SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
the
Securities Exchange Act of 1934
| Meeting Date & Time: | | | Meeting Place: | | | Record Date: | |
| Wednesday May 1, 2019 8:00 a.m. Central Time | | | The Four Seasons Hotel Houston 1300 Lamar Street Houston, Texas 77010 | | | March 4, 2019 | |
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Dear Stockholder:
You are cordially invited to attend
The notice of meeting and proxy statement that follow this letter describe the business to be conducted at the 2014 Annual Meeting of Stockholders, including the election of three Class II directors.
Your vote is important. Whether or not you plan to attend the 2014 Annual Meeting of Stockholders, we strongly encourage you to provide your proxy by telephone, the Internet or on the enclosed proxy card at your earliest convenience.
Thank you for your cooperation and support.
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KEY ENERGY SERVICES, INC.
1301 McKinney Street
Suite 1800
Houston, Texas 77010
NOTICE OF 2014 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 15, 2014
To Our Stockholders:
We invite you to our 20142019 Annual Meeting of Stockholders, which we refer to as the Annual Meeting, of Key Energy Services, Inc., which we refer to as the Company, will be held at the Embassy SuitesFour Seasons Hotel Houston, Downtown, 1515 Dallas St.,1300 Lamar Street, Houston, Texas 77010, on Thursday,Wednesday, May 1, 2019 at 8:00 a.m. (Central Time). At the Annual Meeting, we will ask you to consider and take action on the following matters:
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five proposals:
Stockholders of record at the close of business on March 3, 2014, the record date for the 2014 Annual Meeting, are entitled to notice of, and to vote at, the meeting. Your vote is important regardless of the number of shares you own. Whether or not you expect to attend the meeting, we hope you will take the time to vote your shares. If you are a stockholder of record, you may vote over the Internet, by telephone or by completing and mailing the enclosed proxy card in the envelope provided. If your shares are held in “street name,” that is, held for your account by a broker or other nominee, you will receive instructions from the holder of record that you must follow for your shares to be voted.
Our stock transfer books will remain open for the purchase and sale of our common stock.
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Houston, Texas
March 17, 2014
This1, 2019: The Notice of Annual Meeting of stockholders, Proxy Statement along withand the Annual Report to security holders for the fiscal year ended December 31, 2013,Stockholders are available at http://www.viewproxy.com/keyenergy/2019.
and these proxy materials will be forwarded to you by that organization. As a beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote the shares held in their account, and the nominee has enclosed or provided voting instructions for you to use in directing it how to vote your shares. The nominee that holds your shares, however, is considered the stockholder of record for purposes of voting at the Annual Meeting. Because you are not the stockholder of record, you may not vote your shares in person at the Annual Meeting unless you bring to the Annual Meeting a letter from your broker, bank or other nominee confirming your beneficial ownership of the shares as of the Record Date. Whether or not you plan to attend the Annual Meeting, we urge you to vote by following the voting instructions provided to you to ensure that your vote is counted.
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KEY ENERGY SERVICES, INC.
1301 McKinney Street
Suite 1800
Houston, Texas 77010
Proxy Statement
To Be Held on May 15, 2014
Thisbroker non-votes and “abstain” votes, with respect to each proposal, is discussed below under “Required Votes.”
In this proxy statement, we referrevocation addressed to Key Energy Services, Inc. as “Key,” the “Company,” “we” and “us.”
We are sending you this proxy statement in connection with the solicitation of proxies by our Board of Directors (the “Board”) for use at the annual meeting.
We are mailing our 2013 Annual Report to Stockholders for the year ended December 31, 2013 with these proxy materials on or about March 17, 2014.
IMPORTANT INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
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Delivery of Documents to Security Holders Sharing an Address
Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of this proxy statement or
Annual Report to Stockholders may have been sent to multiple stockholders in your household, unless we have received contrary instructions. We will promptly deliver a separate copy of either document to you if you request it by writing to or calling us at the following address or telephone number:Counsel, 1301 McKinney Street, Suite 1800, Houston, Texas 77010, Attention: Investor Relations; (713) 651-4300. If you want to receive separate copies of this(2) duly executing a proxy statementbearing a later date, (3) voting again by Internet or by telephone or (4) attending the Annual Report to StockholdersMeeting and voting in person. Your last vote or proxy will be the future,vote or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker or other nominee record holder, or you may contact usproxy that is counted. Attendance at the above address and telephone number.
Stock OwnershipAnnual Meeting will not cause your previously granted proxy to be revoked unless you vote or specifically so request.
This section provides information about the beneficial ownership of our common stock by our directors and executive officers. The numberpersons holding a majority of shares of Common Stock outstanding on the Record Date will constitute a quorum, permitting us to conduct our common stock beneficially ownedbusiness at the Annual Meeting. On the Record Date, there were 20,374,477 shares of Common Stock held by each person is determined under91 stockholders of record. Abstentions (i.e., if you or your broker mark “abstain” on a proxy or voting instruction form, or if a stockholder of record attends the rulesAnnual Meeting but does not vote (either before or during the Annual Meeting)) and broker non-votes will be considered to be shares present at the meeting for purposes of establishing a quorum.
The address for each person identified below is care of Key Energy Services, Inc., 1301 McKinney Street, Suite 1800, Houston, Texas 77010.
Throughout this proxy statement, the individuals who served as our PrincipalNamed Executive Officer and Principal Financial Officer during fiscal year 2013, and each of our three other most highly compensated executive officers in fiscal year 2013, are referred to as the “Named Executive Officers” or “NEOs.”
Set forth below is certain information with respect to beneficial ownership of our common stock as of February 17, 2014 by each of our NEOs and each of our directors, as well as the directors and all executive officers asCompensation.
Name of Beneficial Owner | Number of Shares(1) | Percentage of Outstanding Shares(2) | ||||||
Richard J. Alario(3) | 1,909,175 | 1.24 | % | |||||
Lynn R. Coleman | 91,966 | * | ||||||
Kevin P. Collins | 110,390 | * | ||||||
William D. Fertig | 183,804 | * | ||||||
W. Phillip Marcum | 190,890 | * | ||||||
Ralph S. Michael, III(4) | 144,687 | * | ||||||
William F. Owens | 91,189 | * | ||||||
Robert K. Reeves | 92,670 | * | ||||||
Mark H. Rosenberg | 28,878 | |||||||
J. Robinson West | 82,497 | * | ||||||
Arlene M. Yocum | 91,966 | * | ||||||
Kim B. Clarke(5) | 416,966 | * | ||||||
J. Marshall Dodson(6) | 322,908 | |||||||
Kimberly R. Frye(7) | 358,886 | * | ||||||
T. M. Whichard III(8) | 455,489 | * | ||||||
Newton W. Wilson III(9) | 850,159 | * | ||||||
Current Directors and Executive Officers as a group (18 persons, including the persons listed above)(10) | 5,301,885 | 3.40 | % |
The following table sets forth, as of February 17, 2014, certain information regarding the beneficial ownership of common stock by each person, other than our directors or executive officers, who is known by us to own beneficially more than 5% of the outstanding shares of our common stock.
Shares Beneficially Owned | ||||||||
Name and Address of Beneficial Owner | Number | Percent | ||||||
MHR Fund Management LLC(1) | 17,484,343 | 11.5 | % | |||||
40 West 57th Street, 24th Floor | ||||||||
New York, NY 10019 | ||||||||
BlackRock, Inc.(2) | 8,607,985 | 5.7 | % | |||||
40 East 52nd Street | ||||||||
New York, NY 10022 |
Stock Ownership Guidelines
We believe that the ownership of our stock by our executive officers and directors aligns their interests with those of our stockholders. Accordingly, the Board adopted stock ownership guidelines in August 2011, as amended in August 2012, that require our Chief Executive Officer, or CEO, Board members, and executive officers who are direct reports to our CEO or Chief Operating Officer to own shares of common stock at least equal in value to the following multiples of base salary or annual retainer (as applicable) by the later of December 31, 2016 or at the end of five years of continuous service:
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For purposes of calculating share ownership levels required by these guidelines, we include both vested and unvested restricted stock and restricted stock units, but we do not include unexercised stock options, cash-based performance units , SARs, or jointly-held stock. Stock ownership levels are calculated at year-end using the 12-month volume weighted average pricenon-binding advisory basis, of the Company’s common stock.
Named Executive Officer compensation for the fiscal year ended December 31, 2018 requires the affirmative vote of the holders of at least a majority of the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote. Broker non-votes are not taken into account in determining the outcome of this proposal, and abstentions will have the effect of a vote against this proposal. This advisory vote on executive compensation is not
The current Class II directors are William D. Fertig, Robert K. Reeves, Mark H. Rosenberg and J. Robinson West. Each of Mr. Fertig, Mr. Reeves and Mr. Rosenberg has been nominated by the Board pursuant to the recommendation of the Corporate Governance and Nominating (“CGN”) Committee to be elected by the holders of our common stock to serve a three-year term as a Class II director. Mr. West has elected not to standCompany. Biographical information for re-election and his term will expire at the annual meeting. If you execute and return the enclosed proxy card, the proxies named therein will vote to elect as Class II directors William D. Fertig, Robert K. Reeves and Mark H. Rosenberg, unless you indicate on your proxy card that your shares should be voted against one or more of the nominees or to abstain from votingeach director nominee is contained in the election“Directors and Executive Officers” section below.
Each of the nominees has indicated his or her willingnessunwilling to serve if elected. However, if anyIf a director nominee shouldbecomes unable or unwilling to accept nomination or election, either the number of the Company’s directors will be unable to serve,reduced or the sharespersons acting under the proxy will vote for the election of common stock represented by proxies may be voted for a substitute nominee designated bythat the Board.
There are no family relationships between or among anyBoard of Directors recommends.
Director nominees are elected by a relative majority voteCompany’s director resignation policy, in uncontested director elections. Under this voting standard, in order to be elected in an uncontestedany non-contested election our bylaws require that a directorof directors, any incumbent nominee must receive more votes cast “for” such nominee’s election than “against” his or her re-election in order to be re-elected to the Board. The Board requires that a director tender his or her resignation if he or she fails to receive the required number of votes cast “against” such nominee’s election. Under our Corporate Governance Guidelines, as a condition to being nominated, each incumbent director is required to submit an irrevocable letter of resignation that will become effective if stockholders do not re-elect the director and the Board determines to accept the resignation.for re-election. If an incumbent director is not re-elected in an uncontested election, our CGNfails to receive the required vote for re-election, the Nominating and Governance Committee will recommendact on an expedited basis to determine whether to accept the director’s resignation and will submit its recommendation for prompt consideration by the Board. The Nominating and Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept a director’s resignation.
Name | | | Age | | | Title | |
Robert J. Saltiel | | | 56 | | | President, Chief Executive Officer and Director | |
J. Marshall Dodson | | | 47 | | | Senior Vice President, Chief Financial Officer and Treasurer | |
Scott P. Miller | | | 40 | | | Senior Vice President, Operational Services and Chief Administrative Officer | |
Katherine I. Hargis | | | 47 | | | Senior Vice President, General Counsel and Corporate Secretary | |
Louis Coale | | | 52 | | | Vice President and Controller | |
Phil Norment(2) | | | 59 | | | Chairman of the Board and Soter Director | |
Jacob Kotzubei(2)(3) | | | 50 | | | Soter Director | |
Bryan Kelln(2)(3) | | | 53 | | | Soter Director and Chair of the Compensation Committee | |
Mary Ann Sigler(3) | | | 64 | | | Soter Director and Chair of the Nominating and Governance Committee | |
Steve Pruett(1) | | | 57 | | | Lead Director and Independent Director | |
Sherman Edmiston(1) | | | 56 | | | Independent Director | |
Scott Vogel(2)(3) | | | 43 | | | Independent Director | |
Tripp Wommack(1)(2)(3) | | | 63 | | | Independent Soter Director and Chair of the Audit Committee | |
be a “Controlled Company” for purposes of the New York Stock Exchange (“NYSE”) Rule 303A.
publicly held companies of which he or she currently serves as a director or has served as a director during the past five years. In additionAssuming the Company’s stockholders elect the director nominees of the Board set forth in “Proposal One: Election of Directors” above, Steve Pruett, Sherman Edmiston, Scott Vogel and Robert J. Saltiel will continue as directors of the Company until their re-election, resignation or removal. Soter has separately nominated and will elect H.H. “Tripp” Wommack, III, Phil Norment, Jacob Kotzubei, Bryan Kelln and Mary Ann Sigler to continue as Soter Directors until their resignation or removal in accordance with our certificate of incorporation and bylaws.
Nominees for Term Expiring in 2014 (Class II Directors)
William D. Fertigwill hold two votes on matters presented to the Board after the Annual Meeting.
RobertTrustees of Spindletop Charities.
Mark H. Rosenberg2002.
Continuing Directors
Biographical and other information with respect to all members of the Board of Directors whose current terms will continue after the annual meeting is set forth below:
Directors Whose Term Expires in 2015 (Class III Directors)
Richard J. Alario, age 59, has been a member of the Board since May 2004. Mr. Alario joined Key as President2017 and Chief Operating Officer effective January 1, 2004. On May 1, 2004, he was promoted to Chief Executive OfficerVice President and appointed to the Board. He was elected ChairmanController of the BoardCompany on August 25, 2004.October 3, 2018. Prior
to joining Key, Mr. Alario was employed by BJ Services Company, an oilfield services company, where heCoale most recently served as Vice Presidentthe Managing Principal at Coale’s Consulting from June 2016 to May 2002 after OSCA, Inc. was acquired by BJ Services.2018. Coale’s Consulting provides Business, IT and Financial consulting to various industries. Prior to joining BJ Services,his time at Coale’s Consulting, Mr. Alario had over 21 years of service in various capacities with OSCA, an oilfield services company, most recently havingCoale served as its Executive Vice President. He currently serves as chairman, director and executive committee member of the National Ocean Industries Association. He is also a director of Kirby Corporation and serves on its Audit Committee. He is a member of the Louisiana State University Forever LSU Foundation, a member of the Petroleum Equipment Suppliers Association, and a member of the American Association of Drilling Engineers. Mr. Alario was also a director of Seahawk Drilling, Inc., serving as Chair of its Compensation Committee and as a member of its Corporate Governance Committee from August 2009 until February 2011. Mr. Alario holds a BA from Louisiana State University. We believe Mr. Alario’s qualifications to serve on our Board include his extensive experience of over 30 years in the oilfield services business, including his service as Key’s President and Chief Executive Officer.
Ralph S. Michael, III, age 59, has been a member of the Board since March 2003. He has served as President and Chief Executive Officer of Fifth Third Bank, Cincinnati Region, since December 2010. Mr. Michael was President and Chief Operating Officer of the Ohio Casualty Insurance Company from July 2005 until its sale in August 2007. From 2004 through July 2005, Mr. Michael served as Executive Vice President and ManagerCFO at Baker Hughes (Baker Oil Tools Divestiture) from 2015 to May 2016, Vice President of West the Finance, Planning and Analysis—Commercial Banking for U.S. Bank, National Association and then as ExecutiveAnalytics Modeling Dept. from 2014 to 2015, Vice President and ManagerCFO of Private Asset Management for U.S. Bank. He also served as President of U.S. Bank Oregonthe Global Products & Technology Dept. from 2013 to 2014, Vice President/Transformation Leader (Baker Hughes Finance) from 2009 to 2013, Vice President/Division CFO (Drilling Fluids) from 2007 to 2009, WW Controller (Baker Oil Tools—Completions) from 2005 to 2007 and WW Controller, Wireline Service from 2003 to 2005. From 2001 to 2002, he served as Executive Vice President and Group Executive of PNC Financial Services Group, with responsibility for PNC Advisors, PNC Capital Markets and PNC Leasing. He is a director of AK Steel Corporation, Arlington Asset Investment Corporation, Cincinnati Bengals, Inc., CSAA Insurance Group and Xavier University. Previously, he served as a director for Integrated Alarm Services Group, Inc. from 2003 to 2007, for Ohio Casualty Corporation from 2002 to 2005 and FBR & Co. from 2010 until 2013. He holds a BA from Stanford University and an MBA from the Graduate School of Management of the University of California Los Angeles. We believe Mr. Michael’s qualifications to serve on our Board include the broad business and finance background obtained through his more than 30 years experience working in financial services, much of which has been in executive management positions, as well as his extensive experience as a corporate board member, including his service on our and other companies’ audit committees, all of which led to his designation as an “audit committee financial expert.”
Arlene M. Yocum, age 56, has been a member of the Board since October 2007. Ms. Yocum has been Executive Vice President, Managing Executive of Client Sales and Service for PNC’s Asset Management Group since 2003. Prior to that, she served as an Executive Vice President of PNC’s Institutional Investment Group from 2000 to 2003. Ms. Yocum was a director of Protection One, Inc until 2010. She holds a BA from Dickinson College and a JD from Villanova School of Law. We believe Ms. Yocum’s qualifications to serve on our Board include her extensive business experience, including her investment and finance expertise and her designation as an “audit committee financial expert,” as well as her knowledge of legal matters by virtue of her training as an attorney.
Directors Whose Term Expires in 2016 (Class I Directors)
Lynn R. Coleman, age 74, has been a member of the Board since October 2007. As a partner in the firm of Skadden, Arps, Slate, Meagher and Flom LLP, Mr. Coleman founded and led the firm’s energy practice for 20 years. He retired from the Skadden partnership in 2007. Prior to joining Skadden, Mr. ColemanCoale also served as the General Counsel of the U.S. Department of Energy and later as Deputy Secretary. From March 2008 through April 2010, Mr. Coleman served on the Supervisory Board of Lyondell Basell Industries, a large chemical company with operations in the U.S. and abroad. In May 2008, he also was appointedExpat Finance Lead (Wireline Services: Asia-Pacific from 2001 to the board of directors (non-executive Chair) of Total Holdings USA, Inc., a U.S. subsidiary of a large international oil company. In June 2010, Mr. Coleman was appointed to the board of directors of Defense Group Inc., a privately-owned corporation involved in defense and national security contracts, headquartered in Vienna, Virginia. In December 2012, Mr. Coleman was appointed to the board of directors of Standard Solar, Inc., a privately held corporation involved in development and installation of solar systems at the residential, commercial and municipal level. In
2007 and 2008, he was a lecturer at the University of Virginia School of Law, offering a seminar on energy and environmental law. He has also been appointed adjunct professor at the University of Texas School of Law offering a similar seminar. He holds an LLB degree from the University of Texas and a BA from Abilene Christian College. We believe Mr. Coleman’s qualifications to serve on our Board include his extensive experience practicing law in the energy industry, including his 20 years as a senior partner and leader of the energy practice at a prominent global law firm. He has wide ranging experience with energy transactions, litigation, government policy and regulation, in the U.S. and other countries. He has also served as managing partner and in similar management positions over other large groups of attorneys. His responsibilities in this capacity included decisions concerning strategic planning, hiring, partnership advancement, attorney evaluations, direction of work of other attorneys and management of client relationships.
Kevin P. Collins, age 63, has been a member of the Board since March 1996. He has been Managing Member of The Old Hill Company LLC since 1997, a company he founded that provides corporate finance and management consulting services. From 1979 until 1992, he worked for various financial institutions; from 1992 to 1997, he served as a principal of JHP Enterprises, Ltd.; and from 1985 to 1992, as Senior Vice President of DG Investment Bank, Ltd., both of which were engaged in providing corporate finance and advisory services. Mr. Collins was a director of WellTech, Inc. from January 1994 until March 1996, when WellTech was merged into Key. From 2000 until 2010, Mr. Collins served as a director of the Penn Traffic Company. Mr. Collins was also a director of Applied Natural Gas Fuels, Inc. from November 2008 until October 2012. Mr. Collins was also a director of Antioch LLC from January 2009 until November 2013. Mr. Collins is also a director of PowerSecure International, Inc. He holds BS and MBA degrees from the University of Minnesota. Mr. Collins is a CFA Charterholder. We believe Mr. Collins’ qualifications to serve on our Board include his extensive knowledge of Key and our industry, his analytical business background, his experience working on strategic transactions, as well as his lending and advisory experience with large financial institutions and his extensive experience serving on boards of directors, including his service on our and other companies’ audit committees.
