Targeting Compensation at Approximately the 50th Percentile of the Peer Group

TABLE OF CONTENTSTarget award opportunities are expressed as a percentage of base salary and are based on the individual NEO’s level of responsibility and ability to impact overall business results. The Committee set target award levels to align TDC and annual cash incentive levels at approximately the 50th percentile of our peer group.

Specifically, the following tables set forth target award opportunities under our prior executive compensation program, and the target cash bonus for 2017, followed by a table that sets forth the targeted long-term incentives under our current and prior programs for 2017 as compared to 2015. Our current cash incentive plan was implemented in 2016; our long-term incentive plan was implemented in December 2015. The second table also demonstrates the significant shift from time-based awards to performance-based awards.

The end result of these changes was to set targeted TDC near the 50th percentile of our peers with a significant portion of total compensation in the form of stock-based compensation. The portion of restricted stock that is performance-based doubled from 25% of each NEO’s award to 50% of each award effective with the 2015 awards.

Emphasizing Performance

Both our annual cash and long-term incentives place a significant focus on attaining certain performance goals and are evaluated on a relative basis as compared with our peers. We developed metrics, both financial and operational, to measure performance and ensure that our NEOs’ expectations are aligned with our stockholders.

The financial performance metrics upon which our NEOs’ performance-based incentive awards are determined are directly linked to the key drivers of our business: achieving superior operating margins and free cash flow growth rates. These metrics are also meaningful to investors.

The strategic and operational initiatives established and approved by the Compensation Committee at the beginning of each year ensure that the highest priorities are identified, monitored and measured over the course of the performance period. All of the financial and strategic goals are thoughtfully developed to complement each other— creating a holistic program that aligns the interests of our stockholders with our business strategy.

Annual cash incentives reward both the achievement of short-term financial goals, as well as the execution of activities to advance our strategic and operational priorities, which support near-term financial performance and long-term strategic objectives. Below is a summary of the annual cash incentive plan structure, including metrics and weightings.

Annual Cash Incentives— Plan Structure

The financial metric portion of the award is determined by the achievement of the combined score of the three performance metrics set at the beginning of the year as compared with our peers on a relative basis at the end of the year. The actual amount of cash incentives to be paid will be driven by the achievement of the below target performance targets relative to our peer group as follows:

*Performance achieved between the 25th and 50th percentiles and 50th and 75th percentiles is interpolated between the end points identified above.

The strategic and operational portion of the award is determined by the achievement of the strategic and operational objectives set at the beginning of the year as compared with our peers on an absolute basis at the end of the year. The actual amount of cash incentives to be paid is driven by the achievement of the performance targets determined by the Committee, as set forth below:

* Performance achieved between the 25th and 50th percentiles and 50th and 75th percentiles is interpolated between the end points identified above.

Total cash incentives are equal to the sum of the financial and non-financial achievements, and are awarded to our managers, including NEOs, based on their individual performance.

Long-term incentives encourage the NEOs to execute on longer-term financial goals that drive stockholder value creation and support our retention strategy.

The actual amount of performance-based restricted stock earned and vested is driven by the achievement of performance against goals at the end of the three-year performance period relative to our compensation peer group as follows:

*Performance achieved between the 25th and 50th percentiles and 50th and 75th percentiles is interpolated between the end points identified above.

Executive Compensation Philosophy

Introduction

The Committee believes that executive compensation opportunities must align with and enhance long-term stockholder value. This core philosophy is embedded in all aspects of our executive compensation program and has allowed us to establish an important set of guiding principles. We believe these principles create a meaningful link between compensation outcomes and long-term, sustainable growth for our stockholders.

How We Make Compensation Decisions

Role of the Committee on Compensation and Executive Development

The Committee, which consists of three independent directors, is responsible for overseeing the development and administration of our executive compensation program. The Committee reviews and approves all aspects of our executive compensation program.

In this role, the Committee makes all compensation decisions relative to our CEO and approves all compensation recommendations for the other NEOs.

The Committee’s responsibilities include:

·                                          Reviewing and approving incentive plans and objectives

·                                          Assessing each NEO’s performance relative to these targets and objectives

·                                          Evaluating the competitiveness of each NEO’s total compensation package

·                                          Approving changes to a NEO’s compensation elements, including base salary, annual and long-term incentive opportunities and awards, benefits and perquisites

·                                          Designing executive compensation plans and programs

The NEOs assist the Committee as requested with certain of the above.

The Committee’s charter, which sets out its objectives and responsibilities, can be found on our web site at www.klx.com.

The Committee’s Process

The Committee maintains a structured process for the evaluation of Company, CEO and NEO performance. At the beginning of each fiscal year, the Committee establishes strategic and financial objectives for the CEO for the upcoming year and for a longer-term period. At this meeting, it also evaluates the prior year performance of the CEO and NEOs.

A combination of qualitative and quantitative factors provides a broad and balanced assessment of performance.

A Process for Performance Evaluation

The Role of Management

The CEO does not play any role in the Committee’s determination of his own compensation. However, he presents the Committee with recommendations for each element of compensation, including the level of base salary and annual and long-term incentive awards for the other NEOs. Mr. Khoury bases these recommendations upon his assessment of each individual’s performance, the performance of his or her respective business unit and/or function, benchmark information and retention risk. The Committee reviews the CEO’s recommendations, makes adjustments, as appropriate, and approves compensation changes at its sole discretion.

The Role of Compensation Consultant

To gain a perspective on external pay levels, emerging practices and regulatory changes, the Committee has engaged an independent executive compensation consultant to provide benchmark and survey information and advise the Compensation Committee as it conducts its review of our executive and director compensation programs. Our Board selected Pearl Meyer as its independent consultant and tasked them with gathering market competitive data, reviewing compensation plan design alternatives and advising the Committee on director and executive compensation trends and best practices.

Executive Compensation Practices

We strive to maintain sound compensation practices by continually monitoring the evolution of best practices. Here are some of the principal practices we follow:

·Review of Pay versus Performance.  The Committee continually reviews the relationship of the CEO’s compensation relative to the Company’s performance.

·Rigorous Stock Ownership Guidelines.  Stock ownership requirements for the CEO are five

times base salary; three times base salary for the other NEOs.

·Review of Compensation Peer Group (“CPG”).  The Committee periodically reviews the CPG and makes adjustments, when appropriate, to further enhance our market competitiveness and alignment with investor expectations. As an example, during 2016, the Committee modified our CPG to eliminate businesses that no longer were of similar size and added other aerospace, industrial or energy service providers which are more appropriate for peer comparison purposes.

·No Tax Gross-Ups.  KLX does not provide excise tax reimbursements or gross-ups in the event of a change in control.

·No Pledging of Shares.  To avoid conflicts of interest that could undermine the goals of our share ownership policy and the focus on sustainable long-term growth, KLX prohibits directors and employees from entering into transactions involving short sales of our securities or put or call options based on our securities, except for options granted under KLX compensation programs. In addition, directors and NEOs are generally prohibited from holding KLX shares in a margin account or pledging KLX shares as collateral for a loan.

·No Hedging.  Directors and employees may not enter into short sales or purchase put or call options on KLX common stock.

·No Repricing or Underwater Cash Buyouts.  Stock option exercise prices are set at the grant date market price and may not be reduced (except to adjust for stock splits or similar transactions) without stockholder approval.

