Proposal 1   Election of Directors

The Board of Directors recommends that you vote “FOR” each nominee for director.

Upon the recommendation of the Nominating and Corporate Governance Committee, the board of directors of the Company has nominated each of the following twelve nominees to be elected at the Annual Meeting: Lucas Batzer, Robert W. Drummond, Dale Dusterhoft, Marc G.R. Edwards, Christian A. Garcia, Lisa A. Gray, Gary M. Halverson, Shawn Keane, Elmer D. Reed, James C. Stewart, Lenard B. Tessler and Scott Wille.

Each director elected will serve until the 2020 Annual Meeting or, in each case, until his or her earlier death, retirement, resignation or removal from the position of director. All of our nominees have consented to serve as directors and our board of directors has no reason to believe that any of the nominees will be unable to act as a director.

A director nominee will be re-elected if approved by a simple majority of the votes cast. If you properly submit a proxy card, but do not indicate how you wish to vote, the Proxy Holders will vote for all of the listed director nominees.

 

 

Director Information

Director Nominee Biographies

 

	Age: 56			James C. Stewart, Executive Chairman.   Mr. Stewart became the Executive Chairman of Keane in August 2018. He previously served as the Company’s Chief Executive Officer from March 2011 until August 2018. Prior to joining Keane, from 2007 to 2009, he served as the President and Chief Executive Officer of a privately held international drilling company. From 2006 to 2007, Mr. Stewart served as Vice President of Integrated Drilling Services for Weatherford International plc, based in London and Dubai, where he created and managed a global business unit that included a 50-rig international land contract drilling group and a global project management team. Mr. Stewart began his career with Schlumberger Limited, where he held senior leadership positions across the globe over the span of 22 years. Mr. Stewart’s qualifications to serve as Executive Chairman include his broad leadership experience with oilfield services, as well as his long tenure and successes in the oil and natural gas market.

 

	Age: 58			Marc G. R. Edwards, Lead Independent Director.   Mr. Edwards has served as a member of Keane’s board of directors since September 2016. Mr. Edwards has served as President and Chief Executive Officer and as a member of the board of directors of Diamond Offshore Drilling, Inc., a deepwater water drilling contractor, since 2014. He previously spent 30 years at Halliburton Company, where he worked in various roles, most recently as Senior Vice President of the Completion and Production Division. Mr. Edwards developed an extensive background in the global energy industry during his tenure at Halliburton, which enables him to provide important contributions and a new perspective to our board of directors. His day-to-day leadership experience gives him invaluable insight regarding the operations of an oilfield services company.

 

2019 Proxy Statement | 5

Age: 35		Lucas N. Batzer, Director.   Mr. Batzer has served as a member of Keane’s board of directors since March 2016. He currently serves as a Managing Director of Private Equity at Cerberus Capital Management, L.P. (“Cerberus”), which he joined in August 2009. Prior to joining Cerberus, Mr. Batzer worked as an analyst at The Blackstone Group from 2007 to 2009. He has served on the boards of directors of ABC Group, two automotive component suppliers, since June 2016. Mr. Batzer’s experience in the private equity industry, board experience and comprehensive knowledge of our business and operational strategy, positions him as an important resource on our board of directors.

 

Age: 58		Robert W. Drummond, Director and Chief Executive Officer.   Mr. Drummond joined Keane in August 2018 as Chief Executive Officer. He holds a B.S. in Petroleum Engineering from the University of Alabama, and during his career has earned a wealth of experience in positions of leadership across the energy industry. Prior to joining Keane, Mr. Drummond served as the President & Chief Executive Officer of Key Energy Services, Inc. and served for more than 30 years at Schlumberger Limited in various executive positions, including President of North America, Vice President & General Manager U.S. Land, Vice President of Global Sales, Vice President General Manager U.S. Gulf of Mexico, and President North American Offshore and Alaska. Mr. Drummond has been a Supervisory Director at Frank’s International N.V.
since May 2017, and sits on the board of directors of the Petroleum Equipment Suppliers Association and the advisory board for the University of Alabama College of Engineering. He has previously served on the board of directors of the National Ocean Industries Association, the Houston Offshore Energy Center, the Greater Houston Partnership, the API Upstream Committee, and as an Advisory Board Member of the University of Houston Global Energy Management Institute. Mr. Drummond’s extensive experience in the oil and gas industry makes him uniquely qualified to serve on our board and lead our management team.

 

Age: 58		Dale M. Dusterhoft, Director.   Mr. Dusterhoft has served as a member of Keane’s board of directors since March 2016 and currently serves as Chief Executive Officer and as a director of Trican Well Service L.P. (“Trican”), which he joined at its inception in 1996. He has served on the board of directors of Trican since August 2009. Prior to becoming Chief Executive Officer of Trican, Mr. Dusterhoft was the Company’s Senior Vice President of Technical Services. Before joining Trican, Mr. Dusterhoft worked for 12 years with a major Canadian pressure pumping company, where he held management positions in Operations, Sales and Engineering. Mr. Dusterhoft serves on the board of the Alberta Children’s Hospital Foundation and the Calgary Petroleum Club. In addition, Mr. Dusterhoft is a past President of the Canadian Association of Drilling Engineers, the Canadian
Section of the Society of Petroleum Engineers and a past member of the Industry Advisory Board of the Schulich School of Engineering at the University of Calgary. Mr. Dusterhoft’s years of leadership and operational experience in large, successful enterprises in the oil industry is valuable to our board of directors’ understanding of the industry.

 

6 | Keane Group, Inc.

Age: 55		Christian A. Garcia, Director.   Mr. Garcia has served as a member of Keane’s board of directors since May 2017. Mr. Garcia currently serves as Executive Vice President and Chief Financial Officer of Visteon Corporation, a role he has held since October 2016. Previously, Mr. Garcia served in various executive and leadership roles at Halliburton Company, including as Senior Vice President and Acting Chief Financial Officer. Mr. Garcia has a Bachelor of Science in Business Economics from the University of the Philippines and a Master of Science in Management in Finance from Purdue University, and brings extensive financial and oilfield services experience to the Company.

 

Age: 63		Lisa A. Gray, Director.   Ms. Gray has served as a member of Keane’s board of directors since March 2011. Ms. Gray has served as Vice Chairman of Cerberus Operations and Advisory Company, LLC (“COAC”) since May 2015, as General Counsel from 2004 to 2017 and currently serves as Senior Legal Officer. Prior to joining Cerberus, she served as Chief Operating Executive and General Counsel for WAM!NET Inc. from 1996 to 2004. Prior to that, she was a partner at the law firm of Larkin, Hoffman, Daly & Lindgren, Ltd from 1990 to 1996. Prior to that, she was active in several non-profit corporations. Ms. Gray has over 25 years of experience in the areas of mergers and acquisitions, corporate debt restructuring and corporate governance. Ms. Gray serves as Vice Chairman and General Counsel of COAC, an affiliate of our largest beneficial owner, and has
extensive experience and familiarity with us. In addition, Ms. Gray has extensive legal and corporate governance skills, which broaden the scope of our board of directors’ experience.

