.
The Audit Committee serves an important role in providing risk oversight, as further detailed in its charter. One of the Audit Committees primary duties
and responsibilities is to monitor the integrity of the Companys financial statements, financial reporting processes, systems of internal controls regarding finance, and disclosure controls and procedures. The Audit Committee is also
responsible for establishing procedures for the receipt, retention, response to and treatment of complaints, including confidential, anonymous submissions by the Companys employees, regarding accounting, internal controls, disclosure or
auditing matters, and providing an avenue of communication among the independent auditors, management, and the internal audit function and the Board. In addition, the Audit Committee monitors the Companys compliance with legal and regulatory
requirements, as well as the Companys cybersecurity risks (which the Audit Committee considers at each quarterly meeting and at other times on an as needed basis). The Company considers the Audit Committee an important part of the risk
management process, and senior management works closely with the Audit Committee on these matters in managing material risks to the Company.
The other
committees of the Board also assist in the risk oversight function. The Nominating/Corporate Governance Committee is responsible for ensuring that the Board and its committees are appropriately constituted so that the Board and its directors may
effectively meet their fiduciary obligations to stockholders and the Company. The Nominating/Corporate Governance Committee is also responsible
24
for monitoring and evaluating on an annual basis the effectiveness of the Board and management of the Company, including their effectiveness in implementing the policies and principles of the
Corporate Governance Guidelines. The Compensation Committee is responsible for compensation of the Companys directors and executive officers. These various responsibilities of these committees allow them to work with the Company to make sure
these areas do not pose undue risks to the Company.
Risk Assessment in Compensation Programs
Consistent with SEC disclosure requirements, the Company, its Compensation Committee and the Compensation Committees independent compensation consultant
assess the Companys compensation programs on an annual basis and have determined that the Companys compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. On an
annual basis, Company management, the Compensation Committee and the Compensation Committees compensation consultant will assess the Companys executive and broad-based compensation programs to determine if the programs provisions
and operations create undesired or unintentional risk of a material nature.
The Companys variable forms of compensation, namely the annual cash
incentive bonus program and long-term equity incentives, have structural limitations and other mitigating controls which are designed to prevent the Company from being exposed to unexpected or unbudgeted materially adverse events. For example, bonus
payments to an executive under the annual cash incentive bonus program are capped at a certain percentage of the executives base salary, and the number of shares of restricted stock and stock options granted under the Companys long-term
equity incentive plan are fixed amounts of shares.
The Company, the Compensation Committee, and the Compensation Committees consultant believe that
the Companys compensation policies and practices do not create inappropriate or unintended significant risk to the Company as a whole. The Company and the Compensation Committee also believe that the Companys incentive compensation
arrangements provide incentives that do not encourage risk-taking beyond the organizations ability to effectively identify and manage significant risks and are supported by the oversight and administration of the Compensation Committee with
regard to executive compensation programs.
Policies on Business Ethics and Conduct
The Company has a long-standing Business Ethics Policy. The Board adopted the Code of Business Conduct and Ethics For Members of the Board of Directors and
Executive Officers and the Code of Ethics for Senior Financial Officers. These codes are designed to focus the Board and management on areas of ethical risk, provide guidance to personnel to help them recognize and deal with ethical issues, provide
mechanisms to report unethical conduct and help to foster a culture of honesty and accountability. As set forth in the Corporate Governance Guidelines, the Board may not waive the application of the Companys policies on business ethics and
conduct for any Director or Executive Officer. Copies of the Code of Business Conduct and Ethics For Members of the Board of Directors and Executive Officers and the Code of Ethics for Senior Financial Officers, as well as the code of ethics
applicable to employees of the Company, are available on the Companys website,
www.distributionnow.com
, under the Investor Relations/Corporate Governance section. The Company will furnish print copies of these Codes to interested
stockholders without charge, upon request. Written requests for such copies should be addressed to: Raymond Chang, Secretary, NOW Inc., 7402 N. Eldridge Parkway, Houston, Texas 77041.
25
Communications with Directors
The Board has provided a process for interested parties to communicate with our
non-employee
directors. Parties wishing
to communicate confidentially with our
non-employee
directors may do so by calling
1-866-880-2773.
This procedure is described on the Companys website,
www.distributionnow.com
, in the Investor
Relations/Corporate Governance section. Calls to this number will be answered by an independent, automated system 24 hours a day, 365 days a year. A transcript of the call will be delivered to a member of the Audit Committee. Parties wishing to send
written communications to the Board, other than sales-related communications, should send a letter addressed to the member or members of the Board to whom the communication is directed, care of the Secretary, NOW Inc., 7402 N. Eldridge Parkway,
Houston, Texas, 77041. All such communications will be forwarded to the Board member or members specified.
Director Attendance at Annual Meetings
The Company does not have a formal policy with respect to director attendance at annual stockholder meetings. In 2017, all members of the Board were
in attendance at the annual meeting.
NYSE Corporate Governance Matters
As a listed company with the NYSE, our Chief Executive Officer, as required under Section 303A.12(a) of the NYSE Listed Company Manual, must certify to
the NYSE each year whether or not he is aware of any violation by the Company of NYSE Corporate Governance listing standards as of the date of the certification. On June 14, 2017, the Companys Chief Executive Officer submitted such a
certification to the NYSE which stated that he was not aware of any violation by the Company of the NYSE Corporate Governance listing standards.
On
February 14, 2018, the Company filed its 2017 Annual Report on Form
10-K
with the SEC, which included as Exhibits 31.1 and 31.2 the Chief Executive Officer and Chief Financial Officer certifications
required under Section 302 of the Sarbanes-Oxley Act of 2002.
26
EXECUTIVE OFFICERS
The following persons are our current executive officers. The executive officers of the Company serve at the pleasure of the Board of Directors and are
subject to annual appointment by the Board of Directors. None of the executive officers, directors, or nominees for director has any family relationships with each other.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Biography
|
Robert Workman
|
|
49
|
|
President and Chief Executive Officer
|
|
Mr. Workman has been a director of the Company since May 2014. Mr. Workman has served as President and Chief Executive Officer of the Company since February 2014. Mr. Workman served as National Oilwell Varcos
President Distribution Services from January 2001 until the Companys
spin-off
in May 2014. He previously served National Oilwell Varco starting in 1991 in various managerial positions with the
distribution business group. He also previously served as the Chairman of the Petroleum Equipment Suppliers Association.
|
|
|
|
|
David Cherechinsky
|
|
54
|
|
Senior Vice President and Chief Financial Officer
|
|
Mr. Cherechinsky has served as Senior Vice President and Chief Financial Officer since February 2018. Mr. Cherechinsky previously served as the Companys Vice President, Corporate Controller and Chief Accounting
Officer from February 2014 until February 2018. Mr. Cherechinsky served as Vice PresidentFinance for National Oilwell Varcos distribution business group from 2003, and as Vice PresidentFinance for National Oilwell Varcos
Distribution & Transmission business segment from 2011, until the Companys
spin-off
in May 2014. He previously served National Oilwell Varco starting in 1989 in various corporate roles,
including internal auditor, credit management and business analyst, and is a CPA.
|
27
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Biography
|
Daniel Molinaro
|
|
71
|
|
Executive Vice President
|
|
Mr. Molinaro has served as Executive Vice President since February 2018. Mr. Molinaro previously served as the Companys Senior Vice President and Chief Financial Officer from February 2014 until February 2018.
Mr. Molinaro served as National Oilwell Varcos Vice President from 2003, and served as National Oilwell Varcos Treasurer from 1987, until the Companys
spin-off
in May 2014. Prior to
that, he was Controller of the Oilwell Division of U.S. Steel Corporation (USX). He started with USX in 1968, and has held various managerial positions in auditing, accounting and finance.
|
|
|
|
|
Raymond Chang
|
|
47
|
|
Vice President, General Counsel and Secretary
|
|
Mr. Chang has served as the Companys Vice President and General Counsel since February 2014. Mr. Chang served as National Oilwell Varcos Vice President, Assistant General Counsel and Assistant Secretary from
2009 until the Companys
spin-off
in May 2014. He previously served National Oilwell Varco starting in 2001 in various positions within its legal department. Prior to joining National Oilwell Varco, he
was an associate at the law firm of Baker & McKenzie from 1997 until 2001.
|
|
|
|
|
Mark Johnson
|
|
36
|
|
Vice President, Corporate Controller and Chief Accounting Officer
|
|
Mr. Johnson has served as the Companys Vice President, Corporate Controller and Chief Accounting Officer since February 2018. Mr. Johnson previously served as the Companys Vice President Finance and
Assistant Corporate Controller from May 2014 until February 2018. Mr. Johnson served as Vice President Finance for the National Oilwell Varco Distribution business group from 2012 until the Companys
spin-off
in May 2014. Before joining National Oilwell Varco in 2008, he worked in public accounting and is a CPA.
|
28
STOCK OWNERSHIP
Security Ownership of Certain Beneficial Owners
Based on
information filed with the SEC as of the most recent practicable date, this table shows the number and percentage of shares beneficially owned by owners of more than five percent of the outstanding shares of the common stock of the Company at
December 31, 2017. The number and percentage of shares of common stock beneficially owned is based on 109,519,665 shares outstanding as of December 31, 2017.
|
|
|
|
|
|
|
|
|
5% Owners
|
|
No. of
Shares
|
|
|
Percent
of Class
|
|
Baillie Gifford & Co.
(1)
|
|
|
12,686,073
|
|
|
|
11.58
|
%
|
Calton Square
|
|
|
|
|
|
|
|
|
1 Greenside Row
|
|
|
|
|
|
|
|
|
Edinburgh EH1 3AN
|
|
|
|
|
|
|
|
|
Scotland
|
|
|
|
|
|
|
|
|
UK
|
|
|
|
|
|
|
|
|
|
|
|
BlackRock, Inc.
(2)
|
|
|
11,255,905
|
|
|
|
10.28
|
%
|
55 East 52
nd
Street
|
|
|
|
|
|
|
|
|
New York, NY 10055
|
|
|
|
|
|
|
|
|
|
|
|
The Vanguard Group
(3)
|
|
|
9,232,217
|
|
|
|
8.43
|
%
|
100 Vanguard Blvd.
|
|
|
|
|
|
|
|
|
Malvem, PA 19355
|
|
|
|
|
|
|
|
|
|
|
|
Clearbridge Investments, LLC
(4)
|
|
|
8,274,837
|
|
|
|
7.56
|
%
|
620 8
th
Avenue
|
|
|
|
|
|
|
|
|
New York, NY 10018
|
|
|
|
|
|
|
|
|
|
|
|
First Eagle Investment Management, LLC
(5)
|
|
|
7,871,637
|
|
|
|
7.19
|
%
|
1345 Avenue of the Americas
|
|
|
|
|
|
|
|
|
New York, NY 10105
|
|
|
|
|
|
|
|
|
|
|
|
Massachusetts Financial Services Company
(6)
|
|
|
5,594,088
|
|
|
|
5.11
|
%
|
111 Huntington Avenue
|
|
|
|
|
|
|
|
|
Boston, MA 02199
|
|
|
|
|
|
|
|
|
(1)
|
Shares owned at December 31, 2017, as reflected in Amendment No. 4 to Schedule 13G filed with the SEC on January 24, 2018, by Baillie Gifford & Co. (Baillie Gifford). Securities
reported on this Schedule 13G were reported as being beneficially owned by Baillie Gifford and are held by Baillie Gifford and/or one or more of its investment adviser subsidiaries, which may include Baillie Gifford Overseas Limited, on behalf of
investment advisory clients, which may include investment companies registered under the Investment Company Act, employee benefit plans, pension funds or other institutional clients.
|
(2)
|
Shares owned at December 31, 2017, as reflected in Amendment No. 4 to Schedule 13G filed with the SEC on January 19, 2018, by BlackRock, Inc. (BlackRock). Within the BlackRock group are the
following subsidiaries: BlackRock (Netherlands) B.V., BlackRock Advisors, LLC, BlackRock Asset Management Canada Limited, BlackRock Asset Management Ireland Limited, BlackRock Asset Management Schweiz AG, BlackRock Financial Management, Inc.,
BlackRock Fund Advisors, BlackRock Institutional Trust Company, N.A., BlackRock Investment Management (Australia) Limited, BlackRock Investment Management (UK) Ltd, BlackRock Investment Management, LLC, BlackRock Life Limited and BlackRock
International Limited.
|
29
(3)
|
Shares owned at December 31, 2017, as reflected in Amendment No. 3 to Schedule 13G filed with the SEC on February 14, 2018, by The Vanguard Group. Vanguard Fiduciary Trust Company (VFTC), a
wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 109,607 shares or 0.10% of the common stock outstanding of the Company as a result of its serving as investment manager of collective trust accounts. Vanguard
Investments Australia, Ltd. (VIA), a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 19,814 shares or 0.01% of the common stock outstanding of the Company as a result of its serving as investment manager
of Australian investment offerings.
|
(4)
|
Shares owned at December 31, 2017, as reflected in Amendment No. 2 to Schedule 13G filed with the SEC on February 14, 2018 by Clearbridge Investments, LLC.
|
(5)
|
Shares owned at December 31, 2017, as reflected in Amendment No. 3 to Schedule 13G filed with the SEC on February 8, 2018, by First Eagle Investment Management, LLC (FEIM). FEIM, an investment
adviser registered under Section 203 of the Investment Advisers Act of 1940, is deemed to be the beneficial owner of 7,871,367 shares, or 7.30% of the common stock believed to be outstanding as a result of acting as investment adviser to
various clients. Clients of FEIM have the right to receive and the ultimate power to direct the receipt of dividends from, or the proceeds of the sale of, such securities. The First Eagle Global Fund, a registered investment company for which FEIM
acts as investment adviser, may be deemed to beneficially own 5,851,664 of these 7,871,637 shares, or 5.43% of the Companys common stock.
|
(6)
|
Shares owned at December 31, 2017, as reflected in Schedule 13G filed with the SEC on February 9, 2018, by Massachusetts Financial Services Company.
|
30
Security Ownership of Management
This table shows the number and percentage of shares of the Companys common stock beneficially owned as of April 4, 2018 by each of our current
directors and executive officers and by all current directors and executive officers as a group. The number and percentage of shares of common stock beneficially owned is based on 109,790,782 shares outstanding as of April 4, 2018. Beneficial
ownership includes any shares as to which the director or executive officer has the right to acquire within 60 days of April 4, 2018 through the exercise of any stock option, warrant or other right. Each stockholder has sole voting and
investment power, or shares these powers with his/her spouse, with respect to the shares beneficially owned.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially Owned
|
|
|
|
|
Name of Individual
|
|
Number of
Common
Shares
(1)
|
|
|
Outstanding
Options
Exercisable
Within 60
Days
|
|
|
Percent
of Class*
|
|
Richard Alario
|
|
|
22,562
|
|
|
|
0
|
|
|
|
*
|
|
Terry Bonno
|
|
|
24,962
|
|
|
|
0
|
|
|
|
*
|
|
Raymond Chang
|
|
|
141,715
|
|
|
|
115,510
|
|
|
|
*
|
|
David Cherechinsky
|
|
|
110,415
|
|
|
|
98,679
|
|
|
|
*
|
|
Galen Cobb
|
|
|
22,562
|
|
|
|
0
|
|
|
|
*
|
|
Paul Coppinger
|
|
|
5,000
|
|
|
|
0
|
|
|
|
*
|
|
James Crandell
|
|
|
27,562
|
|
|
|
0
|
|
|
|
*
|
|
Rodney Eads
|
|
|
27,826
|
|
|
|
0
|
|
|
|
*
|
|
Michael Frazier
|
|
|
48,863
|
|
|
|
0
|
|
|
|
*
|
|
Mark Johnson
|
|
|
11,904
|
|
|
|
26,949
|
|
|
|
*
|
|
Daniel Molinaro
|
|
|
183,225
|
|
|
|
205,396
|
|
|
|
*
|
|
J. Wayne Richards
|
|
|
22,562
|
|
|
|
0
|
|
|
|
*
|
|
Robert Workman
|
|
|
606,905
|
|
|
|
579,231
|
|
|
|
1.1
|
%
|
All current directors and executive officers as a group
(13 persons)
|
|
|
1,256,063
|
|
|
|
1,025,765
|
|
|
|
2.1
|
%
|
(1)
|
Includes shares deemed held by executive officers and directors in the Companys 401(k) plans and deferred compensation plans.
|
31
COMPENSATION DISCUSSION AND ANALYSIS
General Overview
NOW Inc.s executive compensation
program is administered by the Compensation Committee of the Board of Directors. The Compensation Committee establishes specific compensation levels for the Companys executive officers and administers the Companys long-term incentive
award plans. The Compensation Committees objective regarding executive compensation is to design and implement a compensation program that will attract and retain the best available individuals to serve on the Companys executive team and
properly incentivize those executives to achieve the Companys short-term and long-term financial and operational goals. To this end, the Compensation Committee strives to provide compensation packages for key executives that generally offer
compensation opportunities in the median range of the companies in its designated peer group as described below. Data sources reviewed by the Compensation Committee and its independent compensation consultants include industry survey groups,
national survey databases, proxy disclosures and general trend data, which are updated annually. The Compensation Committee reviews all elements of executive compensation both separately and in the aggregate.