·Clawback(s).  KLX has a comprehensive policy addressing the clawback of executive compensation. In the event of a material restatement of the Company’s financial results, the Board will review the facts and circumstances that led to the requirement for the restatement and may take such actions, if any, as it deems necessary or appropriate in its discretion. The Board will consider whether any executive officer received cash incentive compensation based on the original financial statements because it appeared he or she had achieved financial performance targets that were not achieved based on the restatement. The Board also will consider the accountability of any executive officer whose acts or omissions were responsible in whole or in part for the events that led to the restatement and whether such acts or omissions constituted misconduct.

Competitive Positioning

Peer Group Benchmarking

To evaluate market competitiveness, we compare our program to the compensation at the 17 companies that make up our CPG. These companies provide a relevant comparison based on their similarity to us in size and complexity, taking into account factors such as their revenues, market capitalization, global scope of operations during 2017 and diversified product portfolios. For benchmarking purposes, the Committee believes that a mix of both industry and non-industry peers provides a balanced and realistic perspective on competition for the pool of potential senior executive talent.

In addition to CPG data, we look at a broader sample of proxy and general industry pay benchmark data. This information provides useful insight on compensation trends and supplements CPG data, when appropriate. For certain positions such as our President and Chief Operating Officer, where there are not an adequate number of incumbents to benchmark against, we develop an alternative peer group with similar positions at comparable size companies to establish benchmarks. Because the benchmarking process is performed based upon publicly available information from our CPG, and other broader samples, the comparisons are based upon data from the preceding year. As a result, the August 2017 Pearl Meyer benchmarking study prepared for the Committee was generally based upon data for the year ended December 31, 2016 and May 30, 2017 as to size and composition of the peer group for purposes of determining the applicability of the peers. The study which Pearl Meyer will prepare for the Committee for its August 2018 meeting will be generally based on the comparison companies’ data for the period ended December 31, 2017.

Our 2017 CPG includes the following companies, based on May 30, 2017 data as described above (dollars in thousands):

(1)         Calculated as of May 30, 2017

The above peer group was appropriate for KLX in 2017 and will be reviewed annually as industry conditions in the aerospace and defense and energy sectors change. The above study was based on December 31, 2016 trailing twelve months revenues and equity valuations as of May 30, 2017. KLX’s equity market capitalization and enterprise value based on our May 30, 2017 share price of $47.86 was $2,475 and $3,389, respectively, which would have represented percentile rankings of 53% and 63%, respectively.

External Benchmarking

Benchmarking Objectives

The Committee uses external benchmarking based on our compensation structure as we strive to ensure that our compensation program remains competitive and in alignment with our industry peers. Through the structural changes we made to our NEO compensation program during 2015, our primary objective of our executive compensation program was to align our target levels of TDC for our NEOs at approximately the 50th percentile of our CPG. We define target total direct compensation as base salary, target annual cash incentives and target long-term incentives. We reviewed the weighting of each component and have adjusted the various elements accordingly based upon stockholder feedback and market best practices. While maintaining our primary objective, we also consider the cyclical nature of our business, our historical business performance, and our future

financial and strategic goals. These factors are necessary in attracting, maintaining and retaining our leadership team, who we view as critical assets given their knowledge, relationships and expertise.

We believe market data provides a reference and framework for decisions about the base salary, target annual cash incentives and the appropriate target level of long-term incentives to be provided to each NEO. However, due to variability and the inexact science of matching and pricing executive jobs, we believe that market data should be interpreted within the context of other important factors and should not solely be used to dictate a specific pay level for an executive. As a result, in setting the target pay level of our NEOs, market data is reviewed along with a variety of other factors, including individual performance, competencies, skills, future potential, prior experience, scope of responsibility and accountability within the organization.

Pearl Meyer reviewed both the individual components and aggregate composition of our compensation packages for our NEOs focusing on several components of pay including:

·                                          base salary;

·                                          target and actual cash incentives;

·                                          total cash compensation (i.e., base salary plus cash incentives);

·                                          target and actual long-term equity incentives; and

·                                          target and actual total direct compensation (i.e., total cash plus long-term equity incentives).

Based on this review of our revised compensation program, Pearl Meyer advised the Committee that, for our NEOs, the target TDC for the NEO group approximated the median (50th percentile) of our CPG.

How We Structure Our Compensation

The following elements make up our compensation program:

Emphasis on Contingent Compensation

The total compensation of each NEO is substantially contingent on performance. The Committee selects individual and business performance metrics designed to link actual compensation amounts with factors that contribute to stockholder value.

Fixed compensation elements, such as base salary, SERP and other benefits, are designed to be sufficiently competitive for recruitment and retention purposes.

The following charts illustrate the basic pay mix for our CEO and other NEOs:

Pay Mix

Our compensation structure has an appropriate focus on performance-based compensation. The charts below show targeted 2017 TDC for our CEO and our other NEOs. These graphs also illustrate the targeted annual cash incentives for our CEO and our NEO group. These charts demonstrate that our compensation structure emphasizes accountability and correlation of performance relative to pay and correlates well with our CPG.

All figures are shown as a percentage of target TDC.

Target TDC Comparison: CEO

Target TDC Comparison: Other NEOs

How We Set Our Financial Targets

Each year we establish financial and strategic objectives with quantitative targets that determine annual and long-term incentive award opportunities for our NEOs. We strive to set financial targets that are both challenging and realistic.

2017 Financial Performance Assessment

Following are the Consolidated, ASG and ESG financial and operational highlights:

(1)         Adjusted net earnings and adjusted EPS reflect net earnings before the non-cash charge associated with the revaluation of the Company’s deferred tax assets, Costs as Defined, amortization and non-cash compensation expense, and include the tax benefit from the amortization of tax-deductible goodwill.

2017 Operational Highlights

·                                          Enhanced strong corporate infrastructure to support business segments.

·                                          Continued to enhance a comprehensive corporate governance structure that recognizes risk management as an important part of day to day responsibilities.

·                                          Completed the development of a KLX data center and completed the migration from B/E Aerospace’s data center.

·                                          Implemented new warehouse management system in Phoenix operations yielding approximately 30% increase in site productivity.

·                                          Continued to enhance our ESG Research and Development Center of Excellence, which has developed or is in the process of developing more than 21 innovative tools for our energy service customers, including 7 patented products and 27 tools with patents pending.

·                                          Completed the build-out of ASG’s new global distribution and operations center in Miami.

·                                          ESG revenues of $320.6 million increased by 109.3% and generated positive adjusted operating earnings in the fourth quarter of 2017.

·                                          Continued to strengthen the ASG and ESG management teams through numerous key new hires and internal development programs.

·                                          Won approximately $150 million of new ASG customers under long-term agreements in each of ASG’s end markets.

·                                          Renewed/expanded ASG’s long-term agreements with key customers on programs.

·                                          Continued to expand the number of ASG suppliers under long-term supply agreements.

·                                          Expanded E-Commerce website at ASG with annualized revenues of approximately $70 million.

Annual Incentive Plan

The Committee determined due to the severity of the decline in the energy sector as well resulting fluctuations in customer demand for ESG’s products and services that ESG should be evaluated on the basis of non-financial goals oriented toward aligning its products and service and staffing levels consistent with demand, with a focus on improving its core infrastructure, systems and processes, upgrading the quality of its personnel as appropriate, and establishing new product development activities to further differentiate ESG as the industry

begins to recover. As a result, our evaluation of ESG’s performance was based on these and other non-financial goals and accomplishments set forth above. During 2016, cash bonuses at ESG were based on individual performance and were limited to 50% of targeted bonus.

In addition, in order to maintain morale at ESG in these difficult conditions, we increased the key executives’ restricted stock awards by 50% of the targeted cash bonus that was foregone in 2016, thereby effecting a strong retention tool as the oil field service sector began its recovery. ASG and ESG were evaluated on a relative basis as compared with its CPG.