 

Age: 60		Gary M. Halverson, Director.   Mr. Halverson has served as a member of Keane’s board of directors since September 2016. In 2016, Mr. Halverson became a Senior Advisor at First Reserve, a private equity firm that focuses on energy investments, and in 2018, Mr. Halverson became Non-Executive Chairman of Tri-Point Oil and Gas, an oil and gas production and process equipment and services company. In January 2019, Mr. Halverson become a Non-Executive Director of Energy Alloys, a distributor of high strength alloys and corrosion resistant alloy materials. Mr. Halverson was formerly a Partner at 360 Development Partners, a commercial real estate firm from 2016-2018 and Group President of Drilling and Production Systems and Senior Vice President at Cameron International Corporation from 2014 to 2016 prior to its sale to Schlumberger in 2016. He has over 38 years of
industry experience with Cameron, where he worked in various roles across the U.S., Latin America and Asia, including President of Surface Systems between 2005 and 2014, Vice President and General Manager for Western Hemisphere between 2002 and 2006, General Manager of Latin America between 2001 and 2002 and Director of Sales and Marketing for Asia/Pacific/Middle East between 1993 and 2001. Mr. Halverson formerly served as Chairman of the Board of Directors of the Petroleum Equipment Suppliers Association, as a director on the board of the General Committee of Special Programs of the American Petroleum Institute, as a director on the board of the Well Control Institute and was the U.S. delegate to the World Petroleum Congress. Mr. Halverson’s extensive involvement in the oilfield service industry brings a valuable perspective to our Board.

 

2019 Proxy Statement | 7

Age: 52		Shawn Keane, Director.   Mr. Keane has served as a member of Keane’s board of directors since March 2011. Mr. Keane served as President of Keane from 2008 to 2011 and helped transition the company into the hydraulic fracturing industry in the Marcellus/Utica Shale. Previously, he served as Keane’s Vice President between 2000 and 2008, and in various management positions from 1983 to 2000, when he began his employment with Keane & Sons Drilling, Inc., a predecessor entity of Keane. Mr. Keane’s knowledge of our company’s operational history and experience in the oilfield services industry is valuable to our board of directors’ understanding of our business and financial performance.

 

Age: 69		Elmer D. Reed, Director.   Mr. Reed has served as a member of Keane’s board of directors since April 2011. Prior to joining our board of directors, Mr. Reed served as Vice President, Executive Sales for Select Energy Services from 2010 to 2015 and in various management positions for BJ Services Company from 2003 to 2010, Newpark Drilling Fluids from 2001 to 2003 and Halliburton Energy Services from 1971 to 1999. Mr. Reed has over 45 years of oilfield service and operational experience. He served as a member of the board of directors of Circle Star Energy, an E&P company, in 2012. Mr. Reed has been active in the Independent Petroleum Association of America and is a lifetime member of the Society of Petroleum Engineers. He is also a member of Houston Livestock Show and Rodeo and Houston Farm and Ranch, and regularly assists with infrastructure development
projects in South America. Mr. Reed strengthens our board of directors with decades of experience in the oilfield service industry.

 

Age: 66		Lenard B. Tessler, Director.   Mr. Tessler has served as a member of Keane’s board of directors since October 2012. Mr. Tessler is currently Vice Chairman and Senior Managing Director of Cerberus, where he is a member of the Cerberus Capital Management Investment Committee. Prior to joining Cerberus in 2001, Mr. Tessler served as Managing Partner of TGV Partners from 1990 to 2001, a private equity firm which he founded. Earlier in his career, he was a founding partner of Levine, Tessler, Leichtman & Co., and a founder, Director and Executive Vice President of Walker Energy Partners. Mr. Tessler is currently Lead Director of Albertsons Companies, and a director of Avon Products, Inc. He is also a Trustee of the New York-Presbyterian Hospital where he is a member of the Investment Committee and the Budget and Finance Committee. Mr. Tessler’s leadership roles at our largest
beneficial owner, his board service, his extensive experience in financing and private equity investments and his in-depth knowledge of our company and its acquisition strategy, provide critical skills for our board of directors to oversee our strategic planning and operations.

 

Age: 37		Scott Wille, Director.   Mr. Wille has served as a member of Keane’s board of directors since March 2011. Mr. Wille is currently Co-Head of Private Equity and a Senior Managing Director at Cerberus, which he joined in 2006. Prior to joining Cerberus, Mr. Wille worked in the leveraged finance group at Deutsche Bank Securities Inc. from 2004 to 2006. Mr. Wille has served as a director of and Albertsons Companies since 2015. Mr. Wille previously served as a director of Remington Outdoor Company, Inc., a designer, manufacturer and marketer of firearms, ammunition and related products, from 2014 to 2018 and of Tower International, Inc., a manufacturer of engineered structural metal components and assemblies, from 2010 to 2012. Mr. Wille’s experience in the financial and private equity industries, together with his in-depth knowledge of our company and its
acquisition strategy, are valuable to our board of directors’ understanding of our business and financial performance.

 

 

8 | Keane Group, Inc.

Board of Directors

Family Relationships

None of our officers or directors has any family relationship with any director or other officer. “Family relationship” for this purpose means any relationship by blood, marriage or adoption, not more remote than first cousin.

Board Composition

Our business and affairs are currently managed under the board of directors of Keane. Our board of directors has twelve members. Members of the board of directors will be elected at our annual meeting of stockholders to serve for a term of one year or until their successors have been elected and qualified, subject to prior death, resignation, retirement or removal from office.

Board Meetings

During 2018, the board of directors met seven times, the Audit and Risk Committee met seven times, the Compensation Committee met five times and the Nominating and Corporate Governance Committee met three times; all of the directors participated, in person or by telephone, in at least 75% of all board of directors and applicable committee meetings. It is our policy that directors are expected to attend each annual meeting of stockholders.

Director Independence

Our board of directors has affirmatively determined that Marc G. R. Edwards, Christian A. Garcia, Gary M. Halverson and Elmer D. Reed are independent directors under the applicable rules of the New York Stock Exchange (the “NYSE”) and as such term is defined in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934 (the “Exchange Act”).

Director Nominations

In obtaining the names of possible director nominees, our Nominating and Corporate Governance Committee conducts its own inquiries and considers suggestions from other directors, management, stockholders and professional director search firms. The Nominating and Corporate Governance Committee’s process for evaluating nominees identified in unsolicited recommendations from stockholders is the same as its process for unsolicited recommendations from other sources and is further described in Section 4.01 of the Company’s Bylaws. However, stockholders desiring to nominate a director candidate at the annual meeting must comply with certain procedures, for more information, please read “Proposals by Stockholders.”

The Nominating and Corporate Governance Committee believes that nominees should possess the highest personal and professional ethics, reputation, integrity and values and be committed to representing the long-term interests of our stockholders. Directors should have a record of accomplishment in their chosen professional field and demonstrate sound business judgment. Directors must be willing and able to devote sufficient time to carrying out their duties and responsibilities effectively, including attendance at and participation in board and committee meetings, and should be committed to serve on the board for an extended period of time. The Nominating and Corporate Governance Committee will consider independence, diversity of viewpoints, backgrounds and experience, including a consideration of gender, ethnicity, race, country of citizenship and age in determining whether a candidate will be an appropriate fit with, and an asset to, the board of directors. When considering existing directors, the Nominating and Corporate Governance Committee evaluates their history of attendance at board and committee meetings as well as contributions and effectiveness at such meetings.