Major components of the executive compensation program for 2017 are base salary, participation in the Companys annual cash incentive (bonus) plan and
the grant of
non-qualified
stock options, restricted stock and performance-based restricted stock awards (long-term incentives).
2017 Performance Overview
In 2017, the Company had the
following highlights:
|
|
|
The Company generated positive EBITDA for 2017;
|
|
|
|
The Company has completed twelve acquisitions since its inception in 2014;
|
|
|
|
Revenue in 2017 of $2.648 billion, an increase of $541 million over 2016.
|
Participants
The following is a list of our named executive officers by name and position, as of December 31, 2017:
|
|
|
Name
|
|
Position
|
Robert Workman
|
|
President and Chief Executive Officer
|
Daniel Molinaro
|
|
Senior Vice President and Chief Financial Officer
|
Raymond Chang
|
|
Vice President, General Counsel and Secretary
|
David Cherechinsky
|
|
Vice President and Chief Accounting Officer
|
Mark Johnson
|
|
Vice President Finance and Assistant Corporate Controller
|
32
Good Pay Practices
Our compensation program and policies include key features that are designed to align the interests of our executives and stockholders and to mitigate
compensation-related risks. The table below highlights our practices:
|
|
|
What We Do
|
|
What We Do Not Do
|
☑ Pay for Performance
|
|
☒ No
gross-up
payments to cover
excise taxes or perquisites
|
☑ Long-term incentives linked to stock price appreciation and company
financial performance
|
|
☒ No Guaranteed Annual or Multi-Year Bonuses
|
☑ Annual Cash Incentive and Long-Term Incentives are subject to the
Companys clawback policy
|
|
☒ No Repricing of Underwater Stock Options
|
☑ Bonus payments to executives under the annual cash incentive program
are capped at a certain percentage of the executives base salary
|
|
☒ No significant compensation in the form of perquisites for
executives
|
☑ Long-term incentive awards do not fully vest until a minimum of three
years after the grant
|
|
☒ No pledging of our shares by executive officers or
directors
|
☑ Varied performance metrics under short-term and long-term incentive
plans
|
|
|
☑ Double Trigger Provisions for Change in Control
|
|
|
☑ Independent Consultant Reports Directly to the Compensation
Committee
|
|
|
☑ Fully independent Compensation Committee
|
|
|
☑ Benchmark pay relative to the market and review the designated peer
group used for market benchmarking on an annual basis
|
|
|
☑ Mitigate Undue Risk in Compensation Programs
|
|
|
In 2017, approximately 94% of the votes cast on our
say-on-pay
proposal were in favor of our executive compensation program and policies.
Compensation Philosophy
The Company believes it is
important for each executive to have a fixed amount of cash compensation, in the form of base salary, that is not dependent on the performance or results of the Company. The Company recognizes that a certain amount of financial certainty must be
provided to its executives as part of their compensation.
While the Company believes a competitive base salary is needed to attract and retain talented
executives, the Companys compensation program also places a strong emphasis on performance driven annual and long-term incentives to align the executives interests with stockholder value. The annual and long-term incentives are
calculated and paid based primarily on financial measures of profitability and stockholder value creation. Executives of the Company are incentivized to increase the Companys profitability and stockholder return and to optimize the
Companys financial performance in order to earn a major portion of their compensation package.
The Company seeks to structure a balance between
achieving strong short-term annual results and ensuring the Companys long-term success and viability. The Company wants each of its executives to
33
balance his or her focus between the Companys
day-to-day
operational performance and the Companys
long-term goals and strategies. To reinforce the importance of balancing these perspectives, the Companys executives are provided both short and long-term incentives.
Base salary is designed to compensate the executive for his or her performance of normal, everyday job functions. The Companys annual cash incentive
(bonus) plan and long-term incentives are designed to reward the executive for executing business plans that will benefit the Company in the short and long-term. The Company believes that the mix of short and long-term incentives allows the Company
to deliver results aligned with the interests of stockholders. Stock options create a focus on share price appreciation, while the annual cash incentive (bonus) and performance-based restricted stock awards emphasize financial performance, both
absolute and relative.
Components of NOWs Compensation Program
|
|
|
|
|
|
|
Total Compensation
|
|
|
Components
of Compensation
|
|
Purpose
|
Fixed Pay
|
|
Base Salary
|
|
Fixed level
of compensation to attract and retain executive talent
Salary level based on tenure, expertise, scope of responsibility and individual
performance
|
|
|
Annual Incentives (Cash)
|
|
Incentivize
and reward executives for achieving the Companys profitability goals
Encourage prudent deployment of capital
Attract, motivate, and retain
high quality management talent
|
|
|
Stock Options
|
|
Link
significant portion of executive compensation to the enhancement of stockholder value
Focus executives on share price appreciation and reward for creating long-term stockholder
value
|
At Risk Pay
|
|
Performance Shares
|
|
Recognizes
the Companys total shareholder performance relative to industry peers
Encourage positive financial results on the income statement and balance sheet
Links the Companys
performance to long-term stockholder value creation
Provides a long-term incentive vehicle tied to a three-year performance goal
|
|
|
Restricted Stock
|
|
Aligns
interests of executives with shareholders by providing long-term stock ownership
Requires three-year cliff vesting, thus serves as a retention tool
|
Given the inherent nature of these forms of compensation and the cyclical nature of the industry in which we operate, the
Company understands that its annual cash incentives and long-term compensation will result in varying compensation for its executives each year. Because of this, the Company has tried to design its annual cash incentives and long-term compensation
program in such a way to provide
34
meaningful financial rewards to its executives during times when the Companys financial and operational performance is strong, while motivating executives to stay with the Company during
more challenging economic times when the Companys performance may not be as strong.
There are no compensation policy differences among the
individual executives, except that the more senior officers, such as the chief executive officer, receive higher compensation consistent with their increased responsibilities. These differences are reviewed and considered in connection with the
compensation analysis performed by the Compensation Committees independent consultant.
Competitive Positioning
Because of these goals and objectives for executive compensation, the Company believes each element of compensation should be properly designed, as well as
competitive with the marketplace, to incentivize its executives in the manner stated above. The Company believes it is also important that executive compensation be properly designed to attract and retain talented executives.
As part of its process to establish compensation levels for the Companys named executive officers, the Compensation Committee compares each of the major
elements of compensation (base salary, annual bonus and long-term incentives) for each of its named executive officers against the median compensation provided to comparable executive officers at companies in a designated peer group. When analyzing
peer group data, the Compensation Committee does not establish a specific numeric range around the median data points, which it considers reasonable or acceptable. Rather, in setting compensation for any particular named executive officer, the
Compensation Committee considers any variance from the median, taking into account other factors as discussed below, and determines whether such variance is appropriate. If the Compensation Committee determines that any variance is unwarranted, the
Compensation Committee will make appropriate adjustments to the compensation levels.
In November 2017, the Compensation Committee requested that its
independent compensation consultant, Longnecker & Associates (L&A), review its designated peer group against which the Companys named executive officers compensation is compared, and provide recommendations on the
ongoing peer group framework. The designated peer group, developed in 2014, was comprised of companies of similar size, companies in the equipment and services industry with emphasis on serving the energy industry, and companies in the peer group of
its closest competitors, as well as companies for which the Company competes for management talent. Two companies in the original peer group, Rosetta Resources and Dresser-Rand, were acquired by other companies since the establishment of the
designated peer group. As a result, those two companies were removed from the designated peer group, reducing the designated peer group to fourteen companies.
L&A reviewed each designated peer companys revenue, assets, market capitalization and enterprise value in relation to the Company. L&A indicated
that an ideal size for the designated peer group of the Company would be between 12 to 18 companies, and that the current designated peer group size of 14 companies would still be reasonable and proper. L&A also indicated that in order for the
Company to maintain its stated philosophy related to peer selection criteria (peer companies should generally fall within reasonable size parameters of 0.5 to 2.0 times the Companys revenues, assets, EBITDA and/or market capitalization),
L&A recommended that W.W. Grainger, Inc. (the largest peer member) be removed from the peer group and that Oceaneering International, Inc. (a company of comparable size to the Company) be added in its place. Such recommendation was approved by
the Company and the Compensation Committee.
35
After reviewing the peer group and L&As analysis and recommendations, the Compensation Committee
approved the following peer group of 14 companies to form the Companys designated peer group:
|
|
|
|
|
Oceaneering International, Inc.
|
|
WESCO International Inc.
|
|
KBR, Inc.
|
MRC Global Inc.
|
|
Flowserve Corp.
|
|
Superior Energy Services, Inc.
|
MasTec, Inc.
|
|
Fastenal Company
|
|
DXP Enterprises, Inc.
|
MSC Industrial Direct Co. Inc.
|
|
McDermott International Inc.
|
|
Applied Industrial Technologies, Inc.
|
Anixter International Inc.
|
|
Forum Energy Technologies, Inc.
|
|
|
The Compensation Committee recognized that the designated peer group was within reasonable size parameters (generally 0.5
times to 2 times the Companys revenues, assets, EBITDA and/or market capitalization) and were generally similar to the Company in terms of industry and/or operations.
The Compensation Committee then engaged L&A in November 2017 to conduct its annual competitive review of executive compensation for the Companys top
five executives relative to its peer companies, as well as to analyze internal pay equity based on the peer group approved by the Compensation Committee. L&A analyzed and compared each positions responsibilities and job title to develop
competitive market data. Its executive compensation review covered the following elements of compensation: base salaries, annual bonuses, and equity compensation. L&A generated data on the components of the Companys compensation program
compared to the market 25
th
percentile, market 50
th
percentile, and market 75
th
percentile
of the designated peer group.
Based on the compiled data and the comparisons prepared by L&A, the Compensation Committee, in consultation with the
Company and L&A, determined that the total direct compensation for the Companys named executive officers relative to the designated peer group was generally positioned between the 25
th
percentile and 50
th
percentile range of the peer group.
Components of Compensation
The following describes the elements of the Companys compensation program for 2017, why they were selected, and how the amounts of each element were
determined.
Base Salary
Base salaries provide
executives with a fixed level of monthly cash income. While the Compensation Committee is aware of competitive levels, actual salary levels are based on factors including tenure, individual performance, and level and scope of responsibility. The
Company does not give specific weights to these factors. The Compensation Committee determines median base salary levels by having L&A conduct a comprehensive review of information provided in proxy statements filed by our peer companies.
Generally, each executive is reviewed by the Compensation Committee individually on an annual basis. Salary adjustments are based on the individuals experience and background, the individuals performance during the prior year, the
general movement of salaries in the marketplace, our financial position and, for each executive other than the chief executive officer, the recommendations of our chief executive officer. The Compensation Committee does not establish specific
individual goals for the Companys named executive officers, other than the chief executive officer (see Compensation of the Chief Executive Officer below for a discussion of the chief executive officers goals). The
Compensation Committees analysis of the individual performance of any particular named executive officer is subjective in nature and takes into account the recommendations of the chief executive officer (other than with respect to him). As a
result of these factors, an executives base salary may be above or below the targeted median at any point in time.
In November 2014, the
Compensation Committee reviewed with L&A the base salaries of the named executive officers. The Compensation Committee considered each named executive officers base salary relative to his peers and found that overall, the Companys
executives are generally aligned below the market 25
th
percentile. Based on L&As analysis, the CEO was further behind the market than the other
36
executives. The Compensation Committee also considered that there had been no adjustments to the Companys named executive officers base salary since the Companys
spin-off
from National Oilwell Varco in May 2014.
L&A recommended to the Compensation Committee that it adopt a
philosophy of targeting base salaries near the market 50
th
percentile of the Companys designated peer group. Given that many of the executives were not near the market 50
th
percentile, and to allow the executives to mature into their current roles, L&A recommended that increases to base salaries to achieve near the market 50
th
percentile be made over a period of three years, so as to limit the amount of any increases over a one year period and to allow the Compensation Committee to review and make any further adjustments
on an annual basis. In November 2014, the Compensation Committee agreed to the staged increases in base salary pay over a three year period, subject to an annual cap that would allow the Company to maintain fiscal responsibility and better manage
pay for performance alignment while salaries adjust to the market median (Original Three Year Base Pay Plan).
In November 2015, the
Compensation Committee conducted its annual review with L&A of the base salaries of the named executive officers. The Compensation Committee considered each named executive officers base salary relative to his peers and found that the
Companys chief executive officer was below the market 25
th
percentile and the other executives were generally aligned between the market
25
th
percentile and the market 50
th
percentile. The results of such review were consistent with the analysis conducted in 2014, and were to be
addressed by the Compensation Committees approval and implementation of the Three Year Base Pay Plan.
However, given the difficult and severe
market conditions during 2015, Company management requested that the Compensation Committee suspend the previously approved Original Three Year Base Pay Plan, and maintain each executives base salary at current levels, even though such
existing base salary levels were all below median levels of their designated peers (and in the case of the chief executive officer, below the market 25
th
percentile). The Compensation Committee,
in consultation with the Company and L&A, reviewed the Companys request. While the Compensation Committee found the Three Year Base Pay Plan to still be fully supported by market data, it agreed to honor the Companys request and
suspend implementation of the previously approved base salary adjustments for the Companys executive officers per the Three Year Base Pay Plan, and agreed to take such actions taken by Company management into consideration when compensation
was reviewed again in 2016.
