United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________ 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

______________________________________ 

Check the appropriate box:

Check the appropriate box:

PROXY STATEMENT

 

Dear Fellow Stockholder:

On behalf of the Board of Directors, we are pleased to invite you to the 20162017 Annual Meeting of Stockholders of Advanced Emissions Solutions, Inc. (the “Annual Meeting”). The Annual Meeting will be held at 9:00 a.m. (local time) on June 22, 201620, 2017 at the Company’s officesInverness Hotel located at 9135 South Ridgeline Boulevard, Suite 200 Highlands Ranch,Inverness Drive W, Englewood, Colorado 80129.80112.

At the Annual Meeting, in addition to electing eightseven directors, you will be asked to vote on three additional proposals. The first is to ratify the Audit Committee’s selection of Hein & Associates LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016.2017. The second is an advisory vote to approve the Company’s compensation paid to our named executive officers for the fiscal year ended December 31, 2015.2016. The third is to approve Amendment No. 3, in accordance with Section 162(m) of the Internal Revenue Code of 1986, as amended, and Amendment No. 4 to the Company’s Amended and Restated 2007 EquityAdvanced Emissions Solutions, Inc. 2017 Omnibus Incentive Plan, as amended.Plan.

Your Board of Directors and management look forward to greeting those of you who are able to attend the Annual Meeting. The accompanying notice of meeting and this proxy statementProxy Statement provide specific information about the Annual Meeting and explain the various proposals. Please read these materials carefully.

Thank you for your continued support of and interest in the Company.

L. Heath Sampson

President and Chief Executive Officer

To Our Stockholders:

Stockholders of record at the close of business on April 25, 201624, 2017 are entitled to notice of and to vote at the Annual Meeting.

Our stockholders are cordially invited to attend the Annual Meeting in person. Whether or not you plan to attend the Annual Meeting, we urge you to vote your shares by telephone or Internet, or by completing, signing and dating the available proxy card and returning it promptly to the Company.

Please call on our toll-free number (888-822-8617) if you require directions or have other questions concerning the meeting. Directions to our offices are also located on the back cover of this Proxy Statement.

By Order of the Board of Directors,

General CounselChief Accounting Officer and Secretary

Advanced Emissions Solutions, Inc.

Telephone: 888-822-8617

In addition, if you have any questions about the proposals, you may contact:

Alpha IR Group

Nick HughesChris Hodges or Chris HodgesRyan Coleman

312-445-2870

ades@alpha-ir.com

You should rely only on the information contained or incorporated by reference in this proxy statementProxy Statement to vote on the proposals being presented at the Annual Meeting. No person has been authorized to provide you with information that is different from what is contained in this document or in the incorporated documents.

This proxy statementProxy Statement is dated April 29, 2016.27, 2017. You should not assume the information contained in this proxy statementProxy Statement is accurate as of any date other than this date, and the date that this proxy statementProxy Statement is mailed or otherwise made available to stockholders does not imply that information is accurate as of any other date.

As ofImmediately following the date of the 20162017 Annual Meeting, our Board of Directors (the “Board”) will consist of eightseven members. Our Nominating and Governance Committee recommended to our Board the slate of eightseven directors for election or, as applicable, re-election by our stockholders, and the Board approved the recommendation and the slate of directors. Each director will hold office until the next Annual Meeting of Stockholders and thereafter until a successor is elected and qualified. Cumulative voting is not permitted in the election of directors. IN THE ABSENCE OF INSTRUCTIONS TO THE CONTRARY, THE INDIVIDUALS NAMED IN THE ACCOMPANYING PROXY WILL VOTE IN FAVOR OF THE ELECTION OF THE FOLLOWING PERSONS NAMED AS OUR NOMINEES FOR DIRECTORS: ALANA. BRADLEY GABBARD, DEREK C. JOHNSON, PAUL A. LANG, GILBERT LI, R. CARTER PATE, L. HEATH SAMPSON, J. TAYLOR SIMONTON AND L. SPENCER WELLS.

Each of the nominees has consented to be named herein and to serve if elected. We do not anticipate that any nominee will become unable or unwilling to accept nomination or election, but if this should occur, the persons named in the proxy intend to vote for the election in his or her stead of such other person as the Board may recommend. It is the policy and practice of the Company that all directors who reside in the metropolitan Denver, Colorado area attend the Annual Meeting. FourThree of our directors serving at the time of our 20132016 Annual Meeting of Stockholders attended that meeting.meeting in person and three directors attended via the webcast.

Effective as of June 12, 2015, the Audit Committee of the Company’s Board of Directors approved the engagement of Hein & Associates LLP (“Hein”) to serve as the Company's independent registered public accounting firm to audit the Company’s financial statements for the fiscal years ended December 31, 2013, 2014 and 2015 and to re-audit the Company’s financial statements for the fiscal year ended December 31, 2012. On April 13, 2016, the Audit Committee approved the engagement of Hein to serve as the Company's independent registered public accounting firm to audit the Company’s financial statements for the fiscal year ended December 31, 2016. On April 14, 2017, the Audit Committee approved the engagement of Hein to serve as the Company's independent registered public accounting firm to audit the Company's financial statements for the fiscal year ending December 31, 2016.2017. In approving the selection of Hein as the Company's independent registered public accounting firm for the year ending December 31, 2017, the Audit Committee and management completed a written evaluation of Hein’s performance which included, among other criteria, quality of services provided; sufficiency of the firm’s resources; communications and interaction; and independence, objectivity and professional skepticism.