For 2017, ASG performance as compared with peer groups on a relative percentile ranking basis was as follows:

(1)         Free Cash Flow Growth Rate represents KLX consolidated year-over-year performance.

For 2017, ESG performance as compared with its peer group on a relative percentile ranking basis was as follows:

(1)         Free Cash Flow Growth Rate represents KLX consolidated year-over-year performance.

Corporate NEOs’ financial metrics were based on performance with the Company’s CPG. The following table summarizes the company’s consolidated performance against its entire peer group on a relative basis:

As a result, the Committee concluded that the financial metrics for ASG, ESG and the corporate NEOs were achieved at the 75th percentile, which is the maximum level of performance under our annual cash incentive plan.

The Committee reviewed each of ASG’s and ESG’s non-financial goals in detail and determined that these goals were achieved, or substantial progress was made toward achievement of multi-year objectives.

As a result, the Committee determined that the KLX NEOs achieved 200% of their 2017 targeted cash incentives.

Annual Cash Incentive Awards for 2017.  Based on the financial performance results, individual achievements and achievement of non-financial goals, the Committee approved the following cash bonus awards, for each of the NEOs based upon 2017 performance:

Annual incentive payments for Fiscal 2017 were paid in late December 2017. Historically, annual incentive payments have been paid following the end of the applicable fiscal year, but the Committee resolved to make payments earlier for Fiscal 2017 based on the high level of achievement of the applicable Fiscal 2017 performance goals as of the end of calendar year 2017 and in light of the pending federal tax law changes that were adopted at the end of calendar year 2017 and that became effective in calendar year 2018, which introduced uncertainty as to the tax deductibility of such annual incentive payments going forward. To ensure deductibility of the annual incentive payments in 2017 under then existing federal tax law, the payments were subject to recoupment by the Company in the event that the applicable performance goals were not achieved or certified by the Committee based on the full Fiscal 2017 results. Following completion of Fiscal 2017, the Committee certified the achievement of Fiscal 2017 results, and no recoupment was necessary due to the Company’s outstanding performance for Fiscal 2017.

Long-Term Incentives.  In addition to the aforementioned incentives, we provide our NEOs with long-term equity incentive awards under our long-term incentive plan. We believe the use of long-term equity incentive awards accomplishes important objectives of our executive compensation program by linking executive compensation to long-term stockholder value creation. The level of benefit received by our NEOs in connection with these awards is dependent, to a large degree, on our achievement of the pre-determined goals over each three-year period.

On December 8, 2016, the Committee approved grants of restricted stock to our NEOs, as well as other participants. The number of shares of restricted stock comprising each award granted is equal to the dollar value of such award approved by our Committee, divided by the closing price of our common stock as quoted on the NASDAQ Global Select Market on the date of grant. The Company did not grant any stock options during Fiscal 2016 or 2017.

The following chart sets forth our CEO’s total cash, LTIs and all other and total compensation for Fiscal 2016 and 2017.

Long-Term Incentive Award Grants for 2017.  Based on the new compensation program and incentive targets, the Committee approved and granted in December 2017, the following awards:

2017 Long-Term Incentive Award Grants

(1)         Dependent on the achievement of financial metrics relative to our peer group over a three-year performance period.

(2)         Full grant date fair value of performance-based and time-based restricted stock as recognized under U.S. generally accepted accounting principles. The fair value was calculated using the closing price of our common stock on the grant date.

NEO long-term incentive awards reflect a performance-based vesting condition on 50% of the award amount. We structured our compensation program to allow multiple points of feedback to our managers and employees throughout the year. We conduct performance reviews throughout the organization in the second half of each year, award LTIs after the end of our third quarter, and generally award STIs after we report our full year results and adjust base salaries generally in the middle of the fiscal year. We have found this to be a well-rounded process that allows for mentoring, goal setting and on-going performance recognition throughout the year.

For 2017, long-term incentives were granted as follows:

A Closer Look at Performance-Based Restricted Stock Awarded in 2017.  This portion of a NEO’s long-term incentive award is directly linked to a three-year performance period that consists of three annual performance cycles. The performance result used to determine the actual award earned will be calculated at the end of the three-year performance period by averaging the results of the three annual performance cycles:

Comparing the average results on the two key metrics (EBIT margin and free cash flow growth rate) relative to the performance of our peer group over a three-year performance period as follows:

Performance & Payout Ranges

*Performance between 25th and 75th percentiles is interpolated.

Legacy Long-Term Incentives.  The unvested performance portion of restricted stock awards for shares at the date of the spin-off from B/E Aerospace Inc. (B/E) that were based on the performance for the three-year period ended December 31, 2014 were fully realized. The financial metric utilized under those awards at the date of grant were based on achieving an annual ROE target as determined at the beginning of each year. Pursuant to the terms of these legacy awards, in 2016, vesting was based on the planned achievement of the average return on equity target for the three-year period ended 2015. Two years were based on B/E performance and one year was based on ASG performance. In 2017, vesting was based on one year of B/E performance and two years of ASG performance.

Retirement Benefits.  All of our NEOs participated in our qualified 401(k) defined contribution plan in 2017. Under this plan, we match 100% of the first 3% and 50% of the next 2% of employee contributions up to $10,400. In addition, we make tax-deferred contributions on behalf of each of Messrs. McCaffrey and Senft to our 2014 Deferred Compensation Plan (“SERP”) with an aggregate annual value of one times each of their base salaries, and on behalf of Mr. Khoury with an aggregate value of 30% of his base salary.

During 2017, we amended our employment agreement with our CEO, Mr. Khoury, effective May 25, 2017, to make certain minor conforming changes, provide for the use of an automobile (previously provided under his employment agreement with B/E Aerospace), and clarify the manner in which any unpaid executive compensation would be determined for an interim separation period.  We also have a consulting agreement with Mr. Khoury pursuant to which he will provide, upon his retirement, consulting services to the Company for five years for $300,000 per year.

Deferred Compensation Plan.  The Company adopted its 2014 Deferred Compensation Plan in 2014. The 2014 Deferred Compensation Plan is a nonqualified deferred compensation plan pursuant to which certain senior executives of the Company (as selected by the Committee) are eligible to defer salary and bonus. Each of our NEOs was eligible to participate in the plan. We may make a matching contribution equal to 100% of the participant’s deferrals under the 2014 Deferred Compensation Plan up to a maximum of 7.5% of the participant’s total base salary and annual incentive award. Matching contributions vest in equal installments on January 15th of each of the three years succeeding the year in which the contribution is made. In addition, an executive will fully vest in all matching contributions upon (i) meeting the requirements of a retirement, (ii) a termination of employment by the Company without cause, (iii) death, (iv) a change in control of the Company or (v) meeting the requirements of a disability. We made matching contributions to the 2014 Deferred Compensation Plan for NEOs (other than Messrs. Khoury, McCaffrey and Senft) in March 2018 totaling $145,256. Messrs. Khoury, McCaffrey and Senft are not eligible for matching contributions due to the retirement benefits described above. Details regarding 2017 contributions are set forth under the caption “Fiscal 2017 Deferred Compensation” on page 32 of this Form 10-K/A. Our 2014 Deferred Compensation Plan also permits the deferral of equity-based awards.

Other Compensation.  In 2017, our NEOs were eligible to participate in all benefit programs that are generally available to all our employees. In addition, in order to provide a comparative compensation package, we generally reimburse each of our NEOs for medical care expenses that are not otherwise reimbursed by any plan or arrangement up to a maximum benefit of 10% of their base salary per year. We also reimburse each of our NEOs for reasonable costs of financial and estate planning.