W. Phillip Marcum, age 70, has been a member of the Board since March 1996. He was a director of WellTech, Inc. from January 1994 until March 1996, when WellTech was merged into Key. From October 1995 until March 1996, Mr. Marcum was the non-executive Chairman of the Board of WellTech. Previously, from January 1991 until April 2007, when he retired, he was Chairman of the Board, President and Chief Executive Officer of PowerSecure International, Inc. (formerly known as Metretek Technologies, Inc., and prior to that, known as Marcum Natural Gas Services, Inc.). Mr. Marcum also serves as Chairman of the Board of Advanced Emissions Solutions, Inc. (formerly known as ADA-ES), a Colorado based company. From July 2007 until September 2013, Mr. Marcum served as Chairman of the Board of Applied Natural Gas Fuels, Inc. (formerly PNG Ventures, Inc.), a West Lake Village, California based company. Mr. Marcum is Chairman of the Board and Chief Executive Officer of Lilis Energy, Inc. (formerly Recovery Energy, Inc.), a Denver, Colorado based exploration and production company. He holds a BBA from Texas Tech University. We believe Mr. Marcum’s qualifications to serve on our Board include his experience serving on other public companies’ boards of directors and his extensive business knowledge working with other public companies in the energy industry, including his founding and running of Marcum Natural Gas Services, Inc., which has since grown into a public company known as PowerSecure International, Inc.
William F. Owens, age 63, has been a member of the Board since January 2007. He served as Governor of Colorado2003, Argentina/Bolivia/Brazil from 1999 to 2007, as Colorado State Treasurer2001 and Venezuela from 19951996 to 1999,1998.
Senior Fellow at the University of Denver’s Institute for Public Policy Studies. We believe Mr. Owens’ qualifications to serve on our Board include his wide-ranging background and experience in business, public policy, management and energy.
The Board of Directors believes that approval of the election of William D. Fertig, Robert K. Reeves and Mark H. Rosenberg to serve as Class II directors is in the best interestsany director, executive officer, promoter or control person of the Company and of our stockholders and therefore recommends a vote FOR each ofduring the nominees.
past ten years.
We operate under a leadership structure in which our CEO also serves as Chairman of the Board.
As described further below under “Board Committees,” we have five standing committees—the Audit Committee, the Compensation Committee, the Equity Award Committee, the CGN Committee and the Executive Committee. Other than the Executive Committee and the Equity Award Committee, on which Mr. Alario serves, each The Chairman presides at all meetings of the Board, committees consists solelyas well as executive sessions of non-employee directors and, in consultation with the CEO, non-employee directors and management, establishes the agenda for each Board meeting. In the event that the non-management directors include directors who are not independent under the listing requirements of the NYSE, as is currently the case, our Corporate Governance Guidelines provide that at least once a year, there shall be an executive session including only independent directors and each committee has a separate chair.
We believe that we are well-servedthe director who presides at these meetings (the “Lead Director”) shall be chosen by this leadership structure, which is a configuration commonly utilized by other public companies in the United States. We have a single leader for Key who setsBoard based on the tone and has primary responsibility for our operations. We believe this structure provides clear leadership, not only for Key, but for our Board. General oversightrecommendation of the business operations is provided by experienced independent directorsNGC. The Board has appointed Mr. Pruett as Lead Director. The Board has also delegated certain matters to its certain committees. Mr. Saltiel, as the Company’s President, CEO and Director, works in concert with an independent Lead Director and separate committee chairs. We believe that having a combined Chairman / CEO, independent chairs for eachthe rest of our Board committees (other thanto oversee the Equity Award Committeeexecution of the Company’s strategy.
Nevertheless, our Board believes that no single organizational model will provide the most effective leadership structure in all circumstances. Accordingly, the Board may periodically consider whether the offices of CEO and Chairman should continue to be combined and who should serve in such capacities, and it retains the authority to separate the positions of CEO and Chairman if it deems appropriate in the future.
In considering whether to recommend a particular candidate for inclusion in the Board’s slate of recommended director nominees, our CGN Committee applies the criteria set forth in the guidelines contained in the Selection Process for New Director Candidates, whichdirectorship are available in the “Governance” section of our website,www.keyenergy.com. These criteria include the candidate’s integrity, business acumen, a commitment to understand our business and industry, experience, conflicts of interest and ability to act in the interests of all stockholders. The CGN Committee does not assign specific weights to particular criteria, and no particular criterion is a prerequisite for each prospective nominee. Any director nominee madeselected by the CGN Committee must be highly qualifiedNGC in accordance with respect to some or allthe policies and principles of these criteria.
Ourits charter. Although there is no formal diversity policy, our Board believes that the backgrounds and qualifications of its directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow it to fulfill its responsibilities. Although therePursuant to its charter, the NGC is no formal diversity policy, the Selection Process for New Director Candidates tasks the CGN Committeetasked with recommending director candidates who will assist in achieving this mix of Board members having diverse professional backgrounds and a broad spectrum of knowledge, experience and capability. At least once a year, the CGN Committee reviewsNGC will review the size and structure of the Board and its committees, including recommendations on Board committee structure and responsibilities.
Any stockholder entitled to vote for the election of directors may propose candidates for consideration for nomination for election to the Board. The CGN Committee will evaluate candidates proposed by stockholders in compliance with the guidelines contained in the Selection Process for New Director Candidates in the same manner as other candidates. If the Board determines to nominate a stockholder-recommended candidate and recommends his or her election, then the candidate’s name will be included on our proxy card for the next annual
meeting. Stockholders also have the right under our bylaws to directly nominate director candidates, without any action or recommendation on the part of the CGN Committee or the Board, by following the procedures set forth under the heading “Stockholder Proposals for the 2015 Annual Meeting” below. Candidates nominated by stockholders in accordance with procedures set forth in our bylaws will not be included on our proxy card for the next annual meeting.
The
Director Attendance at Annual Meeting of Stockholders
Our Corporate Governance Guidelines provide that directors are expected to attenda committee member in 2018. The Company expects the annual meeting of stockholders. All of our directors attended the 2013 annual meeting, and we expect substantially all of our directors to attend annual meetings of stockholders. Pursuant to the 2014 annual meeting.
Company’s certificate of incorporation and bylaws, as amended, adopted on the Effective Date, the current Board will serve for the Initial Board Term, which commenced on the Effective Date and will conclude upon the election of directors at the Annual Meeting.
The Compensation Committee also has a subcommittee for purposes of Section 16 of the Exchange Act. The subcommittee consists of two directors who both qualify as independent for NYSE purposes. The subcommittee of the Compensation Committee does not have a charter.
The responsibilities of the Audit Committee include the following:
The current members of our Audit Committee are Ms. Yocum and Messrs. Collins, Michael and Owens. Ms. Yocum is the chair of the Audit Committee.Act. All members of the Audit Committee meet the financial literacy standard required by the NYSE rules and at least one member qualifieseach qualify as having accounting or related financial management expertise under the NYSE rules. In addition, as required by theSarbanes-Oxley Act of 2002, the SEC adopted rules requiring that each public company disclose whether or not its audit committee has an “audit committee financial expert” as a member. An “audit committee financial expert” is defined as a person who, based on his or her experience, satisfies all of the following attributes:
The Audit Committee held twelve meetings in 2013.five (5) meetings. In addition, members of the Audit Committee speak regularly with our independent registered public accounting firm and separately with the members of management to discuss any matters that the Audit Committee or these individuals believe should be discussed, including any significant issues or disagreements concerning our accounting practices or financial statements. For further information, see “Report of the Audit Committee” below.
any legal, accounting or other experts retained by the Audit Committee and for the payment of the Audit Committee’s ordinary administrative expenses necessary and appropriate for carrying out the duties of the Audit Committee.
The current members of the Compensation Committee are Messrs. Reeves, Fertig, Marcum and West, all of whom are independent, non-employee members of the Board. Mr. Reeves is the chair of the Compensation Committee. No Compensation Committee member participates in any of our employee compensation programs
other than the Key Energy Services, Inc. 2009 Equity and Cash Incentive Plan and the Key Energy Services, Inc. 2012 Equity and Cash Incentive Plan, and if approved, the Key Energy Services, Inc. 2014 Equity and Cash Incentive Plan, and prior grants under the Key Energy Services, Inc. 2007 Equity and Cash Incentive Plan and the Key Energy Group, Inc. 1997 Incentive Plan. The Compensation Committee held six meetings in 2013. Mr. West is not standing for re-election to the Board and will not be a member of the Compensation Committee after the date of the annual meeting.
Mr. Alario is
Corporate Governance and Nominating Committee
The responsibilities of the CGN Committee include the following:
The CGN CommitteeNGC has the authority and funding to retain counsel and other experts or consultants, including the sole authority to select, retain and terminate any search firm to be used to identify director candidates and to approve the search firm’s fees and other retention terms.
The Executive Committee’s membership consists of the CEO and Chairman of the Board, the Lead Director and the chair of each of the Audit Committee, Compensation Committee and CGN Committee. The Executive Committee only acts in place of the Board in situations where it may be impracticable to assemble the full Board to consider a matter on a timely basis. Any action by the Executive Committee will be promptly reported to the full Board. Currently, Messrs. Alario, Fertig, Michael and Reeves and Ms. Yocum serve on the Executive Committee. The Executive Committee held one meeting in 2013.
Name | | | Title | |
Robert Saltiel | | | President, Chief Executive Officer and Director(1) | |
J. Marshall Dodson | | | Senior Vice President, Chief Financial Officer and Treasurer(2) | |
Scott P. Miller | | | Senior Vice President, Operations Services and Chief Administrative Officer | |
Katherine I. Hargis | | | Senior Vice President, General Counsel and Secretary | |
Louis Coale | | | Vice President and Controller(3) | |
Robert Drummond | | | Former President, Chief Executive Officer and Director(4) | |
David Brunnert | | | Former Senior Vice President and Chief Operations Officer(5) | |
granted time-based cash retention awards (each, a “Retention Bonus”) to Messrs. Dodson, Brunnert and Miller and Ms. Hargis in the following amounts: $637,500, $400,000, $310,000 and $310,000, respectively. Twenty-five percent of the Retention Bonus will vest on July 1, 2019 and the remaining 75% will vest on July 1, 2020. In the event of a voluntary termination prior to vesting, any unvested portion of the Retention Bonus will be forfeited and in the event the Company terminates the executive’s employment without Cause (as defined in the 2016 Equity and Cash Incentive Plan (the “2016 ECIP”)), any unvested portion of the Retention Bonus will vest in full. Mr. Brunnert’s employment with the Company was terminated without Cause on September 12, 2018 and his Retention Bonus of $400,000 vested in full.
| What we do | | | What we don’t do | |
| ✓ Grant short and long-term incentive awards that are performance-based or “at-risk” | | | X No single-trigger change of control vesting | |
| ✓ Equity awards for executive officers subject to three-year vesting periods | | | X No excessive perquisites | |
| ✓ Policy prohibiting hedging and pledging transactions and short sales by executives | | | X No payment of dividends on unvested restricted stock units | |
| ✓ Compensation Committee engages an Independent Compensation Consultant | | | X No gross-ups for severance or change of control payments | |
| ✓ Stock ownership guidelines for non-employee directors and executives | | | ||
| ✓ Annual compensation risk assessment | | | ||
| ✓ All incentive-compensation is subject to a clawback policy | | |
| Basic Energy Services, Inc. | | | Patterson-UTI Energy, Inc. | |
| C & J Energy Services, Inc. | | | Pioneer Energy Services Corp. | |
| Exterran Corporation | | | RPC, Inc. | |
| Helix Energy Solutions Group, Inc. | | | Superior Energy Services, Inc. | |
| Oceaneering International, Inc. | | |
| Basic Energy Services, Inc. | | | Mammoth Energy Services, Inc. | |
| Forbes Energy Services, Inc. | | | Pioneer Energy Services, Corp. | |
| C&J Energy Services, Inc. | | | Nuverra Environmental Solutions, Inc. | |
| Newpark Resources, Inc. | | | NCS Multistage Holdings, Inc. | |
| Quintana Energy Services, Inc. | | | TETRA Technologies, Inc. | |
| Superior Energy Services, Inc. | | | Select Energy Services, Inc. | |
| Ranger Energy Services, Inc. | | | Nine Energy Services, Inc. | |
Name | | | 2018 Base Salaries(2) | | | 2017 Base Salaries | | ||||||
Robert Drummond | | | | $ | 750,000 | | | | | $ | 750,000 | | |
Robert J. Saltiel(1) | | | | $ | 750,000 | | | | | | N/A | | |
J. Marshall Dodson | | | | $ | 425,000 | | | | | $ | 375,000 | | |
David Brunnert | | | | $ | 400,000 | | | | | $ | 350,000 | | |
Katherine I. Hargis | | | | $ | 310,000 | | | | | $ | 300,000 | | |
Scott P. Miller | | | | $ | 310,000 | | | | | $ | 275,000 | | |
Louis Coale(3) | | | | $ | 240,000 | | | | | | N/A | | |
Level | | | Threshold | | | Target | | | Maximum | | | 2018 Achievement | |
Adj. EBITDA | | | $20.5 million | | | $41.0 million | | | $57.4 million | | | $22 million | |
Potential Payout | | | 50% of target | | | 100% of target | | | 140% of target | | | 43% of target | |
Metric | | | Weighting | | | Percent Earned | | | Weighted Payout | |
Adj. EBITDA | | | 80% at target | | | 54% of target goal | | | 43% of target | |
Safety | | | 10% at target | | | 0% of target goal | | | 0% of target | |
Free Cash Flow | | | 10% at target | | | 100% of target goal | | | 10% of target | |
Total Payout | | | | | | | | | 52.6% of target | |
Name | | | Base Salary as of 12/31/18 ($) | | | | | | Target Bonus as % of Base Salary | | | | | | Percentage of Payout | | | | | | Actual 2018 Bonus Award | |
Robert J. Saltiel(1) | | | $750,000 | | | X | | | 100% | | | X | | | N/A | | | = | | | $273,288 | |
J. Marshall Dodson | | | $425,000 | | | X | | | 80% | | | X | | | 52.6% | | | = | | | $178,989 | |
Scott P. Miller | | | $310,000 | | | X | | | 80% | | | X | | | 52.6% | | | = | | | $130,557 | |
Katherine I. Hargis | | | $310,000 | | | X | | | 80% | | | X | | | 52.6% | | | = | | | $130,557 | |
Louis Coale | | | $240,000 | | | X | | | 50% | | | X | | | 52.6% | | | = | | | $60,170(2) | |
Robert Drummond | | | N/A | | | X | | | 125% | | | X | | | N/A | | | = | | | $0 | |
David Brunnert | | | N/A | | | X | | | 80% | | | X | | | N/A | | | = | | | $0 | |
Title | | | Ownership Guidelines | |
Chief Executive Officer | | | Six times annual base salary | |
Direct Reports of the Chief Executive Officer | | | Three times annual base salary | |
Non-executive Board Member | | | Three times annual cash retainer | |
Name | | | Grant Date | | | Target LTI Values $ | | | 2019 LTI Equity Grant (# of RSUs) | | | 2019 LTI Share Value Feb 4, 2019 Close of $2.19 | | | 2019 LTI Cash Award | | | 2019 Grant Date LTI Total Value | | ||||||||||||||||||
Robert J. Saltiel | | | | | 2/4/2019 | | | | | $ | 3,500,000 | | | | | | 600,000 | | | | | $ | 1,314,000 | | | | | $ | 1,000,000 | | | | | $ | 2,314,000 | | |
J. Marshall Dodson | | | | | 2/4/2019 | | | | | $ | 1,000,000 | | | | | | 141,667 | | | | | $ | 310,251 | | | | | $ | 150,000 | | | | | $ | 460,251 | | |
Scott P. Miller | | | | | 2/4/2019 | | | | | $ | 500,000 | | | | | | 58,333 | | | | | $ | 127,749 | | | | | $ | 150,000 | | | | | $ | 277,749 | | |
Katherine I. Hargis | | | | | 2/4/2019 | | | | | $ | 500,000 | | | | | | 58,333 | | | | | $ | 127,749 | | | | | $ | 150,000 | | | | | $ | 277,749 | | |
Louis Coale | | | | | 2/4/2019 | | | | | $ | 250,000 | | | | | | 29,167 | | | | | $ | 63,876 | | | | | $ | 75,000 | | | | | $ | 138,876 | | |
Name and Principal Position | | | Year | | | Salary ($) | | | Bonus ($)(1) | | | Stock Awards ($)(2) | | | Option Awards ($)(2) | | | Non-equity Incentive Plan Compensation ($)(3) | | | All Other Compensation ($)(4) | | | Total | | ||||||||||||||||||||||||
Robert J. Saltiel Chief Executive Officer | | | | | 2018 | | | | | $ | 259,615 | | | | | $ | 273,288 | | | | | $ | 3,255,008 | | | | | $ | ___ | | | | | $ | ___ | | | | | $ | 484 | | | | | $ | 3,788,395 | | |
J. Marshall Dodson Chief Financial Officer | | | | | 2018 | | | | | $ | 399,039 | | | | | $ | ___ | | | | | $ | ___ | | | | | $ | ___ | | | | | $ | 178,989 | | | | | $ | 18,603 | | | | | $ | 596,631 | | |
| | | 2017 | | | | | $ | 375,000 | | | | | $ | 283,333 | | | | | $ | 1,808,886 | | | | | $ | ___ | | | | | $ | 165,262 | | | | | $ | 13,420 | | | | | $ | 2,645,901 | | | ||
| | | 2016 | | | | | $ | 359,351 | | | | | $ | 141,667 | | | | | $ | 3,464,858 | | | | | $ | 1,074,313 | | | | | $ | 202,350 | | | | | $ | 11,002 | | | | | $ | 5,253,541 | | | ||
Scott P. Miller Chief Administrative Officer | | | | | 2018 | | | | | $ | 291,827 | | | | | $ | ___ | | | | | $ | ___ | | | | | $ | ___ | | | | | $ | 130,557 | | | | | $ | 1,191 | | | | | $ | 423,575 | | |
| | | 2017 | | | | | $ | 275,000 | | | | | $ | 100.000 | | | | | $ | 840,260 | | | | | $ | ___ | | | | | $ | 121,192 | | | | | $ | 486 | | | | | $ | 1,336,938 | | | ||
| | | 2016 | | | | | $ | 266,233 | | | | | $ | 50.000 | | | | | $ | 1,587,870 | | | | | $ | 499,038 | | | | | $ | 148,390 | | | | | $ | 486 | | | | | $ | 2,552,017 | | | ||
Katherine I. Hargis General Counsel | | | | | 2018 | | | | | $ | 304,808 | | | | | $ | ___ | | | | | $ | ___ | | | | | $ | ___ | | | | | $ | 130,557 | | | | | $ | 1,341 | | | | | $ | 436,706 | | |
| | | 2017 | | | | | $ | 276,442 | | | | | $ | 80,000 | | | | | $ | 1,070,661 | | | | | $ | 109,002 | | | | | $ | 132,210 | | | | | $ | 594 | | | | | $ | 1,668,909 | | | ||
| | | 2016 | | | | | $ | 266,437 | | | | | $ | 40,000 | | | | | $ | 537,878 | | | | | $ | 166,332 | | | | | $ | 115,493 | | | | | $ | 594 | | | | | $ | 1,126,734 | | | ||
Louis Coale Vice President & Controller | | | | | 2018 | | | | | $ | 144,077 | | | | | $ | ___ | | | | | $ | 324,800 | | | | | $ | ___ | | | | | $ | 60,170 | | | | | $ | 644 | | | | | $ | 529,521 | | |