There have been no disagreements on matters of accounting principles or practices, financial statement disclosures or audit scope or procedures between the Company and Hein during the most recent fiscal year or any subsequent interim period.

Stockholder ratification of the Audit Committee’s selection of Hein as our independent registered public accounting firm as requested in Proposal 2 is not required by our bylaws or otherwise. The Board is submitting this proposal to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain this firm. We anticipate that a representative of Hein will be available to respond to stockholder questions and will have the opportunity to make a statement at that time if the representative desires to do so.

Additional information about Audit Fees and Audit Committee Approval of Services can be found under the Independent Registered Public Accounting Firm section of this Proxy Statement.

As required by Section 14A of the Exchange Act, we are seeking a non-binding advisory vote on the compensation of named executive officers as disclosed in the section of this proxy statementProxy Statement titled “Executive Compensation.” The Company’s Board of Directors proposes the following resolution for approval by the stockholders:

Summary of Amendment No. 3Material Terms of the 2017 Omnibus Plan

Our Compensation Committee approved and adopted Amendment No. 3The following discussion of the material features of the 2017 Omnibus Plan is qualified by reference to the 2007text of the 2017 Omnibus Plan, on February 12, 2014 and our Board approved Amendment No. 3 on February 13, 2014, subject to approval by our stockholders at our 2016 annual meeting. Amendment No. 3a copy of which is attached to this Proxy Statementproxy statement as Annex I.Appendix A.

Subject to the formula have been satisfied;terms and

Construe and interpret the terms of the 2017 Omnibus Plan and any award agreement, and to ensure performance-based bonuses are fully deductible.decide all questions of fact arising in its application; and

The following criteria for the Company on a consolidated basis, one or more related entities, and/or one or more divisionsmaximum number of the foregoing, either in absolute terms or compared to the performance of (x) the Company, its related entities or divisions (for a different period), (y) one or more other companies or (z) an index covering multiple companies:

The maximum number of shares of restricted stock and shares with respect to which restricted stock units, performance shares and other stock-based awards may be granted in any fiscal year to any individual, other than non-management directors,one participant cannot exceed 400,000 shares.

The maximum aggregate compensation that can be paid pursuant to performance units awarded in a givenany one fiscal year to 400,000 from 100,000.any one participant cannot exceed $1,000,000 or a number of shares having an aggregate fair market value not in excess of such amount. The maximum aggregate compensation that can be paid pursuant to a cash-based award in any one fiscal year to any one participant cannot exceed $1,000,000.

Unless otherwise determined by the Committee, to serve as the Plan Administrator and,measurement of performance goals with respect to the performance measures above will exclude the impact of charges for restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring items, as well as the cumulative effects of tax or accounting changes, each as determined in accordance with generally accepted accounting principles or identified in the Company’s financial statements, notes to the financial statements, management’s discussion and analysis or other filings with the SEC.

Following completion of the applicable performance period, the Committee certifies in writing the extent to which a participant has attained the applicable performance goals and the resulting value of the participant’s award. The Committee retains the discretion to adjust the determinations of the degree of attainment of the pre-established performance goals; provided, however, that awards that are designed to qualify for the performance-based exception from the tax deductibility limitations of Code Section 162(m) may not be adjusted upward (the Committee may, in its discretion, adjust such awards downward).

and the number and kind of shares for which awards are outstanding may be proportionately increased or decreased. Any adjustment in outstanding Stock Options or SAR's will not increase the aggregate exercise price or grant price payable with respect to shares that are subject to the unexercised portion of the Stock Option or SAR, in compliance with Section 409A of the Code. Except as otherwise provided in another agreement, upon a change of control the Committee may take any action it deems necessary or desirable with respect to any awards including, among other things, providing that the awards are fully vested or payable. In the event of a reorganization in which the Company is the surviving entity and no change of control occurs, any previous award will generally apply solely to securities to which the holder of the number of securities subject to such award would have been entitled immediately following such reorganization and, in the case of Stock Options or SAR's, with a corresponding proportionate adjustment of the exercise price or grant price per share. Adjustments to shares of Common Stock will be made by the Committee whose determination will be final and the Committee may provide in award agreements for different provisions to apply to an award. However, any provisions may be modified by the Committee to avoid any tax that would otherwise be due under Section 409A of the Code.

Each award agreement may contain other terms and conditions not inconsistent with the 2017 Omnibus Plan as may be determined by the Committee in its discretion. Unless otherwise provided by the Committee, no consideration is currently limited to 100,000 shares, exceptbe received by the Company for Non-Management Directors, whothe granting of Stock Options or other awards.

No awards may be granted annual Awards covering up to 50,000 shares. However, in connection with his or her initial commencement of services with us, a participant in the 2007 Plan who is an employee may be granted up to an additional 100,000 shares, which do not count against the limit set forth in the previous statement. These limitations ensure that any Options granted under the 20072017 Omnibus Plan qualify as “performance-based compensation” under Section 162(m) often years after the Code. Under Code Section 162(m) no deductiondate the 2017 Omnibus Plan is allowed in any taxable year for compensation in excess of $1 million paid to our chief executive officer and each of our four most highly paid other executive officers who are serving in such capacities as of the last day of such taxable year. An exception to this rule applies to compensation that is paid pursuant to a stock incentive plan approved by our stockholders and that specifies, among other things, the maximum number of shares with respect to which options may be granted to eligible employees under such planstockholders.