 

2019 Proxy Statement | 9

In addition, pursuant to the terms of our bylaws and the Amended and Restated Stockholders’ Agreement, dated as of July 3, 2017, by and among the company, Keane Investor Holdings, LLC (“Keane Investor”) and the other parties thereto, Keane Investor (or its permitted assignee or designee) has certain rights to designate members to our board of directors, subject to certain director qualifications, including the rights to:

 

●

for so long as Keane Investor (or its permitted assignee or designee) has beneficial ownership of more than 35% of the then outstanding shares of our common stock, appoint a number of individuals equal to one director fewer than 50% of our board of directors (rounded up to the next whole number);

 

●

for so long as Keane Investor (or its permitted assignee or designee) has beneficial ownership of less than 35% but more than 20% of our then-outstanding common stock, appoint the greater of (i) three individuals or (ii) 25% of our board of directors (rounded up to the next whole number);

 

●

for so long as Keane Investor (or its permitted assignee or designee) has beneficial ownership of less than 20% but more than 15% of our then-outstanding common stock, appoint the greater of (i) two individuals or (ii) 15% of our board of directors (rounded up to the next whole number); and

 

●

for so long as Keane Investor (or its permitted assignee or designee) has beneficial ownership of less than 15% but more than 10% of our then-outstanding common stock, appoint one individual to our board of directors.

For additional information, see “Other Information—Related Party Transactions” in this proxy statement.

Cessation of Controlled Company Status

As of December 6, 2018, Keane Investor no longer holds a majority of our outstanding common stock. As a result, we must comply with all general NYSE corporate governance standards as we no longer are a “controlled company” within the meaning of the NYSE rules. Our Audit and Risk Committee is fully independent and, as of March 1, 2019, we currently have a majority of independent directors on each of our Compensation Committee and Nominating and Corporate Governance Committee and expect that we will have fully independent committees as required by the NYSE rules and a majority independent board by the one-year anniversary of our status change.

Board Leadership Structure

Our board of directors does not have a formal policy on whether the roles of Chief Executive Officer and Chairman of the board of directors should be separate. Until August 2018, James C. Stewart served as both Chairman and Chief Executive Officer of the Company. However, in August 2018, Robert W. Drummond was appointed Chief Executive Officer, which enabled Mr. Stewart to focus on leadership of the Board and the strategic direction of the Company and actively engage with stockholders. The Board believes that this leadership structure, along with the role of the Lead Independent Director, provides the best direction for the management team and is ideal for the Company and its stockholders.

Our corporate governance guidelines provide for the election of one of our directors to serve as Lead Director. Marc G. R. Edwards currently serves as our Lead Independent Director, and is responsible for serving as a liaison between the Chairman and the non-management directors, approving meeting agendas and schedules for our board of directors and presiding at executive sessions of the non-management directors and any other board meetings at which the Chairman is not present, among other responsibilities. Our non-management directors meet regularly in executive sessions at which only non-management directors are present, and the Lead Director chairs those sessions.

Our board of directors expects to periodically review its leadership structure to ensure that it continues to meet the Company’s needs.

Role of Board in Risk Oversight

While the full board of directors has the ultimate oversight responsibility for the risk management process, its committees oversee risk in certain specified areas. In particular, our Audit and Risk Committee oversees management of enterprise risks as well as financial risks. Our Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements and the incentives created by the compensation awards it administers. Our Compliance Committee is responsible for overseeing the management of compliance and regulatory

 

10 | Keane Group, Inc.

risks facing our company and risks associated with business conduct and ethics. Our Nominating and Corporate Governance Committee oversees risks associated with corporate governance. Pursuant to our board of directors’ instruction, management regularly reports on applicable risks to the relevant committee or the full board of directors, as appropriate, with additional review or reporting on risks conducted as needed or as requested by our board of directors and its committees.

Communication with the Board and its Non-Management Members

Persons may communicate with our board of directors by submitting such communication in writing to the attention of Kevin McDonald, Executive Vice President, in care of the Board of Directors, Keane Group, Inc., 1800 Post Oak Boulevard, Suite 450, Houston, Texas 77056. Persons may communicate with the non-management members of the board of directors by submitting such communication in writing to Kevin McDonald, Executive Vice President, in care of the non-management members of the Board of Directors, Keane Group, Inc., 1800 Post Oak Boulevard, Suite 450, Houston, Texas 77056.

Board Committees

Our board of directors has assigned certain of its responsibilities to permanent committees consisting of board members appointed by it. The charter for each committee of our board of directors is available on our website at www.keanegrp.com, by clicking on “Investors,” then “Corporate Governance,” then “Governance Documents,” then the name of the applicable committee charter.

 

Name

Audit & Risk Committee

Compensation Committee

Compliance Committee

Nominating & Corporate Governance Committee

Christian A. Garcia*

🌑

🌑

Dale M. Dusterhoft

🌑

🌑

Elmer D. Reed*

🌑

🌑

Gary M. Halverson*

🌑

🌑

🌑

Lisa A. Gray

🌑

🌑

Lucas N. Batzer

🌑

Marc G. R. Edwards*

🌑

🌑

🌑

Shawn Keane

🌑

🌑 = Chairperson

🌑 = Member

 

*	Indicates that such director is independent under the applicable rules of the NYSE and as such term is defined in Rule 10A-3(b)(1) under the Exchange Act

Audit and Risk Committee

Our Audit and Risk Committee consists of Marc G. R. Edwards, Christian A. Garcia and Gary M. Halverson, with Christian Garcia serving as chair of the committee. The committee assists the board in its oversight responsibilities relating to the integrity of our financial statements, our compliance with legal and regulatory requirements (to the extent not otherwise handled by our Compliance Committee), our independent auditor’s qualifications and independence, and the establishment and performance of our internal audit function and the performance of the independent auditor. Each of Messrs. Garcia, Edwards and Halverson qualify as independent directors under the corporate governance standards of the rules of the NYSE and the independence requirements of Rule 10A-3 of the Exchange Act. Our board of directors has

 

2019 Proxy Statement | 11

determined that Mr. Garcia qualifies as an “audit committee financial expert” as such term is currently defined in Item 407(d)(5) of Regulation S-K. Each member of the Audit and Risk Committee is able to read and understand fundamental financial statements, including our balance sheet, statement of operations and cash flows statements.

Our board of directors has adopted a written charter under which the Audit and Risk Committee operates. A copy of the Audit and Risk Committee charter, which satisfies the applicable standards of the Securities and Exchange Commission (the “SEC”) and the NYSE, is available on our website.

Compensation Committee

Our Compensation Committee consists of Dale M. Dusterhoft, Marc G. R. Edwards, Gary Halverson, and Elmer Reed, with Gary Halverson serving as chair of the committee. The Compensation Committee is authorized to review our compensation and benefits plans to ensure they meet our corporate objectives, approve the compensation structure of our executive officers and evaluate our executive officers’ performance and advise on salary, bonus and other incentive and equity compensation. As of December 6, 2018, Keane Investor no longer holds a majority of our outstanding common stock. As a result, we must comply with all general NYSE corporate governance standards as we no longer are a “controlled company” within the meaning of the NYSE rules. As of March 1, 2019, we currently have a majority of independent directors on our Compensation Committee and expect that the Compensation Committee will be fully independent by the one-year anniversary of our status change. A copy of the Compensation Committee charter is available on our website.