Separated During 2018 | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||
Robert Drummond Former Chief Executive Officer | | | | | 2018 | | | | | $ | 346,154 | | | | | $ | 750,000 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 14,510 | | | | | $ | 1,110,664 | | |
| | | 2017 | | | | | $ | 750,000 | | | | | $ | 766,000 | | | | | $ | 3,561,059 | | | | | $ | — | | | | | $ | 505,795 | | | | | $ | 6,916 | | | | | $ | 5,589,770 | | | ||
| | | 2016 | | | | | $ | 683,654 | | | | | $ | 1,000,000 | | | | | $ | 6,804,358 | | | | | $ | 2,114,929 | | | | | $ | 632,419 | | | | | $ | 15,299 | | | | | $ | 11,250,659 | | | ||
David Brunnert Former Chief Operating Officer | | | | | 2018 | | | | | $ | 280,192 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 801,179 | | | | | $ | 1,081,371 | | |
| | | 2017 | | | | | $ | 350,000 | | | | | $ | — | | | | | $ | 1,418,400 | | | | | $ | — | | | | | $ | 154,244 | | | | | $ | 624 | | | | | $ | 1,923,268 | | | ||
| | | 2016 | | | | | $ | 24,231 | | | | | $ | — | | | | | $ | 2,021,384 | | | | | $ | 665,370 | | | | | $ | — | | | | | $ | — | | | | | $ | 2,710,985 | | |
Name | | | Insurance(a) | | | Medical Expenses(b) | | | Other(c) | | | Severance(d) | | | Total | | |||||||||||||||
Robert J. Saltiel | | | | $ | 306 | | | | | | — | | | | | $ | 179 | | | | | | — | | | | | $ | 484 | | |
Robert Drummond | | | | $ | 471 | | | | | $ | 13,265 | | | | | $ | 774 | | | | | | — | | | | | $ | 14,510 | | |
J. Marshall Dodson | | | | $ | 1,224 | | | | | $ | 17,109 | | | | | $ | 270 | | | | | | — | | | | | $ | 18,603 | | |
David Brunnert | | | | $ | 876 | | | | | | — | | | | | $ | 302 | | | | | $ | 800,000 | | | | | $ | 801,179 | | |
Scott P. Miller | | | | $ | 1,011 | | | | | | — | | | | | $ | 180 | | | | | | — | | | | | $ | 1,191 | | |
Katherine I. Hargis | | | | $ | 1,072 | | | | | | — | | | | | $ | 270 | | | | | | — | | | | | $ | 1,341 | | |
Louis Coale | | | | $ | 437 | | | | | | — | | | | | | — | | | | | | — | | | | | $ | 644 | | |
| | | | | | | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | | | 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 ($/Sh) | | | Grant Date Fair Value of Stock and Option Awards ($)(2) | | ||||||||||||||||||||||||||||||||||||||||||
Name | | | Grant Date | | | Threshold ($) | | | Target ($) | | | Maximum Awards ($) | | | Threshold (#) | | | Target (#) | | | Maximum # | | |||||||||||||||||||||||||||||||||||||||||||||
Robert J. Saltiel | | | | | 8/20/2018 | | | | | | | | | | | | | | | | | | | | | | | | — | | | | | | — | | | | | | — | | | | | | 251,158 | | | | | | — | | | | | | — | | | | | | 3,255,008 | | |
| | | | | | | | | 421,875 | | | | | | 937,500 | | | | | | 990,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||
J. Marshall Dodson | | | | | — | | | | | | | | | | | | | | | | | | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | — | | | | | | 153,000 | | | | | | 340,000 | | | | | | 448,800 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | ||
Scott P. Miller | | | | | — | | | | | | | | | | | | | | | | | | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | — | | | | | | 111,600 | | | | | | 248,000 | | | | | | 327,360 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | ||
Katherine I. Hargis | | | | | — | | | | | | | | | | | | | | | | | | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | | | | | | — | | | | | | — | | |
| | | — | | | | | | 111,600 | | | | | | 248,000 | | | | | | 327,360 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | ||
Louis Coale | | | | | 7/01/2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 20,000 | | | | | | — | | | | | | — | | | | | | 324,800 | | |
| | | | | | | | | 49,500 | | | | | | 110,000 | | | | | | 145,200 | | | | | | 5,000 | | | | | | 10,000 | | | | | | 20,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | ||
Robert Drummond | | | | | — | | | | | | | | | | | | | | | | | | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | — | | | | | | 421,875 | | | | | | 937,500 | | | | | | 1,237,500 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | ||
David Brunnert | | | | | — | | | | | | | | | | | | | | | | | | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | — | | | | | | 126,000 | | | | | | 280,000 | | | | | | 369,600 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | OPTION AWARDS | | | STOCK AWARDS | | |||||||||||||||||||||||||||||||||||||||||||||||||||
Name | | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | | Option Exercise Price ($) | | | Option Expiration Date | | | Number of Shares or Units of Stock That Have Not Vested (#)(2) | | | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | | | Equity Incentive Plan Awards: Number of Unearned Performance Units That Have Not Vested ($)(2) | | | Equity Incentive Plan Awards: Market Value of Unearned Units That Have Not Vested ($)(1) | | | |||||||||||||||||||||||||||||
Robert J. Saltiel | | | | | — | | | | | | — | | | | | | — | | | | | $ | — | | | | | | — | | | | | | 251,158 | | | | | $ | 519,897 | | | | | | — | | | | | $ | — | | | | ||
J. Marshall Dodson | | | | | 12,754 | | | | | | — | | | | | | — | | | | | $ | 19.35 | | | | | | 12/15/26 | | | | | | 51,012 | | | | | $ | 105,595 | | | | | | 76,518 | | | | | $ | 158,392 | | | | ||
| | | 12,754 | | | | | | — | | | | | | — | | | | | $ | 47.99 | | | | | | 12/20/26 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | ||||
David Brunnert | | | | | 7,900 | | | | | | — | | | | | | — | | | | | $ | 19.35 | | | | | | 12/15/26 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | ||
| | | 7,900 | | | | | | — | | | | | | — | | | | | $ | 47.99 | | | | | | 12/20/26 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | ||||
Scott P. Miller | | | | | 5,924 | | | | | | — | | | | | | — | | | | | $ | 19.35 | | | | | | 12/15/26 | | | | | | 23,696 | | | | | $ | 49,051 | | | | | | 35,544 | | | | | $ | 73,576 | | | | ||
| | | 5,924 | | | | | | — | | | | | | — | | | | | $ | 47.99 | | | | | | 12/20/26 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | ||||
Katherine I. Hargis | | | | | 4,938 | | | | | | — | | | | | | — | | | | | $ | 19.35 | | | | | | 12/15/26 | | | | | | 21,666 | | | | | $ | 44,849 | | | | | | 32,500 | | | | | $ | 67,275 | | | | ||
| | | 4,938 | | | | | | — | | | | | | — | | | | | $ | 47.99 | | | | | | 12/20/26 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | ||||
Louis Coale | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 10,000 | | | | | | 20,700 | | | | | | 10,000 | | | | | | 20,700 | | | |
Name | | | Number of Shares | | | Vesting Date | | |||
Robert J. Saltiel | | | | | 83,720 | | | | August 20, 2019 | |
| | | 83,720 | | | | August 20, 2020 | | ||
| | | 83,718 | | | | August 20, 2021 | | ||
J. Marshall Dodson | | | | | 25,506 | | | | December 31, 2019 | |
| | | 102,024 | | | | December 31, 2020 | | ||
Scott P. Miller | | | | | 11,848 | | | | December 31, 2019 | |
| | | 47,392 | | | | December 31, 2020 | | ||
Katherine I. Hargis | | | | | 10,833 | | | | December 31, 2019 | |
| | | 43,333 | | | | December 31, 2020 | | ||
Louis Coale | | | | | 3,334 | | | | July 1, 2019 | |
| | | 3,333 | | | | July 1, 2020 | | ||
| | | 13,333 | | | | July 1, 2021 | |
| | | Option Awards | | | Stock Awards | | ||||||||||||||||||
Name | | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($) | | | Number of Shares Acquired on Vesting (#)(1) | | | Value Realized on Vesting ($)(2) | | ||||||||||||
Robert J. Saltiel | | | | | N/A | | | | | | N/A | | | | | | N/A | | | | | | N/A | | |
J. Marshall Dodson | | | | | — | | | | | | — | | | | | | 25,506 | | | | | $ | 52,797 | | |
Scott P. Miller | | | | | — | | | | | | — | | | | | | 11,848 | | | | | $ | 24,525 | | |
Katherine I. Hargis | | | | | — | | | | | | — | | | | | | 10,834 | | | | | $ | 22,426 | | |
Separated during 2018 | | | | | | | | | | | | | | | | | | | | | | | | | |
Robert Drummond | | | | | N/A | | | | | | N/A | | | | | | N/A | | | | | | N/A | | |
David Brunnert | | | | | — | | | | | | — | | | | | | 60,000 | | | | | $ | 790,200 | | |
shortage of available shares for issuance under the 2016 ECIP, the Company amended Mr. Saltiel’s Employment Agreement to revise the 2019 long-term annual incentive award from an equity award equal to $3.5 million to an award of 600,000 time-vesting restricted stock units that vest in equal annual installments on the first three anniversaries of the grant date and a time-vesting cash long-term incentive award in an amount equal to $1 million that vests 40% on the first anniversary of the grant date and 60% on the second anniversary of the grant date, subject to the terms of the applicable award agreements (the “2019 CEO LTI Grant.” The Audit Committee has also received from,2019 CEO LTI Grant was made on February 4, 2019 and discussedis reflected above in the section entitled “Annual Long Term Incentive Grant—2019 Long-Term Incentive Awards.” Mr. Saltiel is entitled to at least four weeks of vacation per year and to participate in other benefit plans on terms consistent with Grant Thornton LLP,those applicable to the Company’s independent registered public accounting firm, various communications thatemployees generally, including, without limitation, personal time off, group medical and dental, life, accident and disability insurance, retirement plans and supplemental and excess retirement benefits as the Company’s independent registered public accounting firm is required toCompany may from time-to-time provide to similarly situated employees. As a condition of employment, Mr. Saltiel entered into a non-competition agreement pursuant to which Mr. Saltiel has agreed not to compete with Key or to solicit customers or employees of Key after the Audit Committee, includingtermination of his employment for a period of time equal to that during which he receives severance compensation or for a period of three years following a severance received after a Change of Control (as defined in his agreement).
The Company’s independent registered public accounting firm also provided the Audit CommitteeEmployment Agreement), or enhanced cash severance equal to three times the sum of his base salary plus target annual incentive award upon a termination by the Company without “Cause” or a termination by Mr. Saltiel for “Good Reason” (as defined in the Employment Agreement), in each case within two years following a “Change in Control” (as defined in the Employment Agreement).
Based on its discussions with management and the independent registered public accounting firm, and its review of the representations and information provided by management and the independent registered public accounting firm, the Audit Committee recommended to the Board of Directors ofCompany
By the Audit Committee of the Board of Directors
Arlene M. Yocum, Chair
Kevin P. Collins
Ralph S. Michael, III
William F. Owens
Below are the names, ages and certain other information on each of our current executive officers, other than Mr. Alario, whose information is provided above.
Newton W. “Trey” Wilson III, age 63, Executive Vice President and Chief Operating Officer. The Company amended and restated this employment agreement effective April 19, 2016 to reflect Mr. WilsonDrummond’s promotion to President and Chief Executive Officer. The agreement provides for an initial term to expire on March 5, 2018. The term will be automatically renewed for an additional one-year period on that date (and on each subsequent anniversary of the effective date of the agreement) unless either party gives written notice of its intent not to extend the term. The agreement provides for an annual base salary of $750,000 and an annual incentive bonus opportunity based on the achievement of performance objectives established by the Compensation Committee with the target bonus based on a percentage of his base salary as determined by the Compensation Committee. Mr. Drummond is entitled to at least four weeks of vacation per year and to participate in the Company’s Executive Health Reimbursement Plan, Director and Officer Liability Insurance, voluntary annual physicals and other benefit plans on terms consistent with those applicable to the Company’s employees generally, including, without limitation, personal time off, group medical and dental, life, accident and disability insurance, retirement plans and supplemental and excess retirement benefits as the Company may from time-to-time provide to similarly situated employees. As a condition of employment, Mr. Drummond entered into a non-competition agreement pursuant to which Mr. Drummond has agreed not to compete with Key or to solicit customers or employees of Key for a period of one year after the termination of his employment. In addition, in connection with Mr. Drummond’s promotion to Chief Executive Officer, the Company entered into a Promotion Bonus Agreement with Mr. Drummond on March 7, 2016 pursuant to which Mr. Drummond would receive a promotion bonus of $750,000 (the “Promotion Bonus”) if he was appointedstill employed by the Company on March 5, 2018. The Company revised the Promotion Bonus Agreement on
Name | | | Non- Renewal(1) | | | For Cause or Voluntary Resignation(2) | | | Death(3) | | | Disability(4) | | | Without Cause or For Good Reason(5) | | | Change of Control (No Termination)(6) | | | Change of Control and Termination(7) | | |||||||||||||||||||||
Robert J. Saltiel | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash Severance | | | | $ | 3,000,000 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 3,000,000 | | | | | $ | — | | | | | $ | 4,500,000 | | |
RSU(8) | | | | $ | 519,897 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 519,897 | | | | | $ | — | | | | | $ | 519,897 | | |
Health & Welfare(9) | | | | $ | 47,287 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 47,287 | | | | | $ | — | | | | | $ | 47,287 | | |
Retention Bonus(10) | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Outplacement(11) | | | | $ | 15,000 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 15,000 | | | | | $ | — | | | | | $ | 15,000 | | |
Pro Rata Bonus(12) | | | | $ | 273,288 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 273,288 | | | | | $ | — | | | | | $ | 273,288 | | |
Total Benefit | | | | $ | 3,855,472 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 3,855,472 | | | | | $ | 0 | | | | | $ | 5,355,472 | | |
Name | | | Non- Renewal(1) | | | For Cause or Voluntary Resignation(2) | | | Death(3) | | | Disability(4) | | | Without Cause or For Good Reason(5) | | | Change of Control (No Termination)(6) | | | Change of Control and Termination(7) | | |||||||||||||||||||||
J. Marshall Dodson | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash Severance | | | | $ | 850,000 | | | | | $ | — | | | | | $ | — | | | | | $ | 425,000 | | | | | $ | 850,000 | | | | | $ | — | | | | | $ | 2,295,000 | | |
RSU(8) | | | | $ | 263,987 | | | | | $ | — | | | | | $ | 263,987 | | | | | $ | 263,987 | | | | | $ | 263,987 | | | | | $ | — | | | | | $ | 263,987 | | |
Health & Welfare(9) | | | | $ | 62,367 | | | | | $ | — | | | | | $ | 80,708 | | | | | $ | 83,157 | | | | | $ | 62,367 | | | | | $ | — | | | | | $ | 83,157 | | |
Retention Bonus(10) | | | | $ | 637,500 | | | | | $ | — | | | | | $ | 637,500 | | | | | $ | 637,500 | | | | | $ | 637,500 | | | | | $ | — | | | | | $ | 637,500 | | |
Outplacement(11) | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Pro Rata Bonus(12) | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Total Benefit | | | | $ | 1,813,855 | | | | | $ | 0 | | | | | $ | 982,196 | | | | | $ | 1,409,644 | | | | | $ | 1,813,855 | | | | | $ | 0 | | | | | $ | 3,279,644 | | |
Name | | | Non- Renewal(1) | | | For Cause or Voluntary Resignation(2) | | | Death(3) | | | Disability(4) | | | Without Cause or For Good Reason(5) | | | Change of Control (No Termination)(6) | | | Change of Control and Termination(7) | | |||||||||||||||||||||
Scott Miller | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash Severance | | | | $ | 310,000 | | | | | $ | — | | | | | $ | 310,000 | | | | | $ | 310,000 | | | | | $ | 310,000 | | | | | $ | — | | | | | $ | 310,000 | | |
RSU(8) | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 49,051 | | |
Health & Welfare(9) | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 22,806 | | |
Retention Bonus(10) | | | | $ | 310,000 | | | | | $ | — | | | | | $ | 310,000 | | | | | $ | 310,000 | | | | | $ | 310,000 | | | | | $ | — | | | | | $ | 310,000 | | |
Outplacement(11) | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Pro Rata Bonus(12) | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Total Benefit | | | | $ | 620,000 | | | | | $ | 0 | | | | | $ | 620,000 | | | | | $ | 620,000 | | | | | $ | 620,000 | | | | | $ | 0 | | | | | $ | 691,857 | | |
Name | | | Non- Renewal(1) | | | For Cause or Voluntary Resignation(2) | | | Death(3) | | | Disability(4) | | | Without Cause or For Good Reason(5) | | | Change of Control (No Termination)(6) | | | Change of Control and Termination(7) | | |||||||||||||||||||||
Katherine I. Hargis | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash Severance | | | | $ | 310,000 | | | | | $ | — | | | | | $ | 310,000 | | | | | $ | 310,000 | | | | | $ | 310,000 | | | | | $ | — | | | | | $ | 310,000 | | |
RSU(8) | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 44,851 | | |
Health & Welfare(9) | | | | $ | 24,879 | | | | | $ | — | | | | | $ | 24,879 | | | | | $ | 24,879 | | | | | $ | 24,879 | | | | | $ | — | | | | | $ | 24,879 | | |
Retention Bonus(10) | | | | $ | 310,000 | | | | | $ | — | | | | | $ | 310,000 | | | | | $ | 310,000 | | | | | $ | 310,000 | | | | | $ | — | | | | | $ | 310,000 | | |
Outplacement(11) | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Pro Rata Bonus(12) | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Total Benefit | | | | $ | 644,879 | | | | | $ | 0 | | | | | $ | 644,879 | | | | | $ | 644,879 | | | | | $ | 644,879 | | | | | $ | 0 | | | | | $ | 689,730 | | |
Name | | | Non- Renewal(1) | | | For Cause or Voluntary Resignation(2) | | | Death(3) | | | Disability(4) | | | Without Cause or For Good Reason(5) | | | Change of Control (No Termination)(6) | | | Change of Control and Termination(7) | | |||||||||||||||||||||
Louis Coale | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash Severance | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
RSU(8) | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 20,700 | | |
Health & Welfare(9) | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Retention Bonus(10) | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Outplacement(11) | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Pro Rata Bonus(12) | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Total Benefit | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 20,700 | | |
Name | | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($)(1) | | | Total ($) | | |||||||||
Scott D. Vogel | | | | $ | 125,000 | | | | | $ | 125,000 | | | | | $ | 250,000 | | |
Sherman K. Edmiston III | | | | $ | 135,000 | | | | | $ | 125,000 | | | | | $ | 260,000 | | |
H.H. Tripp Wommack, III | | | | $ | 145,000 | | | | | $ | 125,000 | | | | | $ | 270,000 | | |
Steven H. Pruett | | | | $ | 135,000 | | | | | $ | 125,000 | | | | | $ | 260,000 | | |
C. Christopher Gaut | | | | $ | 135,000 | | | | | $ | 135,000 | | | | | $ | 270,000 | | |
Robert Drummond | | | | $ | 34,188 | | | | | $ | — | | | | | $ | 34,188 | | |
J. Marshall Dodson, age 43, Senior Vice President and Chief Financial Officer. Mr. Dodson was appointed Senior Vice President and Chief Financial Officer on March 25, 2013. Mr. Dodson joined Key as Vice President and Chief Accounting Officer on August 22, 2005 and served in that capacity until being appointed Vice President and Treasurer on June 8, 2009. From February 6, 2009 until Mr. Whichard’s election as Key’s new Chief Financial Officer on March 26, 2009, Mr. Dodson servedDecember 1, 2018, our employee population consisted of approximately 2,825 individuals with all of these individuals located in the additional capacityUnited States (as reported in Part I, Item 1 of this Form 10-K). This population consisted of our full-time, part-time, and temporary employees, as interim principal financial officer. Priorwe do not have seasonal workers.
