Document:

Exhibit 10.20

 

FORM OF PROPETRO HOLDING CORP.

 

NON-EMPLOYEE DIRECTOR COMPENSATION POLICY

 

Non-employee members of the board of directors (the “Board”) of ProPetro Holding Corp. (the “Company”) shall be eligible to receive cash and equity compensation as set forth in this Non-Employee Director Compensation Policy (this “Policy”).  The cash and equity compensation described in this Policy shall be paid or be made, as applicable, automatically and without further action of the Board, to each member of the Board who is not an employee of the Company or any parent or subsidiary of the Company and who is not an affiliate of Energy Capital Partners (each, a “Non-Employee Director”) who may be eligible to receive such cash or equity compensation, unless such Non-Employee Director declines the receipt of such cash or equity compensation by written notice to the Company.  This Policy shall become effective immediately after the effectiveness of the Company’s initial public offering (the date of such effectiveness, the “Effective Date”) and shall remain in effect until it is revised or rescinded by further action of the Board. This Policy may be amended, modified or terminated by the Board at any time in its sole discretion and if such an initial public offering does not occur on or prior to December 31, 2017 this Policy shall be void ab initio.  The terms and conditions of this Policy shall supersede any prior cash and/or equity compensation arrangements for service as a member of the Board between the Company and any of its Non-Employee Directors and between any subsidiary of the Company and any of its non-employee directors.  No Non-Employee Director shall have any rights hereunder, except with respect to restricted stock units granted pursuant to this Policy.

 

1.                                    Annual Retainers.  Non-Employee Directors shall be granted the retainers described below.

 

(a)                               Annual Retainers.  Each Non-Employee Director shall receive an annual retainer of $55,000 for service on the Board.

 

(b)                              Additional Annual Retainers.  In addition, a Non-Employee Director shall receive the following annual retainers:

 

(i)                                  Chairperson of the Board.  A Non-Employee Director serving as Chairperson of the Board shall receive an additional annual retainer of $15,000 for such service.

 

(ii)                              Audit Committee.   A Non-Employee Director serving as Chairperson of the Audit Committee shall receive an additional annual retainer of $15,000 for such service.

 

(iii)                          Compensation Committee.  A Non-Employee Director serving as Chairperson of the Compensation Committee shall receive an additional annual retainer of $10,000 for such service.

 

(iv)                          Nominating and Corporate Governance Committee.   A Non-Employee Director serving as Chairperson of the Nominating and Corporate Governance Committee shall receive an additional annual retainer of $10,000 for such service.

 

(c)                               Payment of Retainers.  The annual retainers described in Sections 1(a) and 1(b) shall be earned on a quarterly basis based on a calendar quarter and shall be paid in arrears by the Company not later than the fifteenth day following the end of each calendar quarter.  In the event a Non-Employee Director does not serve as a Non-Employee Director, or in the applicable positions described in Section 1(b), for an entire calendar quarter, such Non-Employee Director shall receive a prorated portion

 

 

of the retainer(s) otherwise payable to such Non-Employee Director for such calendar quarter pursuant to Section 1(b), with such prorated portion determined by multiplying such otherwise payable retainer(s) by a fraction, the numerator of which is the number of days during which the Non-Employee Director serves as a Non-Employee Director or in the applicable positions described in Section 1(b) during the applicable calendar quarter and the denominator of which is the number of days in the applicable calendar quarter.

 

2.                                    Equity Compensation.  Non-Employee Directors shall be granted the equity awards described below.

 

(a)                               Annual Awards.  Each Non-Employee Director who (i) serves on the Board as of the date of any annual meeting of the Company’s stockholders (an “Annual Meeting”) after the Effective Date and (ii) will continue to serve as a Non-Employee Director immediately following such Annual Meeting shall be automatically granted, on the date of such Annual Meeting, restricted stock units with respect to a number of shares of the Company’s common stock (the “Common Stock”) that have an aggregate fair value on the date of grant (based on the closing price per share of the Common Stock on the date of such annual meeting (or the last preceding trading day if the date of the annual meeting is not a trading day)) of $100,000.  The awards described in this Section 2(a) shall be referred to as the “Annual Awards.”  For the avoidance of doubt, a Non-Employee Director elected for the first time to the Board at an Annual Meeting shall receive only an Annual Award in connection with such election, and shall not receive any Initial Award on the date of such Annual Meeting as well.