Our Board may atterminate, amend or modify the 2017 Omnibus Plan; provided that no such termination, amendment or modification may adversely affect, in any time amend, suspendmaterial way, any outstanding award without the consent of the award holder. However, no amendment or terminate the 2007 Plan. To the extent necessary to comply with applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system and the rules of any foreign jurisdiction applicable to awards granted to residents therein, we will obtainmodification may become effective without stockholder approval of any amendment to the 2007 Plan in such a manner and to such a degree as required.if required by applicable law or regulatory requirement.

The vesting of outstanding Options under the 20072017 Omnibus Plan will be subject to acceleration upon certain changes ingoverned by the ownership or controllaws of the Company. The accelerationstate of Delaware except for conflict or choice of law provisions.

Federal Tax Consequences of the vesting of Options in the event of such changes in control may be seen as an anti-takeover provision and may have the effect of discouraging a merger proposal, a takeover attempt or other efforts to gain control of the Company.2017 Omnibus Plan

The grantfollowing is a general summary of an NSO under the 2007 Plan does not typically result in any federal income tax consequences to us and to U.S. participants to awards granted under the optionee2017 Omnibus Plan and does not attempt to describe all possible federal or other tax consequences of such participation or tax consequences based on particular circumstances. The federal tax laws may change and the federal, state and local tax consequences for any participant will depend upon his or her individual circumstances. Tax consequences for any particular individual may be different. This summary is not intended to us sobe exhaustive and does not discuss the tax consequences of a participant’s death or provisions of income tax laws of any municipality, state or other country. Each participant is advised to consult his or her individual tax advisor concerning his or her personal tax consequences.

described below. If such person retains the Common Stock for a period of at least two years after the ISO is granted and one year after the ISO is exercised, any gain upon the subsequent sale of the Common Stock will be taxed as a long asterm capital gain. A participant who disposes of shares acquired by exercise of an ISO prior to the expiration of two years after the ISO is granted or before one year after the ISO is exercised will recognize ordinary income or loss equal to the difference between the exercise price of the option is equal to or exceeds theand fair market value of the underlying stock as of the date of grant. Upon exerciseexercise. Any additional gain or loss recognized upon any later disposition of an NSO, the optionee will recognize compensation income (taxed atshares would be short or long term capital gain or loss depending on whether the rate applicable to ordinary income) onshares had been held by the participant for more than one year. The difference between the optionISO exercise price and the fair market value of the shares on the date of exercise. We are required to pay the employer’s portion of social security, Medicare and other applicable payroll taxes on such income of the optionee, and we are required to withhold and pay over to the relevant tax authorities the federal, state and local income tax withholding and the employee’s portion of such payroll taxes on such income (which the employee is required to pay over to us). We are entitled to an income tax deduction in the amount of the income recognized by the optionee, subject to possible limitations imposed by Section 162(m) of the Code, as well as for the employer’s portion of payroll taxes paid. Any gain or loss on the optionee’s subsequent disposition of the shares will be treated as long-term or short-term capital gain or loss, depending how long the shares are held following the date of exercise (currently for a period of more than one year). We do not receive a tax deduction for any such gain.

as an officer of the company or a subsidiary at the end of such year who is among the three highest compensated officers (other than the chief executive officer and the chief financial officer) for proxy statement reporting purposes. Compensation Committee implements alternative methodsthat qualifies as “performance-based” compensation for purposes of paying bonuses in lieu of compensation intended to be “Performance-Based Compensation” under the 2007 Plan, the future deductibility by the Company of any such bonuses may be limited bySection 162(m) is excluded from the $1 million cap on deductibility of compensationdeduction limitation. The rules and regulations promulgated under Section 162(m) are complex, technical, and change from time to time, sometimes with retroactive effect. In addition, a number of the Code.

New Plan Benefits

All awards under the 20072017 Omnibus Plan to our non-employee directors, executive officers and employees are madewill be granted at the discretion ofCommittee’s discretion. Therefore, the Compensation Committee or, with respect to awards not subject to Section 162(m), a committee consisting of Mr. Sampsonbenefits and Mr. Simonton, subject to certain limitations. At this time, therefore, the compensationamounts that maywill be received by our executive officers and other employees if our stockholders approve Amendment No. 3 and Amendment No. 4 toor allocated under the 20072017 Omnibus Plan cannot be determined, and we haveare not included a table reflecting such benefits and awards.presently determinable.

The Nominating and Governance Committee of the Board seeks directors with strong reputations and experience in areas relevant to our strategy and operations, such as mining, environmental and chemical technologies, government regulation and relations and supply chain management, as well as overall business acumen and experience in financial matters. Each of our current directors and the director nominees set forth in this Proxy Statement holds or has held senior executive positions in complex organizations and has operating experience that meets this objective, as described below. In these positions, the directors and nominees have also gained experience in core management skills, such as strategic and financial planning, public company financial reporting, corporate governance, executive compensation, risk management and leadership development. The Nominating and Governance Committee also believes that each of the directors and nominees has other key attributes that are critical to the composition of an effective Board: integrity and demonstrated impeccable ethical standards, sound judgment, analytical skills, the ability to work together in a constructive and collaborative fashion and the commitment to devote significant time and energy to service on the Board and its Committees.