In November 2016, the Compensation Committee conducted its annual review with L&A of the base salaries of the named
executive officers. The Compensation Committee considered each named executive officers base salary relative to his peers and found that the Companys chief executive officer was still below the market 25
th
percentile and the other executives were generally aligned between the market 25
th
percentile and the market 50
th
percentile. Given the continued difficult and severe market conditions during 2016, Company management requested that the Compensation Committee continue to suspend the previously approved Original
Three Year Base Pay Plan, and maintain each executives base salary at current levels, even though such existing base salary levels were all below median levels of their designated peers (and in the case of the chief executive officer, below
the market 25
th
percentile). The Compensation Committee, in consultation with the Company and L&A, reviewed the Companys request. While the Compensation Committee found the Original
Three Year Base Pay Plan to still be fully supported by market data, it agreed to honor the Companys request and continue to suspend implementation of the previously approved base salary adjustments for the Companys executive officers
per the Original Three Year Base Pay Plan, and agreed to take such actions taken by Company management into consideration when compensation was reviewed again in 2017.
On February 21, 2017, the Compensation Committee agreed to implement the previously approved base salary increase for Mr. David Cherechinsky, the
Companys Chief Accounting Officer, to $300,000, noting that such base salary increase still put Mr. Cherechinskys base salary below the median market base salary level of his peers.
37
In November 2017, the Compensation Committee conducted its annual review with L&A of the base salaries of the
named executive officers. The Compensation Committee considered each named executive officers base salary relative to his peers and found that the Companys chief executive officer was still below the market 25
th
percentile and the other executives were generally aligned between the market 25
th
percentile and the market 50
th
percentile. Given that market conditions during 2017 had improved and the Companys performance had improved as well, and also given that the Companys executive officers had not had any
base salary adjustments for three years (and the executives base salary levels have remained below median levels since the Company was
spun-off
in 2014), the Compensation Committee requested that L&A
review and update the Original Three Year Base Pay Plan, in an effort to come up with a long-term plan to align executive base salary pay to market median levels. After such review and analysis, L&A recommended that increases to base salaries to
achieve near the market 50
th
percentile be made over a period of three years, so as to limit the amount of any increases over a one year period and to allow the Compensation Committee to review
and make any further adjustments on an annual basis. The Compensation Committee agreed to the staged increases in base salary pay over a three year period, subject to an annual cap that would allow the Company to maintain fiscal responsibility and
better manage pay for performance alignment while salaries adjust to the market median, starting in 2018 (Updated Three Year Base Pay Plan).
The Companys named executive officers had the following base salaries at the end of 2017:
|
|
|
|
|
Name
|
|
2017 Base Salary
|
|
Robert Workman
|
|
$
|
600,000
|
|
Daniel Molinaro
|
|
$
|
425,000
|
|
Raymond Chang
|
|
$
|
368,000
|
|
David Cherechinsky
|
|
$
|
300,000
|
|
Mark Johnson
|
|
$
|
168,000
|
|
Annual Incentive Award
The objectives of the Companys annual cash incentive plan are to incent performance to achieve the Companys corporate growth and profitability
goals, encourage smart investments and prudent employment of capital, incent efficient and optimal cash flow management, and provide competitive compensation packages to attract and retain management talent.
The Companys annual incentive plan has two independent,
pre-determined
and equally weighted metrics to measure
the Companys success and payouts under such plan: (1) working capital as a percentage of revenue (Working Capital) and (2) EBITDA percentage (EBITDA). Working capital is defined as current assets (excluding
cash) less current liabilities (excluding short-term borrowings). Substantially all corporate exempt employees of the Company, including executive officers, are eligible to participate in the Companys annual incentive plan in 2017, aligning a
portion of each employees cash compensation with Company performance.
Each participant is assigned a target level percentage bonus (target
incentive opportunity), which ranges from 5% to 100% of salary, depending on the level of the participant. There are three performance metric result levels of the target level percentage bonus set under the incentive plan for each of the two
performance metrics minimum (50%), target (100%) and maximum (200%) (the performance metric result). Entry level is the minimum level of EBITDA and Working Capital for which the Company
38
provides an annual incentive payout. If the Companys EBITDA is less than the entry level threshold, then there is no payout in that fiscal year for the EBITDA portion of the annual
incentive. If the Companys Working Capital is less than the entry level threshold, then there is no payout in that fiscal year for the Working Capital portion of the annual incentive. If the Company achieves the entry level threshold for a
performance metric, the minimum level payout of 50% of the target level percentage bonus is earned. For the EBITDA portion of the annual incentive plan, the target multiplier level (100% of the participants applicable percentage of
base salary) is earned when the target EBITDA level is reached by the Company. For the Working Capital portion of the annual incentive plan, the target multiplier level (100% of the participants applicable percentage of base salary) is earned
when the target Working Capital level is reached by the Company. For the EBITDA portion of the annual incentive plan, for the maximum level multiplier of 200% of the target level percentage bonus to occur, the Companys EBITDA must
equal or exceed the maximum EBITDA goal that was set for the incentive plan. For the Working Capital portion of the annual incentive plan, for the maximum level multiplier of 200% of the target level percentage bonus to occur, the
Companys Working Capital must equal or exceed the maximum Working Capital goal that was set for the incentive plan. Results falling between the stated thresholds of minimum, target and maximum will result in an interpolated, or sliding scale
payout.
For 2017, the chief executive officers participation level was 100%, the chief financial officers participation level was 80%, and
the other executive officers participation levels were between
50-80%.
These participation level percentages are based on each executives level of responsibility for the Companys financial
performance.
The Compensation Committee believes the use of two separate metrics, EBITDA and Working Capital, as the designated performance objectives
under the annual incentive plan best align the interests of the Companys stockholders and the Companys executive officers. The target objective is set at a level that the Company believes is challenging to meet but achievable
if the Company properly executes its operational plan and market conditions are positive and favorable during the year. The minimum and maximum level of EBITDA and Working Capital under the incentive plan are set based off of
the target objective. The Compensation Committee believes this objective, formulaic measure allows the minimum objective to be set at a level that the Company can achieve even if market conditions are
not as favorable and/or the Companys operational plan is not executed as efficiently as planned. The minimum objective serves to motivate the Companys executives to continue to work towards executing the Companys
operational plan if market conditions, which are generally outside the control of the Company, are not as favorable. The Compensation Committee believes this objective, formulaic measure allows the maximum objective to be set at a level
that would be extremely challenging for the Company to achieve. The Compensation Committee believes that, for the maximum objective to be achieved, a combination of market conditions being much more favorable than initially forecasted
and the Company executing its operational plan in a highly efficient manner would need to occur.
Payouts are determined by metric under the
Companys annual incentive plan using the following formula:
The following examples calculate an annual incentive award payment for Mr. Workman assuming (1) the
Companys 2017 EBITDA and Working Capital were each equal to the entry level set under the incentive
39
plan, (2) the Companys 2017 EBITDA and Working Capital were each equal to the target set under the incentive plan, and (3) the Companys 2017 EBITDA and Working Capital each
exceeded the maximum set under the incentive plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA Metric
|
|
Base Salary
|
|
|
Target
Incentive
Opportunity
|
|
|
Performance
Metric Weight
|
|
|
Performance
Metric Result
|
|
|
Award
Amount
|
|
Entry
|
|
$
|
600,000
|
|
|
|
100
|
%
|
|
|
50
|
%
|
|
|
50
|
%
|
|
$
|
150,000
|
|
Target
|
|
$
|
600,000
|
|
|
|
100
|
%
|
|
|
50
|
%
|
|
|
100
|
%
|
|
$
|
300,000
|
|
Maximum
|
|
$
|
600,000
|
|
|
|
100
|
%
|
|
|
50
|
%
|
|
|
200
|
%
|
|
$
|
600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WC/R Metric
|
|
Base Salary
|
|
|
Target
Incentive
Opportunity
|
|
|
Performance
Metric Weight
|
|
|
Performance
Metric Result
|
|
|
Award
Amount
|
|
Entry
|
|
$
|
600,000
|
|
|
|
100
|
%
|
|
|
50
|
%
|
|
|
50
|
%
|
|
$
|
150,000
|
|
Target
|
|
$
|
600,000
|
|
|
|
100
|
%
|
|
|
50
|
%
|
|
|
100
|
%
|
|
$
|
300,000
|
|
Maximum
|
|
$
|
600,000
|
|
|
|
100
|
%
|
|
|
50
|
%
|
|
|
200
|
%
|
|
$
|
600,000
|
|
If the Target level were reached in a given performance period for both metrics for Mr. Workman, the total award in this
example would sum to $600,000 ($300,000 earned in the EBITDA metric and $300,000 earned in the Working Capital (WC/R) metric).
The Companys annual
incentive plan is designed to reward its executives in line with the financial performance of the Company on an annual basis. When the Company is achieving strong financial results, its executives will be rewarded well through its annual incentive
plan. The Company believes this structure helps keep the executives properly motivated to continue helping the Company achieve these strong results. While the executives financial benefit is reduced during times when the Companys
performance is not as strong, other forms of the Companys compensation program, namely its long-term incentive compensation as well as base salary, help motivate its executives to remain with the Company to help it achieve strong financial and
operational results, thereby benefiting the executive, the Company and its stockholders.
Market conditions in 2017 improved but remained challenging. The
Companys operating results were impacted by rig count and the price of WTI and natural gas levels during 2017, resulting in the Company achieving the entry level (minimum) of EBITDA under its annual cash incentive plan, but not the
target level. The Company was able to manage its balance sheet very efficiently and well during an improving 2017 market, resulting in the Company achieving better than the maximum level of Working Capital under its annual cash inventive plan.
Thus, based on the Companys financial results in 2017, bonus payments were made to the Companys named executive officers, as follows: Mr. Workman
- $789,653; Mr. Molinaro - $447,470; Mr. Chang - $387,456; Mr. Cherechinsky - $296,120; and Mr. Johnson - $110,551.
Long-Term Incentive Compensation
The primary purpose of the Companys long-term incentive compensation is to focus its executive officers on a longer-term perspective in their
managerial responsibilities. This component of an executive officers compensation directly links the officers interests with those of the Companys stockholders. In addition, long-term incentives encourage management to focus on the
Companys long-term development and prosperity in addition to profitability and optimal cash flow. This program helps balance long-term versus short-term business objectives, reinforcing that one should not be achieved at the expense of the
other. The Companys long-term incentive compensation program also serves to help the Company attract and retain management talent.
40
In November 2014, the Compensation Committee, the Company and L&A discussed establishing a long-term
incentive plan structure for the Company. L&A conducted a market study to determine what types of grants were used by the Companys peers, as well as the type of grants the employees of the Company were accustomed to receiving during their
employment with National Oilwell Varco before the
spin-off.
In January 2015, the Compensation Committee agreed
that equity grants to be made to the Companys executives under the Companys long-term incentive plan would consist of, in equal portions by value, stock options, time-based restricted stock and performance-based share awards. The
Compensation Committee, the Company and L&A believed it was important that a portion of the equity grants included a grant based on the satisfaction of a specified performance condition to determine vesting of that particular grant. After
consultation with Company management and L&A, the Compensation Committee established three separate performance metrics to be used for vesting of the performance share awards for executives. The Compensation Committee believed that the
performance measures they established would serve to motivate the Companys executives to deliver results aligned with the interests of Company stockholders.
The performance share awards can be earned by the executives only by performance against established goals and vest three years from the grant date. The
performance share awards are divided into three equal, independent parts that are subject to these three separate performance metrics: 33 1/3% with a TSR (total shareholder return) goal, 33 1/3% with an EBITDA goal and 33 1/3% with a working capital
as a percentage of revenue goal (working capital).
Performance against the TSR goal is determined by comparing the performance of the Companys TSR
with the TSR performance of the members of the Companys designated peer group for the three year performance period of the performance share awards. The Compensation Committee believes that the members of the Companys designated peer
group are an appropriate benchmark against which to compare the Companys TSR performance. The following table summarizes the relationship between the Companys TSR performance when compared with the TSR performance of the members of its
designated peer group and the associated payout levels for the performance achieved for the TSR portion of the award:
|
|
|
|
|
|
|
Level
|
|
Payout %
|
|
|
Percentile Rank vs. Designated Peer Group
|
Maximum
|
|
|
200
|
%
|
|
200% earned when the Company is at the 75
th
percentile or greater
|
Target
|
|
|
100
|
%
|
|
100% earned when the Company is at the 50
th
percentile
|
Minimum
|
|
|
50
|
%
|
|
50% earned when the Company is at the 25
th
percentile
|
No Payout
|
|
|
0
|
%
|
|
0% earned when the Company is below the 25
th
percentile
|
Results falling between the stated thresholds of minimum, target and maximum will result in an interpolated, or sliding scale
payout.
41
Performance against the EBITDA percentage goal is determined by comparing the performance of the Companys
actual EBITDA percentage performance average for each of the three years of the performance period against the EBITDA goal set by the Compensation Committee. The following table summarizes the payout levels on the EBITDA portion of the award based
on the Companys EBITDA percentage performance against the EBITDA percentage goal:
|
|
|
|
|
|
|
Level
|
|
Payout %
|
|
|
Actual EBITDA Performance
|
Maximum
|
|
|
200
|
%
|
|
200% earned when EBITDA achievement is 3% or higher
|
Target
|
|
|
100
|
%
|
|
100% earned when EBITDA achievement is 1%
|
Minimum
|
|
|
50
|
%
|
|
50% earned when EBITDA achievement is 0%
|
No Payout
|
|
|
0
|
%
|
|
0% earned when EBITDA achievement is less than 0%
|
Results falling between the stated thresholds of minimum, target and maximum will result in an interpolated, or sliding scale
payout.
Performance against the working capital as a percentage of revenue goal is determined by comparing the performance of the Companys actual
working capital as a percentage of revenue performance average for each of the three years of the performance period against the working capital as a percentage of revenue goal set by the Compensation Committee. The following table summarizes the
payout levels on the working capital as a percentage of revenue portion of the award based on the Companys working capital as a percentage of revenue performance against the working capital goal (WC):
|
|
|
|
|
|
|
Level
|
|
Payout %
|
|
|
Actual Working Capital Performance
|
Maximum
|
|
|
200
|
%
|
|
200% earned when WC achievement is 25% or lower
|
Target
|
|
|
100
|
%
|
|
100% earned when WC achievement is 30%
|
Minimum
|
|
|
50
|
%
|
|
50% earned when WC achievement is 35%
|
No Payout
|
|
|
0
|
%
|
|
0% earned when WC achievement is greater than 35%
|
Results falling between the stated thresholds of minimum, target and maximum will result in an interpolated, or sliding scale
payout. Working capital for purposes of this calculation will exclude cash.
The Compensation Committee implemented this performance award structure to
provide for long-term incentives comparable to those awards used by the Companys peers, such as:
|
|
|
Making award payouts based on multiple measures/metrics; and
|
|
|
|
Providing an
earn-out
structure with a threshold and maximum payout with varying levels of performance to incentivize performance
|
The Company grants stock options, time-based restricted stock and performance-based share awards to the Companys key executives based on competitive
grants within the industry and based on the level of long-term incentives appropriate for the competitive long-term compensation component of total compensation. Such executives are eligible to receive stock options, restricted stock and performance
share awards annually with other key managers being eligible on a discretionary basis. Eligibility for an award does not ensure receipt of an award.