Stock Ownership / Prohibited Transactions in Company Securities

Our Board has established stock ownership guidelines for our executive officers and non-employee directors. Under these guidelines, our NEOs and members of the Board are required to own shares of the Company’s common stock with a market value of at least a multiple of the base salary or annual cash retainer, as applicable, within a reasonable period from their election to the Board or appointment as an executive officer, as determined by the Board. The guidelines are five times base salary for the CEO and three times base salary for all other NEOs and three times the annual cash retainers for the members of our Board. Progress toward meeting the guidelines is reviewed by the Compensation Committee annually.

The Committee considers all shares held by a director or an executive officer toward the meeting of the ownership requirements, including shares owned outright (including family trusts and those held by a spouse), time-vested restricted shares, stock units held in any deferred compensation plan and shares in our employee stock purchase plan. Unexercised stock options and unearned performance shares are not included toward meeting the ownership guidelines.

Our Board also established a policy that prohibits our directors and executive officers from engaging in short sales of Company securities. Our officers and directors are also prohibited from selling or purchasing puts or calls, trading in or writing options, or engaging in other hedging activities with respect to Company securities. Directors and executive officers are also prohibited from holding Company securities in a margin account or pledging Company securities as collateral for a loan, unless our General Counsel, Vice President - Law and Human Resources provides pre-clearance after the director or executive officer clearly demonstrates the financial capability to repay the loan without resort to the pledged securities.

Compensation Risks

Management and the Committee assessed the Company’s compensation policies and practices and determined that its policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. In reaching this conclusion we primarily considered the following factors:

·                                          Executive officers receive a mix of base salary, cash-incentive awards and long-term equity-based awards as compensation, and the cash incentives plus performance-based incentives paid to our executive officers in 2017 ranged from approximately 54% - 58% of TDC while base salary and time-based vesting long-term equity-based awards accounted for approximately 42% - 46% of TDC. We do not believe the amount of cash-incentives paid to our executive officers would incentivize management to take excessive risks for short-term gains.

·                                          Equity-based awards are designed to align the long-term interests of executive officers and stockholders. The performance portion of our long-term equity-based awards vests based on an average achievement of financial metrics as compared with our peers over a three-year period and the time-based portion of the long-term equity-based awards vests over a three-year period. Due to these vesting periods, we do not believe that our equity-based awards incentivize executive officers to take excessive risks for short-term gains.

·                                          To align the long-term interest of our executives and our stockholders, we adopted an anti-hedging policy, which provides that no insider, including NEOs and members of our Board, may engage in short sales of KLX Inc. securities. Also, selling or purchasing puts or calls or otherwise trading in or writing options on KLX Inc. securities by officers and directors is prohibited.

·                                          We have also implemented a comprehensive Clawback policy, as further described below, to ensure that performance-based compensation is not paid based on improper or inaccurate financial results.

·                                          The Committee reviews and approves the targeted annual compensation opportunity and type of compensation available for each executive officer, utilizing its independent compensation consultant as necessary.

·                                          As part of this review, the Committee will compare the targeted and actual total compensation of

each executive officer with their counterparts within the Company’s peer group.

·                                          On an annual basis, our executive officers provide a certification that they have complied with our Code of Business Conduct. In addition, the Company regularly reviews its Code of Business Conduct and our other corporate policies with all employees.

·                                          We do not have employees who are compensated based on taking significant risks with the Company’s capital.

Compensation Recoupment Policy (“Clawback”)

In the event of a material restatement of the Company’s financial results, the Board will review the facts and circumstances that led to the requirement for the restatement and may take such actions, if any, as it deems necessary or appropriate in its discretion. The Board will consider whether any executive officer received cash incentive compensation based on the original financial statements because it appeared he or she had achieved financial performance targets which in fact were not achieved based on the restatement. The Board also will consider the accountability of any executive officer whose acts or omissions were responsible in whole or in part for the events that led to the restatement and whether such acts or omissions constituted misconduct.

The actions, if any, that the Board may in its discretion elect to take against a particular executive officer, depending on all the facts and circumstances as determined during their review, could include (i) the recoupment of all or part of any bonus or other cash incentive compensation paid to the executive officer that was based upon the achievement of financial results that were subsequently restated and/or (ii) the pursuit of other available remedies.

Tax and Accounting Considerations

Section 162(m) of the Internal Revenue Code (“Section 162(m)”) generally limits to $1 million the U.S. federal tax deductibility of compensation paid in one year to certain executive officers. Prior to 2018, a company could deduct compensation above that limit if it paid the compensation in a manner that satisfied the requirements for the “qualified performance-based compensation” exception under Section 162(m). However, beginning in 2018 and subject to very limited exceptions going forward, recent changes in federal tax law have repealed the “qualified performance-based compensation” exception under Section 162(m), thus limiting the Company’s ability to deduct significant portions of the compensation paid to certain of our NEOs. To the extent it determines to be reasonably practicable and consistent with the Company’s other compensation objectives, the Company will provide our NEOs with compensation programs that will preserve tax deductibility. However, the Committee evaluates other considerations, such as hiring qualified executive officers, providing our executive officers with competitive and adequate incentives to remain with and increase our business operations, Company financial performance and prospects, as well as rewarding extraordinary contributions, that also significantly factor into the Committee’s compensation decisions, and the Committee expressly reserves the right to pay compensation that may not qualify for deductibility under Section 162(m).

To the extent that any compensation paid to our NEOs constitutes a deferral of compensation within the meaning of Section 409A of the Internal Revenue Code, the Committee intends to cause the award to comply with the requirements of Section 409A of the Internal Revenue Code and to avoid the imposition of penalty taxes and interest upon the participant receiving the award.

The Committee also takes accounting considerations, including the impact of FASB ASC 718, Compensation — Stock Compensation, into account in structuring compensation programs and determining the form and amount of compensation awarded.

Employment, Severance and Change of Control Agreements

Pursuant to their employment agreements, we provide each of our NEOs with severance benefits if their employment is terminated for any reason other than cause or, due to their resignation for good reason (as each term is defined in the applicable employment agreement). In certain cases, the employment agreements require that we pay the NEO’s base salary for the balance of the then-existing term of the applicable employment

agreement and in other cases provide a severance payment which is generally a multiple of the NEO’s base salary. In addition, the employment agreements describe the treatment of unvested equity upon termination of employment.

The Board recognizes the disparity in remuneration to a NEO in the event of termination of employment as a result of retirement versus remuneration for reasons other than a termination of employment for “cause.” The Board believes that depending on a NEO’s contributions to such NEO’s effective succession plan, including assistance with the identification of a successor and facilitating an effective succession, and other considerations such as the role and tenure of the NEO, his or her contributions to the growth of the Company and the creation of stockholder value during the NEO’s career with the Company, or to facilitate, in certain circumstances, the retirement of a NEO, the Board would favorably consider treating a NEO in the same manner in which the NEO would be compensated in the event of an involuntary termination or a change of control, provided that any such decision would be made at the discretion of the Board at the time of such retirement on a case by case basis.

In the event of a change of control, the employment of our NEOs will be automatically terminated. Payments upon a termination are described below, beginning on page 33 and, depending on the NEO, can include payment of base salary, incentive bonus and automobile allowance for the balance of the then-existing term of the NEO’s employment agreement and a severance payment that is generally a multiple of the NEO’s base salary and incentive bonuses. None of our NEOs’ employment agreements provides for gross-ups in connection with any potential excise taxes imposed under Section 4999 of the Internal Revenue Code. The Committee has not approved tax gross-ups for any executives.