2011 to April 2012, Mr. Lang served as Executive Vice President - Operations of Arch Coal, Inc. Mr. Lang served as Senior Vice President - Operations of Arch Coal, Inc. from December 2006 through August 2011, President of Western Operations from July 2005 through December 2006, and President and General Manager of Thunder Basin Coal Company, LLC (a subsidiary of Arch Coal, Inc.) from 1998 through July 2005. The initial appointment of Mr. Lang to our Board was made pursuant to the 2003 Subscription and Investment Agreement with Arch Coal, Inc. whereby our management agreed to make available one seat on the Board for an Arch Coal designee and to vote all shares and proxies they are entitled to vote in favor of such designee for so long as Arch Coal continues to hold at least 200,000 shares of our common stock.

Director Independence

Board Meetings and Committees

Our Board is responsible for establishing broad corporate policies and monitoring the overall performance of the Company. However, in accordance with corporate legal principles, the Board is not involved in day-to-day operating matters. Members of the Board are kept informed of the Company’s business by participating in Board and committee meetings, by reviewing analysis and reports sent to them weekly and monthly, and through discussions with the President and CEO and other officers.

The Board of Directors met 1810 times in 2015.2016. At each of the Board of Directors meetings the independent directors were polled to determine if they believed an Executive Session was needed. In 2015,2016, the Board held 7two executive sessions where management of the Company was excluded. The Audit Committee met 2416 times in 2015.2016. The Compensation Committee met 11nine times in 2015.2016. The Finance Committee met 22five times in 2015.2016 and was dissolved on May 10, 2016. The Nominating and Governance Committee met 8seven times in 2015. The Stock Committee did not meet in 2015 but did take action by unanimous written consent.2016. All of the directors were present for more than 75% of the meetings of the Board of Directors and the committees of which they were members held during their individual terms.

Stockholder Communications to Directors

Any stockholder may communicate directly with the Board (or any individual director) by writing to the Chairman of the Board, Advanced Emissions Solutions, Inc., 9135 South Ridgeline Boulevard,640 Plaza Drive, Suite 200,270 Highlands Ranch, Colorado 80129 or by emailing the Board through the "Contact the Board" link on our website at www.advancedemissionssolutions.com. Any such communication should state the number of shares beneficially owned by the stockholder making the communication. Provided that such communication addresses a legitimate business issue, the Company or the Chairman will forward the stockholder's communication to the appropriate director. For any communication relating to accounting, auditing or fraud, such communication will be forwarded promptly to the Chairman of the Audit Committee.

Code of Ethics

Board Leadership Structure and Role in Risk Oversight

We have a policy of keeping the roles of Chief Executive Officer and Chairman of the Board separate, and the roles are currently filled by two different individuals. We believe this arrangement is appropriate as it recognizes the distinction between the role played by the Chief Executive Officer, which is a position being more heavily oriented towards day-to-day management, while the Chairman functions as an independent director whose role is to oversee the Board of Directors and is also able to participate in and chair executive sessions of the Board.

Audit Committee

Our Board has an Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which currently consists of Messrs. J. Taylor Simonton, Derek C. Johnson, and Paul A. Lang.Lang, and R. Carter Pate. Our Board determined that Mr. Simonton, Mr. Lang, and Mr. LangPate are each an Audit Committee Financial Expert. Each Audit Committee member is “independent” as that term is used in the listing requirements for the NASDAQ Stock Market, and a brief listing of his relevant experience is stated in his biography above under the caption entitled “Directors of the Registrant.”

The role and functions of the Audit Committee are set out in the Audit Committee Charter, originally adopted by the Company’s Board and most recently amended on March 1, 2015.August 11, 2016. The role of the Audit Committee is one of oversight of the services performed by the Company’s independent registered public accounting firm. The Audit Committee’s functions include the following: reviewing and assessing the Audit Committee Charter annually; overseeing the Company’s compliance with legal, ethical and regulatory requirements, including the Code of Ethics and Business Conduct and approving related party transactions; overseeing the Company’s processes to identify and manage business and financial risk; appointing, approving the compensation of and reviewing the Company’s relationships with its independent registered public accounting firm and/or other auditors and assessing the impact such relationships may have on the auditors’ objectivity and independence; taking other appropriate action to oversee the independence of the outside auditors; reviewing and considering the matters identified in Auditing Standard 16No. 1301 adopted by the Public Company Accounting Oversight Board (“PCAOB”) with the outside auditors and management; reviewing and discussing the Company’s financial statements and report on internal control with the outside auditors and management; recommending whetherreview the Company’s auditedfinancial reporting process and discuss with management and our independent registered public accounting firm the interim and annual financial statements should be included in the Company’s Form 10-K for filingthat we file with the SEC; and reporting to the Board on all such matters. In performing its oversight function, the Audit Committee relies upon advice and information received in its discussions with the Company’s management and independent registered public accounting firm.

Compensation Committee

Our Board has appointed a Compensation Committee currently consisting of Ms. ClarkeMessrs Lang, Li, Pate, and Simonton. Mr. Lang. Ms. ClarkePate currently serves as the chairperson of the Compensation Committee. The responsibilities of the Compensation Committee, as set forth in the Compensation Committee Charter, most recently amended on September 9, 2015, include reviewing our executive compensation programs to analyze their alignment with attracting, retaining and motivating our executive officers to achieve our business objectives; establishing annual and long-term performance goals for our executive officers and evaluating their performance in light of such goals,goals; reviewing, approving and, when appropriate, making recommendations concerning our long-term incentive plans,plans; reviewing and making recommendations regarding stockholder proposals related to compensationcompensation; and administering our equity-based and employee benefit plans. See “Executive Compensation” below for additional information.