Compliance Committee

Our Compliance Committee consists of Lucas N. Batzer, Lisa A. Gray, Shawn Keane and Elmer D. Reed, with Lisa A. Gray serving as chair of the committee. The purpose of the Compliance Committee is to assist the board in implementing and overseeing our compliance programs, policies and procedures that are designed to respond to the various compliance and regulatory risks facing our company, and monitor our performance with respect to such programs, policies and procedures. A copy of the charter for the Compliance Committee is available on our website.

Nominating and Corporate Governance Committee

Our Nominating and Corporate Governance Committee consists of Dale M. Dusterhoft, Marc G. R. Edwards, Christian A. Garcia, Lisa A. Gray and Gary M. Halverson, with Marc G. R. Edwards serving as chair of the committee. The Nominating and Corporate Governance Committee is primarily concerned with identifying individuals qualified to become members of our board of directors, selecting the director nominees for the next annual meeting of the stockholders, selecting director candidates to fill any vacancies on our board of directors and developing our corporate governance guidelines and principles. As of December 6, 2018, Keane Investor no longer holds a majority of our outstanding common stock. As a result, we must comply with all general NYSE corporate governance standards as we no longer are a “controlled company” within the meaning of the NYSE rules. As of March 1, 2019, we currently have a majority of independent directors on our Nominating and Corporate Governance Committee and expect that the Nominating and Corporate Governance Committee will be fully independent by the one-year anniversary of our status change. A copy of the Nominating and Corporate Governance Committee charter is available on our website.

Corporate Governance

Code of Business Conduct and Ethics

We have adopted a written code of business conduct and ethics (“Code of Business Conduct and Ethics”) that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. In addition, our senior financial officers, including our principal executive officer and principal financial officer, are subject to a written code of ethics for senior financial officers. We have made a current copy of both codes available on our website, www.keanegrp.com and both are available in print and without charge to any person who sends a written request to our Corporate Secretary at 1800 Post Oak Boulevard, Suite 450, Houston, TX 77056. In addition, we intend to post on our website all disclosures that are required by law or the NYSE listing standards concerning any amendments to, or waivers from, any provision of either code.

 

12 | Keane Group, Inc.

Stockholder Recommendation of Director Nominees

We do not have formal procedures in place by which stockholders may recommend nominees to our board of directors, other than those described in Section 4.01 of the Company’s Bylaws.

Corporate Governance Guidelines

We have adopted corporate governance guidelines in accordance with the corporate governance rules of the NYSE, as applicable, that serve as a flexible framework within which our board of directors and its committees operate. These guidelines cover a number of areas, including the size and composition of the board, board membership criteria and director qualifications, director responsibilities, board agenda, roles of each of the Executive Chairman and Chief Executive Officer, executive sessions, standing board committees, board member access to management and independent advisors, director communications with third parties, director compensation, director orientation and continuing education, evaluation of senior management and management succession planning. A copy of our corporate governance guidelines are posted on our website.

Director Compensation

All non-employee members of our board of directors earned or received compensation for service on our board of directors during fiscal year 2018, as set forth in the table below and as described in the accompanying narrative.

 

(in dollars) Name		Fees Earned or Paid in Cash $					Stock Awards $ (1)					Option Awards $					Non-Equity Incentive Plan Compensation $					Change in Pension Value and non- qualified Deferred Compensation Earnings $					All Other Compensation $					Total
Gary M. Halverson				87,500					152,101					—					—					—					—					239,601
Elmer D. Reed				87,500					152,101					—					—					—					—					239,601
Marc G. R. Edwards				112,500					152,101					—					—					—					—					264,601
Christian A. Garcia				105,000					152,101					—					—					—					—					257,601
Lucas N. Batzer				87,500					—					—					—					—					—					87,500
Dale M. Dusterhoft				87,500					—					—					—					—					—					87,500
James E. Giesler				—	(2)				—					—					—					—					—					—
Lisa A. Gray				87,500					—					—					—					—					—					87,500
Shawn Keane				87,500					—					—					—					—					—					87,500
Lenard B. Tessler				87,500					—					—					—					—					—					87,500
Scott Wille				87,500					—					—					—					—					—					87,500

 

(1)

The number of shares of restricted stock granted to Messrs. Edwards, Garcia, Halverson and Reed was calculated pursuant to the Director Compensation Plan (as defined below) based on the volume weighted average price of the common stock for the 5-day trading days prior to the grant date. The amount above, however, reflects the grant date fair value calculated in accordance with ASC 718 (as defined below) of the restricted stock granted in fiscal year 2018. See Note (12) Equity-Based Compensation in our consolidated and combined financial statements, included in our 2018 10-K, for a discussion of the assumptions used in the valuation of such awards.

 

(2)	Mr. Geisler resigned from our Board of Directors effective February 26, 2018 and waived his fee for the portion of the year in which he served.

 

2019 Proxy Statement | 13

As of December 31, 2018, the aggregate number of shares of restricted stock held by each non-employee director was:

 

Name		Number of Shares of Restricted Stock (1)
Marc G. R. Edwards				62,816
Christian A. Garcia				29,681
Gary M. Halverson				41,983
Elmer D. Reed				35,042

 

(1)

Reflects to the total amount of vested and unvested restricted stock awards held by each director. For each of Messrs. Edwards, Garcia, Halverson and Reed this includes 10,734 restricted shares granted on August 6, 2018 that will vest in accordance with the Director Compensation Plan (as defined below). For Mr. Edwards this also includes 17,362 shares granted on October 1, 2016 that will vest on October 1, 2019, for Mr. Garcia this also includes 12,632 shares granted on May 15, 2017 that will vest in equal portions on each of May 15, 2019 and 2020, and for Messrs. Halverson and Reed this also includes 10,417 shares granted on October 1, 2016 that will vest on October 1, 2019.

Director Services Agreements

We have entered into Director Services Agreements with each of Marc G. R. Edwards, Christian A. Garcia, Gary M. Halverson and Elmer D. Reed. The Director Services Agreements provide that each such director serve on an at-will basis until the earlier of disability, death, resignation or removal.

Pursuant to the Director Services Agreement with Mr. Edwards, he serves as our lead independent director and is entitled to receive an annual fee of $100,000 per year. The Director Services Agreements with Messrs. Halverson, Reed and Garcia provide that each director is entitled to receive an annual fee of $75,000 per year. Mr. Garcia receives an additional annual fee of $20,000 for his service as chair of the Audit and Risk Committee.

Director Compensation Plan

Commencing in fiscal year 2017, each of the other non-employee members of our board or directors became eligible to receive a director service fee in the amount of $75,000 per year, which amount was increased to $100,000, effective in the third quarter of 2018, pursuant to the Keane Group, Inc. Non-Employee Director Compensation Plan (the “Director Compensation Plan”). Further, under the Director Compensation Plan, our Lead Director is entitled to an additional annual cash fee of $10,000 and each independent director serving as the chair of a Committee is entitled to an additional annual cash fee of $15,000.