Kim B. Clarke, age 58, Senior Vice President, Administration and Chief People Officer. Ms. Clarke joined Key on November 22, 2004 as Vice President and Chief People Officer. She was elected as an executive officer in January 2005 and, since January 1, 2006, she hasindividuals who served as our Senior Vice PresidentPrincipal Executive Officer and Chief PeoplePrincipal Financial Officer (asduring fiscal year 2018, and each of March 25, 2009, her title was changedour other most highly compensated executive officers that are required to Senior Vice President, Administrationbe in our executive compensation disclosures in fiscal year 2018, are referred to as the “Named Executive Officers” or “NEOs.”
Name of Beneficial Owner | | | Total Beneficial Ownership(1) | | | Percent of Outstanding Shares(2) | | ||||||
Non-Management Directors: | | | | ||||||||||
Scott D. Vogel(3) | | | | | 28,907 | | | | | | * | | |
Sherman K. Edmiston III(4) | | | | | 19,718 | | | | | | * | | |
H.H. Tripp Wommack III(5) | | | | | 19,718 | | | | | | * | | |
Steven H. Pruett(6) | | | | | 19,718 | | | | | | * | | |
Bryan Kelln | | | | | — | | | | | | * | | |
Jacob Kotzubei | | | | | — | | | | | | * | | |
Philip Norment | | | | | — | | | | | | * | | |
Mary Ann Sigler | | | | | — | | | | | | * | | |
Named Executive Officers: | | | | ||||||||||
Robert J. Saltiel | | | | | — | | | | | | * | | |
Robert W. Drummond(7) | | | | | 68,123 | | | | | | * | | |
J. Marshall Dodson(8) | | | | | 75,110 | | | | | | * | | |
David Brunnert | | | | | 68,608 | | | | | | * | | |
Scott P. Miller(9) | | | | | 15,480 | | | | | | * | | |
Katherine I. Hargis(10) | | | | | 18,807 | | | | | | * | | |
Louis Coale | | | | | — | | | | | | * | | |
Current Directors and NEOs as a group (15 Persons): | | | | | 334,189 | | | | | | 1.64% | | |
Kimberly R. Frye,age 45, Senior Vice President, General Counsel and Secretary. Ms. Frye joined Key in October 2002 as Associate General Counsel and was promoted to her current position as Senior Vice President, General Counsel and Secretary in July 2008. Prior to joining Key, Ms. Frye was an attorney with Porter Hedges LLP where her practice focused principally on corporate andthe person holding such securities law. Prior to attending law school,
Ms. Frye worked as a federal bank examinerbut are not deemed outstanding for computing the Federal Deposit Insurance Corporation. Ms. Frye received her BS in Corporate Finance and Investment Management from the Universitypercentage ownership of Alabama in 1991 and her JD from the University of Houston in 1997.
Mark A. Cox, age 54, Vice President and Controller. Mr. Cox was appointed as Vice President and Controllerany other person.
Barry B. Ekstrand,age 56, Senior Vice President, CTS, FRS and Edge. Mr. Ekstrand joined Key as its Vice President, Coiled Tubing Services on May 7, 2012. Effective January 21, 2013, he was appointed Senior Vice President, CTS, FRS and Edge. Prior to joining Key, he served as President of CRS Proppants since May 5, 2010. Mr. Ekstrand also has served in various capacities at Weatherford International from 2002 to 2010, including Global Vice President of Reservoir Stimulation & Pressure Pumping. Prior to joining Weatherford, he served 22 years at Halliburton Energy Services, including positions in technology, operations, planning, business development and engineering. He received his BS in Chemical Engineering from California State Polytechnic University at Pomona and his MBA from California State University at Bakersfield.
Jeffrey S. Skelly, age 56, Senior Vice President, Rig Services, Fluid Management Services and Operations Support. Mr. Skelly joined Key as its Senior Vice President, Rig Services effective on June 21, 2010. He currently serves as Senior Vice President, Rig Services and Operations Support. Mr. Skelly’s previous role was that of Chief Operating Officer at GEODynamics, a technology company focused on perforating systems and solutions, from November 2007 to January 2010. Previously, he was President for Expro Group’s Western Hemisphere Operations from January 2005 to June 2007. Mr. Skelly has also served in several roles at Halliburton including Global Manufacturing Operations Manager, Global Product Manager for Logging and Perforating, and Regional Manager of Wireline and Testing for the Middle East. Mr. Skelly began his career in the oil and gas services business after earning a B.S. Degrees in Civil Engineering and Ocean Engineering from Florida Institute of Technology. After college, he joined Schlumberger and held various positions at Schlumberger over the next 15 years including Field Engineer, Technical Manager, Field Service Manager, District Manager, Area Operations Manager, and Sales Manager.
Fees of Independent Registered Public Accounting Firm
Effective December 1, 2006, Grant Thornton LLP was engaged as our independent registered public accounting firm. options.
2013(1) | 2012(2) | |||||||
Audit fees | $ | 2,201,185 | $ | 2,408,118 | ||||
Audit-related fees | — | — | ||||||
Tax fees | — | — | ||||||
All other fees | — | — | ||||||
|
|
|
| |||||
Total | $ | 2,201,185 | $ | 2,408,118 | ||||
|
|
|
|
Audit fees consist of professional services rendered for the auditoutstanding shares of our annual financial statements, the auditcommon stock.
| | | Shares Beneficially Owned | | |||||||||
Name and Address of Beneficial Owner | | | Number | | | Percent | | ||||||
Soter Capital, LLC(1) 360 North Crescent Drive, South Building Beverly Hills, CA 90210 | | | | | 10,204,609 | | | | | | 50.11% | | |
Rutabaga Capital Management(2) 64 Broad Street, 3rd Floor Boston, MA 02109 | | | | | 2,285,871 | | | | | | 11.26% | | |
Contrarian Capital Management, L.L.C.(3) 411 West Putnam Avenue, Suite 425 Greenwich, CT 06830 | | | | | 1,803,736 | | | | | | 8.89% | | |
Goldman Sachs & Co LLC(4) 200 West Street New York, NY 10282 | | | | | 1,514,591 | | | | | | 7.5% | | |
Policy for Pre-Approvaldetermination we may make by reason of Audit and Non-Audit Fees
The Audit Committee has an Audit and Non-Audit Services Pre-Approval Policy. The policy requires the Audit Committee to pre-approve the audit and non-audit services performed by our independent registered public accounting firm. Under the policy, the Audit Committee establishes the audit,audit-related, tax and all other services that have the approvalinclusion of such stockholder or its shares in this table.
The Audit Committee has delegated to its chair the authority to pre-approve services, not previously pre-approved by the Audit Committee, that involve aggregate payments (with respect to each such service or group of related services) of $50,000 or less. The chair will report any such pre-approval to the Audit Committee at its next scheduled meeting.
The policy contains procedures for a determination by the CFO that proposed services are included within the list of services that have received pre-approval of the Audit Committee. Proposed servicescopies of such forms furnished or available to us, we believe that require specific approval byour directors, executive officers and 10% stockholders complied with all Section 16(a) filing requirements for the Audit Committee must be submitted jointly byfiscal year ended December 31, 2018. In making these statements, we have relied upon an examination of the independent registered public accounting firmcopies of Forms 3, 4 and 5, and amendments thereto, and the CFOwritten representations of our directors, executive officers and must include backup statements10% stockholders.
Related to Our Affiliate Transaction Policy requires advance reviewReorganization
interest.
Mr. Reeves joined our Board in October 2007 and is currently an executive officer with Anadarko, one of our customers. During the fiscal year ended December 31, 2013, Anadarko purchased services from us for approximately $41.2 million, which is less than 1% of Anadarko’s revenue for 2013. In addition, Mr. Reeves’ son-in-law, West P. Gotcher, who had been an employee of Edge Oilfield Services, LLC, joined the Company as a non-officer employee upon our acquisition of Edge in August 2011. Mr. Gotcher’s total compensation received from the Company in 2013 was approximately $133,000. Both relationships were reviewed and approved under the Affiliate Transaction Policy. The Board has determined that our relationships with such related parties do not affect the independence of Mr. Reeves and that Mr. Reeves qualifies as “independent” in accordance with NYSE listing standards.
EXECUTIVE COMPENSATION
This section of the proxy statement describes and analyzes our executive compensation philosophy and program in the context of the compensation paid to our Named Executive Officers for 2013. Our 2013 Named Executive Officers are:
On March 25, 2013, Mr. Whichard retired, effective immediately, as Senior Vice President and Chief Financial Officer. J. Marshall Dodson, who had been serving as our Vice President and Treasurer, was appointed to replace Mr. Whichard as Senior Vice President and Chief Financial Officer.
In this Compensation Discussion and Analysis, we first provide an executive summary of our actions and results from 2013 related to executive compensation. We next explain the factors affecting our compensation decisions, results from 2013 and changes for the 2014 executive compensation program. We will also explain our principles that guide our Compensation Committee’s executive compensation decisions, including the compensation philosophy. We encourage you to read the entirety of the executive compensation discussion.
Executive Summary
Pay for Performance Philosophy
We are committed to providing value to our shareholders. We believe that our executive compensation program fairly and appropriately compensates our executive officers. The core principle of our executive compensation philosophy is to pay for performance. Accordingly, our executive compensation program is heavily weighted toward “at-risk” performance-based compensation. We have three principal elements of total direct compensation: base salary, annual incentive compensation and long-term incentive compensation. These elements provide our compensation committee with a platform to reinforce our pay-for-performance philosophy while addressing our business needs and goals with appropriate flexibility.
To illustrate our pay for performance philosophy, the following charts set forth each element as a proportion of the total direct compensation (“TDC”) that the CEO and the other NEOs were targeted to receive for 2013, of which 84% of our CEO’s TDC and, on average, 76% of our other NEO’s TDC was at-risk, performance based and not guaranteed.
Realized Compensation Reflects Alignment with Stockholders
At the Company, a substantial portion of the compensation granted by the Compensation Committee to the CEO and reported in the Summary Compensation Table represents an incentive for future performance, not current cash compensation. This analysis demonstrates the link with performance compensation. The table below sets forth the difference between pay shown in the Summary Compensation Table (“Reported Compensation”) and the actual pay realized by the CEO for fiscal years 2013, 2012 and 2011:
Year of Compensation | Reported Total Direct Compensation | Realized Total Direct Compensation | Realized Pay vs. Reported Pay | |||||||||
2013 | $ | 5,651,334 | $ | 3,771,010 | -$1,880,325 | |||||||
2012 | $ | 4,539,063 | $ | 3,480,585 | -$1,058,478 | |||||||
2011 | $ | 6,461,758 | $ | 8,267,959 | $1,806,201 |
Realized compensation is different than Reported compensation as disclosed in the Summary Compensation Table on page 39.
Reported Compensation—the total compensation based on the current reporting rules for the Summary Compensation Table to be disclosed by a Company. Specifically, Reported Compensation includes the “grant date fair value” of equity awards (i.e. restricted stock and performance shares), rather than actual shares vested or earned at the year end closing price.
Realized Compensation—the total compensation actually received by the executive during the fiscal year, including base salary, the current bonus cash payout, restricted stock that vested in the current year, and performance shares vested in the current year (assuming performance was achieved), at the year end closing stock price and all other compensation amounts realized in the current year. This excludes the value of newly awarded/unvested restricted stock and performance share grants, change in pension value, that will not actually be received until a future date depending upon performance.
A realized compensation analysis measures the value of long-term compensation as it is earned rather than the value at the time of the grant. The table below further illustrates the difference in realized pay versus reported pay for the calendar years 2011- 2013:
Note: The realized long-term incentive values which were determined within the Realized TDC for the chart above by the restricted stock shares and the performance shares vested in each of the years at the year end stock price.
As Key is ultimately focused on the interests of the shareholder, the executive team, namely the CEO, has their compensation they realize linked to the performance of the Company’s total shareholder return and other performance metrics as described in the summary of compensation components below. As such, we have provided the chart below which details the performance of total shareholder return (“TSR”) over the past three years, in comparison toreported compensation and the compensation that was actuallyrealized by the CEO in order to illustrate the compensation plans are in alignment with shareholder return:
Note: The total shareholder return (“TSR”) is the value of the stock performance between January 1st and year end. The realized long-term incentive values which were determined within the Realized TDC for the chart above by the restricted stock shares and the performance shares vested in each of the years at the year end closing stock price.
Executive Compensation Principles
As discussed in greater detail in this Compensation Discussion & Analysis, we believe that our compensation practices align the interest of our executives to that of our stockholders to drive performance. An overview of the practices we have implemented to drive behavior and value are highlighted below.
We Pay for Performance.
We Follow Preferred Compensation Practices.
We Follow Best Governance Practices.
Business Highlights of 2013
Industry conditions are influenced by a number of factors, such as the domestic and international supply and demand for oil and natural gas, competition, domestic and international economic conditions, political instability in oil producing countries and merger, acquisition and divestiture activity among E&P companies.
Over the course of 2013, U.S. customer demand remained at a relatively stable level despite historically high oil prices. In addition, while customer demand as measured by the Baker Hughes land drilling rig count was flat across 2013, competition was intense, as the oilfield services industry that had supported a higher demand level in 2012 competed for work. The influx of equipment into the areas of higher demand drove competition for not only activity but people as well.
As a result of the change in market conditions, management made several changes in the U.S. business to position Key for success in a market of flat demand and intense competition. These changes included:
Management also made changes to ensure that the Company’s assets and infrastructure were aligned to improve cash flows from investments the Company has made. As a result of these changes, the Company’s U.S. business improved over the course of 2013.
Internationally, the Company’s largest customer, accounting for 12.1% of the Company’s consolidated revenues in 2012, informed management early in the second quarter of 2013 that it would be significantly reducing its activity in the North Region of Mexico and deferring payment on amounts it owed service providers due to an overspending of its 2012 budget. As a result, over the course of 2013, we reduced staffing in Mexico by 85% and accelerated our efforts to diversify the international business away from the North Region of Mexico to other customers and regions in Mexico, as well as expanding operations in Colombia and beginning a new operation in Ecuador. Profits were impacted by the overall lower activity in Mexico as well as cost inefficiencies due to activity declines and severance impacts. Profits were further impacted by the costs to relocate equipment and the start up cost inefficiencies in other markets.
Despite these volatile market factors, our management team delivered the following financial and operational performance in 2013:
In 2013, our NEOs effectively managed the execution of the Company’s business and made strategic decisions that enabled achievement of the results noted above. We also made meaningful progress against our long-term strategy to improve our balance sheet and deploy capital and continue to drive favorable, long-term stockholder returns. In our International segment, we leveraged our existing infrastructure while faced with rapidly dropping activity. These results were significant given the unique oilfield services business cycle we witnessed in 2013.
Compensation Philosophy
In order to recruit and retain the most qualified and competent individuals as senior executives, we strive to maintain a compensation program that is competitive in our market and with respect to the general profession of our executives. We remain committed to hiring and retaining qualified, motivated employees at all levels within the organization while ensuring that all forms of compensation are aligned with business needs. The purpose of our compensation program is to reward exceptional organizational and individual performance. Our compensation system is designed to support the successful attainment of our vision, values and business objectives.
The following compensation objectives are considered in setting the compensation components for our senior executives:
We want our executives to be motivated to achieve ourshort- and long-term goals, without sacrificing our financial and corporate integrity in trying to achieve those goals. While an executive’s overall compensation should be strongly influenced by the achievement of specific financial targets, we believe that an executive must be provided a degree of financial certainty and stability in his or her compensation. The design and operation of the compensation arrangements provide the executives with incentives to engage in business or other activities that would support the value of Key or its stockholders. One mechanism to achieve this arrangement is our stock ownership guidelines. See “Stock Ownership of Certain Beneficial Owners and Management—Stock Ownership Guidelines” above.
The principal components of our executive compensation program are base salary, cash incentive bonuses and long-term incentive awards in the form of equity, including performance-based equity. We blend these elements in order to formulate compensation packages that provide competitive pay, reward the achievement of financial, operational and strategic objectives on ashort- and long-term basis, and align the interests of our executive officers and other senior personnel with those of our stockholders. To understand our compensation philosophy, it is important to note that we believe compensation is not the only manner in which we attract people to Key. We strive to hire and retain talented people who are compatible with our corporate culture, committed to our core values, and who want to make a contribution to our mission.
2013 Executive Compensation Highlights
We achieved strong operational performance during 2013; however, our financial performance fell short of our goal. As a result:
More details regarding our 2013 performance and executive compensation can be found below. We encourage you to read this section in conjunction with the advisory (nonbinding) vote with respect to the compensation of our NEOs described below. See “Compensation of Executive Officers—Summary Compensation Table” and other related compensation tables and narrative disclosure in the “Compensation of Executive Officers” section below.
Elements of Compensation
The annual compensation program for our senior executives consists principally of the following components:
Base Salaries
We provide base salaries to compensate our senior executives and other employees for services performed during the fiscal year. This provides a level of financial certainty and stability in an industry with historical volatility and cyclicality. The base salaries are designed to reflect the experience, education, responsibilities and contribution of the individual executive officers. This form of compensation is eligible for annual merit increases, and is initially established for each executive through individual negotiation and is reflected in his or her employment agreement. Thereafter, salaries are reviewed annually, based on a number of factors, both quantitative, including detailed organizational and competitive analyses performed by an independent consultant engaged by the Compensation Committee, and qualitative, including the Compensation Committee’s perception of the executive’s experience, performance and contribution to our business objectives and corporate values.
The Compensation Committee, effective January 2014, approved base salary increases for certain NEOs, which represented a salary increase of 7.14% and 4.32% for J. Marshall Dodson and Kimberly Frye, respectively. These increases brought these executives to the market 50th percentile for salaries as compared to our peers. No other NEO, including the CEO, received a base salary increase for 2013.
Name | 2013 Base Salaries | 2014 Base Salaries | % Increase | |||||||||
Richard J. Alario | $ | 865,000 | $ | 865,000 | 0 | % | ||||||
J. Marshall Dodson | $ | 350,000 | $ | 375,000 | 7.14 | % | ||||||
Newton W. Wilson III | $ | 496,460 | $ | 496,460 | 0 | % | ||||||
Kim B. Clarke | $ | 360,150 | $ | 360,150 | 0 | % | ||||||
Kimberly R. Frye | $ | 330,720 | $ | 345,000 | 4.32 | % |
Cash Bonus Incentive Plan
The cash bonus incentive plan provides variable cash compensation earned only when established performance goals are achieved. It is designed to reward the plan participants, including the NEOs, who have achieved certain corporate and executive performance objectives and have contributed to the achievement of certain objectives of Key. The cash bonus incentive plan is measured on an annual basis and is designed to pay-for-performance and align our executive compensation with stockholder interests.
Under this cash compensation program, each executive has the opportunity to earn a cash incentive compensation bonus based on the achievement of pre-determined operating and financial performance measures and other performance objectives established by the Compensation Committee. For 2013, each performance measure and related performance objective is independent of the results of the other performance measures. The cash bonus incentive plan goals for 2013 were as follows:
Cash Bonus Incentive Plan Measurements
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Our financial performance target and safety target are determined using the Company’s budget and operating plan, respectively, for the subsequent year for which the bonuses are being paid. The operating budget is approved by the Board each year. The Compensation Committee then establishes a threshold and a target percentage of financial performance for the period. The cash bonus incentive plan incorporates weightings with respect to each of the performance measurements.