Options are granted with an exercise price per share equal to the fair market value of the Companys common stock on the date of grant and generally vest
in equal annual installments over a three-year period, and have a seven-year term subject to earlier termination. Option grants, restricted stock award grants and performance award grants must be reviewed and approved by the Compensation Committee.
The Companys long-term incentive compensation program is focused on employees who will have a greater impact on the direction and long-term results
of the Company by virtue of their roles and responsibilities.
42
Based on the foregoing, on February 21, 2017, the Compensation Committee approved the grant of stock options
to its executive officers pursuant to the NOW Inc. Long-Term Incentive Plan, as follows:
|
|
|
Name
|
|
Securities Underlying
Options (#)
|
Robert Workman
|
|
228,389
|
Daniel Molinaro
|
|
66,306
|
Raymond Chang
|
|
51,572
|
David Cherechinsky
|
|
29,470
|
Mark Johnson
|
|
13,000
|
The exercise price of the stock options is $20.64 per share, which was the closing stock price of NOW Inc. common stock on the
date of grant. The stock options have a term of seven years from the date of grant and vest in three equal annual installments beginning on the first anniversary of the date of the grant.
On February 21, 2017, the Compensation Committee approved the grant of time-based restricted stock to its executive officers pursuant to the NOW Inc.
Long-Term Incentive Plan, as follows:
|
|
|
Name
|
|
Shares of Restricted Stock (3
Years) (#)
|
Robert Workman
|
|
38,065
|
Daniel Molinaro
|
|
11,051
|
Raymond Chang
|
|
8,595
|
David Cherechinsky
|
|
4,912
|
Mark Johnson
|
|
2,175
|
The restricted stock awards granted by the Company to its executive officers vest 100% on the third anniversary of the date of
grant.
On February 21, 2017, the Compensation Committee approved the grant of performance share awards to its executive officers pursuant to the NOW
Inc. Long-Term Incentive Plan, as follows:
|
|
|
Name
|
|
Performance Awards
(Target # of Shares)
|
Robert Workman
|
|
38,065
|
Daniel Molinaro
|
|
11,051
|
Raymond Chang
|
|
8,595
|
David Cherechinsky
|
|
4,912
|
Mark Johnson
|
|
|
The performance share awards can be earned by the executives only by performance against established goals and vest three
years from the grant date. The performance share awards are divided into three equal, independent parts that are subject to three separate performance metrics: 33 1/3% with a TSR (total shareholder return) goal, 33 1/3% with an EBITDA percentage
goal, and 33 1/3% with a working capital as a percentage of revenue goal (working capital).
43
The Compensation Committee also designated an annual 2017 equity grant for Mr. Miller, the Companys
Executive Chairman, in the form of stock options, time-based restricted stock and performance share awards. Mr. Miller voluntarily requested that he be allowed to decline receiving such grant and waive his right to it. While the size of his
grant was fully supported by market data, as confirmed by L&A, the Compensation Committee respected Mr. Millers wishes and allowed him to decline receiving such proposed grant. Mr. Miller retired from the Company on
October 1, 2017.
The goal of the stock option program is to provide a compensation program that is competitive within the industry while directly
linking a significant portion of the executives compensation to the enhancement of stockholder value. The ultimate value of any stock option is based solely on the increase in value of the shares of the Companys common stock over the
grant price. Accordingly, stock options have value only if the Companys stock price appreciates from the date of grant. Additionally, the option holder must remain employed during the period required for the option to vest, thus
providing an incentive for an option holder to remain employed by the Company. This
at-risk
component of compensation focuses executives on the creation of stockholder value over the long-term and is therefore
inherently performance-based compensation.
The goal of the performance-based share award program is to provide a compensation program that is also
competitive within the industry while directly linking a significant portion of the executives compensation to the financial performance of the Company. The performance-based share awards received by the executives have value only if the
Companys designated financial performance objectives are met and exceeded. Additionally, the holder must also remain employed during the period required for the award to vest, thus providing an additional incentive for the award
holder to remain employed by the Company. This
at-risk
component of compensation focuses executives on achieving strong financial performance for the Company over the long-term.
The goal of time-based restricted stock award grants is to serve as a key retention tool for the Company to retain its executives and key employees. The
restricted stock awards will have value to the executive even if the Companys stock price falls below the price on the date of grant, provided that the executive remains employed during the period required for the award to vest.
The Company believes that its equity incentive grants must be sufficient in size and duration to provide a long-term performance and retention incentive
for executives and to increase their interest in the appreciation of the Companys stock and achievement of positive financial results, both in absolute terms and relative to its peers. The Company believes that stock option, restricted stock
and performance award grants at a competitive level, with certain vesting requirements, are an effective way of promoting the long-term nature of its business.
Compensation of the Chief Executive Officer
The
Compensation Committee determines the compensation of the chief executive officer based on competitive peer group data, leadership, meeting operational goals, executing the Companys business plan, and achieving certain financial results.
Components of Mr. Workmans compensation for 2017 are consistent with those for executive officers as described above and included base salary, participation in the annual incentive plan and the grant of stock options, restricted stock and
performance awards.
In considering Mr. Workmans base salary level, the Compensation Committee, generally on an annual basis, reviews the
compensation level of chief executive officers of each of the companies in the designated peer group and considers Mr. Workmans individual performance and success in achieving the Companys strategic objectives.
44
The Compensation Committee establishes goals and objectives for Mr. Workman for each fiscal year. For 2017,
Mr. Workmans performance was measured in four key areas of the Company: (1) financial performance, (2) formulation and implementation of Company strategy, (3) operational performance, and (4) management and employee
development. The specific goals within these four areas were set based on a determination of prioritizing Mr. Workmans efforts on those specific areas and responsibilities that would have the greatest impact on the Company, and included
the following:
|
|
|
grow market share, manage EBITDA margins and improve working capital as a percentage of revenue;
|
|
|
|
utilize in an efficient manner Board approved capital expenditures;
|
|
|
|
identify and execute on strategic growth opportunities;
|
|
|
|
manage the size of operations based upon analysis of business and market conditions; and
|
|
|
|
training throughout the Company to ensure best in class management development processes.
|
Retirement,
Health and Welfare Benefits
The Company offers retirement, health and welfare programs to all eligible employees. The Companys executive
officers generally are eligible for the same benefit programs on the same basis as the rest of the Companys employees. The health and welfare programs cover medical, pharmacy, dental, vision, life, business travel accident, accidental death
and dismemberment and disability insurance.
The Company offers retirement programs that are intended to supplement the employees personal savings.
The programs include the NOW Inc. 401(k) and Retirement Savings Plan (401k Plan) and NOW Inc. Supplemental Savings Plan (Supplemental Plan). The Companys U.S. employees, including its executives, are generally eligible
to participate in the 401k Plan. Employees of the Company who are eligible based on guidelines established by the Companys benefits plan administrative committee may participate in the Supplemental Plan. Participation in the 401k Plan and
Supplemental Plan are voluntary.
The Company established the 401k Plan to allow employees to save for retirement through a
tax-advantaged
combination of employee and Company contributions and to provide employees the opportunity to directly manage their retirement plan assets through a variety of investment options. The 401k Plan
allows eligible employees to elect to contribute a portion of their eligible compensation into the 401k Plan. Wages and salaries from the Company are generally considered eligible compensation. After one year of service, employee contributions are
matched in cash by the Company at the rate of $1.00 per $1.00 employee contribution for the first 4% of the employees salary. In addition, the Company makes cash contributions for all eligible employees between 2.5% and 5.5% of their salary
depending on the employees full years of service with the Company. Such contributions vest immediately. The 401k Plan offers 26 different investment options, for which the participant has sole discretion in determining how both the employer
and employee contributions are invested. The 401k Plan provides the Companys employees the option to invest directly in the Companys stock. The 401k Plan offers
in-service
withdrawals, loans and
hardship distributions.
The Company established the Supplemental Plan, a
non-qualified
plan, to
|
|
|
allow Supplemental Plan participants to continue saving towards retirement when, due to compensation and contribution ceilings established under the Internal Revenue Code, they can no longer contribute to the 401k Plan;
and
|
|
|
|
provide Company contributions that cannot be contributed to the 401k Plan due to compensation and contribution ceilings established under the Internal Revenue Code.
|
45
Compensation which may be deferred into the Supplemental Plan includes wages and salaries from the Company and
bonus payments made under a Company incentive plan. Supplemental Plan participants may elect to defer a percentage of their base pay and bonus payments received under a Company incentive plan into the Supplemental Plan. Contributions in the
Supplemental Plan vest immediately. The investment options offered in the Supplemental Plan are similar to the investment options offered in the 401k Plan (except Company stock is not offered).
U.S. Income Tax Limits on Deductibility
Section 162(m) of the Internal Revenue Code imposes a $1 million limitation on the deductibility of certain compensation paid to our chief executive
officer and the next three highest paid executives excluding the chief financial officer (covered employees). Pursuant to the 2017 Tax Cuts and Jobs Act, signed into law on December 22, 2017 (the Tax Act), for fiscal
years beginning after December 31, 2017, the compensation of the chief financial officer is also subject to the deduction limitation. For fiscal years beginning on or before December 31, 2017, Section 162(m) excluded compensation from
this limitation that qualified as performance based. For compensation to be performance based, it must meet certain criteria, including being based on predetermined objective standards approved by stockholders. Our stock option and
performance-based share award grants have been designed to be performance based compensation and, for periods prior to January 1, 2018, bonus payments to our executives under the Companys Annual Incentive Plan should also
qualify as performance based and therefore be excluded from this limitation. Pursuant to the Tax Act, subject to certain transition rules, for fiscal years beginning after December 31, 2017, the performance-based compensation exception to the
deduction limitations under Section 162(m) will no longer be available. As a result, for fiscal years beginning after December 31, 2017, any compensation in excess of $1,000,000 million paid to our executive officers may not be
deductible. Although the Compensation Committee takes the requirements of Section 162(m) into account in designing executive compensation, the Compensation Committee believes that the potential deductibility of the compensation payable under
our executive compensation plans and arrangements should be only one of a number of relevant factors taken into consideration in establishing those compensation plans and arrangements for our executive officers and not the sole governing factor. For
that reason, for the 2018 fiscal year, the Compensation Committee intends to structure our compensation plans and arrangements in a manner similar to the 2017 fiscal year, acknowledging that a portion of those compensation payments may not be
deductible under Section 162(m), in order to assure appropriate levels of total compensation for our executive officers based on the Companys performance.
Option Grant Practices
Historically, the Company has
granted stock options to its key employees, including executives, in the first quarter of the year. The Company does not have any program, plan or practice to time its option grants to its executives in coordination with the release of material
non-public
information, and has not timed its release of material
non-public
information for the purposes of affecting the value of executive compensation. The Company does
not set the grant date of its stock option grants to new executives in coordination with the release of material
non-public
information.
The Compensation Committee has the responsibility of approving any Company stock option grants. The Compensation Committee does not delegate material aspects
of long-term incentive plan administration to any other person. The Companys senior executives in coordination with the Compensation Committee set a time for the Committee to meet during the first quarter of the year to review and approve
stock option grants proposed by the senior executives. The specific timing of the meeting during the quarter is dependent on committee member schedules and availability and the Company finalizing its stock option grant proposal. If approved by the
Compensation Committee, the grant date for the stock option grants is the date the Committee meets and approves the grant, with the exercise price for the option grant being based on the Companys closing stock price on the date of grant.
46
Recoupment Policy and Other Considerations
Clawback Policy Regarding the Adjustment or Recovery of Compensation
The Companys Long-Term Incentive Plan allows the Compensation Committee, at its sole discretion, to terminate any award if it determines that the
recipient of such award has engaged in material misconduct. For purposes of this provision, material misconduct includes conduct adversely affecting the Companys financial condition or results of operations, or conduct which constitutes fraud
or theft of Company assets, any of which require the Company to make a restatement of its reported financial statements. If any material misconduct results in any error in financial information used in the determination of compensation paid to the
recipient of any award and the effect of such error is to increase the payment amount pursuant to such award, the Compensation Committee may also require the recipient to reimburse the Company for all or a portion of such increase in compensation
provided in connection with any such award. In addition, if there is a material restatement of the Companys financial statements that affects the financial information used to determine the compensation paid to the recipient of an award, then
the Compensation Committee may take whatever action it deems appropriate to adjust such compensation.
Prohibition on Hedging and Pledging
The Company has had a policy in place since its inception in 2014 prohibiting the Companys executives from engaging in pledging activities with respect
to the Companys shares. The Company also has a policy in place prohibiting the Companys executives from engaging in various hedging activities with respect to the Companys shares, including prohibitions against making any short
sales of any shares of the Company as well as prohibitions against the Companys executives buying or selling puts, calls or options in respect of the Companys shares.
Compensation Consultant Independence
In furtherance of
maintaining the independence of the Compensation Committees compensation consultant, the Compensation Committee has the sole authority to retain or terminate L&A.
In connection with its engagement of L&A, the Compensation Committee considered various factors bearing upon L&As independence including, but
not limited to, the amount of fees received by L&A from the Company as a percentage of L&As total revenue, L&As policies and procedures designed to prevent conflicts of interest, and the existence of any business or personal
relationship that could impact L&As independence. After reviewing these and other factors, the Compensation Committee determined that L&A was independent and that its engagement did not present any conflicts of interest. L&A also
determined that it was independent from management and confirmed this to the Compensation Committee.
47
Recent Developments
In May 2017, our stockholders overwhelmingly approved, on an advisory basis, the compensation of our named executive officers, with approximately 94% of
stockholder votes cast in favor of our
say-on-pay
resolution. As a result, the Compensation Committee decided to maintain our general approach to executive compensation,
with an emphasis on short and long-term incentive compensation that rewards our executives when they achieve the Companys financial and operational goals and deliver value for our stockholders.
On February 20, 2018, the Compensation Committee approved the terms and structure of the 2018 NOW Inc. Annual Incentive Plan.
On February 20, 2018, the Compensation Committee approved the terms and structure of the 2018 Long-Term Incentive grants to the Companys
executives. The terms of such grants are consistent with those described under Long-Term Incentive Compensation above, except as otherwise set forth below. Further to the above, the Compensation Committee approved the following specific
grants to the Companys executive officers:
On February 20, 2018, the Compensation Committee approved the grant of stock options to its
executive officers pursuant to the NOW Inc. Long-Term Incentive Plan, as follows:
|
|
|
|
|
Name
|
|
Securities Underlying
Options (#)
|
|
Robert Workman
|
|
|
447,761
|
|
David Cherechinsky
|
|
|
123,881
|
|
Daniel Molinaro
|
|
|
123,881
|
|
Raymond Chang
|
|
|
93,284
|
|
Mark Johnson
|
|
|
47,015
|
|
The exercise price of the stock options is $9.90 per share, which was the closing stock price of NOW Inc. common stock on the
date of grant. The stock options have a term of seven years from the date of grant and vest in three equal annual installments beginning on the first anniversary of the date of the grant.
On February 20, 2018, the Compensation Committee approved the grant of time-based restricted stock to its executive officers pursuant to the NOW Inc.