Fiscal 2018 Compensation Decisions In Connection With Pending Boeing Merger

In prior disclosures, the Company has disclosed to stockholders that (i) the Board has been mindful of ensuring that the interests of stockholders and the senior executives of the Company are aligned in the event of a transaction which would constitute a change of control of the Company and (ii) the Committee and the Board had concluded that they would favorably consider a discretionary transaction bonus at that time for senior executives, including our NEOs, which transaction bonus would be in addition to amounts payable under each employment agreement, including those described below.

Consistent with the foregoing historical disclosures, in connection with the pending merger between the Company and The Boeing Company (which we refer to herein as the “Merger”), the Company entered into Transaction Bonus and Noncompetition Agreements with each of Messrs. Khoury, McCaffrey, Senft and Franks, which generally provide for the following, upon, and subject to, the completion of the Merger:

·                                          Lump-sum cash transaction bonuses in an amount equal to $20,720,000, $9,620,000, $3,330,000 and $3,330,000 for each of Messrs. Khoury, McCaffrey, Senft and Franks, respectively;

·                                          Customary and market outplacement services following termination of employment until the earlier of the expiration of a period of twelve (12) months termination and the date upon which the applicable executive obtains substantially comparable employment; and

·                                          A non-competition restriction applicable for a period of three (3) years following termination of employment generally restricting each executive’s engagement in any employment, consulting or other activity in any business directly competitive with the Company’s operations and services as of the date of the completion of the Merger, without the Company’s written consent, which consent will not be unreasonably withheld, except that the executives are permitted to serve as a director of any corporation or a partner or investor in any private equity firm.

In addition, at the request of Boeing, Mr. Khoury’s employment agreement was amended to address certain matters relating to Mr. Khoury’s contemplated employment by KLX Energy, and to eliminate the Company’s and Mr. Khoury’s obligations pursuant to the consulting arrangement contemplated by the employment agreement, which otherwise would have taken effect on upon the consummation of the Merger. In exchange for the elimination of the contemplated consulting arrangement and the cancellation of the valuable benefits to which Mr. Khoury otherwise would have been entitled thereunder, Mr. Khoury will be entitled to receive an additional lump-sum cash payment equal to $7,500,000 upon, and subject to, the completion of the

Merger.

For more detailed information regarding the pending Merger, please see the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 1, 2018, which is hereby incorporated by reference.

Report of the Compensation Committee on Executive Compensation

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis for the year ended January 31, 2018 with management. Based on the review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Form 10-K/A.

EXPLANATORY NOTEour NEOs in Fiscal 2017 (the year ended January 31, 2018), Fiscal 2016 (the year ended January 31, 2017) and Fiscal 2015 (the year ended January 31, 2016).

KLX Inc. (the “Company,” “we,” “us,” or “our”) is filing this Amendment No. 2 on Form 10-K/A (this “Amendment”)

(1)The amounts reported in the “Stock Award” column represent the aggregate full grant date fair value of the restricted stock awards calculated in accordance with FASB ASC 718 (without any reduction for risk of forfeiture). For more information about our adoption of FASB ASC 718 and how we value stock-based awards (including assumptions made in such valuation), refer to its Annual Report on Form 10-KNote 11 to our audited financial statements for the fiscal year ended January 31, 2016, which was originally2018 included in our Annual Report on Form 10-K filed with the SEC on March 24,19, 2018. For the performance-based restricted stock awards, the grant date value is based upon the probable outcome of the performance metrics. If the highest level of payout were achieved, the value of the December 2017, 2016 (the “Original Filing”),and 2015 awards as of the grant date for performance based restricted stock are capped at 200% of the performance award target. All other performance based awards granted in 2015 are capped at 100% of the performance award target. Whether, and to amend and restate Item 9A of Part II, “Controls and Procedures,”what extent, a NEO realizes value with respect to (1)restricted stock awards will depend on our conclusions regardingactual operating performance, stock price fluctuations and the effectivenessNEO’s continued employment.

(2)All annual cash bonuses paid to our NEOs are reflected in the “Non-Equity Incentive Plan Compensation” column of this table. The amounts shown represent the annual cash incentive payments received by our NEOs. These cash awards were earned in 2017, 2016 and 2015 and were paid on December 29, 2017, March 24, 2017 and March 15, 2016, respectively. The annual cash incentives are described in detail above in our “Compensation Discussion and Analysis.”

(3)With respect to Mr. Khoury, the amount reported for 2017, 2016 and 2015 as “All Other Compensation” include $324,468, $1,030,000 and $1,015,000, respectively, for SERP contributions; and additional amounts in 2017 for estate planning.

(4)With respect to Mr. McCaffrey, the amounts reported for 2017, 2016 and 2015 as “All Other Compensation” include $691,118, $658,170 and $648,585, respectively, for SERP contributions; $11,882, $10,195 and $8,745, respectively, for 401(K) Plan contributions; and additional amounts relating to automobile allowance and estate planning.

(5)With respect to Mr. Senft, the amount reported for 2017, 2016 and 2015 as “All Other Compensation” includes $462,072, $447,063 and $430,000, respectively, for SERP contributions; $32,470, $26,610 and $40,000, respectively, for payments under our executive

medical plan; and additional amounts for automobile allowance and financial planning. The amount reported for 2016 and 2015 includes $68,467 and $567,883, respectively, for moving and relocation expenses.

(6)With respect to Mr. Cuomo, the amounts reported for 2017, 2016 and 2015 as “All Other Compensation” includes $75,386, $72,267 and $52,517, respectively, for SERP contributions; $11,860, $16,915 and $26,592, respectively, for payments under our executive medical plan; and $11,474, $11,271 and $9,569, respectively, for 401(k) Plan contributions; and additional amounts for automobile allowance and financial planning.

(7)With respect to Mr. Franks, the amounts reported for 2017, 2016 and 2015 as “All Other Compensation” include $69,870, $65,000 and $48,741, respectively, for SERP contributions; $39,220, $47,517 and $25,924, respectively, for payments under our executive medical plan; $11,424, $11,807 and $6,442, respectively, for 401(k) Plan contributions; and additional amounts for automobile allowance and financial planning.

Grants of Plan Based Awards During 2017

The following table sets forth information concerning incentive awards made to our NEOs in 2017. Awards consisted of restricted stock, restricted stock units, stock options and annual incentive awards under our annual incentive plan as described in detail in our “Compensation Discussion and Analysis.”

(1)         The amounts shown represent the range of annual cash incentive opportunities for each NEO under our 2017 annual incentive plan.

(2)         Since the amount of Non-Equity Incentive Plan awards is determined on the basis of a NEO’s contributions to the success of a segment or the Company, as applicable, no specific threshold can be determined.

(3)         The amounts shown represent restricted stock units that are subject to performance criteria and have not yet been earned. The number of shares of restricted stock granted is generally equal to the dollar value approved by the Committee divided by the closing price of our disclosure controlscommon stock on the date of grant, rounded to the nearest whole number of units. Performance from the 25th percentile to the 50th percentile will result in 50% - 100% of the target number of shares being earned. Performance from the 50th to the 75th percentiles will result in 100% - 200% of the target number of shares being earned, and proceduresperformance above the 75th percentile will result in 200% of the target number of shares being earned. Shares earned will be linearly interpolated for performance between 25th and the 75th percentiles.