The Compensation Committee reviews all performance goals at the beginning of the period and authorizes payment following the end of the period. Under our incentive compensation program, the Compensation Committee has discretion to adjust targets, as well as individual awards, either positively or negatively.
Long-TermEquity-Based Incentive Compensation
The purpose of our long-term incentive compensation is to align the interests of our executives with those of our stockholders and to retain our executives and employees over the long term. We want our executives to be focused on increasing stockholder value. In order to encourage and establish this focus on stockholder value, during 2012, we used the Key Energy Services, Inc. 2007 Equity and Cash Incentive Plan (the “2007 Plan”), the Key Energy Services, Inc. 2009 Equity and Cash Incentive Plan (the “2009 Plan”) and the Key Energy Services, Inc. 2012 Equity and Cash Incentive Plan (the “2012 Plan,” and together with the 2007 Plan and the 2009 Plan, the “Equity Plans”) as long-term vehicles to accomplish this goal. On January 30, 2014, subject to stockholder approval at the annual meeting on May 15, 2014, we adopted the Key Energy Services, Inc. 2014 Equity and Cash Incentive Plan, which we refer to as the 2014 Plan. For more information on the 2014 Plan, see“Proposal 2—Adoption of the 2014 Equity and Cash Incentive Plan.”
To promote our long-term objectives, equity awards are made under the Equity Plans to directors, executive officers and other employees who are in a position to make a significant contribution to our long-term success. The terms of the Equity Plans are substantially the same, and each provides that the Compensation Committee has the authority to grant participants different types of equity awards, including non-qualified and incentive stock options, common stock, restricted stock, restricted stock units, performance compensation awards and stock appreciation rights (or “SARs”). Because equity awards may vest and grow in value over time, this component of our compensation plan is designed to provide incentives to reward performance over a sustained period. Since adoption of the respective Equity Plans, only stock options and restricted stock have been granted under the 2007 Plan, and only restricted stock, restricted stock units and performance units have been granted under the 2009 Plan and the 2012 Plan.
The following types of awards are available for grant under the Equity Plans:
Restricted Stock. Restricted stock awards represent awards of actual shares of our common stock that include vesting provisions which are contingent upon continued employment. Typically the restricted stock we grant to our executives vests at a rate of one-third per year over a three-year term.
We believe that awards of restricted stock provide a significant incentive for executives to achieve and maintain high levels of performance over multi-year periods, and strengthen the connection between executive and stockholder interests. We believe that restricted shares are a powerful tool for helping us retain executive talent. The higher value of a share of restricted stock in comparison to a stock option allows us to issue fewer total shares in order to arrive at a competitive total long-term incentive award value. Furthermore, we believe that the use of restricted stock reflects competitive practice among other oilfield service companies with whom we compete for executive talent.
Performance Units. Performance units provide a cash incentive award, the unit value of which is determined with reference to the value of our common stock. The performance units are measured based on two performance periods. One half of the performance units are measured based on a performance period consisting of the first year after the grant date, and the other half are measured based on a performance period consisting of the second year after the grant date. At the end of each performance period, subject to
review and certification of results by our Compensation Committee, performance units subject to that performance period vest based on the relative placement of Key’s total stockholder return within a peer group of companies.
Total stockholder return is calculated with respect to each performance period, for Key and each other company in the peer group, based on the change in (i) the average closing price of common stock for the 30 trading days immediately preceding the grant date and (ii) the average closing price of common stock for the last 30 trading days before the end of the applicable performance period (adding to such amount, if any, dividends paid per share by any of the companies during the applicable performance period).
The peer group for the performance units consists of the group of eleven companies used for comparative market data analyses in connection with setting compensation levels, which is listed and discussed below under the heading “The Role of Compensation Consultants.”
The number of performance units that may be earned by a participant is determined at the end of each performance period based on the relative placement of Key’s total stockholder return for that period within the peer group, as follows:
Company Placement In Proxy Peer Group for the Performance Period | Percentile Ranking In Proxy Peer Group | Performance Units Earned as a Percentage of Target | ||||||
First | 100 | % | 200 | % | ||||
Second | 91 | % | 180 | % | ||||
Third | 82 | % | 160 | % | ||||
Fourth | 73 | % | 140 | % | ||||
Fifth | 64 | % | 120 | % | ||||
Sixth | 55 | % | 100 | % | ||||
Seventh | 45 | % | 75 | % | ||||
Eighth | 36 | % | 50 | % | ||||
Ninth | 27 | % | 25 | % | ||||
Tenth | 18 | % | 0 | % | ||||
Eleventh | 9 | % | 0 | % | ||||
Twelfth | 0 | % | 0 | % |
If any performance units are earned based on the above criteria for one or both of the performance periods, then the participant will be paid, within 60 days following the end of the applicable performance period, a cash amount equal to the number of units earned multiplied by the closing price of our common stock on the last trading day of that performance period (subject to the participant’s continuing employment through the payment date, except that payment will still be made in the case of the participant’s death or disability following the end of the performance period but prior to the payment date).
We believe that awards of performance units provide a significant incentive for senior executives to remain employed and to achieve and maintain high levels of performance over multi-year periods, and strengthen the connection between executive and stockholder interests. We intend to settle future performance units with shares of the Company’s common stock once the proposed stock plan is approved by shareholders.
Stock Options. Stock options represent rights to purchase shares of our common stock at a set price at some date in the future, not to exceed ten years from the date of grant (except for incentive stock options granted to a stockholder holding 10% or more of our common stock, the term of which may not exceed five years from the grant date). Stock options are granted with an exercise price equal to the closing stock price on the date of the grant (except for incentive stock options granted to a stockholder holding 10% or more of our common stock, the exercise price for which may not be less than 110% of the fair market value on the date of grant). Although noperformance-vesting criteria are applied to our stock option awards, we believe that stock options represent a powerful performance incentive, as the options become valuable only to the extent that our stock price increases following the date of grant.
Stock Appreciation Rights. SARs entitle the recipient to receive the difference between the exercise price and the fair market value of a share of our common stock on the date of exercise, multiplied by the number of shares of common stock for which the SAR was exercised. The exercise price is equal to the closing stock price on the date of grant. The exercise price for a SAR may be settled in cash, shares of our common stock or a combination thereof. Although no SARs have been granted under the 2007 Plan or the 2009 Plan, SARs granted under the Key Energy Group, Inc. 1997 Incentive Plan remain outstanding. Currently outstanding SARs were granted with three-year ratable vesting schedules and 10-year terms.
Clawback Policy. To date, our Board of Directors has not adopted a formal “clawback” policy to recoup incentive based compensation upon the occurrence of a financial restatement, misconduct, or other specified events. However, all equity award agreements, including those related to performance-based grants, are subject to “clawback” and “detrimental activities” provisions that allow us to reclaim previously granted equity under certain circumstances.
2013 Compensation Results and Decisions
Annual Cash Bonus Incentive Plan Results for the Year Ended December 31, 2013
In 2013, the NEO’s had the following bonus thresholds, targets, and maximums:
2013 Bonus Opportunity | ||||||||||||
Participant | Threshold | Target | Maximum | |||||||||
Richard J. Alario | 25 | % | 125 | % | 250 | % | ||||||
J. Marshall Dodson | 20 | % | 80 | % | 160 | % | ||||||
Newton W. Wilson III | 20 | % | 90 | % | 160 | % | ||||||
Kim B. Clarke | 20 | % | 75 | % | 160 | % | ||||||
Kimberly R. Frye | 20 | % | 75 | % | 160 | % |
For 2013, the Company fell short of its profit before taxes, or PBT, goal, and, as such, no payment was made with respect to that performance metric. However, the Company achieved its safety performance goal and therefore payment was made for successfully achieving that goal. In addition, each NEO had the opportunity to achieve payment for his or her respective individual performance targets. The bonus opportunities with respect to each performance metric and the payments earned by each NEO in 2013 under the annual cash bonus incentive plan were as follows:
Richard J. Alario
Performance Measure | Base Salary | Weighting | Target Bonus Opportunity | Maximum Bonus Opportunity | Actual Bonus Paid | |||||||||||||||
PBT | $ | 865,000 | 50 | % | $ | 540,625 | $ | 1,081,250 | $ | 0 | ||||||||||
Safety | $ | 865,000 | 25 | % | $ | 270,313 | $ | 540,625 | $ | 459,431 | ||||||||||
Individual | $ | 865,000 | 25 | % | $ | 270,312 | $ | 540,625 | $ | 270,317 | ||||||||||
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Total Bonus | $ | 1,081,250 | $ | 2,162,500 | $ | 729,844 | ||||||||||||||
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J. Marshall Dodson
Performance Measure | Base Salary | Weighting | Target Bonus Opportunity | Maximum Bonus Opportunity | Actual Bonus Paid | |||||||||||||||
PBT | $ | 350,000 | 50 | % | $ | 140,000 | $ | 280,000 | $ | 0 | ||||||||||
Safety | $ | 350,000 | 25 | % | $ | 70,000 | $ | 140,000 | $ | 119,000 | ||||||||||
Individual | $ | 350,000 | 25 | % | $ | 70,000 | $ | 140,000 | $ | 70,000 | ||||||||||
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Total Bonus | $ | 280,000 | $ | 560,000 | $ | 189,000 | ||||||||||||||
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Newton W. Wilson III
Performance Measure | Base Salary | Weighting | Target Bonus Opportunity | Maximum Bonus Opportunity | Actual Bonus Paid | |||||||||||||||
PBT | $ | 496,460 | 50 | % | $ | 223,407 | $ | 397,168 | $ | 0 | ||||||||||
Safety | $ | 496,460 | 25 | % | $ | 111,704 | $ | 198,584 | $ | 172,520 | ||||||||||
Individual | $ | 496,460 | 25 | % | $ | 111,703 | $ | 198,584 | $ | 111,703 | ||||||||||
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Total Bonus | $ | 446,814 | $ | 794,336 | $ | 284,223 | ||||||||||||||
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Kim B. Clarke
Performance Measure | Base Salary | Weighting | Target Bonus Opportunity | Maximum Bonus Opportunity | Actual Bonus Paid | |||||||||||||||
PBT | $ | 360,150 | 50 | % | $ | 135,056 | $ | 288,120 | $ | 0 | ||||||||||
Safety | $ | 360,150 | 25 | % | $ | 67,528 | $ | 144,060 | $ | 114,798 | ||||||||||
Individual | $ | 360,150 | 25 | % | $ | 67,528 | $ | 144,060 | $ | 67,528 | ||||||||||
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Total Bonus | $ | 270,112 | $ | 576,240 | $ | 182,326 | ||||||||||||||
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Kimberly R. Frye
Performance Measure | Base Salary | Weighting | Target Bonus Opportunity | Maximum Bonus Opportunity | Actual Bonus Paid | |||||||||||||||
PBT | $ | 330,720 | 50 | % | $ | 124,020 | $ | 264,576 | $ | 0 | ||||||||||
Safety | $ | 330,720 | 25 | % | $ | 62,010 | $ | 132,288 | $ | 105,417 | ||||||||||
Individual | $ | 330,720 | 25 | % | $ | 62,010 | $ | 132,288 | $ | 62,010 | ||||||||||
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Total Bonus | $ | 248,040 | $ | 529,152 | $ | 167,427 | ||||||||||||||
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T.M. Whichard III was not paid a bonus for 2013 as the plan requires the person to be employed by the Company at the time of payment.
Annual Long-Term Equity-Based Incentive Grant
For 2013, the Compensation Committee approved grants using the following long-term incentive plan multipliers recommended by its compensation consultant and provided for an allocation of long-term incentive compensation consisting of restricted stock and performance units as follows:
Participant | LTI Multiplier (to base salary) | % of Performance Units | % of Restricted Stock | |||||||||
Richard J. Alario | 450 | % | 50 | % | 50 | % | ||||||
J. Marshall Dodson(1) | 75 | % | 20 | % | 80 | % | ||||||
T.M. Whichard III | 325 | % | 20 | % | 80 | % | ||||||
Newton W. Wilson III | 350 | % | 40 | % | 60 | % | ||||||
Kim B. Clarke | 275 | % | 20 | % | 80 | % | ||||||
Kimberly R. Frye | 250 | % | 20 | % | 80 | % |
The program continues to tie executive compensation to the Company’s long-term financial performance, with a significant portion that is deferred and at-risk, and is designed to create appropriate incentives for employees to maximize long-term stockholder value, discourage excessive risk taking and promote retention.
Restricted Shares
The following table sets forth the number of restricted shares granted for 2013 determined using the long-term incentive plan multipliers and the restricted share allocations described above. The number of restricted shares granted was based on the then existing stock price at or about the time of grant and the multiple of base salary recommended by the compensation consultant.
Participant | 2013 Restricted Shares Granted | Grant Value (based on $7.70 stock price) | ||||||
Richard J. Alario | 259,500 | $ | 1,998,150 | |||||
J. Marshall Dodson | 22,000 | $ | 169,400 | |||||
T.M. Whichard III | 135,200 | $ | 1,041,040 | |||||
Newton W. Wilson III | 134,960 | $ | 1,039,192 | |||||
Kim B. Clarke | 100,613 | $ | 774,720 | |||||
Kimberly R. Frye | 84,800 | $ | 652,960 |
In addition, Mr. Dodson was awarded 100,000 restricted shares, with a grant value of $795,050, at the time of his appointment as Chief Financial Officer.
Performance Units
The following table sets forth the number of performance shares granted in 2013 determined using the long-term incentive plan multipliers and the performance unit allocations. The number of performance units granted was based on the then existing stock price at or about the time of grant and the multiple of base salary recommended by the compensation consultant.
Participant | 2013 Performance Units Granted | Grant Value (based on $7.70 stock price) | First Vesting Payout | |||||||||
Richard J. Alario | 259,500 | $ | 1,998,150 | $ | 0 | |||||||
J. Marshall Dodson | 5,500 | $ | 42,350 | $ | 0 | |||||||
T.M. Whichard III | 33,800 | $ | 260,260 | $ | 0 | |||||||
Newton W. Wilson III | 89,973 | $ | 692,792 | $ | 0 | |||||||
Kim B. Clarke | 25,153 | $ | 193,678 | $ | 0 | |||||||
Kimberly R. Frye | 21,200 | $ | 163,240 | $ | 0 |
In 2012, the NEO’s were granted performance units under the 2012 Plan with a grant value as set forth below. One half of the performance units that were granted in 2012 were measured based on a performance period consisting of calendar year 2012 (the “first performance period”), and the other half were measured based on a performance period consisting of calendar year 2013 (the “second performance period”). Because the Company did not meet the performance criteria during the first or second performance periods, none of those performance units vested. As such, the NEO’s were not paid for any performance units during 2013.
Participant | 2012 Performance Units Granted | Grant Value (based on $15.47 stock price) | First Vesting Payout | Second Vesting Payout | ||||||||||||
Richard J. Alario | 48,403 | $ | 748,800 | $ | 0 | $ | 0 | |||||||||
J. Marshall Dodson | 1,616 | $ | 25,000 | $ | 0 | $ | 0 | |||||||||
T.M. Whichard III | 15,756 | $ | 243,750 | $ | 0 | $ | 0 | |||||||||
Newton W. Wilson III | 20,362 | $ | 315,000 | $ | 0 | $ | 0 | |||||||||
Kim B. Clarke | 11,732 | $ | 181,500 | $ | 0 | $ | 0 | |||||||||
Kimberly R. Frye | 9,696 | $ | 150,000 | $ | 0 | $ | 0 |
For additional information about equity grants awarded in 2013, see“Compensation of Executive Officers—Summary Compensation Table”and “—2013 Grants of Plan-Based Awards.”
2014 Incentive Program Redesign
Our executive compensation program is designed to support and reinforce our mission and each of our strategic objectives while at the same time aligning the interests of our management with those of our stockholders. As such, the Compensation Committee determined that beginning in 2014 our annual cash bonus incentive plan will include Key Value Added (“KVA”) as our new primary financial performance measure. KVA is a single measure that defines financial success. KVA fully balances Key’s economic drivers of growth, margins, asset turnover, reinvestment, and reinvestment effectiveness. We want our executives to maximize KVA by making year-on-year KVA improvements, which we believe will drive stockholder value and reward our executive officers through the individual element of our annual cash bonus incentive plan. KVA promotes an ownership-like mindset by motivating all employees to treat capital like it’s their own. KVA has been defined in a way that demonstrates a strong relationship with changes in market value over time. We believe that this promotes a solid alignment between the Company’s executives and its stockholders.
Key Value Added. KVA is a measure of after tax operating cash flow (Gross Cash Earnings) less a Capital Charge based on our Required Return multiplied by our Gross Operation Assets. For purposed of calculating KVA, we employ the following concepts:
Safety Performance Metric. Although we will continue to use total recordable incident rate as our objective safety measure for NEOs, the Company is aligning the operational segments around a combination of total recordable incident rates and proactive measures.
Individual Performance Metrics. Each NEO has also been assigned individual performance goals that are related to their respective area of expertise or influence.
2014 Cash Bonus Incentive Plan
The cash bonus incentive plan is earned when established performance goals are achieved. For 2014, each performance measure for each NEO under the cash bonus incentive plan is weighted as follows:
Performance Measure Weighting | ||||||||||||
Participant | KVA | Safety | Individual | |||||||||
Richard J. Alario | 50 | % | 25 | % | 25 | % | ||||||
J. Marshall Dodson | 50 | % | 25 | % | 25 | % | ||||||
Newton W. Wilson III | 50 | % | 25 | % | 25 | % | ||||||
Kim B. Clarke | 50 | % | 25 | % | 25 | % | ||||||
Kimberly R. Frye | 50 | % | 25 | % | 25 | % |
The bonus opportunity under the cash bonus incentive plan is calculated as an absolute percentage of base salary multiplied by the respective weighting for the performance target. For each NEO, the bonus opportunity as a percentage of base salary for 2014 for each performance measure is as follows:
2014 Bonus Opportunity Financial Target Safety Target Participant Participant Richard J. Alario J. Marshall Dodson Newton W. Wilson III Kim B. Clarke Kimberly R. Frye Threshold Target Maximum Threshold Target Maximum 0% 125% 250% Richard J. Alario 25% 125% 250% 0% 80% 160% J. Marshall Dodson 20% 80% 160% 0% 90% 180% Newton W. Wilson III 20% 90% 180% 0% 80% 160% Kim B. Clarke 20% 80% 160% 0% 80% 160% Kimberly R. Frye 20% 80% 160%
Individual Performance Targets | ||||||
Participant | Threshold | Target | Maximum | |||
Richard J. Alario | 25% | 125% | 250% | |||
J. Marshall Dodson | 20% | 80% | 160% | |||
Newton W. Wilson III | 20% | 90% | 180% | |||
Kim B. Clarke | 20% | 80% | 160% | |||
Kimberly R. Frye | 20% | 80% | 160% |
The total cash bonus opportunity reflects the incremental bonus percentage that may be received by an executive once the respective performance measure (KVA, Safety or Individual Goals) is achieved. Each performance metric is calculated on a stand-alone basis. For example, Mr. Alario would be entitled to 0% to 124% of his base salary depending on KVA performance above threshold, but below target, which would then be multiplied by the 50% weighting for the financial target. At target performance, Mr. Alario would receive 125% of his salary, which would then be multiplied by the 50% weighting for the financial target. The same concept applies if we outperform target improvements in KVA. In that scenario, Mr. Alario would be entitled to 126% to 250% of his base salary, depending on the improvement in KVA above target, which would then be multiplied by the 50% weighting for the financial target. The same applies with respect to the safety target and the individual goals. If we meet the threshold or overachieve on those targets, Mr. Alario would be entitled to 25% or 250%, respectively, of his base salary, which would then be multiplied by the applicable weighting for that target.