Long-Term Incentive Plan, as follows:
|
|
|
|
|
Name
|
|
Shares of Restricted Stock (3
Years) (#)
|
|
Robert Workman
|
|
|
76,220
|
|
David Cherechinsky
|
|
|
21,087
|
|
Daniel Molinaro
|
|
|
21,087
|
|
Raymond Chang
|
|
|
15,879
|
|
Mark Johnson
|
|
|
8,003
|
|
The restricted stock awards granted by the Company to its executive officers vest 100% on the third anniversary of the date of
grant.
48
On February 20, 2018, the Compensation Committee approved the grant of performance share awards to its
executive officers pursuant to the NOW Inc. Long-Term Incentive Plan, as follows:
|
|
|
|
|
Name
|
|
Performance Awards
(Target # of Shares)
|
|
Robert Workman
|
|
|
76,220
|
|
David Cherechinsky
|
|
|
21,087
|
|
Daniel Molinaro
|
|
|
21,087
|
|
Raymond Chang
|
|
|
15,879
|
|
Mark Johnson
|
|
|
8,003
|
|
The performance share awards can be earned by the executives only by performance against established goals and vest three
years from the grant date. The performance share awards are divided into three equal, independent parts that are subject to three separate performance metrics: 33 1/3% with a TSR (total shareholder return) goal, 33 1/3% with an EBITDA goal, and 33
1/3% with a working capital as a percentage of revenue goal (working capital). With respect to the EBITDA performance metric, the Compensation Committee approved increasing the EBITDA performance metrics to 2%, 2.5% and 4.5% for the minimum, target
and maximum levels, respectively. With respect to the working capital metric, the Compensation Committee also approved increasing the working capital metrics to 30%, 25% and 20% for the minimum, target and maximum levels, respectively.
Effective January 1, 2018, the Compensation Committee, in connection with its annual review of executive compensation and performance, after consulting
with L&A, approved the following base salary increases for the Companys executive officers: Robert Workman from $600,000 to $700,000; Daniel Molinaro from $425,000 to $450,000; Raymond Chang from $368,000 to $400,000;
and David Cherechinsky from $300,000 to $305,000. These base salary adjustments were the result of the Compensation Committee approving the Updated Three Year Base Pay Plan, as a result of their following findings: (1) the Companys
chief executive officer was still below the market 25
th
percentile in base salary pay and the other executives were generally aligned between the market 25
th
percentile and the market 50
th
percentile, (2) market conditions during 2017 had improved and the Companys performance had improved as
well, and (3) the Companys executive officers had not had any base salary adjustments for three years. The Updated Three Year Base Pay Plan was designed to address the above concerns, taking into further consideration that the
executives base salary levels have remained below median levels since the Company was
spun-off
in 2014, and the implementation of this new plan was designed to bring executive compensation closer to the
market 50
th
percentile over a three year period.
On February 20, 2018, the Compensation
Committee, after consulting with L&A, approved the following base salary increases for the Companys executive officers: David Cherechinsky from $305,000 to $405,000 and Mark Johnson from $168,000 to $243,000. Increases in
base salary for these executive officers were approved, effective February 16, 2018, as a result of such executives promotions to new positions at the Company and each of their increased responsibilities (Mr. Cherechinsky becoming
the Companys Chief Financial Officer and Mr. Johnson becoming the Companys Chief Accounting Officer, effective February 16, 2018). While each of their new base salaries are still below the median level of comparable salaries
offered by the Companys industry peers, it moves their prior salaries to a level closer to the median level and allows the Company to bring their compensation closer to the market 50
th
percentile over a period of time.
Compensation Committee Report
The responsibilities of the Compensation Committee, which are set forth in the Compensation Committee Charter adopted by the Board of Directors, include
approving and evaluating all compensation of directors and executive officers, including salaries, bonuses, and compensation plans, policies and programs of the Company.
49
We have reviewed and discussed with senior management the Compensation Discussion and Analysis section included
in this proxy statement. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Companys 2018 Proxy Statement.
Members of the Compensation Committee
Richard Alario,
Committee Chairman
Paul Coppinger
James Crandell
Michael Frazier
50
Employment Contracts and Termination of Employment and
Change-in-Control
Arrangements
Workman
The Company entered into an employment agreement on May 30, 2014 with Mr. Workman. Under the employment agreement, Mr. Workman is provided a
base salary. The employment agreement also entitles him to receive an annual bonus and to participate in the Companys incentive, savings and retirement plans. The agreement has a term of one year and is automatically extended on an annual
basis. The agreement provides for a base salary, participation in employee incentive plans, and employee benefits as generally provided to all employees.
In addition, the agreement contains certain termination provisions. If the employment relationship is terminated by the Company for any reason other than
|
|
|
termination for cause (as defined);
|
or if the employment relationship is terminated by the employee for Good Reason, as
defined below, Mr. Workman is entitled to receive three times the amount of his current base salary, an amount equal to the total of the employer matching contributions under the Companys 401k Plan and Supplemental Plan, and continual
participation in the Companys welfare and medical benefit plans. Further, any restricted stock held by Mr. Workman, not already vested, will be 100% vested.
Under the agreement, termination by Mr. Workman for Good Reason means
|
|
|
the assignment to him of any duties inconsistent with his current position or any action by the Company that results in a diminution in his position, authority, duties or responsibilities;
|
|
|
|
a failure by the Company to comply with the terms of the agreement; or
|
|
|
|
requiring Mr. Workman to relocate or to travel to a substantially greater extent than required at the date of the agreement.
|
The agreement also contains restrictions on competitive activities and solicitation of our employees for one year following the date of termination. After any
such termination of employment, Mr. Workman will also have the option to participate in the Companys welfare and medical benefit plans at employee rates and will be entitled to receive outplacement services valued at not more than 15% of
base salary.
Molinaro, Chang, and Cherechinsky
The Company entered into employment agreements on May 30, 2014 with Messrs. Molinaro, Chang and Cherechinsky. Under the employment agreements, Messrs.
Molinaro, Chang, and Cherechinsky are provided base salary. The agreements have a
one-year
term and are automatically extended on an annual basis. The agreements also provide for participation in employee
incentive plans, and employee benefits as generally provided to all employees. If the employment relationship is terminated by the Company for any reason other than
|
|
|
termination for cause (as defined);
|
51
or if the employment relationship is terminated by the employee for Good Reason, the employee is entitled to
receive 2.5 times his current base salary (with the exception of Mr. Cherechinsky who would be entitled to receive 1.5 times his current base salary) and an amount equal to the total of the employer matching contributions under the
Companys 401k Plan and Supplemental Plan, and continual participation in the Companys welfare and medical benefit plans. Further, any restricted stock held by the executive, not already vested, will be 100% vested.
Under the agreements, termination by Messrs. Molinaro, Chang, and/or Cherechinsky for Good Reason means:
|
|
|
the assignment to him of any duties inconsistent with his current position or any action by the Company that results in a diminution in his position, authority, duties or responsibilities;
|
|
|
|
a failure by the Company to comply with the terms of the agreement; or
|
|
|
|
requiring the executive to relocate or to travel to a substantially greater extent than required at the date of the agreement.
|
The agreements also contain restrictions on competitive activities and solicitation of our employees for one year following the date of termination. After any
such termination of employment, the executive will also have the option to participate in the Companys welfare and medical benefit plans at employee rates and will be entitled to receive outplacement services valued at not more than 15% of the
executives base salary.
Additionally, the Companys stock option agreements, restricted stock agreements, and performance award agreements
provide for full vesting of unvested outstanding options, restricted stock and performance awards, respectively, in the event of a change of control of the Company and a change in the holders responsibilities following a change in control of
the Company (a double trigger).
The Companys employment agreements with its executives do not contain any gross up
provisions for excise tax that could be imposed under Section 4999 of the Internal Revenue Code as a result of any payment or benefits provided to an executive under his employment agreement.
Potential Payments Upon Termination or Change in Control
The Company has entered into certain agreements and maintains certain plans that will require the Company to provide compensation to the named executive
officers in the event of a termination of employment or change in control of the Company.
The Companys Compensation Committee believes the payment
and benefit levels provided to its named executive officers under their employment agreements and/or change of control plans upon termination or change of control should correspond to the level of responsibility and risk assumed by the named
executive officer. Thus, the payment and benefit levels for Mr. Workman, Mr. Molinaro, Mr. Chang, Mr. Cherechinsky and Mr. Johnson are based on their levels of responsibility and market considerations at the time the Company
entered into the relevant agreements. The Compensation Committee recognizes that it is not likely that the Companys named executive officers would be retained by an acquirer in the event of a change of control. As a result, the Compensation
Committee believes that a certain amount of cash compensation, along with immediate vesting of all unvested equity compensation, is an appropriate and sufficient incentive for the named executive officers to remain employed with the Company, even if
a change of control were imminent. It is believed that these benefit levels should provide the Companys named executive officers with reasonable financial security so that they could continue to make strategic decisions that impact the future
of the Company.
The amount of compensation payable to each named executive officer in each situation is listed in the tables below.
52
The following table describes the potential payments upon termination or change in control of the Company as of
December 31, 2017 for Robert Workman, the Companys President and Chief Executive Officer.
|
|
|
|
|
Executive Benefits and Payments Upon
Termination (1)
|
|
Involuntary Not for Cause
Termination (2)
|
|
Base Salary (3 times)
|
|
$
|
1,800,000
|
|
Continuing medical benefits
|
|
$
|
344,829
|
|
Retirement Contribution and Matching
|
|
$
|
80,178
|
|
Value of Unvested Stock Options
|
|
$
|
0
|
|
Value of Unvested Restricted Stock
|
|
$
|
4,311,936
|
|
Value of Unvested Performance Awards (3)
|
|
$
|
1,546,351
|
|
Outplacement Services (4)
|
|
$
|
90,000
|
|
Total:
|
|
$
|
8,173,294
|
|
(1)
|
For purposes of this analysis, we assumed the Executives compensation is as follows: base salary as of December 31, 2017 of $600,000. Unvested stock options include 34,720 options from 2015 grant at
$22.44/share, 121,276 options from 2016 grant at $13.71/share and 228,389 options from 2017 grant at $20.64/share. Unvested restricted stock includes 250,733 shares from 2014 grants, 34,719 shares from 2015 grant, 67,411 shares from 2016 grant and
38,065 shares from 2017 grant. Unvested performance share awards includes 34,719 shares from 2015 grant, 67,411 shares from 2016 grant and 38,065 shares from 2017 grant. Value of unvested stock options, restricted stock and performance share awards
based on a share price of $11.03, the Companys closing stock price on December 31, 2017.
|
(2)
|
Assumes the employment relationship is terminated by the Company for any reason other than voluntary termination, termination for cause, death, or disability, or if the employment relationship is terminated by the
executive for Good Reason, as of December 31, 2017. Termination by the executive for Good Reason means the assignment to the employee of any duties inconsistent with his current position or any action by the Company that
results in a diminution in the executives position, authority, duties or responsibilities; a failure by the Company to comply with the terms of the executives employment agreement; or the requirement of the executive to relocate or to
travel to a substantially greater extent than required at the date of the employment agreement.
|
(3)
|
For purposes of this analysis, we have assumed that the performance share awards vest at target (100%).
|
(4)
|
Executive also entitled to outplacement services valued at not more than 15% of base salary. For purposes of this analysis, we valued the outplacement services at 15% of base salary.
|
In the event of:
|
|
|
a Company termination of Mr. Workmans employment for cause;
|
|
|
|
Mr. Workmans voluntary termination of his employment with the Company (not for Good Reason); or
|
|
|
|
Mr. Workmans employment with the Company is terminated due to his death or disability,
|
no extra
benefits are payable by the Company to Mr. Workman as a result of any such events, other than accrued obligations and benefits owed by the Company to Mr. Workman (such as base salary through the date of termination and his outstanding
balance in the Companys 401k Plan and Supplemental Plan). In the event termination is not for cause, Mr. Workman would also be entitled to receive an amount equal to 50% of his base salary.
53
The following table describes the potential payments upon termination or change in control of the Company as of
December 31, 2017 for Daniel Molinaro, the Companys Senior Vice President and Chief Financial Officer.
|
|
|
|
|
Executive Benefits and Payments Upon
Termination (1)
|
|
Involuntary Not for Cause
Termination (2)
|
|
Base Salary (2.5 times)
|
|
$
|
1,062,500
|
|
Continuing medical benefits
|
|
$
|
193,842
|
|
Retirement Contribution and Matching
|
|
$
|
59,948
|
|
Value of Unvested Stock Options
|
|
$
|
0
|
|
Value of Unvested Restricted Stock
|
|
$
|
1,618,112
|
|
Value of Unvested Performance Awards (3)
|
|
$
|
459,841
|
|
Outplacement Services (4)
|
|
$
|
63,750
|
|
Total:
|
|
$
|
3,457,993
|
|
(1)
|
For purposes of this analysis, we assumed the Executives compensation is as follows: base salary as of December 31, 2017 of $425,000. Unvested stock options include 10,416 options from 2015 grant at
$22.44/share, 36,383 options from 2016 grant at $13.71/share and 66,306 options from 2017 grant at $20.64/share. Unvested restricted stock includes 105,011 shares from 2014 grants, 10,416 shares from 2015 grant, 20,223 shares from 2016 grant and
11,051 shares from 2017 grant. Unvested performance share awards includes 10,416 shares from 2015 grant, 20,223 shares from 2016 grant and 11,051 shares from 2017 grant. Value of unvested stock options, restricted stock and performance share awards
based on a share price of $11.03, the Companys closing stock price on December 31, 2017.
|
(2)
|
Assumes the employment relationship is terminated by the Company for any reason other than voluntary termination, termination for cause, death, or disability, or if the employment relationship is terminated by the
executive for Good Reason, as of December 31, 2017. Termination by the executive for Good Reason means the assignment to the employee of any duties inconsistent with his current position or any action by the Company that
results in a diminution in the executives position, authority, duties or responsibilities; a failure by the Company to comply with the terms of the executives employment agreement; or the requirement of the executive to relocate or to
travel to a substantially greater extent than required at the date of the employment agreement.
|
(3)
|
For purposes of this analysis, we have assumed that the performance share awards vest at target (100%).
|
(4)
|
Executive also entitled to outplacement services valued at not more than 15% of base salary. For purposes of this analysis, we valued the outplacement services at 15% of base salary.
|
In the event of:
|
|
|
a Company termination of Mr. Molinaros employment for cause;
|
|
|
|
Mr. Molinaros voluntary termination of his employment with the Company (not for Good Reason); or
|
|
|
|
Mr. Molinaros employment with the Company is terminated due to his death or disability,
|
54
no extra benefits are payable by the Company to Mr. Molinaro as a result of any such events, other than
accrued obligations and benefits owed by the Company to Mr. Molinaro (such as base salary through the date of termination and his outstanding balance in the Companys 401k Plan and Supplemental Plan). In the event termination is not for
cause, Mr. Molinaro would also be entitled to receive an amount equal to 50% of his base salary.