 

Nominating and Governance Committee

Our Board has appointed a Nominating and Governance Committee currently consisting of Ms. Clarke and Messrs. Johnson, Li, and Lang.Simonton. Mr. Johnson serves as the chairman of the Nominating and Governance Committee. The responsibilities of the Nominating and Governance Committee, as set forth in the Nominating and Governance Committee Charter, most recently amended on September 9, 2015, include selecting director nominees for the Board,Board; reviewing director compensation and benefits,benefits; submitting the same to the entire Board for approval,approval; overseeing the annual self-evaluation of the Board and its committees,committees; recommending the structure and composition of Board committees to the entire Board for approval,approval; monitoring in conjunction with the Audit Committee compliance with our Code of Ethics and Business Conduct,Conduct; granting any waivers thereto with respect to directors and executive officers,officers; recommending individuals to serve as Chairperson of the Board and Chief Executive Officer,Officer; and reviewing the Chief Executive Officer’s recommendations for individuals to serve as executive officers and analyzing and recommending such persons to the Board.

Criteria established for the selection of candidates for the Board include:

Director nominees are generally identified by our officers, directors or stockholders based on industry and business contacts. Regardless of the source of the nomination, nominees are interviewed and evaluated by the Nominating and Governance Committee, other members of the management team, and the Board as deemed appropriate by the Nominating and Governance Committee. The Nominating and Governance Committee then presents qualified candidates to the Board for a final discussion and vote.

We do not have a formal policy with respect to the consideration of diversity in the identification of director nominees, but the Nominating and Governance Committee strives to select candidates for nomination to the Board with a variety of complementary skills so that, as a group, the Board possesses the appropriate talent, skills and expertise to oversee the Company’s businesses.

Under the Nominating and Governance Committee Charter, the Nominating and Governance Committee will consider nominees submitted by our stockholders. Recommendations of individuals that meet the criteria set forth in the Nominating and Governance Committee Charter for election at our 20172018 annual meeting of stockholders may be submitted to the Nominating and Governance Committee in care of Christine B. Amrhein, General CounselGreg P. Marken, Chief Accounting Officer and Secretary, at 9135 South Ridgeline Boulevard,640 Plaza Drive, Suite 200,270, Highlands Ranch, Colorado 80129 no later than December 30, 2016.28, 2017.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Review and Approval of Related Party Transactions

Our Board recognizes that related party transactions present a heightened risk of conflicts of interest and/or improper valuation (or the perception thereof) and therefore has adopted a written policy with respect to all related party transactions involving the Company. Under this policy, any related party transaction, as defined (which excludes transactions available to all employees generally and transactions involving less than $5,000), may be consummated or may continue only if:

Management must refer to the Audit Committee any related party transactions into which it proposes that the Company enter at its first regularly scheduled meeting each year. After review, the Audit Committee will approve or disapprove such transactions and at each subsequently scheduled meeting and management must update the Audit Committee as to any material change to those proposed transactions. If management recommends any additional related party transactions subsequent to such meeting, such transactions may be presented to the Audit Committee for approval or preliminarily entered into by management subject to ratification by suchthe Audit Committee. If the Audit Committee does not ratify the transaction, however, management must make all reasonable efforts to cancel or annul such transaction.

Any material related party transaction must be disclosed to our full Board, of Directors, and management must assure that all related party transactions are approved in accordance with any requirements of our financing or other agreements.

Related Party Transactions

Board of Director Matters

An Arch designee holds one seat on the Company’s Board of Directors (the “Board”).Board. The appointment of one designee to the Board was made pursuant to a 2003 Subscription, as amended pursuant to the Company’s 2:1 stock split in March 2014, and Investment Agreement with Arch, as amended pursuant to the Company's 2:1 stock split in March 2014, whereby the Company’s management agreed to make available one seat on our Board for an Arch designee and to vote all shares and proxies they are entitled to vote in favor of such designee for so long as Arch continues to hold at least 200,000 shares of our common stock.the Company's Common Stock. In addition, as required by the Company's related-party transaction policy, the above noted agreements were approved by the Company’s Audit Committee before being recommended to the Board for approval and were then approved by the disinterested members of the Board. During the year ended December 31, 2012 and tothrough August 2013, Robert E. Shanklin, the Vice President of Coal Technology of Arch served on the Company's Board. Upon Mr. Shanklin's resignation, Paul A. Lang, the current President and COO of Arch Coal, began serving on the Company's Board.

Stockholders Matters

On October 22, 2015, the Company entered into a credit agreement for a $15.0 million term loan, with Franklin Mutual Quest Fund and MFP Investors LLC (the "Lenders"), and Wilmington Trust, National Association, as thean administrative agent and collateral agent (the “Credit Agreement”), which was subsequently amended in 2016 as discussed below. Under the original loan terms and conditions, the Credit Agreement matured on April 22, 2016, subject to a three month extension at the Company's option to the extent certain conditions are met. The loan under the Credit Agreement bearsbore interest at an annual rate equal to 10.5% and iswas subject to various prepayment and other premiums if certain events, including a change in control, occur. The Company received net proceeds of $13.5 million and recorded debt discounts and debt issuance costs of $1.5 million. The debt discounts and debt issuance costs will bewere amortized to interest expense using the effective interest method over the life of

On February 8, 2016, the Company entered into the first amendment to the Credit Agreement that extended the 2015 SEC filings date to March 30, 2016. On March 30, 2016, the Company entered into the second amendment to the Credit Agreement, which extended the maturity date to July 8, 2016, extended the Company's filing date deadline related to its 2015 SEC filings to April 20, 2016, increased the stated interest rate from 10.5% to 15.0% and increased the minimum cash balance requirement from $3.0 million to $3.5 million. The Company incurred approximately $0.6 million in fees related to the second amendment.