 

(b)                              Initial Awards.  Except as otherwise determined by the Board, each Non-Employee Director who is initially elected or appointed to the Board after the Effective Date on any date other than the date of an Annual Meeting shall be automatically granted, on the date of such Non-Employee Director’s initial election or appointment (such Non-Employee Director’s “Start Date”), an award of restricted stock units with respect to a number of shares of Common Stock that have an aggregate fair value on such Non-Employee Director’s Start Date (based on the closing price per share of the Common Stock on such Start Date (or the last preceding trading day if such Start Date is not a trading day)) equal to the product of (i) $100,000 and (ii) a fraction, the numerator of which is (x) 365 minus (y) the number of days in the period beginning on the date of the Annual Meeting immediately preceding such Non-Employee Director’s Start Date (or, if no such Annual Meeting has occurred, the Effective Date) and ending on such Non-Employee Director’s Start Date and the denominator of which is 365.  The awards described in this Section 2(b) shall be referred to as “Initial Awards.”  For the avoidance of doubt, no Non-Employee Director shall be granted more than one Initial Award.

 

(c)                               Termination of Employment of Employee Directors.  Members of the Board who are employees of the Company or any parent or subsidiary of the Company who subsequently terminate their employment with the Company and any parent or subsidiary of the Company and remain on the Board will not receive an Initial Award pursuant to Section 2(b) above, but to the extent that they are otherwise eligible, will be eligible to receive, after termination from service with the Company and any parent or subsidiary of the Company, Annual Awards as described in Section 2(a) above.

 

(d)                              Vesting of Awards Granted to Non-Employee Directors.  Each Annual Award and Initial Award shall vest and become exercisable on the earlier of (i) the day immediately preceding the date of the first Annual Meeting following the date of grant and (ii) the first anniversary of the date of grant, subject to the Non-Employee Director continuing in service through the applicable vesting date.  No portion of an Annual Award or Initial Award that is unvested or unexercisable at the time of a Non-Employee Director’s termination of service on the Board shall become vested and exercisable thereafter.  All of a Non-Employee Director’s Annual Awards and Initial Awards shall vest in full immediately prior to the occurrence of a Change in Control (as defined in the Equity Plan (as defined below)), to the extent outstanding at such time.

 

 

3.                                    General.  The annual retainers and equity awards described herein shall be granted under and shall be subject to the terms and provisions, including the limitations on the numbers of shares and cash that may be granted to Non-Employee Directors each calendar year, of the Company’s 2017 Incentive Award Plan or any other applicable Company equity incentive plan then-maintained by the Company (such plan, as may be amended from time to time, the “Equity Plan”).  The equity awards shall be granted subject to the execution and delivery of award agreements, including attached exhibits, in substantially the forms previously approved by the Board.  All numbers of shares determined hereunder shall be rounded down to the nearest whole share and subject to adjustment as provided in the Equity Plan.

 

* * * * *Exhibit 10.21

 

FORM OF PROPETRO HOLDING CORP.

 

DIRECTOR STOCK OWNERSHIP POLICY
 (as of _______ __, 2017)

 

Purpose

 

This Non-Employee Director Stock Ownership Policy (the “Policy”) of ProPetro Holding Corp. (the “Company”), together with the equity awards granted to certain members of the board of directors of the Company (the “Board”) pursuant to the Company’s Non-Employee Director Compensation Policy, as may be amended from time to time (the “Non-Employee Director Compensation Policy”), is designed to align the interests of members of the Board with the interests of the Company’s common stockholders.  This Policy shall become effective upon the consummation of an initial public offering of the Company’s common stock and if such an initial public offering does not occur on or prior to December 31, 2017 this policy shall be void ab initio.

 

Eligibility

 

This Policy shall apply to all members of the Board who are not employees of the Company or its subsidiaries and who is not an affiliate of Energy Capital Partners (each, a “Non-Employee Director”).