(4)         These awards are subject to time-based vesting only. The number of shares of restricted stock or restricted stock units granted is equal to the dollar value approved by the Committee divided by the closing price of our internal control overcommon stock on the date of grant.

(5)         The amounts shown represent the aggregate grant date fair value of the long-term incentive awards calculated in accordance with FASB ASC 718 (without any reduction for risk of forfeiture). For more information about our adoption of FASB ASC 718 and how we value stock based awards (including assumptions made in such valuation), refer to Note 11 to our audited financial reporting and (2) Deloitte & Touche LLP’s related attestation report due to a material weaknessstatements for the fiscal year ended January 31, 2018 included in our internal control over financial reporting identified subsequent toAnnual Report on Form 10 K filed with the issuance of our Original Filing.  Item 15 of Part IV, “Exhibits and Financial Statement Schedules,” has also been amended to revise the reference to Deloitte’s opinionSEC on our Internal Control Over Financial Reporting in its Report of Independent Registered Public Accounting Firm on our consolidated and combined financial statements and financial statement scheduleMarch 19, 2018.

2017 Outstanding Equity Awards at Fiscal Year-End

The following table provides information concerning outstanding equity awards held by each NEO as of January 31, 2018, which includes unvested shares of restricted stock and restricted stock units.

(1)         The time-based awards vest ratably on an annual basis over three years following the grant date provided the executive is employed or, as to Mr. Khoury, is providing consulting services to the Company on the applicable vesting date.

(2)         The market value of unvested shares is based on KLX’s common stock closing share price on January 31, 2018 as quoted on the NASDAQ Global Select Market.

(3)         The December 2017, 2016 and 2015 awards are subject to performance-based vesting based upon the three years ended January 31, 2016, December 31, 2014following criteria: If the Company achieves performance below the 25th percentile relative to its Peer Group over the three-year performance period, none of these shares will be earned. Performance from the 25th percentile to the 50th percentile will result in 50% - 100% of the target number of shares being earned. Performance from the 50th to the 75th percentile will result in 100% - 200% of the target number of shares being earned, and December 31, 2013,performance above the 75th percentile will result in 200% of the target number of shares being earned. Shares earned will be linearly interpolated for performance between 25th and the one-month period ended January 31, 2015.75th percentiles. The 2014 annual restricted stock award vests subject to achieving the annual return on equity targets established by the Committee, which were met, and vest four years from the date of grant. These awards will vest in November 2018.

While there is no requirement for any adjustments or restatement to our annual financial statements for any of the last three completed fiscal years, for any of the quarters of our last completed fiscal year or for the one-month transition period prior to our last completed fiscal year, the possibility existed at January 31, 2016 that an identified weakness in our internal controls could have resulted in a material error in our financial results which may not have been detected in a timely manner.Option Exercises and Stock Vested During 2017

The following table provides information concerning vesting of common stock awards held by each NEO during 2017.

(1)         Represents the number of securities for which the options were exercised during 2017.

(2)         Represents the number of shares acquired on exercise multiplied by the difference between the market price at exercise, as reported on the NASDAQ Global Select Market and the exercise price of the options.

(3)         Represents the shares of restricted stock that vested during 2017.

(4)         Represents the number of shares of restricted stock that vested during 2017 multiplied by the closing price of our common stock, as reported on the NASDAQ Global Select Market on the applicable vesting date.

Fiscal 2017 Deferred Compensation

The Deferred Compensation Plan is a nonqualified deferred executive compensation plan pursuant to which certain senior executives of the Company (as selected by the Committee) are eligible to defer a portion of their base salary, cash bonus and equity-based awards.

A deferral election must be made prior to the beginning of the calendar year in which deferral occurs. Each of our NEOs is eligible to participate in the plan. We may make a matching contribution equal to 100% of the participant’s deferrals under the Deferred Compensation Plan up to a maximum of 7.5% of the participant’s total base salary and annual cash bonus, except for the benefit of Messrs. Khoury, McCaffrey and Senft, who are not eligible for matching contributions. Matching contributions vest in equal installments on January 15th of each of the three years succeeding the year in which the contribution is made. In addition, an executive will fully vest in all matching contributions upon: (i) meeting the requirements of a retirement, (ii) a termination of employment by the Company without cause, (iii) death, (iv) a change in control of the Company or (v) meeting the requirements of a disability.

The Deferred Compensation Plan is a non-qualified plan under the Internal Revenue Code and does not provide for guaranteed returns on plan contributions. A participant’s deferrals, together with Company matching contributions, are adjusted for earnings or losses measured by the rate of return on the notional investments available under the plan to which participants allocate their accounts.

Participants may change investment elections on any business day. Distributions are made after termination of employment or on a date, selected by the participant, prior to termination of employment.

During 2017, each of the NEOs elected to defer compensation under the plan and we made matching contributions for these NEOs (other than Messrs., Khoury, McCaffrey and Senft) in March 2018 totaling $145,256.

Nonqualified Deferred Compensation

(1)         All executive contributions are included as compensation in the Summary Compensation Table.

(2)         Earnings on account balances are not included in the Summary Compensation Table.

(3)         Includes current and prior year contributions and earnings.

In addition to the 2014 Deferred Compensation Plan, all of our NEOs participated in our qualified 401(k) defined contribution plan. Pursuant to this plan, we match 100% of the first 3% and 50% of the next 2% of employee contributions up to $10,400.

Employment Agreements

Amin J. Khoury.  Mr. Khoury is party to an employment agreement with us entered into on September 15, 2014 (effective as of the spin-off date), amended and restated as of February 27, 2015, further amended and restated as of May 25, 2016, and further amended and restated as of May 25, 2017, pursuant to which he serves as our Chairman and Chief Executive Officer. The employment agreement has enhanceda three-year term with automatic extension by one year on each anniversary of the effective date of the agreement unless either party gives at least 30 days’ written notice.

The agreement provides that Mr. Khoury will receive a specified base salary, currently $1,100,164 per year, subject to increases as determined from time to time by our Board or the Committee. He is also eligible to receive an annual discretionary incentive bonus of not less than 175% of his base salary and strengthened its methodologyan annual equity grant with a grant date value of no less than 325% of his base salary. In lieu of retirement benefits, we make tax deferred contributions on behalf of Mr. Khoury to our deferred compensation plan. Previously, we contributed an aggregate annual value equal to one times Mr. Khoury’s base salary. Effective February 1, 2017, Mr. Khoury voluntarily reduced the tax deferred contribution from us from one times his annual base salary to 30% of his annual base salary. Mr. Khoury is also eligible to participate in all benefit plans generally available to our executives and in all benefits pursuant to our travel policy.

General Provisions

In the event of a dispute between us and Mr. Khoury with respect to any breach of his employment agreement, the prevailing party will be entitled to recover from the non-prevailing party all reasonable costs incurred in connection with the dispute.

During the term of his employment agreement with us and for estimatinga period of two years thereafter, Mr. Khoury is subject to noncompetition and nonsolicitation obligations. In addition, Mr. Khoury is subject to a perpetual confidentiality covenant. Pursuant to his Transaction Bonus and Noncompetition Agreement, as described above, upon and subject to the excesscompletion of the Merger, Mr. Khoury will be subject to a three year post-employment noncompetition restriction.

Specific Termination and obsolete (“E&O”) inventory provisionChange of Control Provisions

In addition to the benefits described above, Mr. Khoury will be entitled to receive the following benefits and payments upon the occurrence of the following specified events.