2014 Cash Bonus Incentive Plan Performance Targets
KVA target is determined for a bonus year based on the Company’s prior year KVA performance. If the Company maintains the prior year KVA performance, it will result in a performance metric of one times target payout. Year-over-year improvements in KVA will result in increases to the performance metric up to a maximum of two times the target payout and year-over-year declines in KVA performance will result in decreases to the performance metric down to a minimum of zero.
Safety targets are determined based on overall recordable incident rate trends to activity levels on a year-over-year basis. In 2013, we recorded the best total recordable incident rate in Company history. This year’s target was calculated as a percentage of improvement from last year’s results. In this regard, the safety goals set for 2014 may be less achievable because the lower the total recordable incident rate becomes, the difficulty in achieving the lower target is exponentially greater; nevertheless, safety improvement is fundamental to the core values at Key and those of our customers, and, accordingly, we will continue to set performance goals that strive for an incident-free workplace.
The Compensation Committee has also established the individual goals for the CEO, who has in turn established the individual goals for the other NEOs. Each NEO has three target goals and of the individual performance targets are margin-enhancing goals that are consistent with strategic plan initiatives.
Oversight of Executive Compensation Program
As described above under “Corporate Governance—Board Committees—Compensation Committee,” the Compensation Committee of our Board is responsible for establishing, implementing and continually monitoring adherence with our compensation philosophy. The Compensation Committee has the sole authority to engage independent compensation consultants, who report directly to the committee, to advise and consult on compensation issues.
Role of Executives in Establishing Compensation
The Compensation Committee makes the final determination of all compensation paid to our NEOs and is involved in all compensation decisions affecting our chief executive officer. When making compensation decisions for individual executive officers, the committee considers many factors, including:
The Compensation Committee evaluates the performance of the chief executive officer and considers the evaluations of the other Named Executive Officers on an annual basis following the close of each fiscal year. Although these performance evaluations are most closely connected to the qualitative portion of the officer’s annual incentive award, the committee considers individual performance in evaluating the appropriateness of the officer’s base salary specifically and the compensation package as a whole. However, management also plays a role in the determination of executive compensation levels. The key members of management involved in the compensation process are the chief executive officer and the administration and chief people officer. Management proposes certain corporate safety and individual executive performance objectives based on the following year’s business plan, which is approved by the Board each year. Management also participates in the discussion of peer companies to be used to benchmark NEO compensation, and recommends the overall funding level for cash bonuses and equity incentive awards. All management recommendations are reviewed by its compensation consultant, modified as necessary by the Compensation Committee, and approved by the Compensation Committee. The Compensation Committee meets regularly in executive session without management present.
The Role of Compensation Consultants
The Compensation Committee has sole authority over the selection, use, and retention of any compensation consultant or any other experts engaged to assist the committee in discharging its responsibilities. In November 2013, the Compensation Committee engaged Longnecker & Associates to assist with its overall compensation review and decision-making. Longnecker conducted an independent, comprehensive, broad-based analysis of our executive compensation program, and the Compensation Committee used this analysis as one of several reference points in making decisions regarding 2013 compensation. Longnecker’s objectives were to:
Longnecker performed services solely on behalf of the Compensation Committee. In accordance with the rules and regulations of the SEC and the NYSE, Compensation Committee assessed the independence of Longnecker and concluded that no conflicts of interest exist that would prevent Longnecker from providing independent and objective advice.
Longnecker also provides guidance on industry best practices. This information assists us in developing and implementing compensation programs generally competitive with those of other companies in our industry and other companies with which we generally compete for executive talent. The Compensation Committee reviews salary ranges for all senior executive positions annually.
Longnecker also tailored its recommendations to (i) balance external market data, (ii) reflect our internal environment to ensure fiscal responsibility, and (iii) address potential retention concerns. Specifically, Longnecker evaluated the total direct compensation of the senior executives, assessed the competitiveness of our executive compensation and analyzed other factors such as cost of management, pay versus total stockholder return performance, mix of pay, peer annual incentive targets and mix of peer long-term incentive awards.
The benchmarks used for the executive compensation comparisons included companies in our industry with similar revenue and companies that we considered to be competing for the same level of executive talent. The following companies fit one or both of those categories and were used in our most recent peer group analysis:
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Longnecker also reviewed survey data as a reference point to compare the compensation of our executives to those of a broad range of companies. The following published surveys utilized by Longnecker were:
Based on its review of the compensation program, Longnecker recommended to the Compensation Committee that we (i) maintain the practice of aligning targeted total cash opportunity between market median and the 75th percentile but paying above market only when performance warrants; (ii) maintain the use of restricted stock and performance units for the senior executive team to continue alignment of executive and stockholder interests with 50% of the CEO’s long-term incentive award vesting only when relative stock price performance is above predetermined peer performance; (iii) maintain current long-term incentive mix for the NEO’s; (iv) continue aligning base salaries of the executive team at or just above the market midpoint; (v) consider base salary increases of approximately 3.0-4.0%; and (vi) consider targeting the CEO and other key executives between the market 50th and 75th percentile for total direct compensation in light of hyper-competitive market for talent in the energy industry.
Third parties other than Longnecker provided advice and consulting services related to all other non-executive compensation.
Executive Compensation Risk Assessment
We do not believe that our compensation policies and practices encourage excessive or unnecessary risk-taking. In fact, we believe that our program is designed with an appropriate balance of annual and long-term incentives. Factors considered in this analysis include the following:
Other Components of Total Compensation
The total compensation program for our senior executives also consists of the following components:
Retirement, Health and Welfare Benefits
We offer a 401(k) savings plan and health and welfare programs to all eligible employees. Under the terms of their employment agreements, the NEOs are eligible for the samebroad-based benefit programs on the same basis as the rest of our employees. Our health and welfare programs include medical, pharmacy, dental, vision, life insurance and accidental death and disability. For additional information about employment agreements, see “Compensation of Executive Officers—Employment Agreements” below.
Under the 401(k) plan, eligible employees may elect to contribute up to 100% of their eligible compensation on a pre-tax basis in accordance with the limitations imposed under the Internal Revenue Code of 1986, as amended, and the regulations promulgated there under (collectively, the “Code”). We also match 100% of each employee’s deferrals up to 4% of the individual’s eligible salary, subject to a cap of $255,000. Therefore, even if an employee earned more than $255,000 in eligible salary, our matching contribution could not exceed $10,200.
The cash amounts contributed under the 401(k) plan are held in a trust and invested among various investment funds in accordance with the directions of each participant. For the year ended December 31, 2013, we made employer matching contributions to the 401(k) plan in the amount of $10,587,109.
Perquisites
We provide our NEO’s with the opportunity to participate in our other employee benefit programs and to receive certain perquisites that we believe are reasonable and consistent with the practices of our peer group. In addition to the compensation described above, under the terms of his employment agreement, the CEO may also be reimbursed for personal financial advisory counseling, accounting and related services, legal advisory or attorneys’ fees and income tax preparation and tax audit services. Additional perquisites paid for the CEO include automobile allowances, plus reimbursement for reasonable insurance and maintenance expenses, and club memberships. With respect to all NEOs, we pay all covered out-of-pocket medical and dental expenses not otherwise covered by insurance. The NEOs receive these reimbursements under the terms of, and subject to the limitations set forth in, our Executive Health Reimbursement Plan. These programs are intended to promote the health and financial security of our employees. The programs are provided at competitive market levels to attract, retain and reward superior employees for key positions. Perquisites did not constitute a material portion of the compensation to the NEO’s for 2013. Our costs associated with providing these benefits for NEOs in 2013 are reflected under “Compensation of Executive Officers—Perquisites” and “—Employment Agreements” below.
Discretionary Cash Bonuses
In addition to the bonuses that may be paid under the cash bonus incentive plan discussed above, from time to time, the Compensation Committee may also approve the payment of discretionary cash bonuses to officers and other employees in recognition of an individual’s achievement beyond established targets. No discretionary bonuses were paid to any Named Executive Officer for fiscal year 2012 or 2013.
Severance Payments/Change of Control
We have employment agreements in place with each of the NEOs providing for severance compensation for a period of up to three years if the executive’s employment is terminated for a variety of reasons, including a change of control of Key. We have provided more information about these benefits, along with estimates of the value under various circumstances, under the heading “Compensation of Executive Officers—Payments upon Termination or Change of Control” below.
Our practice has been to structure control benefits as “double trigger” benefits. In other words, the change of control does not itself trigger benefits. Rather, benefits are paid only if the employment of the executive is terminated during a specified period after a change of control. We believe a “double trigger” benefit maximizes stockholder value because it prevents an unintended windfall to executives in the event of a friendly change of control, while still providing appropriate incentives to cooperate in negotiating any change of control. In addition, these agreements avoid distractions involving executive management that arise when the Board is considering possible strategic transactions involving a change of control, and assure continuity of executive management and objective input to the Board when it is considering any strategic transaction. For additional information concerning our change of control agreements, see “Compensation of Executive Officers—Payments upon Termination or Change of Control” below.
Each of the executive officers is subject to noncompete and non-solicitation provisions pursuant to the terms of their employment agreements. See below under “Compensation of Executive Officers—Employment Agreements” for additional information about the NEOs’ employment agreements.
Regulatory Considerations
The tax and accounting consequences of utilizing various forms of compensation are considered by the Compensation Committee when adopting new or modifying existing compensation.
Under Section 162(m) of the Code, publicly held corporations may not take a tax deduction for compensation in excess of $1 million paid to any of the executive officers named in the Summary Compensation Table during any fiscal year. There is an exception to the $1 million limitation forperformance-based compensation meeting certain requirements. To maintain flexibility in compensating executives in a manner designed to promote varying corporate goals, the Compensation Committee has not adopted a policy requiring all compensation to be deductible under Section 162(m). However, the Compensation Committee considers deductibility under Section 162(m) with respect to compensation arrangements for executives. The Compensation Committee cannot guarantee that future executive compensation will be fully deductible under Section 162(m). All compensation paid during calendar year 2013 was qualified under Section 162(m).
Accounting forEquity-Based Compensation
We account for equity-based compensation in accordance with the requirements of FASB ASC Topic 718,“Stock Compensation.”
Compensation of Executive Officers
Summary Compensation Table
The following table contains information about the compensation that our NEOs earned for fiscal years 2013, 2012 and 2011:
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1)(2) | Option Awards ($)(3) | Non-equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total | ||||||||||||||||||||||||
Richard J. Alario | 2013 | $ | 865,000 | — | $ | 3,996,300 | — | $ | 729,844 | $ | 60,190 | $ | 5,651,334 | |||||||||||||||||||
Chief Executive Officer | 2012 | $ | 863,731 | — | $ | 3,610,879 | — | — | $ | 64,453 | $ | 4,539,063 | ||||||||||||||||||||
2011 | $ | 832,000 | — | $ | 3,457,528 | — | $ | 2,121,600 | $ | 50,630 | $ | 6,461,758 | ||||||||||||||||||||
J. Marshall Dodson | 2013 | $ | 332,981 | — | $ | 1,006,750 | — | $ | 189,000 | $ | 3,801 | $ | 1,532,532 | |||||||||||||||||||
Chief Financial Officer | ||||||||||||||||||||||||||||||||
T. M. Whichard III | 2013 | $ | 219,000 | — | $ | 1,301,300 | — | — | $ | 235,958 | $ | 1,756,258 | ||||||||||||||||||||
Former Chief Financial Officer | 2012 | $ | 389,423 | — | $ | 1,175,413 | — | — | $ | 10,364 | $ | 1,575,200 | ||||||||||||||||||||
2011 | $ | 375,000 | — | $ | 1,168,790 | — | $ | 605,625 | $ | 4,164 | $ | 2,153,579 | ||||||||||||||||||||
Newton W. Wilson III | 2013 | $ | 495,904 | — | $ | 1,731,984 | — | $ | 284,223 | $ | 40,613 | $ | 2,552,724 | |||||||||||||||||||
Chief Operating Officer | 2012 | $ | 480,769 | — | $ | 1,519,005 | — | — | $ | 22,754 | $ | 2,022,528 | ||||||||||||||||||||
2011 | $ | 450,000 | — | $ | 1,402,542 | — | $ | 726,750 | $ | 26,862 | $ | 2,606,154 | ||||||||||||||||||||
Kim B. Clarke | 2013 | $ | 359,490 | — | $ | 968,398 | — | $ | 182,326 | $ | 17,378 | $ | 1,527,592 | |||||||||||||||||||
Administration and Chief People Officer | 2012 | $ | 342,500 | — | $ | 875,237 | — | — | $ | 17,970 | $ | 1,235,707 | ||||||||||||||||||||
2011 | $ | 325,817 | — | $ | 857,119 | — | $ | 532,950 | $ | 25,732 | $ | 1,741,618 | ||||||||||||||||||||
Kimberly R. Frye | 2013 | $ | 330,231 | — | $ | 816,200 | — | $ | 167,427 | $ | 13,075 | $ | 1,326,933 | |||||||||||||||||||
General Counsel and Secretary | 2012 | $ | 171,923 | — | $ | 723,337 | — | — | $ | 14,868 | $ | 910,128 | ||||||||||||||||||||
2011 | $ | 298,077 | — | $ | 779,189 | — | $ | 484,500 | $ | 20,524 | $ | 1,582,290 |
Perquisites
The following table contains information about the perquisites that our NEOs received for fiscal year 2013:
Name | Savings Plan Contributions(1) | Insurance | Auto Allowance(2) | Medical Expenses(3) | Other | Total | ||||||||||||||||||
Richard J. Alario | $ | 10,200 | $ | 14,487 | (4) | $ | 14,552 | $ | 8,361 | $ | 12,590 | (5) | $ | 60,190 | ||||||||||
J. Marshall Dodson | $ | 3,330 | — | — | $ | 291 | $ | 180 | (6) | $ | 3,801 | |||||||||||||
T. M. Whichard III | $ | 2,190 | — | — | — | $ | 233,768 | (8) | $ | 235,958 | ||||||||||||||
Newton W. Wilson III | $ | 10,200 | $ | 3,058 | (7) | — | $ | 26,167 | $ | 1,188 | (6) | $ | 40,613 | |||||||||||
Kim B. Clarke | $ | 10,200 | — | — | $ | 6,404 | $ | 774 | (6) | $ | 17,378 | |||||||||||||
Kimberly R. Frye | $ | 7,104 | — | — | $ | 5,791 | $ | 180 | (6) | $ | 13,075 |
2013 Grants of Plan-Based Awards
The following table presents information on plan-based awards made to the NEOs in fiscal 2013:
Estimated Possible Payouts UnderNon-Equity Incentive Plan Awards(1) | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards(2) ($) | ||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | ||||||||||||||||||||||||||||
Richard J. Alario | — | $ | 173,000 | $ | 1,081,250 | $ | 2,162,500 | — | — | — | — | |||||||||||||||||||||
1/21/13 | — | — | — | 259,900 | (3) | — | — | $ | 1,998,150 | |||||||||||||||||||||||
1/21/13 | — | — | — | 259,900 | (4) | — | — | $ | 1,998,150 | (5) | ||||||||||||||||||||||
J. Marshall Dodson | — | $ | 70,000 | $ | 280,000 | $ | 560,000 | — | — | — | — | |||||||||||||||||||||
1/21/13 | — | — | — | 22,000 | (3) | — | — | $ | 169,400 | |||||||||||||||||||||||
1/21/13 | — | — | — | 5,500 | (4) | — | — | $ | 42,350 | (5) | ||||||||||||||||||||||
3/25/13 | — | — | — | 100,000 | (3) | — | — | $ | 795,000 | |||||||||||||||||||||||
T. M. Whichard, III | — | $ | 136,500 | $ | 312,000 | $ | 741,000 | — | — | — | — | |||||||||||||||||||||
1/21/13 | 135,200 | (3) | — | — | $ | 1,041,040 | ||||||||||||||||||||||||||
1/21/13 | 33,800 | (4) | — | — | $ | 260,260 | (5) | |||||||||||||||||||||||||
Newton W. Wilson III | — | $ | 99,292 | $ | 446,814 | $ | 794,336 | — | — | — | — | |||||||||||||||||||||
1/21/13 | — | — | — | 134,960 | (3) | — | — | $ | 1,039,192 | |||||||||||||||||||||||
1/21/13 | — | — | — | 89,973 | (4) | — | — | $ | 692,792 | (5) | ||||||||||||||||||||||
Kim B. Clarke | — | $ | 72,030 | $ | 270,113 | $ | 576,240 | — | — | — | — | |||||||||||||||||||||
1/21/13 | — | — | — | 100,613 | (3) | — | — | $ | 774,720 | |||||||||||||||||||||||
1/21/13 | — | — | — | 25,153 | (4) | — | — | $ | 193,678 | (5) | ||||||||||||||||||||||
Kimberly R. Frye | — | $ | 66,144 | $ | 248,040 | $ | 529,152 | — | — | — | — | |||||||||||||||||||||
1/21/13 | — | — | — | 84,800 | (3) | — | — | $ | 652,960 | |||||||||||||||||||||||
1/21/13 | — | — | — | 21,200 | (4) | — | — | $ | 163,240 | (5) |
Employment Agreements
We have determined that it is appropriate to formally document the employment relationships that we have with certain executive officers of the Company and we have entered into employment agreements with each of our NEO’s that offer severance payments and other benefits following termination of the applicable executive officer’s employment under various scenarios, as described below. The Company believes that offering
severance benefits is beneficial in attracting and retaining key executive officers, encourages the retention of such executive officers during the pendency of a potential change of control transaction or other organizational changes within the Company and protects the Company’s interest. Each such agreement contains a confidentiality covenant, requiring the applicable officer to not disclose confidential information at any time, as well as noncompetition and nonsolicitation covenants, which prevent the executive from competing during employment and for a prescribed period after the officer’s employment terminates. We believe the terms and benefits offered pursuant to these employment agreements are provided at competitive market levels and allow us to attract, retain and reward superior employees for key positions.
Each NEO’s employment agreement provides for an initial term of two years and automatically renews for successive one-year extension terms unless terminated by the executive or Key at least 90 days prior to the commencement of an extension term. Each of the NEOs receives an annual salary, which can be increased (but not decreased) at the discretionrecommendation of the Compensation Committee, and, in the case of Mr. Wilson, Mr. Dodson, Ms. Clarke and Ms. Frye, at the discretion of the CEO. Each executive is also eligible for an annual incentive bonus, of up to 100% of his or her base salary in the case of Mr. Wilson, Mr. Dodson, Ms. Clarke and Ms. Frye, up to 200% of his base salary in the case of Mr. Alario. Each NEO is entitled to participate in awards of equity-based incentives at the discretion of the Board or the Compensation Committee. Pursuant to the Executive Health Reimbursement Plan, in the absence of medical and dental insurance coverage, Key reimburses each of the NEOs directly for all medical and dental expenses incurred by them and their respective spouses and children, so that the executives have no out-of-pocket cost with respect to such expenses.
Mr. Alario receives an allowance of $1,100 per month, plus reimbursement for reasonable insurance and maintenance expenses, in connection with the use of his automobile and is entitled to be reimbursed up to $15,000 in any fiscal year for personal services provided by certified public accountants and tax attorneys. Mr. Alario is also entitled to be reimbursed for the initiation fee and the annual or other periodic fees, dues and costs to become and remain a member of one club or association for business use, as approved by the Compensation Committee.