Additionally, the Director Compensation Plan provides that each independent director is eligible to receive an annual equity award. On August 6, 2018, we granted each of Messrs. Edwards, Garcia, Halverson and Reed 10,734 shares of restricted stock under our Equity and Incentive Award Plan. Subject to their continued service with the Company on each vesting date, the Restricted Stock vests in its entirety on earliest of: (i) the one-year anniversary of the grant date, (ii) the date of the first meeting of the Company’s stockholder at which directors will be elected in the calendar year following the calendar year in which the grant date occurs, (iii) the date the participant incurs a termination without Cause, (iv) the date of the participant’s death, and (v) the date of a Change in Control, as such capitalized terms used herein are defined in the Equity Plan. All unvested restricted stock will be forfeited upon a termination of service for any reason other than without Cause or due to the participant’s death.

Director Stock Ownership Guidelines

We have stock ownership requirements for all independent, non-employee Directors to further align their interests with our stockholders. As a result, all such Directors are required to own Company common stock, including unvested restricted stock awards, in an amount equal to or in excess of five (5) times such Directors Annual Director Fee pursuant to the Director Compensation Plan, which shall be determined annually as of the last day of the prior fiscal year. Each such Director has five years to meet the requirements, measured from the date he or she is first elected to the Board. The Company believes that each independent, non-employee Director is on track meet such ownership requirements within the requisite five-year period.

 

14 | Keane Group, Inc.

 Proposal 3   Advisory Approval of Executive Compensation

The Board of Directors recommends that you vote “FOR” this proposal.

We are asking our stockholders to approve, on an annual advisory basis, the compensation of our named executive officers (“NEOs”) as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion. While this vote is not binding on our Company, the results of the vote on this proposal will be carefully considered by the board of directors and the Compensation Committee when making future executive compensation decisions.

The text of the resolution in respect of Proposal 3 is as follows:

“ RESOLVED , that the compensation paid to the Company’s named executive officers, as disclosed in this Proxy Statement pursuant to the rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and any related narrative discussion is hereby APPROVED.”

We urge you to carefully review the Compensation Discussion and Analysis, or “CD&A,” section in this Proxy Statement, as well as the 2018 Summary Compensation Table, other compensation tables and related narrative discussion, for more information regarding the compensation of our NEOs. We believe the information in this Proxy Statement demonstrates the successful design and implementation of a compensation program that aligns stockholders’ and management’s interests.

A simple majority of the votes cast is required to approve this proposal. If you properly give a proxy but do not indicate how you wish to vote, the persons named on the proxy card, or if you do not name your proxy or proxies, the Proxy Holders, will vote for the proposal.

 

 

Executive Compensation

Our Executive Officers

Set forth below is certain information regarding our executive officers, other than the biography of our Executive Chairman and Chief Executive Officer, which appears under “Proposal 1—Election of Directors—Director Information.”

 

Name		Age †		Position
James C. Stewart		56		Executive Chairman
Robert W. Drummond		58		Chief Executive Officer
Gregory L. Powell		44		President and Chief Financial Officer
M. Paul DeBonis Jr.		59		Advisor to the Chairman
Kevin M. McDonald		51		Executive Vice President, General Counsel & Secretary

 

†

As of December 31, 2018

 

18 | Keane Group, Inc.

Gregory L. Powell , President and Chief Financial Officer . Mr. Powell has served as Chief Financial Officer of Keane since March 2011. He previously held the title of Vice President between March 2011 and July 2015, when he became President. Prior to joining Keane, Mr. Powell served as an Operations Executive for Cerberus from 2006 to March 2011. During his tenure at Cerberus, he was responsible for evaluating new investments and partnering with portfolio companies to maximize value creation. Mr. Powell previously served on the board of directors and audit committee of Tower International, Inc., a manufacturer of engineered structural metal components and assemblies. Prior to joining Cerberus, Mr. Powell spent ten years with General Electric, starting with global leadership training and growing into various leadership roles in Finance and Mergers and Acquisitions, with his last role being Chief Financial Officer for GE Aviation—Military Systems.

M. Paul DeBonis Jr. , Advisor to the Chairman . Mr. DeBonis became Advisor to the Chairman in September 2018. He previously served as the Company’s Chief Operating Officer from March 2011 to September 2018. Prior to joining Keane, he served as President of Big Country Energy Services USA LP from May 2010 to May 2011 and as President of Pure Energy Services (USA), Inc. from June 2005 to May 2010. He previously served as Oilfield Services Marketing Manager at Schlumberger Limited. Mr. DeBonis started his oil and gas career with Dowell Services in the fracturing and cementing departments. He has worked in several basins throughout the United States and Canada. Mr. DeBonis was a Schlumberger Field Engineer Graduate in 1985. Mr. DeBonis has authored and published two papers related to hydraulic fracturing for the Society of Petroleum Engineers.

Kevin M. McDonald, Executive Vice President, General Counsel  & Secretary . Mr. McDonald has served as Keane’s Executive Vice President, General Counsel & Secretary since November 2016. Prior to joining Keane, he served in leadership roles at Marathon Oil Corporation from 2012 to 2016, including as Deputy General Counsel of Corporate Legal Services and Government Relations, Deputy General Counsel of Governance, Compliance & Corporate Services and Assistant General Counsel. He practiced as a partner at the international law firm Fulbright & Jaworski LLP (now Norton Rose Fulbright LLP) in 2012. Mr. McDonald previously held various counsel positions, including President & Chief Executive Officer and acting General Counsel at Arms of Hope, a non-profit organization, from 2008 to 2012, Senior Vice President, General Counsel & Chief Compliance Officer at Cooper Industries between from 2006 to 2008, Associate General Counsel at Anadarko Petroleum from 2006 to 2008 and Managing Counsel (Litigation) at Valero Energy from 2002 to 2004. Mr. McDonald began his career as an associate at Norton Rose Fulbright LLP between 1992 and 2001.

Compensation Committee Report

The Compensation Committee has reviewed and discussed this CD&A with the Company’s management. Based on the review and discussions, the Compensation Committee has recommended to our board of directors that this CD&A be included in this Proxy Statement.

The Compensation Committee

Gary Halverson, Chair

Dale M. Dusterhoft

Marc G.R. Edwards

Elmer Reed

 

2019 Proxy Statement | 19

Compensation Discussion & Analysis

This Compensation Discussion & Analysis (“CD&A”) explains our executive compensation program for our named executive officers (“NEOs”) listed below. This CD&A also describes the Compensation Committee’s process for making pay decisions, as well as its rationale for specific decisions related to the fiscal year ended December 31, 2018 (“fiscal year 2018”).

 

NEO		Title
James C. Stewart		Executive Chairman (1)
Robert W. Drummond		Chief Executive Officer (“CEO”) (2)
Gregory L. Powell		President and Chief Financial Officer (“CFO”)
M. Paul DeBonis Jr.		Advisor to the Chairman (3)
Kevin M. McDonald		Executive Vice President, General Counsel & Secretary

 

(1)

Mr. Stewart served as the Company’s Chief Executive Officer until August 6, 2018, after which he assumed the role of Executive Chairman.