All obligations of the Company under the Credit Agreement arewere unconditionally guaranteed by each of the Company’s wholly-owned domestic subsidiaries (other than ADA Analytics, LLC) and arewere secured by perfected security interests in substantially all of the assets of the Company and the guarantors, subject to certain agreed upon exceptions.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Common Stock

The following table provides information with respect to the beneficial ownership of the Company’s common stockCommon Stock by (1) each Director of the Company, (2) each named executive officer ofcurrently serving the Company, listed in the Summary Compensation Table, (3) all Directors and executive officers as a group, and (4) each person beneficially owning more than 5% of our outstanding common stock.Common Stock. We base the share amounts shown on each person’s beneficial ownership as of March 31, 20162017 (including options exercisable or performance share units ("PSU's") to be delivered within 60 days thereof), unless we indicate some other basis for the share amounts. Percentage ownership is calculated based on 21,946,01722,072,056 shares outstanding as of DecemberMarch 31, 2015,2017, including securities deemed outstanding pursuant to Rule 13d-3(d)(1) under the Exchange Act. As the Company's shares are traded OTC, each personFor persons beneficially owning more than 5% of our outstanding common stock is only required to report such holdings on an annual basis, rather than as events occur. Therefore,Common Stock, the Company has used the most recent annualownership filings related to the below table. Except as noted below, each of the individuals named below has sole voting and investment power for the respective shares.

* Less than 1%

Restricted Stock Units and Performance Share Units

Section 16(a) of the Exchange Act requires our officers, directors, and persons who beneficially own more than ten percent10% of a registered class of our equity securities to file reports of ownership with the SEC. Officers, directors, and greater than ten percent10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

For the fiscal year ended December 31, 2015, the following2016, there were no persons subject to Section 16(a) beneficial ownership reporting filedin which a late reports:

The Company is not aware of any unreported transactions for 2015.2016.

The Compensation Committee has reviewed and discussed with the Company’s management the Company’s Compensation Discussion and Analysis for the fiscal year ended December 31, 2015.2016.

Based on the review and discussions with management, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis for the year ended December 31, 20152016 be included in this Proxy Statement for filing with the SEC.

In this Compensation Discussion and Analysis, we provide an analysis and explanation of our compensation program and the compensation earned by our named executive officers in the fiscal year ended December 31, 2015.2016. Our Compensation Committee is charged with establishing the Company’s philosophy for executive compensation and approval, oversight, implementation and administration of executive compensation and benefits. Generally, the President and Chief Executive Officer of the Company makes recommendations to the Compensation Committee regarding executive compensation; however, authority to approve compensation, performance goals and objectives for all executives is vested in the Compensation Committee.

Our Compensation Committee has the sole authority to engage and compensate a compensation adviser and in November 2012 determined it was in the best interest of the Company to engage a compensation adviser to assist with the design and implementation of compensation arrangements starting in 2013. In November 2012, our Compensation Committee completed a competitive bidding process and selected Longnecker & Associates (“Longnecker”). Based on disclosures made by Longnecker, the Compensation Committee determined that Longnecker meets the independence criteria of Rule 10C-1 of the Securities Exchange Act of 1934, as amended.Act. Longnecker does not provide any other services to the Company.

In 2013, 2014 and 2015, Longnecker advised the Company on:

Our philosophy for executive compensation is set forth in a document entitled “Executive Compensation Philosophy and Objectives” (the “EC Philosophy”) adopted by the Compensation Committee on January 2, 2014, which replaced our Amended and Restated Advanced Emissions Solutions, Inc. Executive Compensation Plan (the “EC Plan”). The EC Philosophy is designed to support achievement of our strategies and goals, thereby creating long-term value for our stockholders and customers and ensuring our ability to recruit and retain highly qualified executive employees. Our EC Philosophy:

Incentive cash bonuses and long term equity incentive awards consistent with the EC Philosophy are made under our 2007 Plan. We believe that our compensation policies and practices do not motivate excessive or imprudent risk-taking. We note the following key aspects of our compensation policies and practices in making this determination:

Because of these factors, we believe that our compensation policies and practices, both for our employees generally and for our executive officers, do not create risks that are reasonably likely to have a material adverse effect on the Company.

The Company provides its stockholders with the opportunity to cast an advisory vote on annual executive compensation (a “say-on-pay proposal”). A say-on-pay proposal will generally be put forth annually; however, becauseAt the Company did not hold anCompany’s Annual Meeting in 2016, approximately 95.6% of Stockholders in 2014 or 2015, there was nothe votes cast on the say-on-pay proposaladvisory vote regarding the executive compensation for each of the fiscal yearsyear ended December 31, 2013 and 2014 pursuant to Rule 14a-21 under2015 were in favor of the Securities Exchange Act of 1934, as amended.proposal, which results the Compensation Committee reviewed in assessing executive compensation for the fiscal year ended December 31, 2016. Proposal 3 included in the Proxy Statement is a say-on-pay advisory vote regarding the executive compensation for the fiscal year ended December 31, 2015. The Compensation Committee reviewed the results of the say-on-pay proposal from the June 2013 ADA Annual Meeting of Shareholders, where approximately 91.4% of the votes cast on the say-on-pay proposal were in favor of the proposal.2016. The Compensation Committee will continue to consider the results of the Company’s say-on-pay votes when making future compensation decisions for the Company’s executive officers, including named executive officers.