If we terminate Mr. Khoury’s employment for any reason, upon Mr. Khoury’s death or incapacity, upon a “Change of Control” or if Mr. Khoury resigns for “Good Reason” (as defined in orderthe employment agreement), Mr. Khoury is entitled to remediate this weakness. Management believes(i) any accrued and unpaid salary and benefits through the enhancementstermination date, (ii) any earned but unpaid bonuses payable to Mr. Khoury for any fiscal periods ending prior to the termination date and (iii) a lump-sum amount equal to the sum of (A) a prorated portion of 175% of Mr. Khoury’s then current salary, with the prorated amount to be determined based on the number of days that Mr. Khoury was employed by us in the year during which it has developed remediated the weakness that existedtermination date occurs, (B) Mr. Khoury’s salary for the remainder of the employment term, (C) the retirement contributions based on amounts in effect at January 31, 2016.2017 that would have been made during the remainder of the employment term and (D) two times Mr. Khoury’s target bonus. In addition, any equity awards granted to Mr. Khoury that would not vest on or prior to the termination date will vest and be exercisable immediately, and, notwithstanding any termination of employment provisions set forth in the applicable agreement or related plan, all equity awards will continue to be exercisable until their original stated expiration date. In addition to the foregoing payments and benefits, Mr. Khoury would be entitled to a pro-rata portion of Mr. Khoury’s annual bonus for the fiscal year in which Mr. Khoury’s termination occurs in respect of the period of active service for such fiscal year, (i) based on actual results for such fiscal year, in the event that we terminate Mr. Khoury’s employment for any reason or if Mr. Khoury resigns for Good Reason, or (ii) based on the assumed performance achievement at the maximum performance pay out level applicable for such fiscal year under the annual bonus plan, in the event that Mr. Khoury’s employment terminates due to Mr. Khoury’s death or incapacity or a Change of Control. In addition to the foregoing payments and benefits, Mr. Khoury would be entitled to a pro-rata portion of Mr. Khoury’s annual bonus for the fiscal year in which Mr. Khoury’s termination occurs in respect of the period of active service for such fiscal year, (i) based on actual results for such fiscal year, in the event that we terminate Mr. Khoury’s employment for any reason or if Mr. Khoury resigns for Good Reason, or (ii) based on the assumed performance achievement at the maximum performance pay out level applicable for such fiscal year under the annual bonus plan, in the event that Mr. Khoury’s employment terminates due to Mr. Khoury’s death or incapacity or a Change of Control.

If Mr. Khoury’s employment terminates for any other reason, he will receive accrued and unpaid salary, benefits and bonuses through the termination date but will not be entitled to severance payments.

During 2016, the Committee determined the Company should provide Mr. Khoury’s estate with a $3.5 million death benefit (to be funded by a fully paid life insurance policy effective as of February 1, 2017) in recognition of his voluntary 70% reduction in annual SERP contributions.

Thomas P. McCaffrey.  Mr. McCaffrey is party to an employment agreement with us entered into on September 15, 2014 (effective as of the spin-off date) and amended and restated as of February 27, 2015, pursuant to which he serves as our President and Chief Operating Officer, or COO. The employment agreement has a three-year term with automatic extension by one year on each anniversary of the effective date of the agreement unless either party gives at least 30 days’ written notice. Mr. McCaffrey’s employment agreement provides that Mr. McCaffrey will receive a specified base salary, currently $703,005 per year, which may be increased in the discretion of our Board or the Committee. Mr. McCaffrey will have an annual target bonus of no less than 150% of his base salary. He will also receive an annual equity grant with a grant date value of no less than 325% of his base salary. In lieu of retirement benefits, we make tax deferred contributions on behalf of Mr. McCaffrey to our deferred compensation plan with an aggregate annual value of one times Mr. McCaffrey’s base salary. While

employed by us, Mr. McCaffrey will be eligible to participate in all benefit plans generally available to our executives and to receive an automobile allowance of $1,100 per month.

General Provisions

In the event of a dispute between us and Mr. McCaffrey with respect to any breach by Mr. McCaffrey of his employment agreement, the prevailing party will be entitled to recover from the non-prevailing party all reasonable costs incurred in connection with the dispute.

Pursuant to his Transaction Bonus and Noncompetition Agreement, as described above, upon and subject to the completion of the Merger, Mr. McCaffrey will be subject to a three year post-employment noncompetition restriction.

Specific Termination and Change of Control Provisions

In addition to the benefits described above, Mr. McCaffrey will be entitled to receive the following benefits and payments upon the occurrence of the following specified events. Upon Mr. McCaffrey’s death, incapacity, termination by us without “Cause,” resignation for “Good Reason” or upon a “Change of Control” (as defined in the employment agreement), Mr. McCaffrey will be entitled to (i) a lump-sum amount equal to the sum of (A) a prorated portion of 150% of Mr. McCaffrey’s then current salary, with the prorated amount to be determined based on the number of days that Mr. McCaffrey was employed by us in the year during which the termination date occurs, (B) Mr. McCaffrey’ salary for the remainder of the employment term, (C) the retirement contributions that would have been made during the remainder of the employment term, and (D) two times Mr. McCaffrey’s target bonus and (ii) a lump-sum amount equal to (A) any accrued and unpaid salary, automobile allowance, vacation time and benefits through the termination date and (B) any earned but unpaid bonuses payable to Mr. McCaffrey for any fiscal periods ending prior to the termination date. In addition, any equity awards granted to Mr. McCaffrey that would not vest on or prior to the termination date will vest and be exercisable immediately, and, notwithstanding any termination of employment provisions set forth in the applicable agreement or related plan, such equity awards will continue to be exercisable until their original stated expiration date.

If Mr. McCaffrey’s employment terminates for any other reason, he will not be entitled to severance payments.

Michael F. Senft.  Mr. Senft is party to an employment agreement with us dated September 30, 2014, (effective as of the spin-off date) and amended and restated as of February 27, 2015, pursuant to which he serves as Vice President, Chief Financial Officer, or CFO. The employment agreement has a three-year term with automatic extension by one year on each anniversary of the effective date of the agreement unless either party gives at least 30 days’ written notice.

Mr. Senft’s employment agreement provides that Mr. Senft will receive a specified base salary, currently $470,019 per year, which may be increased in the discretion of our Board or the Committee. Mr. Senft will have an annual target bonus of no less than 75% of his base salary. He will also receive an annual equity grant with a targeted grant date value of no less than 175% of his base salary. Beginning 90 days after the effective date of Mr. Senft’s employment agreement, we make tax deferred contributions on behalf of Mr. Senft to our deferred compensation plan with an aggregate annual value of one times Mr. Senft’s base salary. While employed by us, Mr. Senft will be eligible to participate in all benefit plans generally available to our executives and to receive an automobile allowance of $1,100 per month.

General Provisions

Mr. Senft is also party to a proprietary rights agreement with us, pursuant to which he is subject to a perpetual confidentiality covenant. He is also subject to a noncompetition covenant during the term of his employment agreement and a nonsolicitation covenant during the term of his employment agreement and for two years thereafter.

In the event of a dispute between us and Mr. Senft with respect to any breach by Mr. Senft of his employment agreement, the prevailing party will be entitled to recover from the non-prevailing party all reasonable costs incurred in connection with the dispute.

Pursuant to his Transaction Bonus and Noncompetition Agreement, as described above, upon and subject to the completion of the Merger, Mr. Senft will be subject to a three year post-employment noncompetition restriction.

Specific Termination and Change of Control Provisions

In addition to the benefits described above, Mr. Senft will be entitled to receive the following benefits and payments upon the occurrence of the following specified events.