 

(2)

Mr. Drummond joined the Company as our Chief Executive Officer effective August 6, 2018.

 

(3)

Mr. DeBonis served as the Company’s Chief Operating Officer until September 4, 2018, after which he assumed the role of Advisor to the Chairman.

Executive Summary

Compensation Practices & Policies

The following practices and policies in our program promote sound compensation governance and are in the best interests of our stockholders and executives:

 

What We Do		What We Don’t Do
☑    Emphasis on variable compensation tied to annual financial performance or long-term stock price performance ☑    Performance-based long-term incentives dependent upon our performance relative to peers make up 30% of NEO LTI starting in 2019 ☑    Clawback policy that applies to cash and equity compensation ☑    Annual compensation risk assessment ☑    Independent compensation consultant reporting directly to our Compensation Committee ☑    Stock Ownership Guidelines for each of our independent, non-employee Directors		☒    Prohibition on option repricing without shareholder approval ☒    Prohibition on hedging of Company securities by our executive officers ☒    Prohibition on pledging of Company securities by our executive officers and directors ☒    No single-trigger change-in-control severance payments ☒    No excise tax gross-ups ☒    Limited use of perquisites and supplemental benefits

2018 Compensation Actions At-A-Glance

The Compensation Committee took the following compensation-related actions for fiscal year 2018:

 

●

Base Salaries : no changes were made to NEO base salaries during 2018.

 

●

Annual Incentives: The Compensation Committee adopted an annual bonus program for fiscal year 2018, based on the achievement of specific Company performance objectives related to EBITDA and EBITDA per fleet. Based on our level of achievement, our Compensation Committee has determined that each of our currently employed NEOs is eligible to receive an amount under the 2018 Second Amended and Restated Executive Bonus Program equal to 100% of the NEO’s target bonus.

 

●

Long-Term Incentives: A significant amount of the compensation delivered to the NEOs is in the form of equity. The NEOs were awarded long-term incentives consisting of a mixture of restricted stock unit awards and stock options. The Compensation Committee believes the use of these equity vehicles creates strong alignment with the Company’s stockholders by linking NEO compensation closely to stock performance.

 

20 | Keane Group, Inc.

What Guides Our Program

Our Compensation Philosophy

Our compensation philosophy is driven by the following guiding principles:

 

●

A significant portion of an executive’s total compensation should be variable (“at-risk”) and linked to the achievement of specific short- and long-term performance objectives.

 

●

Executives should be compensated through pay elements (base salaries, short and long-term incentives) designed to enhance stockholder value by incentivizing our executives to work towards goals that drive a suitable rate of return on stockholder investment.

 

●

Target compensation should be competitive with that being offered to individuals in comparable roles at other companies with which we compete for talent to ensure we employ the best people to lead the successful implementation of our business plans and to attract the caliber of executive we need to support the long-term growth of our enterprise.

 

●

Decisions about compensation should be guided by best-practice governance standards and rigorous processes that encourage prudent decision-making.

The Principal Elements of Pay

Our compensation philosophy is supported by the following principal elements of pay:

 

Pay Element		How it’s Paid		Purpose
Base Salary		Cash (Fixed)		Provide a competitive base salary rate relative to similar positions in the market and enable the Company to attract and retain critical executive talent
Annual Incentives		Cash (Variable)		Reward executives for delivering on annual financial and strategic objectives that contribute to stockholder value creation
Long-Term Incentives		Equity (Variable)		Provide incentives for executives to execute on longer-term financial and strategic goals that drive stockholder value creation and support the Company’s retention strategy

 

2019 Proxy Statement | 21

Pay Mix

A majority of NEO total direct compensation for fiscal year 2018 was variable, at approximately 89% for our CEO, and approximately 82% for our other NEOs, including our Executive Chairman. The following charts illustrate the total direct compensation mix for our CEO and our other NEOs for fiscal year 2018:

 

CEO		Other NEOs (average)
89% variable		82% Variable

Our Decision-Making Process

The Role of the Compensation Committee

The Compensation Committee oversees the executive compensation program for our NEOs. The Compensation Committee is comprised of members of our board of directors. The Compensation Committee works very closely with its independent consultant and management to examine the effectiveness of the Company’s executive compensation program throughout the year. The Compensation Committee evaluates, determines and approves the compensation of our CEO and other executive officers, and to recommend the compensation of our outside directors. The Compensation Committee administers the Company’s equity plans and has overall responsibility for monitoring of the Company’s executive compensation policies, plans and programs. The Compensation Committee may delegate its authority relating to non-employee director compensation to a subcommittee consisting of one or more members, when appropriate. Details of the Compensation Committee’s authority and responsibilities are specified in the committee’s charter which is available on the Company’s website at www.keanegrp.com.

The Role of Management

Compensation Committee meetings are regularly attended by our Executive Chairman, CEO, CFO and General Counsel. Each of the management attendees provides the Compensation Committee with his specific expertise and the business and financial context necessary to understand and properly target financial and performance metrics. None of the members of management are present during the Compensation Committee’s deliberations regarding their own compensation adjustments, but the Company’s independent compensation consultant may participate in those discussions.

The Role of the Independent Consultant

The Compensation Committee has the full authority to engage compensation consultants and other advisors to assist it in the performance of its responsibilities. Prior to retaining, or seeking advice from, a compensation consultant or other advisor, the Compensation Committee must consider the independence of such compensation consultant or other advisor. The independent compensation consultant retained by the Compensation Committee reports directly to the Compensation Committee.

 

22 | Keane Group, Inc.

In 2017, the Compensation Committee engaged Pearl Meyer & Partners, LLC (“Pearl Meyer”) as its independent compensation consultant. The Compensation Committee assessed the independence of Pearl Meyer and determined that its work for the Compensation Committee has not raised any conflict of interest. In 2018, Pearl Meyer provided services to the Compensation Committee, including (i) a refreshed compensation review for the executive officers of the Company, including the NEOs; (ii) an assessment of the Company’s compensation components compared to survey and peer group data; and (iii) recommendations for total compensation opportunity guidelines (i.e., base salary and annual and long-term incentive targets). Pearl Meyer does not provide any services to the Company or any of its subsidiaries other than the services provided to the Compensation Committee.

The Role of the Compensation Peer Group

The Compensation Committee strives to set a competitive level of total compensation for each NEO as compared with executives in similar positions at peer companies. For purposes of setting fiscal year 2018 compensation levels, in conjunction with the recommendation of Pearl Meyer, the Compensation Committee took into account publicly-available data from industry compensation surveys and proxy statements from the group of peer companies listed below.

 

Compensation Peer Group
Basic Energy Services, Inc.		Nabors Industries, Ltd.		Precision Drilling Corporation
C&J Energy Services		Noble Corporation, Plc.		ProPetro Holding Corp.
Ensco plc		Oil States International, Inc.		RPC, Inc.
Forum Energy Technologies		Patterson-UTI Energy, Inc.		Superior Energy Services, Inc.
Helmerich & Payne, Inc.		Pioneer Energy Services Corp.		Transocean Ltd.

The peer companies were selected as potential competitors for executive talent based upon similarity in terms of business focus, financial size, and peer group overlap. We fell at the 65 ^th percentile for revenue size relative to this group during 2018, and at the 43 ^rd percentile for market cap as of December 31, 2018.

This market data is not the sole determinant in setting executive pay levels. The Compensation Committee also considers Company and individual performance, the nature of an individual’s role within the Company, and his or her experience and contributions to his or her current role when making its compensation-related decisions.

The 2018 Executive Compensation Program in Detail

Base Salary

We provide each of our NEOs with a competitive fixed annual base salary. The base salaries for our NEOs are set forth in employment agreements between the Company and each NEO (the “Executive Employment Agreements”) and are reviewed annually by the Compensation Committee by taking into account the results achieved by each executive, his future potential contributions, scope of responsibilities and experience, and competitive pay practices. Mr. McDonald’s base salary was reviewed in late 2017 by the Compensation Committee and increased to $400,000. See the section titled “—Executive Employment Agreements” below for a further discussion regarding the Executive Employment Agreements.

2018 Annual Incentives

Each Executive Employment Agreement provides that the NEO is eligible for an annual bonus. The Executive Employment Agreements with Messrs. Stewart, Drummond, Powell and DeBonis each provide for a target annual bonus at 100% of base salary for the applicable year, and the Executive Employment Agreement. In addition, Mr. McDonald’s target annual bonus was reviewed in late 2017 by the Compensation Committee and increased to 100%.

 

2019 Proxy Statement | 23

The Compensation Committee adopted the Annual Executive Bonus Program for Fiscal Year 2018 (the “2018 Executive Bonus Program”) under the terms of the Company’s Executive Incentive Bonus Plan. The 2018 Executive Bonus Program provides that each NEO is eligible to receive an annual bonus for fiscal year 2018 calculated by multiplying the NEO’s target bonus by the achieved “Funding Level” based on the Company’s achievement of the following metrics:

 

Performance Objectives		2018 Performance Metrics		Weighting
Corporate Financial Results		Adjusted EBITDA			50	%
Corporate Financial Results		Adjusted EBITDA per Fleet Rank			50	%

The funding amount for the Adjusted EBITDA metric was to be determined as set forth in the table below, which amounts were adjusted in January 2019 following a review of the Company’s annual performance, industry conditions for the year, and in consultation with its compensation consultant Pearl Meyer whereby the Compensation Committee determined that the threshold level of EBITDA was initially set at a more challenging level relative to our plan than is typical in our peer group:

 

Achievement Level		Performance Hurdle		Funding Level
Threshold		$332M		50%
Target		$475M		100%
Stretch Level 1		$525M		150%
Stretch Level 2		$575M		200%
Stretch Level 3		>$575M		Linear incremental bonus increase up to the maximum bonus award provided under the Company’s Executive Incentive Bonus Plan.

The Funding Level would increase on a linear basis between the Threshold, Target and Stretch performance hurdles.

The funding amount for the Annual Adjusted EBITDA Per Fleet Rank metric was to be determined as set forth in the table below:

 

Annual Adjusted EBITDA Per Fleet Rank		1				2				3				4				5				6				7				8				9
Funding Level			200	%			175	%			150	%			125	%			100	%			75	%			50	%			0	%			0	%

The Compensation Committee chose to utilize Adjusted EBITDA and Annual Adjusted EBITDA Per Fleet Rank as they are EBTIDA performance is an important measure of the health of our business and a direct measure of our management team’s ability to generate cash and to operate the business profitably. The addition of the EBITDA per Fleet Rank metric adds a relative metric that not only holds us accountable for strong performance against peers but also addresses industry cyclicality.

The 2018 Executive Bonus Program was amended during 2018 to include Mr. Drummond. Pursuant to the Executive Employment Agreement with Mr. Drummond, Mr. Drummond’s bonus is calculated in part based on a contractual amount set forth in the Executive Employment Agreement, which amount is reflective of the bonus that he forfeited with his prior employer, and the remainder based on the Company’s performance under the 2018 Executive Bonus Program.

 

24 | Keane Group, Inc.

For fiscal year 2018, we achieved a level of Adjusted EBITDA of $385 million and an Annual Adjusted EBITDA Per Fleet Rank of 4. Based on such achievements, our Compensation Committee approved a Funding Level equal to 100% of the target bonus for each participant in the 2018 Executive Bonus Program resulting in the NEO bonus payments set forth in the table below:

 

		2018 Annual Bonus
James C. Stewart		$1,000,000
Robert W. Drummond (1)		$   885,000
Gregory L. Powell		$   800,000
M. Paul DeBonis Jr.		$   350,000
Kevin M. McDonald		$   400,000

 

(1)

Pursuant to the Executive Employment Agreement with Mr. Drummond, Mr. Drummond’s bonus is calculated in part based on a contractual amount set forth in the Executive Employment Agreement, which amount is reflective of the bonus that he forfeited with his prior employer, and the remainder based on the Company’s performance under the 2018 Executive Bonus Program.

2018 Long-Term Incentives

Long-term equity awards provide a strong link between executive pay and stockholder interests. Our NEOs are eligible to receive long-term equity awards under the stockholder approved Equity and Incentive Award Plan. For fiscal year 2018, equity awards were granted as a combination of stock options and restricted stock unit awards.

 

●

Stock options are performance-based awards that provide meaningful incentives for management to execute on the longer-term financial and strategic growth goals that drive stockholder value creation. This is because they only provide value to the NEOs if the price of the Company’s stock appreciates over time. Specifically, the value of the award depends on the price of our common stock in the future as compared to the exercise price of the options granted. There can be no assurance that any value will actually be realized under the stock options.

 

●

Restricted stock unit awards are intended to provide the NEOs with the economic equivalent of a direct ownership interest in the Company during the vesting period and provide the Company with significant retention security regardless of post-grant stock price volatility.

For fiscal year 2018, the Compensation Committee reviewed market data provided by Pearl Meyer in determining the targeted award levels for each of our NEOs. In order to help ensure that 2018 award values were properly aligned with the median of our peers, the Compensation Committee approved 2018 awards in two installments. The first installment was approved with a grant date of March 1, 2018 and the second installment was approved with a grant date of August 6, 2018 following a review of peer group data from 2018 proxy filings provided by Pearl Meyer.

The table below shows the number of long-term incentive awards granted for fiscal year 2018 for each of the NEOs:

 

NEO		Stock Option Awards					Restricted Stock Unit Awards					Total Grant Date  Value ($) (1)
James C. Stewart				209,809					181,776				$	4,336,851
Robert W. Drummond				—					407,900				$	5,779,943
Gregory L. Powell				159,780					138,520				$	3,304,337
M. Paul DeBonis Jr.				56,457					49,712				$	1,165,615
Kevin M. McDonald				60,685					52,950				$	1,253,908

 

(1)	Reflects the grant date fair value calculated in accordance with ASC 718.