55
The following table describes the potential payments upon termination or change in control of the Company as of
December 31, 2017 for Raymond Chang, the Companys Vice President and General Counsel.
|
|
|
|
|
Executive Benefits and Payments Upon
Termination (1)
|
|
Involuntary Not for Cause
Termination (2)
|
|
Base Salary (2.5 times)
|
|
$
|
920,000
|
|
Continuing medical benefits
|
|
$
|
991,821
|
|
Retirement Contribution and Matching
|
|
$
|
43,712
|
|
Value of Unvested Stock Options
|
|
$
|
0
|
|
Value of Unvested Restricted Stock
|
|
$
|
1,317,125
|
|
Value of Unvested Performance Awards (3)
|
|
$
|
352,287
|
|
Outplacement Services (4)
|
|
$
|
55,200
|
|
Total:
|
|
$
|
3,680,145
|
|
(1)
|
For purposes of this analysis, we assumed the Executives compensation is as follows: base salary as of December 31, 2017 of $368,000. Unvested stock options include 7,936 options from 2015 grant at
$22.44/share, 27,720 options from 2016 grant at $13.71/share and 51,572 options from 2017 grant at $20.64/share. Unvested restricted stock includes 87,474 shares from 2014 grants, 7,936 from 2015 grant, 15,408 shares from 2016 grant and 8,595 shares
from 2017 grant. Unvested performance share awards includes 7,936 shares from 2015 grant, 15,408 shares from 2016 grant and 8,595 shares from 2017 grant. Value of unvested stock options, restricted stock and performance share awards based on a share
price of $11.03, the Companys closing stock price on December 31, 2017.
|
(2)
|
Assumes the employment relationship is terminated by the Company for any reason other than voluntary termination, termination for cause, death, or disability, or if the employment relationship is terminated by the
executive for Good Reason, as of December 31, 2017. Termination by the executive for Good Reason means the assignment to the employee of any duties inconsistent with his current position or any action by the Company that
results in a diminution in the executives position, authority, duties or responsibilities; a failure by the Company to comply with the terms of the executives employment agreement; or the requirement of the executive to relocate or to
travel to a substantially greater extent than required at the date of the employment agreement.
|
(3)
|
For purposes of this analysis, we have assumed that the performance share awards vest at target (100%).
|
(4)
|
Executive also entitled to outplacement services valued at not more than 15% of base salary. For purposes of this analysis, we valued the outplacement services at 15% of base salary.
|
In the event of:
|
|
|
a Company termination of Mr. Changs employment for cause;
|
|
|
|
Mr. Changs voluntary termination of his employment with the Company (not for Good Reason); or
|
|
|
|
Mr. Changs employment with the Company is terminated due to his death or disability,
|
no extra
benefits are payable by the Company to Mr. Chang as a result of any such events, other than accrued obligations and benefits owed by the Company to Mr. Chang (such as base salary through the date of termination and his outstanding balance
in the Companys 401k Plan and Supplemental Plan). In
56
the event termination is not for cause, Mr. Chang would also be entitled to receive an amount equal to 50% of his base salary.
The following table describes the potential payments upon termination or change in control of the Company as of December 31, 2017 for David Cherechinsky,
the Companys Vice President and Chief Accounting Officer:
|
|
|
|
|
Executive Benefits and Payments Upon
Termination (1)
|
|
Involuntary Not for Cause
Termination (2)
|
|
Base Salary (1.5 times)
|
|
$
|
450,000
|
|
Continuing medical benefits
|
|
$
|
558,333
|
|
Retirement Contribution and Matching
|
|
$
|
39,575
|
|
Value of Unvested Stock Options
|
|
$
|
0
|
|
Value of Unvested Restricted Stock
|
|
$
|
928,969
|
|
Value of Unvested Performance Awards (3)
|
|
$
|
209,746
|
|
Outplacement Services (4)
|
|
$
|
45,000
|
|
Total:
|
|
$
|
2,231,623
|
|
(1)
|
For purposes of this analysis, we assumed the Executives compensation is as follows: base salary as of December 31, 2017 of $300,000. Unvested stock options include 4,795 options from 2015 grant at
$22.44/share, 16,748 options from 2016 grant at $13.71/share and 29,470 options from 2017 grant at $20.64/share. Unvested restricted stock includes 65,206 shares from 2014 grants, 4,795 shares from 2015 grant, 9,309 shares from 2016 grant and 4,912
shares from 2017 grant. Unvested performance share awards includes 4,795 shares from 2015 grant, 9,309 shares from 2016 grant and 4,912 shares from 2017 grant. Value of unvested stock options, restricted stock and performance share awards based on a
share price of $11.03, the Companys closing stock price on December 31, 2017.
|
(2)
|
Assumes the employment relationship is terminated by the Company for any reason other than voluntary termination, termination for cause, death, or disability, or if the employment relationship is terminated by the
executive for Good Reason, as of December 31, 2017. Termination by the executive for Good Reason means the assignment to the employee of any duties inconsistent with his current position or any action by the Company that
results in a diminution in the executives position, authority, duties or responsibilities; a failure by the Company to comply with the terms of the executives employment agreement; or the requirement of the executive to relocate or to
travel to a substantially greater extent than required at the date of the employment agreement.
|
(3)
|
For purposes of this analysis, we have assumed that the performance share awards vest at target (100%).
|
(4)
|
Executive also entitled to outplacement services valued at not more than 15% of base salary. For purposes of this analysis, we valued the outplacement services at 15% of base salary.
|
In the event of:
|
|
|
a Company termination of Mr. Cherechinskys employment for cause;
|
|
|
|
Mr. Cherechinskys voluntary termination of his employment with the Company (not for Good Reason); or
|
|
|
|
Mr. Cherechinskys employment with the Company is terminated due to his death or disability,
|
57
no extra benefits are payable by the Company to Mr. Cherechinsky as a result of any such events, other than
accrued obligations and benefits owed by the Company to Mr. Cherechinsky (such as base salary through the date of termination and his outstanding balance in the Companys 401k Plan and Supplemental Plan). In the event termination is not
for cause, Mr. Cherechinsky would also be entitled to receive an amount equal to 50% of his base salary.
The following table describes the potential
payments upon termination or change in control of the Company as of December 31, 2017 for Mark Johnson, the Companys Vice President Finance and Assistant Corporate Controller.
|
|
|
|
|
Executive Benefits and Payments
Upon Termination (1)
|
|
Involuntary Not for Cause
Termination (2)
|
|
Base Salary
|
|
$
|
0
|
|
Continuing medical benefits
|
|
$
|
0
|
|
Retirement Contribution and Matching
|
|
$
|
17,461
|
|
Value of Unvested Stock Options
|
|
$
|
0
|
|
Value of Unvested Restricted Stock
|
|
$
|
0
|
|
Outplacement Services
|
|
$
|
0
|
|
Total:
|
|
$
|
17,461
|
|
|
(1)
|
For purposes of this analysis, we assumed the Executives compensation is as follows: base salary as of December 31, 2017 of $168,000. Unvested stock options include 3,167 options from 2015 grant at
$22.44/share, 11,000 options from 2016 grant at $13.71/share and 13,000 options from 2017 grant at $20.64/share. Unvested restricted stock includes 1,750 shares from 2015 grant, 2,930 shares from 2016 grant and 2,175 shares from 2017 grant. Value of
unvested stock options and restricted stock based on a share price of $11.03, the Companys closing stock price on December 31, 2017.
|
|
(2)
|
Assumes the employment relationship is terminated by the Company for any reason other than voluntary termination, termination for cause, death, or disability, or if the employment relationship is terminated by the
executive for Good Reason, as of December 31, 2017. Termination by the executive for Good Reason means the assignment to the employee of any duties inconsistent with his current position or any action by the Company that
results in a diminution in the executives position, authority, duties or responsibilities; a failure by the Company to comply with the terms of the executives employment agreement; or the requirement of the executive to relocate or to
travel to a substantially greater extent than required at the date of the employment agreement.
|
The Company entered into an employment
agreement on February 16, 2018 with Mr. Johnson, with terms similar to what was provided for Messrs. Molinaro, Chang and Cherechinsky.
58
EXECUTIVE COMPENSATION
The following table sets forth for the year ended December 31, 2017 the compensation paid by the Company to its named executive officers (the Named
Executive Officers) serving in such capacity at December 31, 2017.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary
($)(1)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)(2)
|
|
|
Option
Awards
($)(3)
|
|
|
Non-Equity
Incentive Plan
Compens-ation
($)(4)
|
|
|
Change in
Pension
Value and
Nonqual-
ified
Deferred
Compen-
sation
Earnings
($)
|
|
|
All Other
Compen-
sation
($)(5)
|
|
|
Total ($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
(i)
|
|
|
(j)
|
|
Merrill Miller, Jr. (1)
Executive Chairman
|
|
|
2017
2016
2015
|
|
|
$
$
$
|
1
1
1
|
|
|
|
|
|
|
|
|
(6)
(6)
(6)
|
|
|
|
(6)
(6)
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
$
$
|
1
1
1
|
|
Robert Workman
President & Chief Executive Officer
|
|
|
2017
2016
2015
|
|
|
$
$
$
|
600,000
600,000
600,000
|
|
|
|
|
|
|
$
$
$
|
1,792,012
2,100,551
1,624,270
|
|
|
$
$
$
|
1,614,345
941,345
839,597
|
|
|
$
$
|
789,653
288,344
|
|
|
|
|
|
|
$
$
$
|
62,806
30,000
27,981
|
|
|
$
$
$
|
4,858,816
3,960,240
3,091,848
|
|
Daniel Molinaro
Senior VP & Chief Financial Officer
|
|
|
2017
2016
2015
|
|
|
$
$
$
|
425,000
425,000
425,000
|
|
|
|
|
|
|
$
$
$
|
520,255
630,156
487,295
|
|
|
$
$
$
|
468,677
282,404
251,876
|
|
|
$
$
|
447,470
163,395
|
|
|
|
|
|
|
$
$
$
|
45,599
41,973
41,818
|
|
|
$
$
$
|
1,907,001
1,542,928
1,205,989
|
|
Raymond Chang
VP, General Counsel, & Secretary
|
|
|
2017
2016
2015
|
|
|
$
$
$
|
368,000
368,000
368,000
|
|
|
|
|
|
|
$
$
$
|
404,633
480,119
371,273
|
|
|
$
$
$
|
364,532
215,164
191,912
|
|
|
$
$
|
387,456
141,481
|
|
|
|
|
|
|
$
$
$
|
34,270
22,080
20,668
|
|
|
$
$
$
|
1,558,891
1,226,844
951,853
|
|
David Cherechinsky
VP & Chief Accounting Officer
|
|
|
2017
2016
2015
|
|
|
$
$
$
|
300,000
253,000
253,000
|
|
|
|
|
|
|
$
$
$
|
231,246
290,072
224,326
|
|
|
$
$
$
|
208,306
129,994
115,947
|
|
|
$
$
|
296,120
99,118
|
|
|
|
|
|
|
$
$
$
|
27,260
23,587
21,683
|
|
|
$
$
$
|
1,062,932
795,771
614,956
|
|
Mark Johnson
VP Finance and Assistant Corporate Controller
|
|
|
2017
2016
2015
|
|
|
$
|
168,000
|
|
|
|
|
|
|
$
|
44,892
|
|
|
$
|
91,899
|
|
|
$
|
110,551
|
|
|
|
|
|
|
$
|
11,308
|
|
|
$
|
426,650
|
|
59
(1)
|
On October 1, 2017, Mr. Miller retired as the Companys Executive Chairman and Chairman of the Board of Directors. As a result of his retirement, the
one-time
stock
grant Mr. Miller received on November 2014 for 385,830 shares was cancelled. During Mr. Millers service as the Companys Executive Chairman and Chairman of the Board of Directors from May 2014 until October 2017, Mr. Miller
received $1 in annual base pay, did not participate in the annual incentive program, and voluntarily waived his right to receive an annual equity grant in 2015, 2016 and 2017. Mr. Miller effectively received no compensation for his nearly 3
1
⁄
2
years of service to the Company. As a result, after Mr. Millers departure from the Company, the Company granted Mr. Miller, in consideration of
his prior service to the Company for which he received no compensation, a phantom stock award in the amount of shares equal to his
one-time
stock grant that was cancelled (grant date fair value of $5,336,029).
The phantom stock award vested during the fourth quarter of 2017.
|
(2)
|
The amounts reported in this column represent the aggregate grant date fair value of stock awards granted in the relevant year compiled in accordance with FASB Topic 718, excluding forfeiture estimates. Refer to the
Companys 2017 Annual Report on Form
10-K,
for all relevant valuation assumptions used to determine the grant date fair value of the stock awards included in this column. On February 21, 2017, each
of the Named Executive Officers at that time was granted shares of performance-based share awards, which are included in this column in the table above. The grants vest on the third anniversary of the date of grant, contingent on performance against
three separate, independently established goals. For a more detailed discussion, see the section titled Long-Term Incentive Compensation. For the performance-based share awards, the value as of the grant date under FASB ASC Topic 718,
excluding the effect of estimated forfeitures, based upon the probable outcome of such conditions were as follows: Mr. Workman - $1,006,350; Mr. Molinaro- $292,163; Mr. Chang - $227,232; and Mr. Cherechinsky - $129,862. For the performance-based
share awards, the value as of the grant date under FASB ASC Topic 718, excluding the effect of estimated forfeitures, assuming that the highest level of performance conditions will be achieved were as follows: Mr. Workman - $1,731,958; Mr.
Molinaro- $502,821; Mr. Chang - $391,073; and Mr. Cherechinsky - $223,496.
|
(3)
|
The amounts reported in this column represent the aggregate grant date fair value of option awards granted in the relevant year compiled in accordance with FASB Topic 718, excluding forfeiture estimates. Refer to the
Companys 2017 Annual Report on Form
10-K,
for all relevant valuation assumptions used to determine the grant date fair value of option awards included in this column.
|
(4)
|
Starting in 2015, the Named Executive Officers have participated in the NOW Inc. Annual Incentive Plan. There were no payments awarded under the 2015 Annual Incentive Plan. For further information, see the section
titled Annual Incentive Award.
|
|
(a)
|
The Companys cash contributions for 2017 under the 401k Plan, a defined contribution plan, on behalf of Mr. Miller - $0; Mr. Workman - $13,500; Mr. Molinaro - $25,650; Mr. Chang - $22,123;
Mr. Cherechinsky - $25,731 and Mr. Johnson - $11,308.
|
|
(b)
|
The Companys cash contributions for 2017 under the Supplemental Plan, a defined contribution plan, on behalf of Mr. Miller - $0; Mr. Workman - $49,306; Mr. Molinaro - $19,949; Mr. Chang -
$12,147; Mr. Cherechinsky - $1,529 and Mr. Johnson - $0.
|
(6)
|
The Compensation Committee also designated an annual 2015 equity grant, an annual 2016 equity grant and an annual 2017 equity grant for Mr. Miller in the form of stock options, time-based restricted stock and
performance share awards. Mr. Miller voluntarily requested that he be allowed to decline receiving such grants. While the Compensation Committee believed such grants for Mr. Miller were each fully supported by market data, as confirmed by
the Compensation Committees independent compensation consultant, Longnecker & Associates, the Compensation Committee agreed to honor Mr. Millers request and allowed him to decline receiving such proposed grants.
|
60
Grants of Plan Based Awards
The following table provides information concerning stock options, restricted stock and performance share awards granted to Named Executive
Officers during the fiscal year ended December 31, 2017. The Company has granted no stock appreciation rights.