The compensation for our NEOs currently consists of three elements: base salaries, annual incentive cash bonuses and long term equity incentive awards in the form of restricted shares of our Common Stock (“RSA's”)RSA's and Performance Share Units (“PSU's”)PSU's and, for Mr. Sampson in 2015 and 2016, options to purchase our Common Stock (“Stock Options”) and Stock Appreciation Rights (“SAR's”).Stock. Executive compensation is designed to reward performance in a straightforward and transparent manner.

Base salary is defined as ongoing, cash compensation paid bi-weekly based on such factors as job responsibilities, external competitiveness, and the individual’s experience and performance. Pay ranges have been set based on the market where the Company competes for similar positions, with consideration given for employees serving similar functions in comparable companies. Base salary is typically increased annually based on performance and cost of labor/living increases. In consultation with Longnecker and the use of market data, the Compensation Committee considers the size of and whether to grant merit increases based on data from comparable companies, as well as review of theiran officer's annual performance and meeting of objectives. The Company attempts to ensure middle market pay for solid performers and to consider higher levels of pay for outstanding performers. The Company does not intend to be a market leader in base compensation.

On April 24, 2015, the Compensation Committee approved an increase in Mr. Sampson’s base salary to $500,000 effective April 1, 2015 given his promotion to President and Chief Executive Officer (in addition to his continued role as Chief Financial Officer until Mr. Gabbard’s appointment as Chief Financial Officer in June 2015) based on the Compensation Committee’s review of market data and recommendation from Longnecker.

On June 12, 2015, the Compensation Committee approved Mr. Gabbard's base salary of $350,000 upon his appointment as Chief Financial Officer.

Effective July 1, 2015, the Compensation Committee approved an increase in Ms. Sjostrom's base salary to $285,000 given her promotion to Chief Product Officer based on the Compensation Committee's review of market data and recommendation from Longnecker.

As of the date of this Proxy Statement,On May 27, 2016, the Compensation Committee has not made any changes toapproved base salaries in 2016.for Messrs. Hanson and Marken of $200,000 and $220,000, respectively.

The Company utilizes incentive compensation in the form of stock and equity awards to motivate executives and align executive and stockholder interests. Incentive amounts are set based on job position and market practices. Incentives paid in cash are subject to payroll taxes and other customary withholdings. In addition to awards under the Company’s Short-Term Incentive Plan (“STIP”) and Long-Term Incentive Plan (“LTIP”), we generally grant restricted stock awards to new executive officers.

The STIP is designed to motivate executives to achieve critical short-term goals, typically within a twelve month period, that are expected to contribute to the long-term health and value of the Company. Incentives may be paid in cash or equity as determined by the Compensation Committee. For 2013, STIP awards were made under the EC Plan. On February 12, 2014, the Compensation Committee approved Amendment No. 2 to the Company’s 2007 Plan, which amended the 2007 Plan to make non-material changes to specifically allow for cash awards, such as under the STIP, and establish certain procedures for such cash awards. STIP awards for 2014 and 2015 were made under the 2007 Plan. The Compensation Committee adopted the Executive Short Term Incentive Plan (“ESTIP”) on September 9, 2015 to further establish terms and conditions for cash awards made under the STIP, and the Compensation Committee expects tomay make future STIP awards under the 2007 Plan and ESTIP.

The LTIP is designed to align executives’ interests with those of the Company’s stockholders. Equity awards are the primary long-term incentive instrument and may be in the form of RSA's, PSU's, Stock Options or SAR's. Equity awards may vest

From time to time the Board or Compensation Committee may recognize exemplary performance of any executive with a cash or equity award. Exemplary performance is performance that the Board or Compensation Committee determines to have required significant effort and commitment and is determined to have had a significant positive impact on the current or future performance of the organization. No such payments were made in 2016, 2015 or 2014 or 2013 other thanexcept as set forth below under the RC Bonus and equity awards to Mr. Sampson described below."Additional Executive Compensation Awards" section.

The stock portions of the 2016, 2015, 2014 and 20132014 incentive awards are shown below in the Summary Compensation table under the “Stock Awards” column. The cash portions of the 2016, 2015, 2014 and 20132014 incentive awards are shown below in the Summary Compensation table under the “Non-Equity Incentive Plan Compensation” column.

On March 1, 2016, the Compensation Committee approved a maximum payout amount underacknowledged certain proposed Performance Goals, as defined in the ESTIP, for 2015 for eachperformance schedule and target amounts (the “2016 Bonus Guidelines”) but did not establish a 2016 ESTIP or grant any awards at that time. On October 16, 2016, the Compensation Committee of the three remaining participants at 75%Board approved short-term bonus guidelines (the "2016 CEO Bonus Guidelines") for 2016 for the Company's CEO. The 2016 CEO Bonus Guidelines set a target cash bonus of target100% of the CEO's base salary subject to adjustment based on performance goals to be approved by the level of achievementBoard.