 

Share Retention Policy

 

Each Non-Employee Director is encouraged to hold shares of the Company’s common stock (“Common Stock”) and at all times make good faith progress towards holding, on and following the later of the later of the fifth anniversary of (i) the date hereof and (ii) the Non-Employee Director’s election or appointment to the Board, Qualifying Shareholdings (as defined herein) equal to or in excess of the Non-Employee Director’s equity threshold, as described under “Equity Threshold” below, as such threshold may be amended by the Company’s Nominating and Corporate Governance Committee (the “Committee”) from time to time.

 

Equity Threshold

 

Each Non-Employee Director’s equity threshold is an amount equal to 300% of the Non-Employee Director’s annual cash retainer (as set forth in Section 1(a) of the Non-Employee Director Compensation Policy).

 

The Company uses the closing price per share of the Common Stock on the applicable measurement date to determine the number of Qualifying Shareholdings required to meet the equity threshold.

 

 

Qualifying Shareholdings

 

Securities that qualify in determining whether a Non-Employee Director has satisfied the shareholding requirements of this Policy (“Qualifying Shareholdings”) include:  (i) issued and outstanding shares of Common Stock held beneficially or of record by the Non-Employee Director that are not subject to transfer or other restrictions; (ii) issued and outstanding shares of Common Stock held by a Qualifying Trust (as defined below); (iii) issued and outstanding shares of Common Stock held by a 401(k) or other qualified pension or profit-sharing plan for the benefit of the Non-Employee Director (whether denominated in shares or units);  and (iv) shares of Common Stock underlying vested Company time-based restricted stock units; provided that the number of shares of Common Stock underlying restricted stock units constituting Qualifying Shareholdings shall equal the number of shares of Common Stock that would be deliverable upon exercise or settlement in full of the respective awards, less a number of shares of Common Stock with a value equal to any applicable income and employment taxes, utilizing an assumed tax rate equal to 40% (the “Tax Amount”).  The Company uses the closing price per share of Common Stock on the applicable measurement date to determine the number of shares needed to satisfy the Tax Amount.

 

For purposes of the foregoing paragraph, “beneficial ownership” shall mean the ownership or sharing, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, of (i) voting power which includes the power to vote, or to direct the voting of, such security; and/or (ii) investment power which includes the power to dispose, or to direct the disposition, of such security. “Qualifying Trust” means a trust created for the benefit of the Non-Employee Director, the Non-Employee Director’s spouse, or members of the Non-Employee Director’s immediate family.

 

Qualifying Shareholdings Reporting

 

Each Non-Employee Director shall report in such Non-Employee Director’s annual Director and Officer Questionnaire (“D&O Questionnaire”) his or her Qualifying Shareholdings as of the date the D&O Questionnaire is completed and, in the case of newly appointed Non-Employee Directors, such information shall also be reported in such Non-Employee Director’s initial D&O Questionnaire.

 

Remedies for Non-Compliance

 

The Committee has the authority to review each Non-Employee Director’s compliance (or progress towards compliance) with this Policy from time to time and, in its sole discretion, to impose such conditions, restrictions or limitations on any Non-Employee Director as the Committee determines to be necessary or appropriate in order to achieve the purposes of this Policy.  For example, the Committee may mandate that a Non-Employee Director retain (and not transfer) all or a portion of any shares delivered to the Non-Employee Director through the Company’s equity plans or otherwise restrict the Non-Employee Director’s transfer of previously owned shares.

 

Undue Hardship

 

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There may be instances in which this Policy would place a severe hardship on a Non-Employee Director or prevent the Non-Employee Director from complying with a court order, such as a divorce settlement, or other legal requirement.  In these instances, the Non-Employee Director must submit a request in writing to the Committee or its designee that summarizes the circumstances and describes the extent to which an exemption is being requested.  The Committee or its designee will make the final decision as to whether an exemption will be granted.  If such a request is granted in whole or part, the Committee or its designee will work with the Non-Employee Director to develop an alternative stock ownership plan that reflects both the intention of this Policy and the Non-Employee Director’s individual circumstances.

 

Administration

 

This Policy is administered and interpreted by the Committee.  The Committee retains the authority to make exceptions to or waivers of the Policy based upon changes in circumstances or to otherwise amend or alter the Policy as it may determine appropriate.  The Committee will review each Non-Employee Director’s compliance efforts with respect to this Policy no less than annually and will review this Policy from time to time as the Committee deems necessary or appropriate.

 

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