Upon Mr. Senft’s death, incapacity, termination by us without “Cause,” resignation for “Good Reason” or upon a “Change of Control” (as defined in the employment agreement), Mr. Senft will be entitled to (i) a lump-sum amount equal to the sum of (A) a prorated portion of 75% of Mr. Senft’s then current salary, with the prorated amount to be determined based on the number of days that Mr. Senft was employed by the Company in the year during which the termination date occurs, (B) Mr. Senft’s salary for the remainder of the employment term, (C) the retirement contributions that would have been made during the remainder of the employment term and (D) two times Mr. Senft’s target bonus and (ii) a lump-sum amount equal to (A) any accrued and unpaid salary, automobile allowance, vacation time and benefits through the termination date and (B) any earned but unpaid bonuses payable to Mr. Senft for any fiscal periods ending prior to the termination date. In addition, any equity awards granted to Mr. Senft that would not vest on or prior to the termination date will vest and be exercisable immediately, and, notwithstanding any termination of employment provisions set forth in the applicable agreement or related plan, such equity awards will continue to be exercisable until their original stated expiration date.

If Mr. Senft’s employment terminates for other reason, he will not be entitled to severance payments.

John A. Cuomo.  Mr. Cuomo is party to an employment agreement with us dated February 26, 2015, and amended and restated as of December 22, 2015, and serves as our Vice President and General Manager, Aerospace Solutions Group. The employment agreement has a three-year term, with automatic annual renewals on each anniversary of the effective date unless the option not to renew is exercised by either party not less than 30 days prior to the anniversary date.

Mr. Cuomo’s employment agreement provides that he will receive a specified base salary, currently at $437,972, which may be increased at the discretion of our Board or Committee, an annual target bonus up to 75% of his salary, reimbursement of all reasonable business expenses, an automobile allowance of $1,100 per month and will be eligible to participate in all benefits plans made available to employees and executives generally and will be able to participate in our equity incentive plan.

Mr. Cuomo is also party to a proprietary rights agreement with us, pursuant to which he is subject to a perpetual confidentiality covenant. He is also subject to a noncompetition covenant and a nonsolicitation covenant during the term of his employment agreement and for two years thereafter.

Specific Termination and Change of Control Provisions

Upon Mr. Cuomo’s death, incapacity, termination without “Cause,” resignation for “Good Reason”, or a “Change of Control” (as defined in Mr. Cuomo’s employment agreement), Mr. Cuomo will be entitled to an amount equal to the sum of (i) a prorated portion of 75% of the Mr. Cuomo’s then current salary, with the prorated amount to be determined based on the number of days that Mr. Cuomo was employed by the Company in the year during which the termination date occurs, (ii) Mr. Cuomo’s salary for the remainder of the employment term, (iii) the maximum annual contribution under our deferred compensation plan of 7.5% of Mr. Cuomo’s total base salary and annual cash bonus (with such maximum amount to be determined in accordance with the terms of the applicable deferred compensation plan) that would have been made during the remainder of the employment period and (iv) two times Mr. Cuomo’s target bonus.

Roger M. Franks.  Mr. Franks is party to an employment agreement, dated October 7, 2014, (effective as of the spin-off date), amended and restated as of February 27, 2015, and further amended and restated as of December 22, 2015, pursuant to which he serves as our General Counsel and Vice President—Law and Human Resources. The employment agreement has a three-year term with automatic extension by one year on each anniversary of the effective date of the agreement unless either party gives at least 30 days’ written notice.

Mr. Franks’s employment agreement provides that Mr. Franks will receive a specified base salary, currently $405,927 per year, which may be increased in the discretion of the Committee. Mr. Franks will have an annual target bonus of no less than 75% of his base salary. He will also receive an annual equity grant with a targeted grant date value of 150% of his base salary. While employed by us, Mr. Franks is eligible to participate in all benefit plans generally available to our executives and to receive an automobile allowance of $1,100 per month.

Mr. Franks is also party to a proprietary rights agreement with us, pursuant to which he is subject to a perpetual confidentiality covenant. He is also subject to a noncompetition covenant during the term of his employment agreement, and a nonsolicitation covenant during the term of his employment agreement and for two years thereafter.

Pursuant to his Transaction Bonus and Noncompetition Agreement, as described above, upon and subject to the completion of the Merger, Mr. Franks will be subject to a three year post-employment noncompetition restriction.

Specific Termination and Change of Control Provisions

In addition to the compensation and benefits described above, Mr. Franks will be entitled to receive the following benefits and payments upon the occurrence of the following specified events.

Upon Mr. Franks’s death, incapacity, termination by us without “Cause,” resignation for “Good Reason” or upon a “Change of Control” (as defined in the employment agreement), Mr. Franks will be entitled to a lump-sum amount equal to the sum of (i) a prorated portion of 75% of Mr. Franks’s then current salary, with the prorated amount to be determined based on the number of days that Mr. Franks was employed by us in the year during which the termination date occurs, (ii) Mr. Franks’s salary for the remainder of the employment term, (iii) the maximum annual contribution under our deferred compensation plan of 7.5% of Mr. Franks’s total base salary and annual cash bonus (with such maximum amount to be determined in accordance with the terms of the applicable deferred compensation plan) that would have been made during the remainder of the employment period and (iv) two times Mr. Franks’s target bonus.

If Mr. Franks’s employment terminates for any other reason, he will not be entitled to severance payments.

Potential Payments upon a Termination or Change of Control

The following tables summarize the potential compensation that would have been payable to each of our NEOs as a result of a termination of the NEO’s employment or a Change of Control. The tables generally assume that the NEOs employment terminated on January 31, 2018 and, if applicable, that the Change of Control occurred on January 31, 2018. In addition, for purposes of the calculations, we assume that the fair market value of our common stock was $70.66, which was the closing price of our common stock as quoted on the NASDAQ Global Select Market on January 31, 2018.

The tables below do not include the value of any vested and non-forfeitable payments or other benefits that the NEOs would have been entitled to receive on January 31, 2018, regardless of whether a termination event occurred on such date (e.g., benefits the executive would have received even if he voluntarily resigned on the assumed date of the change of control), including the following:

·Defined Contribution Plans. Each of the NEO’s account balances under the 401(k) plan, including any Company contributions, were fully vested as of January 31, 2018.

·Vested Equity Awards. Once vested, restricted stock awards are not forfeitable. The number and fair market value of all shares of restricted stock that were vested as of January 31, 2018 are set forth above in the Outstanding Equity Awards at Fiscal Year-End table.

·Life Insurance. Each of the NEOs is entitled to receive Company paid group term life insurance of one times his base salary. This plan is applicable to all of our employees on a nondiscriminatory basis.

·Deferred Compensation Plan. Employee deferrals are vested upon contribution, and unless otherwise specified by the Compensation Committee, Company contributions vest in equal installments on January 15th of each of the three years succeeding the year in which the Company contribution is made. In the case of death, disability, termination without cause and a change of control, Company contributions will fully vest.

The amounts shown in the tables below represent summary estimates of the payments to be made upon each specified termination event as if the event occurred on January 31, 2018, based upon each NEO’s employment agreement in effect as of January 31, 2018 (exclusive of actual accrued cash bonuses as of this date and giving effect to new target bonuses as of February 1, 2018), and do not reflect any actual payments to be received by the NEOs. In addition, the tables below do not reflect the amounts that may become payable to the executives in connection with the pending Merger pursuant to the above-referenced Transaction Bonus and Noncompetition Agreements, or, in the case of Mr. Khoury, the settlement payment in respect of the cancellation of his post-termination consulting arrangement to which was agreed in connection with the pending Merger:

Amin J. Khoury