Grants of
Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date
|
|
|
Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards
|
|
|
Estimated Future Payouts
Under Equity Incentive
Plan Awards
|
|
|
All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
|
|
|
Exercise
or Base
Price of
Option
Awards
($/Sh)
|
|
|
Grant Date
Fair Value of
Stock and
Option
Awards (3)
|
|
|
|
Thresh-
old
($)(1)
|
|
|
Target
($)(1)
|
|
|
Maximum
($)(1)
|
|
|
Thresh-
old
(#)(2)
|
|
|
Target
(#)(2)
|
|
|
Maximum
(#)(2)
|
|
|
|
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
(i)
|
|
|
(j)
|
|
|
(k)
|
|
|
(l)
|
|
Merrill Miller, Jr.
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
Robert Workman
|
|
|
2017
|
|
|
$
|
300,000
|
|
|
$
|
600,000
|
|
|
$
|
1,200,000
|
|
|
|
19,033
|
|
|
|
38,065
|
|
|
|
76,130
|
|
|
|
38,065
|
|
|
|
228,389
|
|
|
$
|
20.64
|
|
|
$
|
3,406,357
|
|
Daniel Molinaro
|
|
|
2017
|
|
|
$
|
170,000
|
|
|
$
|
340,000
|
|
|
$
|
680,000
|
|
|
|
5,526
|
|
|
|
11,051
|
|
|
|
22,102
|
|
|
|
11,051
|
|
|
|
66,306
|
|
|
$
|
20.64
|
|
|
$
|
988,933
|
|
Raymond Chang
|
|
|
2017
|
|
|
$
|
147,200
|
|
|
$
|
294,400
|
|
|
$
|
588,800
|
|
|
|
4,298
|
|
|
|
8,595
|
|
|
|
17,190
|
|
|
|
8,595
|
|
|
|
51,572
|
|
|
$
|
20.64
|
|
|
$
|
769,164
|
|
David Cherechinsky
|
|
|
2017
|
|
|
$
|
112,500
|
|
|
$
|
225,000
|
|
|
$
|
450,000
|
|
|
|
2,456
|
|
|
|
4,912
|
|
|
|
9,824
|
|
|
|
4,912
|
|
|
|
29,470
|
|
|
$
|
20.64
|
|
|
$
|
439,551
|
|
Mark Johnson
|
|
|
2017
|
|
|
$
|
42,000
|
|
|
$
|
84,000
|
|
|
$
|
168,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,175
|
|
|
|
13,000
|
|
|
$
|
20.64
|
|
|
$
|
136,781
|
|
(1)
|
Represents the range of possible payouts under our 2017 annual incentive compensation plan.
|
(2)
|
On February 21, 2017, each of the Named Executive Officers at that time was granted performance-based share awards, which are reflected in the Estimated Future Payouts Under Equity Incentive Plan Awards
column in the table above. The performance share awards can be earned by the executives only by performance against established goals and vest three years from the grant date. The performance share awards are divided into three equal, independent
parts that are subject to these three separate performance metrics: 33 1/3% with a TSR (total shareholder return) goal, 33 1/3% with an EBITDA goal and 33 1/3% with a working capital as a percentage of revenue goal (working capital). For a more
detailed discussion, see the section titled Long Term Incentive Compensation.
|
(3)
|
Assumptions made in calculating the value of option and restricted stock awards are further discussed in Item 15. Exhibits and Financial Statement Schedules Notes to Consolidated Financial Statements, Note 16, of
the Companys Form
10-K
for the fiscal year ended December 31, 2017.
|
(4)
|
The Compensation Committee also designated an annual 2017 equity grant for Mr. Miller in the form of stock options, time-based restricted stock and performance share awards. Mr. Miller voluntarily requested
that he be allowed to decline receiving such grant. While the Compensation Committee believed such grant for Mr. Miller was fully supported by market data, as confirmed by the Compensation Committees independent compensation consultant,
Longnecker & Associates, the Compensation Committee agreed to honor Mr. Millers request and allowed him to decline receiving such proposed grant. For further information, see Footnote 1 to the Summary Compensation Table.
|
61
Exercises and Holdings of Previously-Awarded Equity Disclosure
The following table provides information regarding outstanding awards that have been granted to Named Executive Officers where the ultimate
outcomes of such awards have not been realized, as of December 31, 2017. The table includes awards received by the Named Executive Officers while employed under National Oilwell Varco (NOV awards granted prior to the
spin-off)
which were converted into Company awards as a result of the
spin-off
from National Oilwell Varco.
Outstanding Equity Awards at Fiscal
Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
(a)
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(b)
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(c)
|
|
|
Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(d)
|
|
|
Option
Exercise
Price
($)
(e)
|
|
|
Option
Expiration
Date
(f)
|
|
|
Number of
Shares or
Units of Stock
That Have Not
Vested
(#)
(g)
|
|
|
Market Value
of Shares or
Units of Stock
That Have
Not Vested
($) (1)
(h)
|
|
|
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have
Not
Vested
(#)
(i)
|
|
|
Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights
That
Have Not
Vested
($) (1)
(j)
|
|
Merrill Miller, Jr. (2)
|
|
|
264,248
|
|
|
|
|
|
|
|
|
|
|
$
|
33.521
|
|
|
|
2/23/21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
308,290
|
|
|
|
|
|
|
|
|
|
|
$
|
35.529
|
|
|
|
2/22/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
470,172
|
|
|
|
|
|
|
|
|
|
|
$
|
29.123
|
|
|
|
2/16/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
470,015
|
|
|
|
|
|
|
|
|
|
|
$
|
31.433
|
|
|
|
2/26/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Workman
|
|
|
56,182
|
|
|
|
|
|
|
|
|
|
|
$
|
33.521
|
|
|
|
2/23/21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69,037
|
|
|
|
|
|
|
|
|
|
|
$
|
35.529
|
|
|
|
2/22/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,225
|
|
|
|
|
|
|
|
|
|
|
$
|
29.123
|
|
|
|
2/16/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,225
|
|
|
|
|
|
|
|
|
|
|
$
|
31.433
|
|
|
|
2/26/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69,438
|
|
|
|
34,720
|
(3)
|
|
|
|
|
|
$
|
22.44
|
|
|
|
2/24/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,637
|
|
|
|
121,276
|
(4)
|
|
|
|
|
|
$
|
13.71
|
|
|
|
2/19/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
228,389
|
(5)
|
|
|
|
|
|
$
|
20.64
|
|
|
|
2/21/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,757
|
(6)
|
|
$
|
328,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
220,976
|
(7)
|
|
$
|
2,437,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,719
|
(8)
|
|
$
|
382,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,719
|
(9)
|
|
$
|
382,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,411
|
(10)
|
|
$
|
743,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,411
|
(11)
|
|
$
|
743,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,065
|
(12)
|
|
$
|
419,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,065
|
(13)
|
|
$
|
419,857
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
(a)
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(b)
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(c)
|
|
|
Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(d)
|
|
|
Option
Exercise
Price
($)
(e)
|
|
|
Option
Expiration
Date
(f)
|
|
|
Number of
Shares or Units
of Stock That
Have Not
Vested
(#)
(g)
|
|
|
Market Value
of Shares or
Units of
Stock That
Have Not
Vested
($) (1)
(h)
|
|
|
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have
Not
Vested
(#)
(i)
|
|
|
Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights
That Have Not
Vested
($) (1)
(j)
|
|
Daniel Molinaro
|
|
|
27,960
|
|
|
|
|
|
|
|
|
|
|
$
|
33.521
|
|
|
|
2/23/21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,329
|
|
|
|
|
|
|
|
|
|
|
$
|
35.529
|
|
|
|
2/22/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,188
|
|
|
|
|
|
|
|
|
|
|
$
|
29.123
|
|
|
|
2/16/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,188
|
|
|
|
|
|
|
|
|
|
|
$
|
31.433
|
|
|
|
2/26/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,831
|
|
|
|
10,416
|
(3)
|
|
|
|
|
|
$
|
22.44
|
|
|
|
2/24/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,191
|
|
|
|
36,383
|
(4)
|
|
|
|
|
|
$
|
13.71
|
|
|
|
2/19/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,306
|
(5)
|
|
|
|
|
|
$
|
20.64
|
|
|
|
2/21/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,830
|
(6)
|
|
$
|
229,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,181
|
(7)
|
|
$
|
928,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,416
|
(8)
|
|
$
|
114,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,416
|
(9)
|
|
$
|
114,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,223
|
(10)
|
|
$
|
223,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,223
|
(11)
|
|
$
|
223,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,051
|
(12)
|
|
$
|
121,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,051
|
(13)
|
|
$
|
121,893
|
|
Raymond Chang
|
|
|
11,569
|
|
|
|
|
|
|
|
|
|
|
$
|
33.521
|
|
|
|
2/23/21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,565
|
|
|
|
|
|
|
|
|
|
|
$
|
35.529
|
|
|
|
2/22/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,565
|
|
|
|
|
|
|
|
|
|
|
$
|
29.123
|
|
|
|
2/16/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,093
|
|
|
|
|
|
|
|
|
|
|
$
|
31.433
|
|
|
|
2/26/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,872
|
|
|
|
7,936
|
(3)
|
|
|
|
|
|
$
|
22.44
|
|
|
|
2/24/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,860
|
|
|
|
27,720
|
(4)
|
|
|
|
|
|
$
|
13.71
|
|
|
|
2/19/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,572
|
(5)
|
|
|
|
|
|
$
|
20.64
|
|
|
|
2/21/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,830
|
(6)
|
|
$
|
229,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,644
|
(7)
|
|
$
|
735,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,936
|
(8)
|
|
$
|
87,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,936
|
(9)
|
|
$
|
87,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,408
|
(10)
|
|
$
|
169,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,408
|
(11)
|
|
$
|
169,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,595
|
(12)
|
|
$
|
94,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,595
|
(13)
|
|
$
|
94,803
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
(a)
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(b)
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(c)
|
|
|
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(d)
|
|
|
Option
Exercise
Price
($)
(e)
|
|
|
Option
Expiration
Date
(f)
|
|
|
Number of
Shares or Units
of Stock That
Have Not
Vested
(#)
(g)
|
|
|
Market Value
of Shares or
Units of
Stock That
Have Not
Vested
($) (1)
(h)
|
|
|
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have
Not
Vested
(#)
(i)
|
|
|
Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights
That Have Not
Vested
($) (1)
(j)
|
|
David Cherechinsky
|
|
|
3,808
|
|
|
|
|
|
|
|
|
|
|
$
|
10.905
|
|
|
|
2/21/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,653
|
|
|
|
|
|
|
|
|
|
|
$
|
18.512
|
|
|
|
2/17/20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,569
|
|
|
|
|
|
|
|
|
|
|
$
|
33.521
|
|
|
|
2/23/21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,565
|
|
|
|
|
|
|
|
|
|
|
$
|
35.529
|
|
|
|
2/22/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,565
|
|
|
|
|
|
|
|
|
|
|
$
|
29.123
|
|
|
|
2/16/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,565
|
|
|
|
|
|
|
|
|
|
|
$
|
31.433
|
|
|
|
2/26/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,589
|
|
|
|
4,795
|
(3)
|
|
|
|
|
|
$
|
22.44
|
|
|
|
2/24/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,373
|
|
|
|
16,748
|
(4)
|
|
|
|
|
|
$
|
13.71
|
|
|
|
2/19/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,470
|
(5)
|
|
|
|
|
|
$
|
20.64
|
|
|
|
2/21/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,854
|
(6)
|
|
$
|
196,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,352
|
(7)
|
|
$
|
522,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,795
|
(8)
|
|
$
|
52,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,795
|
(9)
|
|
$
|
52,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,309
|
(10)
|
|
$
|
102,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,309
|
(11)
|
|
$
|
102,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,912
|
(12)
|
|
$
|
54,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,912
|
(13)
|
|
$
|
54,179
|
|
Mark Johnson
|
|
|
2,185
|
|
|
|
|
|
|
|
|
|
|
$
|
35.529
|
|
|
|
2/22/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,413
|
|
|
|
|
|
|
|
|
|
|
$
|
29.123
|
|
|
|
2/16/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,018
|
|
|
|
|
|
|
|
|
|
|
$
|
31.433
|
|
|
|
2/26/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,333
|
|
|
|
3,167
|
(3)
|
|
|
|
|
|
$
|
22.44
|
|
|
|
2/24/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,000
|
(4)
|
|
|
|
|
|
$
|
13.71
|
|
|
|
2/19/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
(5)
|
|
|
|
|
|
$
|
20.64
|
|
|
|
2/21/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,750
|
(8)
|
|
$
|
19,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,930
|
(10)
|
|
$
|
32,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,175
|
(12)
|
|
$
|
23,990
|
|
(1)
|
Calculations based upon the closing price ($11.03) of the Companys common stock on December 29, 2017, the last trading day of the year.
|
(2)
|
Mr. Miller retired from the Company on October 1, 2017. Per the terms of his stock option award agreements, Mr. Miller had three months from the date of his retirement to exercise any outstanding vested
stock options, which would then expire and be cancelled on January 1, 2018. Mr. Millers outstanding stock options listed above were cancelled unexercised on January 1, 2018.
|
(3)
|
2015 Stock Option Grant Stock options vest at the rate of 33 1/3%/year, with vesting dates of 2/24/2016, 2/24/2017, 2/24/2018.
|
(4)
|
2016 Stock Option Grant Stock options vest at the rate of 33 1/3%/year, with vesting dates of 2/19/2017, 2/19/2018, 2/19/2019.
|
64
(5)
|
2017 Stock Option Grant Stock options vest at the rate of 33 1/3%/year, with vesting dates of 2/21/2018, 2/21/2019, 2/21/2020.
|
(6)
|
May 2014 NOV Restricted Stock Award The Grant vests 100% on the fourth anniversary of the date of grant.
|
(7)
|
November 2014 DNOW Restricted Stock Award The Grant vests 100% on the sixth anniversary of the date of grant.
|
(8)
|
2015 Restricted Stock Award The Grant vests 100% on the third anniversary of the date of grant.
|
(9)
|
2015 Performance Share Award Grant The performance share awards can be earned by the executives only by performance against established goals and vest three years from the grant date. The performance share awards
are divided into three equal, independent parts that are subject to these three separate performance metrics: 33 1/3% with a TSR (total shareholder return) goal, 33 1/3% with an EBITDA goal and 33 1/3% with a working capital as a percentage of
revenue goal (working capital).
|
(10)
|
2016 Restricted Stock Award The Grant vests 100% on the third anniversary of the date of grant.
|
(11)
|
2016 Performance Share Award Grant The performance share awards can be earned by the executives only by performance against established goals and vest three years from the grant date. The performance share awards
are divided into three equal, independent parts that are subject to these three separate performance metrics: 33 1/3% with a TSR (total shareholder return) goal, 33 1/3% with an EBITDA goal and 33 1/3% with a working capital as a percentage of
revenue goal (working capital).
|
(12)
|
2017 Restricted Stock Award The Grant vests 100% on the third anniversary of the date of grant.
|
(13)
|
2017 Performance Share Award Grant The performance share awards can be earned by the executives only by performance against established goals and vest three years from the grant date. The performance share awards
are divided into three equal, independent parts that are subject to these three separate performance metrics: 33 1/3% with a TSR (total shareholder return) goal, 33 1/3% with an EBITDA goal and 33 1/3% with a working capital as a percentage of
revenue goal (working capital).
|
65
The following table provides information on the amounts received by the Named Executive Officers during 2017 upon
exercise of stock options or vesting of stock awards.
Option Exercises and Stock Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
Number of
Shares
Acquired
on Exercise
(#)
|
|
|
Value Realized
on Exercise
($)
|
|
|
Number of
Shares
Acquired
on Vesting
(#)
|
|
|
Value Realized
on Vesting
($)
|
|
(a)
|
|
|
(b)
|
|
|
|
(c)
|
|
|
|
(d)
|
|
|
|
(e)
|
|
Merrill Miller, Jr. (1)
|
|
|
0
|
|
|
$
|
0
|
|
|
|
148,104
|
|
|
$
|
2,856,926
|
|
Robert Workman
|
|
|
0
|
|
|
$
|
0
|
|
|
|
26,748
|
|
|
$
|
515,969
|
|
Daniel Molinaro
|
|
|
0
|
|
|
$
|
0
|
|
|
|
5,237
|
|
|
$
|
101,022
|
|
Raymond Chang
|
|
|
0
|
|
|
$
|
0
|
|
|
|
2,618
|
|
|
$
|
50,501
|
|
David Cherechinsky
|
|
|
0
|
|
|
$
|
0
|
|
|
|
1,833
|
|
|
$
|
35,359
|
|
Mark Johnson
|
|
|
5,500
|
|
|
$
|
32,395
|
|
|
|
3,523
|
|
|
$
|
45,519
|
|
(1)
|
On October 1, 2017, Mr. Miller retired as the Companys Executive Chairman and Chairman of the Board of Directors. Compensation is reported for Mr. Miller during the time he served as a Named
Executive Officer in 2017, which ended upon his retirement. For further information, see Footnote 1 to the Summary Compensation Table.
|
66
Post-Employment Compensation
The following table provides information on nonqualified deferred compensation provided under the Supplemental Plan to the Named Executive
Officers during the fiscal year ended December 31, 2017. For a more detailed discussion, see the section titled Compensation Discussion and Analysis Retirement, Health and Welfare Benefits.
Nonqualifed Deferred Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive
Contributions in
Last FY
($)(1)
|
|
|
Registrant
Contributions in
Last FY
($)(2)
|
|
|
Aggregate
Earnings in Last
FY
($)(3)
|
|
|
Aggregate
Withdrawals/
Distributions
($)
|
|
|
Aggregate
Balance
at Last
FYE
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
Merrill Miller, Jr.
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
$
|
0
|
|
Robert Workman
|
|
$
|
0
|
|
|
$
|
49,306
|
|
|
$
|
176
|
|
|
|
|
|
|
$
|
49,482
|
|
Daniel Molinaro
|
|
$
|
96,429
|
|
|
$
|
19,949
|
|
|
$
|
51,944
|
|
|
|
|
|
|
$
|
415,375
|
|
Raymond Chang
|
|
$
|
0
|
|
|
$
|
12,147
|
|
|
$
|
365
|
|
|
|
|
|
|
$
|
12,512
|
|
David Cherechinsky
|
|
$
|
0
|
|
|
$
|
1,529
|
|
|
$
|
6
|
|
|
|
|
|
|
$
|
1,535
|
|
Mark Johnson
|
|
$
|
1,442
|
|
|
$
|
0
|
|
|
$
|
2,878
|
|
|
|
|
|
|
$
|
29,328
|
|
(1)
|
Executive contributions were from the executives salary and are included in the Summary Compensation Table under the Salary column.
|
(2)
|
Registrant contributions are included in the Summary Compensation Table under the All Other Compensation column.
|
(3)
|
Aggregate earnings reflect the returns of the investment funds selected by the executives and are not included in the Summary Compensation Table.
|
Certain Relationships and Related Transactions
We transact business with companies with which certain of our Directors are affiliated. All transactions with these companies are on terms competitive with
other third party vendors, and none of these is material either to us or any of these companies.
A conflict of interest occurs when a
director or executive officers private interest interferes in any way, or appears to interfere, with the interests of the Company. Conflicts of interest can arise when a director or executive officer, or a member of his or her immediate
family, have a direct or indirect material interest in a transaction with us. Conflicts of interest also arise when a director or executive officer, or a member of his or her immediate family, receives improper personal benefits as a result of his
or her position as a director or executive officer of the Company. The Companys Code of Business Conduct and Ethics for Members of the Board of Directors and Executive Officers provides that directors and executive officers must avoid
conflicts of interests with the Company. Any situation that involves, or may reasonably be expected to
67
involve, a conflict of interest with the Company must be disclosed immediately to the Chair of the Companys Audit Committee for his review and approval or ratification. This code also
provides that the Company shall not make any personal loans or extensions of credit to nor become contingently liable for any indebtedness of directors or executive officers or a member of his or her family.
Pay Ratio
As required by Section 953(b) of the
Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation
S-K,
we are providing the following information about the relationship of the annual total compensation of our employees
and the annual total compensation of Mr. Workman, our Chief Executive Officer (our CEO):
For 2017, our last completed fiscal year:
|
|
|
the median of the estimated annual total compensation of all employees of our company (other than our CEO), was $73,266; and
|
|
|
|
the annual total compensation of our CEO was $4,876,910.
|
Based on this information, for 2017 our Chief
Executive Officers annual total compensation was approximately sixty-seven times that of the median of the annual total compensation of all employees.
To identify the median of the estimated annual total compensation of all our employees, as well as to determine the annual total compensation of the
median employee, the methodology and the material assumptions, adjustments, and estimates that we used were as follows:
1. As permitted under
the SEC rules, in order to identify our median employee, we used a consistently applied compensation measure of estimated total cash compensation earned from January 1, 2017 to December 31, 2017. We used December 31, 2017
for our employee listing and annualized total cash compensation for those permanent employees who commenced work during 2017. We did not adjust the size of our employee population or make any
cost-of-living
adjustments when identifying our median employee.
2. In calculating the estimated annual total
compensation of the median employee and CEO, we identified and included the elements of such compensation in accordance with the requirement of Item 402(c)(2)(x) of Regulation
S-K.
We also included the
estimated company cost of their respective Company-provided health and wellness benefits of $13,436 and $18,094, respectively; therefore, the CEOs total compensation for purposes of this calculation differs from the total compensation
described in the summary of compensation table in this document by his health and wellness benefits amount.
3.
We believe the pay ratio
disclosed above is a reasonable estimate calculated in accordance with SEC rules, based on our records and the methodology described above. The SEC rules for identifying the median employee and calculating the pay ratio allow companies to use a
variety of methodologies and apply various assumptions. The application of various methodologies may result in significant differences in the results reported by SEC reporting companies. As a result, the pay ratio reported by other companies may not
be comparable to the pay ratio we report above.
68
DIRECTOR COMPENSATION
Directors who are employees of the Company do not receive compensation for serving on the Board of Directors. The following table sets forth the compensation
paid by the Company to its
non-employee
members of the Board of Directors for the year ended December 31, 2017.
Director Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned
or
Paid in
Cash
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
(a)
|
|
(b)
|
|
|
(c)(1)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
Richard Alario
|
|
$
|
106,000
|
|
|
$
|
119,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
225,593
|
|
Terry Bonno
|
|
$
|
101,500
|
|
|
$
|
119,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
221,093
|
|
Galen Cobb
|
|
$
|
101,500
|
|
|
$
|
119,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
221,093
|
|
Paul Coppinger (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James Crandell
|
|
$
|
96,000
|
|
|
$
|
119,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
215,593
|
|
Rodney Eads
|
|
$
|
114,000
|
|
|
$
|
119,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
233,593
|
|
Michael Frazier
|
|
$
|
106,000
|
|
|
$
|
119,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
225,593
|
|
J. Wayne Richards
|
|
$
|
121,500
|
|
|
$
|
119,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
241,093
|
|
(1)
|
The aggregate number of outstanding shares of restricted stock as of December 31, 2017 for each director are as follows: Mr. Alario 6,780; Ms. Bonno 6,780; Mr. Cobb 6,780;
Mr. Coppinger 0; Mr. Crandell 6,780; Mr. Eads 6,780; Mr. Frazier 6,780; and Mr. Richards 6,780.
|
(2)
|
Mr. Coppinger joined the Board of Directors on December 27, 2017.
|
Board Compensation
Members of the Companys Board of Directors who are not full-time employees of the Company receive the following cash compensation:
|
|
|
For service on the Board of Directors an annual retainer of $70,000, paid quarterly;
|
|
|
|
For service as chairperson of the audit committee of the Board of Directors an annual retainer of $20,000, paid quarterly;
|
|
|
|
For service as chairperson of the compensation committee of the Board of Directors an annual retainer of $15,000, paid quarterly;
|
69
|
|
|
For service as chairperson of the nominating/corporate governance committee of the Board of Directors an annual retainer of $15,000, paid quarterly;
|
|
|
|
For service as a member of the audit committee of the Board of Directors an annual retainer of $7,500, paid quarterly;
|
|
|
|
For service as a member of the compensation committee of the Board of Directors an annual retainer of $5,000, paid quarterly;
|
|
|
|
For service as a member of the nominating/corporate governance committee of the Board of Directors an annual retainer of $5,000, paid quarterly; and
|
|
|
|
$2,000 for each Board meeting and each committee meeting attended.
|
The independent Chairman of the Board
receives an annual cash retainer of $44,000, paid quarterly. The independent Chairman of the Board will also receive annually a restricted stock grant valued at approximately $66,000, in addition to the annual restricted stock grant value received
by all
non-employee
directors of the Company.
Directors of the Board who are also employees of the Company do not
receive any compensation for their service as directors.
Members of the Board are also eligible to receive stock options and awards, including restricted
stock, performance awards, phantom shares, stock payments, or SARs under the NOW Inc. Long-Term Incentive Plan.
The Board approved the grant of 6,780
shares of restricted stock awards on May 24, 2017 to each
non-employee
director under the NOW Inc. Long-Term Incentive Plan. The restricted stock award shares vest in full on the first anniversary of the
date of the grant.
70
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The rules of the SEC require that the Company disclose late filings of reports of stock ownership (and changes in stock ownership) by its directors, executive
officers, and beneficial owners of more than ten percent of the Companys stock. The Company has undertaken responsibility for preparing and filing the stock ownership forms required under Section 16(a) of the Securities and Exchange Act
of 1934, as amended, on behalf of its officers and directors. Based upon a review of forms filed and information provided by the Companys officers and directors, we believe that all Section 16(a) reporting requirements were met during
2017.
STOCKHOLDER PROPOSALS FOR THE 2019 ANNUAL MEETING
If you wish to submit a proposal to be included in our 2019 Proxy Statement, we must receive it on or before December 14, 2018.
Please address
your proposal to:
Raymond Chang, Vice President, General Counsel and Secretary, NOW Inc., 7402 N. Eldridge Parkway, Houston, TX 77041
.
If you wish
to otherwise introduce any item of business for consideration at our 2019 annual meeting, you must comply with the procedures specified in our bylaws and the rules of the SEC, including giving written notice of such item of business no later than
January 13, 2019 nor earlier than December 14, 2018 to:
Raymond Chang, Vice President, General Counsel and Secretary, NOW Inc., 7402 N. Eldridge Parkway, Houston, TX 77041
.
ANNUAL REPORT AND OTHER MATTERS
At the date this Proxy Statement went to press, we did not know of any other matters to be acted upon at the meeting other than the election of directors,
ratification of the appointment of independent auditors, and approval on an advisory basis of the compensation of our named executive officers, as discussed in this Proxy Statement. If any other matter is presented, proxy holders will vote on the
matter in accordance with their best judgment.
NOW Inc.s 2017 Annual Report on Form
10-K
filed on
February 14, 2018 is included in this mailing, but is not considered part of the proxy solicitation materials.
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By order of the Board of Directors,
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/s/ Raymond Chang
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Raymond Chang
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Vice President, General Counsel and Secretary
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Houston, Texas
April 13, 2018
71
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VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. ET on 05/22/2018 for shares held directly
and by 11:59 P.M. ET on 05/20/2018 for shares held in a Plan. 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. Vote by 11:59 P.M. ET on 05/22/2018 for shares held directly and by 11:59 P.M. ET on 05/20/2018 for shares held in a Plan. 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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CONTROL#
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NAME
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THE COMPANY NAME INC. - COMMON
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SHARES
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123,456,789,012.12345
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THE COMPANY NAME INC. - CLASS A
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123,456,789,012.12345
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THE COMPANY NAME INC. - CLASS B
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123,456,789,012.12345
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THE COMPANY NAME INC. - CLASS C
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123,456,789,012.12345
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THE COMPANY NAME INC. - CLASS D
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123,456,789,012.12345
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THE COMPANY NAME INC. - CLASS E
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123,456,789,012.12345
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THE COMPANY NAME INC. - CLASS F
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123,456,789,012.12345
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THE COMPANY NAME INC. - 401 K
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123,456,789,012.12345
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PAGE
1 OF 2
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: ☒
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KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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The Board of Directors recommends you vote FOR the
following:
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1.
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Election of Directors
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Nominees
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For
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Against
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Abstain
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1A
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Terry Bonno
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☐
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☐
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☐
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1B
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Galen Cobb
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☐
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☐
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☐
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1C
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James Crandell
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☐
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☐
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☐
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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 Appointment of Ernst & Young LLP as
Independent Auditors for 2018.
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☐
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☐
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☐
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3.
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Approval of 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 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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Investor Address Line 1
Investor Address Line 2
Investor Address Line 3
Investor Address Line 4
Investor Address Line 5
John Sample
1234 ANYWHERE STREET
ANY CITY, ON
A1A 1A1
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SHARES
CUSIP #
SEQUENCE #
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Signature [PLEASE SIGN WITHIN BOX] Date
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JOB #
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Signature (Joint
Owners) Date
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02 0000000000
0000358009_1 R1.0.1.17
Important Notice Regarding the Availability of
Proxy Materials for the Annual Meeting:
The NPS/10K is/are available at
www.proxyvote.com
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NOW INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
ON MAY 23, 2018
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The undersigned hereby appoints
Daniel Molinaro and Raymond Chang or either of them with full power of substitution, the proxy or proxies of the undersigned to attend the Annual Meeting of Stockholders of NOW Inc. to be held on Wednesday, May 23, 2018, and any adjournments
thereof, and to vote the shares of stock that the signer would be entitled to vote if personally present as indicated on the reverse side and, at their discretion, on any other matters properly brought before the meeting, and any adjournments
thereof, all as set forth in the April 13, 2018 proxy statement.
This proxy is solicited on behalf of the board of directors of NOW Inc. The shares represented by this proxy will be voted as directed
by the Stockholder. If no direction is given when the duly executed proxy is returned, such shares will be voted in accordance with the recommendations of the board of directors FOR all director nominees (Proposal 1), FOR the ratification of the
independent auditors (Proposal 2) and FOR the approval of the compensation of our named executive officers (Proposal 3).
The undersigned acknowledges receipt of the April 13, 2018 Notice of Annual Meeting and the Proxy Statement, which more particularly
describes the matters referred to herein.
Continued and to be
signed on reverse side
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0000358009_2 R1.0.1.17
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