Each NEO’s employment agreement contains a comprehensive non-compete provision. The non-compete provision prohibits the executive from engaging in any activities that are competitive with Key during his or her employment, and for any period in which the executive is receiving severance compensation from Key (or if payment of severance compensation is increased due to a change of control, for a period of three years after the termination of employment) or for twelve months following termination if the executive receives no severance compensation from Key.
The employment agreements for all of the NEOs provide for compliance with the provisions of Section 409A of the Code concerning the payment of potential future benefits to the executives and reimbursement of any tax penalties owed pursuant to Section 409A of the Code on an after-tax basis. If any of Mr. Alario, Mr. Wilson, Mr. Dodson, Ms. Clarke or Ms. Frye is subject to the tax imposed due to unfavorable tax treatment under Section 4999 of the Code because of any termination-related payments, Key has agreed to reimburse the NEO for such tax on an after-tax basis. However, for Mr. Wilson, Mr. Dodson, Ms. Clarke and Ms. Frye, if it is determined that he or she is otherwise entitled to a gross-up payment, the total parachute payments may be reduced if it is determined that the reduction in the total parachute payments would not give rise to any excise tax and the reduced parachute payments would not be less than 90% of the total parachute payments before such reduction. In addition, if any of Mr. Alario, Mr. Wilson, Ms. Clarke or Ms. Frye is subject to unfavorable tax treatment under Section 409A of the Code because of any nonqualified deferred compensation payments, Key has agreed to reimburse the NEO for such tax on an after-tax basis. As part of a comprehensive review of executive compensation conducted in 2011, the Compensation Committee confirmed that it was appropriate to honor and preserve the existing provisions related to the excise tax reimbursement for Key’s current executive officers, including the NEOs. However, the Compensation Committee determined that Key will not include any reimbursement provisions for taxes under either Section 409 or Section 4999 of the Code in employment agreements for executives on a prospective basis.
The employment agreements also provide for certain severance benefits for each of the NEOs. Please see “Payments Upon Termination or Change of Control” and “Elements of Severance Payments” below for further discussion.
On March 25, 2013, Mr. Whichard retired, effective immediately, as Senior Vice President and Chief Financial Officer. Mr. Whichard remained an employee of the Company until June 24, 2013. In connection with his departure, (i) Mr. Whichard received $780,000 payable over the 24 months beginning June 28, 2013 and health and welfare benefits over the 24 months beginning June 28, 2013 and (ii) Mr. Whichard’s unvested equity and outstanding performance units vested, all in accordance with the terms of his employment agreement which expired upon his departure.
2013 Outstanding Equity Awards at Fiscal Year-End
The following table provides information with respect to outstanding stock options, restricted stock and performance units held by the NEOs as of December 31, 2013:
OPTION AWARDS | STOCK AWARDS | |||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable(1) | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | |||||||||||||||||||||
Richard J. Alario | 200,000 | — | — | $ | 11.90 | 06/24/15 | 476,687 | (3) | $ | 3,765,827 | ||||||||||||||||||
224,719 | (4) | — | — | $ | 14.32 | 08/22/17 | 29,750 | (5) | $ | 1,025,025 | (6) | |||||||||||||||||
231,000 | — | — | $ | 15.07 | 04/10/18 | |||||||||||||||||||||||
J. Marshall Dodson | 10,000 | 14.03 | 8/22/15 | 129,618 | (3) | $ | 1,023,982 | |||||||||||||||||||||
25,000 | 15.05 | 3/15/16 | 2,750 | (5) | $ | 21,725 | (6) | |||||||||||||||||||||
14,888 | (4) | 14.32 | 8/22/17 | |||||||||||||||||||||||||
7,000 | 15.07 | 4/10/18 | ||||||||||||||||||||||||||
T. M. Whichard III | — | — | — | — | — | — | — | |||||||||||||||||||||
— | — | — | — | — | 16,900 | (5) | $ | 133,510 | (6) | |||||||||||||||||||
Newton W. Wilson III | 125,000 | — | — | $ | 11.90 | 06/24/15 | 225,000 | (3) | $ | 1,777,500 | ||||||||||||||||||
74,906 | (4) | — | — | $ | 14.32 | 08/22/17 | 44,986 | (5) | $ | 355,389 | (6) | |||||||||||||||||
72,250 | — | — | $ | 15.07 | 04/10/18 | |||||||||||||||||||||||
Kim B. Clarke | — | — | — | — | — | 153,742 | (3) | $ | 1,214,562 | |||||||||||||||||||
— | — | — | — | — | 12,576 | (5) | $ | 99,350 | (6) | |||||||||||||||||||
Kimberly R. Frye | 7,500 | — | — | $ | 15.05 | 03/15/16 | 130,513 | (3) | $ | 1,031,053 | ||||||||||||||||||
12,000 | — | — | $ | 14.32 | 08/22/17 | 10,600 | (5) | $ | 83,740 | (6) | ||||||||||||||||||
8,500 | — | — | $ | 15.07 | 04/10/18 | |||||||||||||||||||||||
25,000 | — | — | $ | 16.06 | 07/31/18 | |||||||||||||||||||||||
8,825 | — | — | $ | 16.50 | 08/21/18 | |||||||||||||||||||||||
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2013 Option Exercises and Stock Vested
The following table sets forth certain information regarding options and stock awards exercised and vested, respectively, during 2013 for the NEOs:
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#)(1) | Value Realized on Vesting ($)(2) | ||||||||||||
Richard J. Alario | — | — | 267,845 | $ | 2,155,542 | |||||||||||
J. Marshall Dodson | — | — | 9,359 | $ | 75,312 | |||||||||||
T. M. Whichard III | — | — | 114,735 | $ | 919,115 | |||||||||||
Newton W. Wilson III | — | — | 109,622 | $ | 881,618 | |||||||||||
Kim B. Clarke | — | — | 64,671 | $ | 520,131 | |||||||||||
Kimberly R. Frye | — | — | 56,583 | $ | 455,497 |
Payments Upon Termination or Change of Control
The following tables reflect the potential payments to which the NEOs would be entitled upon termination of employment on December 31, 2013. The closing price of a share of our common stock on December 31, 2013, the last trading day of the year, was $7.90. The actual amounts to be paid out to executives upon termination can only be determined at the time of each NEO’s separation from Key.
Name | Non- Renewal(1) | For Cause or Voluntary Resignation(2) | Death(3) | Disability(4) | Without Cause or For Good Reason(5) | Change of Control and Termination(6) | ||||||||||||||||||
Richard J. Alario | ||||||||||||||||||||||||
Cash Severance(7) | $ | 1,772,300 | — | — | $ | 2,679,600 | $ | 2,637,300 | $ | 5,274,600 | ||||||||||||||
Restricted Stock(8) | $ | 3,765,827 | — | $ | 3,765,827 | $ | 3,765,827 | $ | 3,765,827 | $ | 3,765,827 | |||||||||||||
Options and SARs(9) | — | — | — | — | — | — | ||||||||||||||||||
Phantom Shares(10) | — | — | — | — | — | — | ||||||||||||||||||
Performance Units(11) | $ | 2,241,242 | — | $ | 2,241,242 | $ | 2,241,242 | $ | 2,241,242 | $ | 2,241,242 | |||||||||||||
Health & Welfare(12) | $ | 74,358 | — | $ | 101,259 | $ | 148,715 | $ | 74,358 | $ | 148,715 | |||||||||||||
Excise TaxGross-Ups(13) | n/a | n/a | n/a | n/a | n/a | — | ||||||||||||||||||
Total Benefit | $ | 7,853,727 | — | $ | 6,108,328 | $ | 8,835,384 | $ | 8,718,727 | $ | 11,430,384 |
Name J. Marshall Dodson Cash Severance Restricted Stock(8) Options and SARs(9) Phantom Shares(10) Performance Units(11) Health & Welfare(12) Excise TaxGross-Ups(13) Total Benefit Non-
Renewal(1) For Cause or
Voluntary
Resignation(2) Death(3) Disability(4) Without
Cause or For
Good
Reason(5) Change of
Control and
Termination(6) $ 700,000 — — $ 350,000 $ 700,000 $ 1,890,000 $ 1,023,982 — $ 1,023,982 $ 1,023,982 $ 1,023,982 $ 1,023,982 — — — — — — — — — — — — $ 43,450 — $ 43,450 $ 43,450 $ 43,450 $ 43,450 $ 16,430 — $ 19,736 $ 21,906 $ 16,430 $ 21,906 n/a n/a n/a n/a n/a — $ 1,783,862 — $ 1,087,168 $ 1,439,339 $ 1,783,862 $ 2,979,339
Name | Non- Renewal(1) | For Cause or Voluntary Resignation(2) | Death(3) | Disability(4) | Without Cause or For Good Reason(5) | Change of Control and Termination(6) | ||||||||||||||||||
Newton W. Wilson III | ||||||||||||||||||||||||
Cash Severance | $ | 992,920 | — | — | $ | 496,460 | $ | 992,920 | $ | 2,978,760 | ||||||||||||||
Restricted Stock(8) | $ | 1,777,500 | — | $ | 1,777,500 | $ | 1,777,500 | $ | 1,777,500 | $ | 1,777,500 | |||||||||||||
Options and SARs(9) | — | — | — | — | — | — | ||||||||||||||||||
Phantom Shares(10) | — | — | — | — | — | — | ||||||||||||||||||
Performance Units(11) | $ | 791,217 | — | $ | 791,217 | $ | 791,217 | $ | 791,217 | $ | 791,217 | |||||||||||||
Health & Welfare(12) | $ | 64,789 | — | $ | 77,606 | $ | 86,385 | $ | 64,789 | $ | 86,385 | |||||||||||||
Excise TaxGross-Ups(13) | n/a | n/a | n/a | n/a | n/a | — | ||||||||||||||||||
Total Benefit | $ | 3,626,426 | — | $ | 2,646,323 | $ | 3,151,562 | $ | 3,626,426 | $ | 5,633,862 |
Name | Non- Renewal(1) | For Cause or Voluntary Resignation(2) | Death(3) | Disability(4) | Without Cause or For Good Reason(5) | Change of Control and Termination(6) | ||||||||||||||||||
Kim B. Clarke | ||||||||||||||||||||||||
Cash Severance | $ | 720,300 | — | — | $ | 360,150 | $ | 720,300 | $ | 2,160,900 | ||||||||||||||
Restricted Stock(8) | $ | 1,214,562 | — | $ | 1,214,562 | $ | 1,214,562 | $ | 1,214,562 | $ | 1,214,562 | |||||||||||||
Options and SARs(9) | — | — | — | — | — | — | ||||||||||||||||||
Phantom Shares(10) | — | — | — | — | — | — | ||||||||||||||||||
Performance Units(11) | $ | 245,050 | — | $ | 245,050 | $ | 245,050 | $ | 245,050 | $ | 245,050 | |||||||||||||
Health & Welfare(12) | $ | 25,895 | — | $ | 31,962 | $ | 34,526 | $ | 25,895 | $ | 34,526 | |||||||||||||
Excise TaxGross-Ups(13) | n/a | n/a | n/a | n/a | n/a | — | ||||||||||||||||||
Total Benefit | $ | 2,205,807 | — | $ | 1,491,574 | $ | 1,854,288 | $ | 2,205,807 | $ | 3,655,038 |
Name | Non- Renewal(1) | For Cause or Voluntary Resignation(2) | Death(3) | Disability(4) | Without Cause or For Good Reason(5) | Change of Control and Termination(6) | ||||||||||||||||||
Kimberly R. Frye | ||||||||||||||||||||||||
Cash Severance | $ | 661,440 | — | — | $ | 330,720 | $ | 661,440 | $ | 1,984,320 | ||||||||||||||
Restricted Stock(8) | $ | 1,031,053 | — | $ | 1,031,053 | $ | 1,031,053 | $ | 1,031,053 | $ | 1,031,053 | |||||||||||||
Options and SARs(9) | — | — | — | — | — | — | ||||||||||||||||||
Phantom Shares(10) | — | — | — | — | — | — | ||||||||||||||||||
Performance Units(11) | $ | 205,779 | — | $ | 205,779 | $ | 205,779 | $ | 205,779 | $ | 205,779 | |||||||||||||
Health & Welfare(12) | $ | 15,888 | — | $ | 18,764 | $ | 21,183 | $ | 15,888 | $ | 21,183 | |||||||||||||
Excise Tax Gross-Ups(13) | n/a | n/a | n/a | n/a | n/a | — | ||||||||||||||||||
Total Benefit | $ | 1,914,159 | — | $ | 1,255,596 | $ | 1,588,735 | $ | 1,914,159 | $ | 3,242,335 |
None of the NEOs would be subject to excise tax in connection with change of control benefits.
As described above, on March 25, 2013, Mr. Whichard retired, effective immediately, as Senior Vice President and Chief Financial Officer. He remained an employee of the Company until June 24, 2013 at which time his Employment Agreement was no longer in effect. In connection with his departure, (i) Mr. Whichard will receive $780,000 payable over the 24 months beginning June 28, 2013 and health and welfare benefits over the
24 months beginning June 28, 2013 and (ii) Mr. Whichard’s unvested equity and outstanding performance units vested, all in accordance with the terms of his employment agreement which expired upon his departure.
Elements of Severance Payments
Key has entered into employment agreements with each NEO that provide for certain payments upon termination depending upon the circumstances of the NEO’s separation from Key, as summarized below.
Cash Severance
If, during the term of Mr. Alario’s employment agreement, he is terminated by Key for any reason other than for “Cause” (as defined in his employment agreement), or if he terminates his employment for “Good Reason” (as defined in his employment agreement), Mr. Alario will be entitled to severance compensation in an aggregate amount, generally equal to three times his base salary in effect at the time of termination, payable in equal installments over a 36-month period following termination. If Mr. Alario’s employment is terminated because Key does not renew his employment agreement, Mr. Alario is entitled to the greater of one year’s base salary then in effect or the highest multiple of base salary in effect for non-renewal under any other executive officer’s employment agreement in effect at the time of non-renewal. However, Mr. Alario would only be able to increase the severance above one year’s salary if such other executive officer’s employment agreement was also either in effect on the commencement date of Mr. Alario’s agreement or later approved by the Compensation Committee after the commencement date of his agreement. For the year ended December 31, 2012, he would have been entitled to an amount equal to two times his base salary.
For Mr. Wilson, Mr. Dodson, Ms. Clarke and Ms. Frye, if, during the term of any such NEO’s employment agreement, the NEO is terminated by Key for any reason other than disability or for “Cause” (as defined in the employment agreements), including non-renewal of the NEO’s employment agreement or if the NEO terminates his or her employment for “Good Reason” (as defined in each employment agreement), the NEO will be entitled to severance compensation in an aggregate amount equal to two times the NEO’s base salary in effect at the time of termination, payable in equal installments over a 24-month period following termination. If any of these four NEOs is terminated for disability, such NEO will be entitled to severance compensation in an aggregate amount equal to one times the NEO’s base salary in effect at the time of termination payable in equal installments over a 12-month period following termination. None of Mr. Wilson, Mr. Dodson, Ms. Clarke or Ms. Frye is entitled to cash severance compensation upon his or her death.
For each of the NEOs, each of their respective employment agreements specifies that if termination is within one year following a change of control of Key, the severance compensation will be an amount equal to three times their respective base salary then in effect plus an amount equal to three times their respective annual target cash bonus, and will be payable in one lump sum on the effective date of the termination.
Equity-Based Incentives
Equity-based incentives include restricted stock, stock options, performance units and SARs. For all of the NEOs, all equity-based incentives immediately vest upon a change of control of Key. For Mr. Alario, Mr. Wilson, Mr. Dodson, Ms. Clarke and Ms. Frye, if any such NEO is terminated by Key for any reason other than for “Cause,” or if the NEO terminates his or her employment for “Good Reason” (as defined in each employment agreement) or following a change of control of Key, any equity-based incentives held by the NEO that have not vested prior to the termination date shall immediately vest and, for stock options and SARs, such awards shall remain exercisable until, with respect to Mr. Alario, the earlier of the third anniversary date of the termination or the stated expiration date of the equity-based incentive, and with respect to Mr. Wilson, Mr. Dodson, Ms. Clarke and Ms. Frye, until the earlier of the first anniversary date of the termination or the stated expiration date of the equity-based incentive.
Health & Welfare
If Mr. Alario, Mr. Wilson, Mr. Dodson, Ms. Clarke or Ms. Frye terminates his or her employment for “Good Reason” (as defined in each employment agreement) or following a change of control or Key terminates his or her employment for any reason other than for “Cause,” including non-renewal, the NEO will continue to receive the benefits that he or she was receiving at Key’s expense prior to such termination until the earlier of (i) 24 months with respect to Mr. Wilson, Mr. Dodson, Ms. Clarke and Ms. Frye, or 36 months with respect to Mr. Alario, (ii) the last date of eligibility under the applicable benefits or (iii) the date on which the NEO commences full-time employment with another employer that provides equivalent benefits; provided that, if termination occurs for any reason within one year following a change of control or in anticipation of a change of control, in lieu of such benefits, Key will pay an amount in cash equal to the aggregate reasonable expenses Key would incur to pay such benefits. In the event of Mr. Alario’s death, his spouse and dependents are entitled to up to 36 months of coverage after the date of termination. With respect to the other NEOs, the executives’ spouses and dependents are entitled to up to 24 months of coverage after the date of termination. In addition, Messrs. Alario and Wilson are entitled to term-life insurance for such period that they are otherwise entitled to severance under their respective employment agreements.
Tax Gross-Ups
If any of Mr. Alario, Mr. Wilson, Ms. Clarke or Ms. Frye is subject to the tax imposed due to unfavorable tax treatment under Section 4999 of the Code because of any termination-related payments, Key has agreed to reimburse the NEO for such tax on an after-tax basis. However, for Mr. Wilson, Ms. Clarke and Ms. Frye, if it is determined that he or she is otherwise entitled to a gross-up payment, the total parachute payments may be reduced if it is determined that the reduction in the total parachute payments would not give rise to any excise tax and the reduced parachute payments would not be less than 90% of the total parachute payments before such reduction. In addition, if any of Mr. Alario, Mr. Wilson, Ms. Clarke or Ms. Frye is subject to unfavorable tax treatment under Section 409A of the Code because of any nonqualified deferred compensation payments, Key has agreed to reimburse the NEO for such tax on an after-tax basis. As part of a comprehensive review of executive compensation conducted in 2011, the Compensation Committee confirmed that it was appropriate to honor and preserve the existing provisions related to the excise tax reimbursement for Key’s current executive officers, including the NEOs. However, the Compensation Committee determined that Key will not include any reimbursement provisions for taxes under either Section 409A or Section 4999 of the Code in employment agreements for executives on a prospective basis.
For 2013, the non-employee directors received a fee equal to $75,000, or a pro-rated amount for partial years of service. The non-employee directors also received an annual award of our common stock having a fair market value of $175,000, and are reimbursed for travel and other expenses directly associated with Key business. Each non-employee director received the annual award of common stock in 2013. Additionally, the chair of the CGN Committee received an additional $10,000 per year for his service, the chair of the Compensation Committee received an additional $12,500 per year for his service, and the chair of the Audit Committee received an additional $20,000 per year for her service. The Lead Director received an additional $25,000 per year for his service. All other members of the Audit Committee (other than the chair) received an additional $10,000 per year for their service.
Third parties other than Longnecker provided advice and consulting services related to all other non-executive compensation.