The Compensation Committee has not approved any ESTIP for 2017 as of the metrics approved on September 9, 2015, with final payout amounts to be determined bydate of this Proxy Statement. On February 28, 2017, the Chief Executive Officer.  Compensation Committee established cash bonus targets for the NEOs as set forth in the following table.

LTIP Incentive Compensation under the 2007 Plan for 20132017

Additional Executive Compensation Plans

2016 EquityRestricted Stock Awards to CEO under the 2007 Plan

On December 11, 2015, the Compensation Committee approved the grant of a Restricted Stock Award for 72,000 shares of the Company’s Common Stock effective as of January 4, 2016 to Mr. Sampson in recognition of the importance of Mr. Sampson continuing to serve the Company as CEO.  The Restricted Stock Award will vest annually at a rate of one-third over a three year vesting period subject to Mr. Sampson’s Continuous Service (as defined in the 2007 Plan).

On March 1, 2016, the Compensation Committee approved the grant of a discretionary cash bonus award to Mr. Gabbard in the amount of $175,000, subject to the Company filing its Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and Mr. Gabbard’s continuous service. The award was paid to Mr. Gabbard on June 3, 2016.

In the event of a restatement of income, any overpayments of incentive pay made to executives based on such restatement of income may be reclaimed at the discretion of the Compensation Committee. As presented within the Annual Report on Form 10-K for the fiscal year ended December 31, 2014, the Company restated its financial statements for the year ended December 31, 2012, and quarterquarterly information for the first three quarters of 2013; the Compensation Committee has not yet determined whether there was an overpayment of incentive pay as a result of such restatements.2013. On November 17, 2015, the Board and the Compensation Committee discussed incentive compensation amounts paid in 2013 and 2014, respectively, and decided to take no action with regard to clawbacks at that time. In December 2015, the Board made a determination of cause against the Company’s former Senior Vice President, Chief Financial Officer, Treasurer and Secretary under the Retirement and Non-Competition Agreement between such former officer and the Company. As a result of the determination of cause, all cash payments to such former officer ceased and the unvested restricted stock and unvested PSU's did not vest and were forfeited pursuant to the terms of the Retirement and Non-Competition Agreement.

We generally maintain key person term insurance for our CEO in the amount of $5 million and for our EVP and CPO in the amount of $2 million. The policies may be assigned to the individuals upon termination of employment (other than for cause) whereupon the executive would be responsible for any premium payments. Subsequent to the termination of the EVP'sExecutive Vice President's employment in January 2016, the Company terminated the key person insurance in the amount of $2 million related to this role.

Executives are encouraged to own a number of shares of stockthe Company's Common Stock equal to a value of at least one (1) times the annual base salary. Ownership is calculated considering holdings of restricted stock and performance share units,PSU's, whether or not such holdings have vested, private holdings, shares held in retirement accounts and other shares attributed the executive in accordance with

holdings. The Compensation Committee reviewedCEO and CPO of the Company met the executive equity ownership againstguidelines as of December 31, 2016, and the ownership goals for our executives in September 2015 and confirmed all executives metCompensation Committee waived the executive equity ownership guidelines for the Company's other executives on August 11, 2016, given the recent appointments of the Chief Accounting Officer and Secretary, and Senior Vice President of Operations at that time.ADA-ES, Inc.

So long as the stock ownership guidelines are met, executives may sell unrestricted stock they have owned for a period greater than 12 months, and may exercise vested stock optionsStock Options and sell shares of the Company's Common Stock to pay for the exercise price and withholding tax, except as otherwise provided for in the underlying stock optionStock Option agreement. It is preferred that executives own stockshares of the Company's Common Stock for a period greater than twelve months before selling it. The Company must be advised of any sale of stock optionsStock Options or shares of stockthe Company's Common Stock at least 30 days in advance or the executive must be engaged in a pre-announced program sale in compliance with federal securities laws, and such sales must be made in compliance with our insider trading policy.

Pursuant to Section 16(b) of the Exchange Act, executives leaving the Company may be required to hold their stock in the Company for at least six months after leaving the Company.

The Company's Profit Sharing Retirement Plan ("401(k) PlanPlan") is available to all eligible employees, including named executive officers. Pursuant to that plan,the 401(k) Plan, we make matching contributions to each eligible employee’s account up to 7% of the employee’s eligible compensation, and may make, at the discretion of the Board, contributions based on the profitability of the Company to those accounts. Beginning in June 2009 through the first quarter of 2014, we made our matching contributions in shares of the Company’s common stock.Common Stock. Subsequent to the first quarter of 2014, we made our matching contributions in cash. No discretionary contributions were made to the 401(k) Plan in 2013, 2014, 2015, or 20152016 other than as discussed above. Investments in an employee’s account may be made in stocks, bonds, mutual funds and other investments permitted by the Plan’s administrator. Beginning in 2017, the Company elected to make Safe Harbor Nonelective Contributions to eligible employees. Pursuant to the Safe Harbor Nonelective Contributions notice, we make contributions to each eligible employee's account in an amount equal to 3% of eligible compensation, and will continue to do so unless the Plan is amended or terminated.

 Employee and Company contributions to the 401(k) Plan are 100% vested. Company contributions become 100% vested if an employee’s employment ends after the date such employee attains normal retirement age (age 65), dies or becomes disabled. If an employee’s employment is terminated prior to the date the employee attains normal retirement age (65) or dies or becomes disabled, the Company’s matching contributions and any discretionary contributions will vest according to the schedule below: