Form of Performance Share Unit Grant Notice and Performance Share Unit Agreement Return on Assets under the Select Energy Services, Inc. 2016 Equity Incentive Plan
SELECT ENERGY SERVICES, INC.
2016 EQUITY INCENTIVE PLAN
PERFORMANCE SHARE UNIT GRANT NOTICE – RETURN ON ASSETS
Pursuant to the terms and conditions of the Select Energy Services, Inc. 2016 Equity Incentive Plan, as amended from time to time (the “Plan”), Select Energy Services, Inc. (the “Company”) hereby grants to the individual listed below (“you” or the “Participant”) the number of performance share units (the “PSUs”) set forth below. This award of PSUs (this “Award”) is subject to the terms and conditions set forth herein and in the Performance Share Unit Agreement attached hereto as Exhibit A (the “Agreement”) and the Plan, each of which is incorporated herein by reference. Capitalized terms used but not defined herein shall have the meanings set forth in the Plan.
Date of Grant:
Award Type and Description:
Other Stock-Based Award granted pursuant to Section 6(h) of the Plan that has been designated as a Performance Award under Section 6(k) of the Plan. This Award represents the right to receive shares of Stock in an amount up to 175% of the Target PSUs (defined below), subject to the terms and conditions set forth herein and in the Agreement.
Your right to receive settlement of this Award in an amount ranging from 0% to 175% of the Target PSUs shall vest and become earned and nonforfeitable upon (i) your satisfaction of the continued employment or service requirements described below under “Service Requirement” and (ii) the Committee’s certification of the level of achievement of the Performance Goal (defined below). The portion of the Target PSUs actually earned upon satisfaction of the foregoing requirements is referred to herein as the “Earned PSUs.”
Target Number of PSUs:
__________ (the “Target PSUs”).
January 1, 2021 (the “Performance Period Commencement Date”) through December 31, 2023 (the “Performance Period End Date”).
Except as expressly provided in Sections 4 and 5 of the Agreement, you must remain continuously employed by, or continuously provide services to, the Company or an Affiliate, as applicable, from the Date of Grant through the Performance Period End Date to be eligible to receive payment of this Award, which is based on the level of achievement with respect to the Performance Goal (as defined below).
Subject to the terms and conditions set forth in the Plan, the Agreement and herein, the number of Target PSUs, if any, that become Earned PSUs
during the Performance Period will be determined based on the Company’s Average Return on Assets (as defined below) relative to the Average Return on Assets of the peer companies listed on Exhibit B hereto (the “Peer Group”) (the “Performance Goal”).
The number of Target PSUs, if any, that become Earned PSUs during the Performance Period will be determined based on the following table:
Outside of Top 10
*The percentage of Target PSUs earned for a Ranking Among Peer Group that is between the values set forth in the table, excluding between the first and second rows of the table, shall be linearly interpolated between the values in the table.
To determine the Company’s Ranking Among Peer Group, Average Return on Assets will be calculated for the Company and each entity in the Peer Group as of the Performance Period End Date. The entities in the Peer Group and the Company will be arranged by their respective Average Return on Assets (highest to lowest). Notwithstanding the foregoing, in the event the Company’s Total Shareholder Return is negative, no Target PSUs will become Earned PSUs, regardless of the Company’s Ranking Among Peer Group.
For purposes of this Award, the following definitions shall apply:
“Adjusted Net Income” means the product obtained by multiplying:
(A) the difference obtained from:
(i) “Adjusted EBITDA” as publicly disclosed by the applicable company or, if not disclosed, “EBITDA” as publicly disclosed by such company, in each case adjusted in a manner consistent with adjustments included in the Company’s publicly disclosed Adjusted EBITDA during each year of the Performance Period; provided, however, that the adjustments contemplated above shall exclude certain items, including (x) any net non-cash gain or loss during such period arising from the sale, exchange, retirement or other disposition of capital assets (such term to include all fixed assets and all securities) in the ordinary
course of business, and (y) any write-up or write-down of tangible assets , less
(ii) the sum of:
(a) interest expense, plus
(b) depreciation expense,
“Average Return on Assets” means the sum of the Return on Assets of the applicable entity during each year of the Performance Period, divided by 3.
“Net Assets” means the applicable company’s average property and equipment, net, for each year during the Performance Period, plus average total current assets (other than cash and cash equivalents and current tax assets) for each year during the Performance Period, less average total current liabilities (other than current tax liabilities) for each year during the Performance Period, each as determined in accordance with generally accepted accounting principles or on a non-GAAP basis consistent with the Company’s practices (as determined by the Compensation Committee).
“Return on Assets” means the percentage obtained by dividing (A) Adjusted Net Income by (B) Net Assets.
“Total Shareholder Return” means the quotient obtained by dividing the sum of (i) the change in the Company’s Class A common stock price as quoted on the New York Stock Exchange (the “Stock Price”) from the first date of the Performance Period to the final date of the Performance Period (as the same may be adjusted as a result of any of any stock split, stock dividend, reverse stock split, reclassification, recapitalization, or other similar transaction or event) and (ii) the cumulative amount of any dividends paid over the course of the Performance Period, by the Stock Price on the first day of the Performance Period.
The Committee may adjust the Performance Goal as permitted by the Plan.
Settlement of the Earned PSUs shall be made solely in shares of Stock, which shall be delivered to you in accordance with Section 6 of the Agreement.
By your acceptance below, you agree to be bound by the terms and conditions of the Plan, the Agreement and this Performance Share Unit Grant Notice (this “Grant Notice”). You acknowledge that you have reviewed the Agreement, the Plan and this Grant Notice in their entirety and fully understand all provisions of the Agreement, the Plan and this Grant Notice. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee regarding any questions or determinations that arise under the Agreement, the Plan or this Grant Notice.
IN ORDER TO RECEIVE THE BENEFITS OF THE AGREEMENT AND THIS GRANT NOTICE, AND FOR THIS AWARD TO BE EFFECTIVE, YOU MUST ACKNOWLEDGE YOUR ACCEPTANCE BY CLICKING THE APPROPRIATE BUTTON BELOW (THE “ACCEPTANCE REQUIREMENTS”). IF YOU FAIL TO SATISFY THE ACCEPTANCE REQUIREMENTS WITHIN 90 DAYS FOLLOWING THE DATE OF GRANT, THEN (1) THIS AWARD WILL BE OF NO FORCE OR EFFECT AND WILL BE AUTOMATICALLY FORFEITED TO THE COMPANY WITHOUT CONSIDERATION AND (2) NEITHER YOU NOR THE COMPANY WILL HAVE ANY FUTURE RIGHTS OR OBLIGATIONS UNDER THE AGREEMENT OR THIS GRANT NOTICE.
PERFORMANCE SHARE UNIT AGREEMENT
This Performance Share Unit Agreement (together with the Grant Notice to which this Agreement is attached, this “Agreement”) is made as of the Date of Grant set forth in the Grant Notice to which this Agreement is attached by and between Select Energy Services, Inc., a Delaware corporation (the “Company”), and _________ (the “Participant”). Capitalized terms used but not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice.
“Good Reason” means “good reason” (or a term of like import) as defined under the Participant’s employment, consulting and/or severance agreement with the Company or an Affiliate or, in the absence of such an agreement or definition, shall mean (i) a material diminution in the Participant’s base salary or (ii) the relocation of the geographic location of the Participant’s principal place of employment by more than 50 miles from the location of the Participant’s principal place of employment as of the Grant Date; provided that, in the case of the Participant’s assertion of Good Reason, (A) the condition described in the foregoing clauses must have arisen without the Participant’s consent; (B) the Participant must provide written notice to the Company of such condition in accordance with this Agreement within 45 days of the initial existence of the condition; (C) the condition specified in such notice must remain uncorrected for 30 days after receipt of such notice by the Company; and (D) the date of termination of the Participant’s
employment or other service relationship with the Company or an Affiliate must occur within 90 days after such notice is received by the Company.
If to the Company, unless otherwise designated by the Company in a written notice to the Participant (or other holder):
Select Energy Services, Inc.
Attn: Senior Vice President, General Counsel and Secretary
1233 W. Loop South, Suite 1400
Houston, Texas 77027
If to the Participant, at the Participant’s last known address on file with the Company.
Any notice that is delivered personally or by overnight courier or telecopier in the manner provided herein shall be deemed to have been duly given to the Participant when it is mailed by the Company or, if such notice is not mailed to the Participant, upon receipt by the Participant. Any notice that is addressed and mailed in the manner herein provided shall be conclusively presumed to have been given to the party to whom it is addressed at the close of business, local time of the recipient, on the fourth day after the day it is so placed in the mail.
Section 409A. Notwithstanding anything herein or in the Plan to the contrary, the PSUs granted pursuant to this Agreement are intended to comply with the applicable requirements of the
Nonqualified Deferred Compensation Rules and shall be construed and interpreted in accordance with such intent. If the Participant is deemed to be a “specified employee” within the meaning of the Nonqualified Deferred Compensation Rules, as determined by the Committee, at a time when the Participant becomes eligible for settlement of the PSUs upon his “separation from service” within the meaning of the Nonqualified Deferred Compensation Rules, then to the extent necessary to prevent any accelerated or additional tax under the Nonqualified Deferred Compensation Rules, such settlement will be delayed until the earlier of: (a) the date that is six months following the Participant’s separation from service and (b) the Participant’s death. Notwithstanding the foregoing, the Company and its Affiliates make no representations that the PSUs provided under this Agreement are compliant with the Nonqualified Deferred Compensation Rules and in no event shall the Company or any Affiliate be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Participant on account of non-compliance with the Nonqualified Deferred Compensation Rules.
COMPANY PEER GROUP1
|1.||FTS International, Inc.|
|2.||NexTier Oilfield Solutions Inc.|
|3.||Liberty Oilfield Services Inc.|
|4.||ProPetro Holding Corp.|
|7.||Nine Energy Service Inc.|
|8.||Newpark Resources Inc.|
|9.||Oil States International, Inc.|
|10.||Patterson UTI Energy Inc.|
|12.||Ranger Energy Services, Inc.|
|13.||TETRA Technologies Inc.|
1 In the event of a major corporate event, such as a merger, acquisition, take-private, spin-off, bankruptcy or similar occurrence, the Compensation Committee shall be permitted to (i) include a substitute entity for the remainder of the Performance Period or (ii) adjust the Percentage of Target PSUs Earned to reflect the Company’s performance relative the remaining members of the Peer Group.