The following table discloses the cash and equity awards earned, paid or awarded, as the case may be, to each of our non-employee directors during the fiscal year ended December 31, 2013:
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | |||||||||
Lynn R. Coleman | $ | 75,000 | $ | 175,001 | $ | 250,001 | ||||||
Kevin P. Collins | $ | 85,000 | $ | 175,001 | $ | 260,001 | ||||||
William D. Fertig | $ | 85,000 | $ | 175,001 | $ | 260,001 | ||||||
W. Phillip Marcum | $ | 75,000 | $ | 175,001 | $ | 250,001 | ||||||
Ralph S. Michael III | $ | 110,000 | $ | 175,001 | $ | 285,001 | ||||||
William F. Owens | $ | 85,000 | $ | 175,001 | $ | 260,001 | ||||||
Robert K. Reeves | $ | 87,500 | $ | 175,001 | $ | 262,501 | ||||||
Mark H. Rosenberg | $ | 45,536 | $ | 175,001 | $ | 220,537 | ||||||
J. Robinson West | $ | 75,000 | $ | 175,001 | $ | 250,001 | ||||||
Arlene M. Yocum | $ | 95,000 | $ | 175,001 | $ | 270,001 |
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Messrs. Reeves (chair), Fertig, Marcum and West, all of whom are independent non-employee directors. None of the Compensation Committee members has served as an officer or employee of Key, and none of Key’s executive officers have served as a member of a compensation committee or board of directors of any other entity, that has an executive officer serving as a member of the Board. As discussed above, Messrs. Reeves and West have certain relationships that require disclosure under SEC regulations but which the Board determined do not affect each such director’s independence.See“Certain Relationships andRelated Party Transactions” under “Corporate Governance.”
Report of the Compensation Committee
The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with our management. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
By the Compensation Committee of the Board of Directors of Key Energy Services, Inc.
Robert K. Reeves, Chair
William D. Fertig
W. Phillip Marcum
J. Robinson West
PROPOSAL 2—ADOPTION OF THE 2014 EQUITY AND CASH INCENTIVE PLAN
The Board of Directors believes that the adoption of the 2014 Equity and Cash Incentive Plan is in our best interests and the best interests of our stockholders and therefore recommends a vote FOR this proposal.
On January 30, 2014,February 22, 2019, our Board adopted, subject to approval by our stockholders, the Key Energy Services, Inc. 20142019 Equity and Cash Incentive Plan (the “2014“2019 Plan” or the “Plan”). Our Board has directed that the proposal to approve the Plan be submitted to our stockholders for their approval at the annual meeting. Stockholder approval is being sought (i) in order to meet the NYSE listing requirements, (ii) so that compensation attributable to awards under the Plan may qualify for an exemption from the deduction limit under section 162(m) of the Code (see discussion of “U.S. Federal Income Tax Consequences” below), and (iii) in order for incentive stock options to meet the requirements of the Code.
Shares of common stock available for distribution under the 2019 Plan shall be authorized and unissued shares or shares reacquired by the Company in any manner.
such awards.
1, 2019.
options, and up to 5% of the shares of common stock initially authorized for issuance under the Plan may be granted free of the vesting limitations set forth in the 2019 Plan.
each option will be fixed by the Administrator but no incentive stock option may be exercisable after the expiration of ten years from the grant date; however, in the case of incentive stock options granted to a 10% stockholder, the term of such option may not exceed five years from the grant date. The exercise price of each option may not be less than 100% of the fair market value of the common stock subject to the option on the date of grant; however, in the case of incentive stock options granted to a 10% stockholder, the exercise price may not be less than 110% of the fair market value on the date of grant. The Administrator will determine the time or times at which, or other conditions upon which, an option will vest or become exercisable. Options, including both incentive stock options and nonstatutory stock options, will not be transferable except by will or by the laws of descent and distribution and will be exercisable during the lifetime of the Participant only by the Participant. However, the Participant may designate a third party who, in the event of the Participant’s death, will be entitled to exercise the option.
Option Awards granted under the 2019 Plan shall not be eligible to receive or be credited with dividends or dividend equivalents.
Performance Compensation Awards. The 2014 Plan provides the Administrator with the authority, at the time of grant of any Award (other than options and stock appreciation rights granted with an exercise price or grant price equal to or greater than the fair market value per share of stock on the date of the grant), to designate such Award as a performance compensation award in order to qualify such Award as “performance-based compensation” under Section 162(m) of the Code. In addition, the 2014 Plan provides the Administrator with the
authority to make an Award of a cash bonus to any Participant and designate such Award as a performance compensation award in order to qualify such Award as “performance-based compensation” under Section 162(m) of the Code.
During the first 90 days of a performance period (or, if longer or shorter, within the maximum period allowed under Section 162(m) of the Code), which period may not be less than one year (the “Performance Period”), the Administrator may, in its sole discretion, select which Participants will be eligible to receive performance compensation awards in respect of such Performance Period. The 2014 Plan provides that, with regard to a particular performance compensation award, the Administrator has full discretion to select the length of the Performance Period, the performance criteria that will be used to establish the performance goal, the kind(s) and/or level(s) of the performance goal(s) that is (are) to apply to the Company and the performance formula to be applied against the relevant performance goal to determine, with regard to the performance compensation award of a particular Participant, whether all, some portion or none of the performance compensation award has been earned for the Performance Period.
The maximum amount payable to any Participant under the 2014 Plan for a calendar year in a Performance Period with respect to performance compensation awards of restricted stock, restricted stock units, performance shares or performance units is 500,000 shares of common stock (applied separately to each type of award) or, in the event such performance compensation award is paid in cash, the equivalent cash value thereof, determined as of the date set forth in the applicable award agreement. The maximum amount that can be paid in any calendar year to any Participant pursuant to a performance compensation award in the form of a cash bonus is $2,000,000.
20142019 Plan are satisfied, in tandem with all or part of any option granted under the 20142019 Plan (“Related Rights”). Upon exercise, the holder of a stock appreciation right will be entitled to receive from us an amount equal to the product of (a) the excess of the fair market value of one share of our common stock on the date of exercise over the exercise price per share specified in the stock appreciation right or related option, multiplied by (b) the number of shares for which such stock appreciation right is exercised. The exercise price of a Free Standing Right will be determined by the Administrator, but will not be less than 100% of the fair market value of our common stock on the grant date of such Free Standing Right. A Related Right granted simultaneously with or subsequent to the grant of an option will have the same exercise price as the related option, will be transferable only upon the same terms and conditions as the related option, and will be exercisable only to the same extent as the related option. A stock appreciation right may be settled, at the sole discretion of the Administrator, in cash, shares of our common stock or a combination thereof.Performance Shares and Performance Units. A Performance Share represents No stock appreciation right shall be exercisable after the expiration of ten years from the date it was granted. In addition, no stock appreciation right shall be eligible to receive a shareor be credited with dividends or dividend equivalents.
underlying performance Award vests.
Change in Control. The Committee may provide in an award agreement terms under which Awards mayControl will fully vest and as applicable, be exercisable or payablebecome exercisable. Notwithstanding the foregoing, in the event of a Change in Control, if any Awards granted pursuant to the 2019 Plan are not assumed by a successor entity, a Participant’s Award will be treated, to the extent permitted under Section 409A of the Code, in accordance with one or more of the following methods as determined by the Administrator in its sole discretion: (a) settle such Awards for an amount of cash or securities equal to their value, (b) provide for the issuance of substitute awards that will substantially preserve the otherwise applicable terms of any affected Awards previously granted under the 2019 Plan, (c) deem any performance conditions satisfied at target, maximum or actual performance
appreciation rights may be exercised in full for a limited period of time on or before a specified date (before or after such Change in Control) fixed by the Administrator, after which specified datewhere all unexercised options and stock appreciation rights and all rights of holders thereunder shall terminate, (b) require the mandatory surrender to us by selected holders of options and stock appreciation rights of some or all of the outstanding options and stock appreciation rights held by such holders as of a date, before or after such Change in Control, specified by the Administrator, in which event the Administrator shall thereupon cancel such options and stock appreciation rights and we shall pay to each such holdersare settled for an amount of cash per share equal toor securities (as determined in the spread, and (c) make such adjustments to options and stock appreciation rights then outstanding asAdministrator’s discretion), the Administrator deems appropriate to reflect such Change in Control, including an adjustment to cover the number and class of shares of stock or other securities or property (including, without limitation, cash) to which the holder would have been entitled pursuant to the terms of the agreement of merger, consolidation or sale of assets and dissolution if, immediately prior to such merger, consolidation or sale of assets and dissolution, the holder had been the holder of record of the number of shares of common stock then covered by suchmay terminate any option or stock appreciation right. Without limitingright for which the foregoing, ifexercise price is equal to or exceeds the per share fair market value of the common stockconsideration to be paid in the Change in Control without payment of consideration therefor. Further, similar actions to those specified in this paragraph may be taken under the 2019 Plan in the event of a merger or other corporate reorganization that does not exceedconstitute a Change in Control under the per share exercise price of the options or stock appreciation rights, we shall not be required to make any payment to the Participant upon surrender of the option or stock appreciation right.
2019 Plan.
other forfeiture provisions, as the Administrator may deem advisable.
Participants Outside of the United States. If any individual who receives an award under the 2014 Plan is subject to taxation in a country other than the United States, our Board or its designee may make the award on such terms and conditions as our Board deems appropriate to comply with the laws of the applicable country.
However, for illustrative purposes, the following table sets forth amounts granted to each of our NEOs, executive officers and non-executive directors and all other employees in 2018 under the 2016 ECIP.
| | | Stock-Based Awards | | | Cash-Based Awards(1) | | ||||||||||||
Name and Position | | | Dollar Value ($) | | | Number of Shares/Units | | | Dollar Value ($) | | |||||||||
Rob Saltiel Chief Executive Officer | | | | $ | 3,255,008 | | | | | | 251,158 | | | | | $ | 273,288 | | |
Robert Drummond Former Chief Executive Officer | | | | | — | | | | | | — | | | | | | — | | |
J. Marshall Dodson Chief Financial Officer | | | | | — | | | | | | — | | | | | $ | 178,989 | | |
David Brunnert Former Chief Operating Officer | | | | | — | | | | | | — | | | | | | — | | |
Scott P. Miller Chief Administrative Officer | | | | | — | | | | | | — | | | | | $ | 133,557 | | |
Katherine I. Hargis General Counsel | | | | | — | | | | | | — | | | | | $ | 133,557 | | |
Louis Coale Vice President & Controller | | | | $ | 324,800 | | | | | | 20,000 | | | | | $ | 60,170 | | |
Executive Group | | | | $ | 3,579,808 | | | | | | 271,158 | | | | | $ | 719,591 | | |
Non-Executive Director Group | | | | $ | 665,520 | | | | | | 53,691 | | | | | | — | | |
Non-Executive Officer Employee Group | | | | $ | 2,030,430 | | | | | | 132,000 | | | | | $ | 4,051,796 | | |
ordinary compensation income in the year of disposition in an amount equal to the excess, if any, of the fair market value of the option shares at the time of exercise (or, if less, the amount realized on disposition), over the exercise price thereof. We are not entitled to any deduction on account of the grant of incentive stock options or the individual’s exercise of the option to acquire common stock. However, in the event of a subsequent disqualifying disposition of such shares of common stock acquired pursuant to the exercise of an incentive stock option under circumstances resulting in taxable compensation to the individual, subject to the limitations set forth in Section 162(m) of the Code and discussed below, in general, we should be entitled to a tax deduction equal to the amount treated as taxable compensation to the individual. Additional special rules apply if an individual exercises an incentive stock option by paying the exercise price, in whole or in part, by the transfer of shares of common stock to the Company.
that Section.
that Section.
Performance Shares and Performance Units. A Participant will not be subject to tax upon the grant of a Performance Share or Performance Unit Award. Rather, upon the delivery of shares or cash pursuant to a Performance Share or Performance Unit Award, the Participant will have taxable compensation equal to the fair market value of the number of shares (or the amount of cash) the Participant actually receives with respect to the Award. We will be able to deduct the amount of taxable compensation to the Participant for U.S. federal income tax purposes, but the deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.
Section 162(m)that Section.
qualified performance-based compensation under Section 162(m) of the Code only if the Awards and the procedures associated with them comply with all other requirements of Section 162(m) of the Code. We cannot assure you that compensation attributable to awardsAwards granted under the 20142019 Plan will be treated as qualified performance-baseddeductible compensation under Section 162(m) of the code and thus be deductible to us.
Code.
IRS Circular 230 Notice Requirement. This communication is not given in the form of a covered opinion, within the meaning of Circular 230 issued by the United States Secretary of the Treasury. Thus, we are required to inform you that you cannot rely upon any tax advice contained in this communication for the purpose of avoiding United States federal tax penalties. In addition, any tax advice contained in this communication may not be used to promote, market or recommend a transaction to another party.
the 2016 ECIP.
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||||
(in thousands) | (in thousands) | |||||||||||
Equity compensation plans approved by stockholders(1) | 2,382 | $ | 14.09 | 219 | ||||||||
Equity compensation plans not approved by stockholders | — | $ | 0.00 | — | ||||||||
|
|
|
| |||||||||
Total | 2,382 | 219 |
Plan Category | | | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants And Rights (a)(2) | | | Weighted Average Exercise Price of Outstanding Options, Warrants And Rights (b)(3) | | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)(4) | | |||||||||
| | | (in thousands) | | | | | | | | | (in thousands) | | ||||||
Equity compensation plans approved by stockholders(1) | | | | | 803 | | | | | $ | 34.92 | | | | | | 380 | | |
Equity compensation plans not approved by stockholders | | | | | — | | | | | $ | — | | | | | | — | | |
Total | | | | | 803 | | | | | | | | | | | | 380 | | |
PUBLIC ACCOUNTING FIRM
Our
| | | 2018 | | | 2017(1) | | ||||||
Audit fees | | | | $ | 1,080,000 | | | | | $ | 1,129,000 | | |
Audit-related fees | | | | | — | | | | | | — | | |
Tax fees | | | | | — | | | | | | — | | |
All other fees | | | | | — | | | | | | — | | |
Total | | | | $ | 1,080,000 | | | | | $ | 1,129,000 | | |
This advisory vote on executive compensation is not binding on the Company, the Compensation Committee or the Board. However, the Compensation Committee and the Board will take into account the result of the vote when determining future executive compensation programs.
We are providingOFFICER COMPENSATION
We are asking our stockholders to indicate their support for our NEO compensation as described in this proxy statement. This proposal gives our stockholders the opportunity to express their views on our NEOs’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies and practices describedas disclosed in the proxy statement each year. The Board believes an annual vote is therefore consistent with our efforts to engage in an ongoing dialogue with our shareholders on executive compensation and corporate governance matters.
While we intend to carefully considerProposal FIVE.
Accordingly, we ask ourtake into account the result of this vote when determining the frequency of future Say-on-Pay votes.
“RESOLVED, that the compensation paid tofrequency of “1 year” for future votes
on a non-binding advisory basis, on the Company’s Named Executive Officers, as disclosed herein pursuant to Item 402Officer compensation.
The Board of Directors believes that approvalDirector Candidates
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a)February 3, 2020. We will only consider proposals that meet the requirements of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and persons who beneficially own more than 10% of a registered class of our equity securities, to file initial reports of ownership on Form 3 and changes in ownership on Forms 4 or 5 with the SEC. Such officers, directors and 10% stockholders also are required by SECapplicable rules to furnish Key with copies of all Section 16(a) reports they file. Based solely on its review of the copies of such forms furnished or available to us, we believe thatSEC and our directors, executive officers and 10% stockholders complied with all Section 16(a) filing requirements forBylaws.
Stockholder Communicationsrecommend to the Board of Directors
nominees for election by the holders of our Common Stock at the annual meeting of stockholders, as well as to fill vacancies or additions on the Board of Directors that may occur between annual meetings (Soter, as holder of our Series A Preferred Stock, identifies the individuals whom Soter will nominate and elect to the Board as sole holder of the Series A Preferred Stock). The Nominating and Governance Committee endeavors to recommend only director candidates who possess the highest personal values and integrity; who have experience and have exhibited achievements in one or more of the key professional, business, financial, legal and other challenges that face a U.S. oilfield services company; who exhibit sound judgment, intelligence, personal character, and the ability to make independent analytical inquiries; who demonstrate a willingness to devote adequate time to Board of Director duties; and who are likely to be able to serve on the Board of Directors for a sustained period.
Proposals which stockholders intend and is unaware of any matters to be includedpresented by other parties. If other matters are properly brought before the meeting for action by the stockholders, proxies will be voted in ouraccordance with the recommendation of the Board or, in the absence of such a recommendation, in accordance with the judgment of the proxy material for presentationholder.
If a stockholder desiresCompany deems necessary for the lawful issuance and sale of Common Stock under this Plan, the Company shall be relieved from any liability for failure to bring a matter beforeissue and sell Common Stock upon exercise of such Awards unless and until such authority is obtained.
By Order of the Board of Directors,
KIMBERLY R. FRYE
Corporate Secretary
March 17, 2014
Affiliates operate or have employees.
1 ¢
ANNUAL MEETING OF STOCKHOLDERS
ToSTOCKHOLDERSTo be held on May 15, 20141, 2019 at 9:8:00 a.m., Central Daylight Time
This Proxy is solicited on behalf of the Board of Directors of Key Energy Services, Inc. (the “Company”)
The.The undersigned, having received notice of the annual meeting of stockholders and the proxy statement therefor and revoking all prior proxies, hereby appoints each of RichardRobert J. AlarioSaltiel and Kimberly R. FryeKatherine I. Hargis (with full power of substitution), as proxies of the undersigned, to attend the annual meeting of stockholders of the Company to be held on Thursday,Wednesday, May 15, 2014,1, 2019, at the Embassy SuitesFour Seasons Hotel Houston, Downtown, 1515 Dallas St.,1300 Lamar Street, Houston, Texas 77010, and any adjourned or postponed session thereof, and there to vote and act as indicated upon the matters on the reverse side in respect of all shares of common stock which the undersigned would be entitled to vote or act upon, with all powers the undersigned would possess if personally present.
Youpresent.You may revoke or change your proxy at any time before it is voted at the annual meeting by (i) giving written notice of revocation to the Secretary of the Company; (ii) submitting another properly completed proxy bearing a later date; (iii) submitting a later dated proxy through the Internet or by telephone prior to the close of the Internet voting facility or the telephone voting facility; or (iv) voting in person at the annual meeting. If the undersigned hold(s) any of the shares of common stock in a fiduciary, custodial or joint capacity or capacities, this proxy is signed by the undersigned in every such capacity as well as individually.
(Continuedindividually.Please vote, date and sign on reverse side and return promptly in the enclosed pre-paid envelope.CONTINUED AND TO BE SIGNED ON REVERSE SIDEPLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED.Important Notice Regarding the Availability of Proxy Materials for the AnnualMeeting of Stockholders to be signedheld May 1, 2019. This Proxy Statement and our2018 Annual Report to Stockholders are available at:http://www.viewproxy.com/keyenergy/2019
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ANNUAL MEETING OF STOCKHOLDERS OF
KEY ENERGY SERVICES, INC.
May 15, 2014
GO GREEN
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of Meeting, proxy statement and proxy card
are available at http://www.keyenergy.com/investor/proxy.
You can also reach this web address by goingInternet: Go to http://www.keyenergy.com,
then clicking on “Investor Relations” and then clicking on “2014 Annual MTG. of Stockholders.”
Please sign, date and mail
www.AALVote.com/KEG Have your proxy card inavailable when you access the
envelope provided as soon
as possible.
i Please above website. Follow the prompts to vote your shares. TELEPHONE Vote Your Proxy by Phone: Call 1 (866) 804-9616 Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your shares. MAILVote Your Proxy by Mail: Mark, sign, and date your proxy card, then detach along perforated lineit, and mailreturn it in the postage-paid envelope provided.i
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
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ANNUAL MEETING OF STOCKHOLDERS OF
KEY ENERGY SERVICES, INC.
May 15, 2014
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i Please detach along perforated line and mail in the envelope providedIF you are not voting via telephone or the Internet. i
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HEREx
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