The stock options and restricted stock units granted to Messrs. Stewart, Powell, DeBonis and McDonald in fiscal year 2018 will vest in one-third increments on March 1 of each of 2019, 2020 and 2021 and August 6 of each of 2019, 2020 and 2021, respectively, contingent upon the continued employment of the NEO through each vesting date. In the event that such NEO’s employment is terminated without Cause, or for Good Reason, within twelve months following a change in control,

 

2019 Proxy Statement | 25

the NEO shall become fully vested in such stock options and restricted stock units, however, if the termination occurs other than following a change in control, such NEO shall become vested in a portion of such stock options or restricted stock units that would have become vested in the twelve months following such termination. The restricted stock units granted to Mr. Drummond include 161,013 restricted stock units that vested 33% on December 31, 2018 and will vest 33% on each December 31 of 2019 and 2020, 85,874 restricted stock units that will vest on August 6 of each of 2019 and 2020, and 161,013 units that vest in their entirety on December 31, 2020, respectively, contingent upon the continued employment of Mr. Drummond through each vesting date. The restricted stock units will become fully vested in the event that Mr. Drummond is terminated without Cause or for Good Reason or following a change in control.

LTI Changes for 2019

Beginning in 2019, the Compensation Committee has decided to replace stock options with performance restricted stock unit (“PSU”) awards. For 2019, PSU awards will comprise 30% of total long-term incentive value for our NEOs, with payout dependent upon total shareholder return (“TSR”) relative to the following group of companies (“Performance Peers”) whom we consider to be direct competitors for business and investor dollars:

 

Performance Peer Group
Basic Energy Services		Liberty Oilfield Services		Quintana Energy Services
C&J Energy Services		Patterson-UTI Energy		RPC, Inc.
FTS International		ProPetro Holding Corp.		Superior Energy Services, Inc.

The performance peer group differs from our compensation benchmarking peer group because not all of our competitors for talent in the oilfield services industry are direct competitors for business, and not all of the companies in the performance peer group are large enough or provide enough publicly-available compensation data for the purposes of benchmarking compensation opportunities.

NEOs may earn between 0% and 200% of the number of performance units granted based upon the following performance payout schedule:

 

Performance Level		Relative TSR Rank		Percent of Target Units Earned
Maximum		100 th Percentile		200%
Target		60 th Percentile		100%
Threshold		30 th Percentile		25%
Below Threshold		Below 30 th Percentile		0%

For the FY 2019 awards, 50% of the PSUs granted to our NEOs may be earned and vested based upon performance over the first two years of the performance period (January 1, 2019 – December 31, 2020), and 50% may be earned and vested based upon performance over a full three-year performance period (January 1, 2019 – December 31, 2021). It is the Committee’s intention to have PSU awards in future years earned based upon performance over a full three-year period.

Executive Employment Agreements

Each currently employed NEO has entered into Executive Employment Agreements with the Company. The Executive Employment Agreements each provide for an initial term that will expire on March 16, 2019 with respect to Messrs. Stewart, Powell and DeBonis, November 7, 2019 with respect to Mr. McDonald, and May 11, 2021 with respect to Mr. Drummond. The Executive Employment Agreement will automatically renew for additional one-year periods unless either party provides written notice at least 90 days prior to the end of the then term and, as a result, Messrs. Stewart, Powell and DeBonis’ Executive Employment Agreements have each been renewed for an additional year.

 

26 | Keane Group, Inc.

Pursuant to the Executive Employment Agreements with the currently employed NEOs, in the event of a termination of the NEO’s employment by us without Cause or due to our non-renewal of the applicable Executive Employment Agreement, or by Messrs. Stewart, Drummond, Powell or McDonald for Good Reason, subject to the execution of a release, the NEO will be entitled to the following severance benefits:

 

●

severance payments equal to:

 

¡

for Mr. Stewart, two times the sum of his annual base salary, and the lesser of the average of the annual bonuses he received during the two years prior to termination and his target bonus;

 

¡

for Mr. Drummond, two times the sum of his annual base salary and his target bonus for the year in which the termination occurs;

 

¡

for Messrs. Powell and DeBonis, two times his annual base salary; and

 

¡

for Mr. McDonald, his annual base salary;

 

●

for Messrs. Stewart and Powell, a pro rata annual bonus for the year of termination;

 

●

for Messrs. Drummond and Powell (upon any termination other than death or voluntarily without Good Reason), and Mr. McDonald, reimbursement of the cost of continuation coverage of group health coverage for up to twelve months following termination.

In addition, pursuant to the Executive Employment Agreements with Messrs. Stewart and Powell, in the event of his termination of employment due to death or disability, subject to the execution of a release, he or his estate, as applicable, will be entitled to:

 

●

severance payments equal to three months of base salary paid for the three-month period following the date of termination; and

 

●

a pro rata annual bonus for the year of termination.

For purposes of the Executive Employment Agreements, “Cause” generally means:

 

●

indictment, conviction or plea of no contest to a felony or any crime involving dishonesty or theft;

 

●

conduct in connection with employment duties or responsibilities that is fraudulent or unlawful;

 

●

conduct in connection with employment duties or responsibilities that is grossly negligent and which has a materially adverse effect on us or our business;

 

●

willful misconduct or contravention of specific lawful directions related to a material duty or responsibility directed to be undertaken from our board of directors;

 

●

material breach of obligations under the applicable Executive Employment Agreement;

 

●

any acts of dishonesty resulting or intending to result in personal gain or enrichment at our expense;

 

●

failure to comply with a material policy; or

 

●

for Mr. Powell, his failure to maintain primary residence in the Houston, Texas metropolitan area.

For purposes of the Executive Employment Agreements, as applicable, “Good Reason” generally means:

 

●

our failure to cure a material breach of our obligations under the applicable Executive Employment Agreement (in the case of Mr. Drummond, a material breach by the Company of its obligations under his Executive Employment Agreement);

 

2019 Proxy Statement | 27

●

a material diminution of duties, position or title (in the case of Mr. Stewart, other than any diminution in connection with the appointment of a new Chairman or Chief Executive Officer if following such appointment Mr. Stewart remains as either Chairman or Chief Executive Officer);

 

●

a material reduction in base salary (in the case of Mr. Drummond, other than as a result of a less-than-ten-percent (10%) reduction that is part of a reduction applicable to other senior executives and in the case of Mr. McDonald, his target bonus); or

 

●

a change in office location that increases the NEO’s commute from his principal residence by more than 50 miles.

Other Practices, Policies and Guidelines

Claw Back Policy

On February 23, 2017, our board of directors adopted the Company’s Compensation Recovery Policy (the “Claw Back Policy”). Pursuant to the Claw Back Policy, in the event of a revision and reissuance of a financial statement previously issued by the Company (an “Accounting Restatement”), our board of directors in its discretion may determine that the officer will be required to repay all or a portion of the amount of incentive-based compensation received by an officer of the Company that exceeds the amount of such compensation that such officer otherwise would been received determined based upon the Accounting Restatement. In the event that any such Accounting Restatement is required due to material non-compliance by the Company with any financial reporting requirement under the securities laws, then an executive officer of the Company will be obligated to repay the amount of incentive-based compensation received by such executive officer that exceeds the amount of such compensation that the executive officer otherwise would have received determined based upon the Accounting Restatement. The Claw Back Policy applies to any incentive-based compensation received by an officer of the Company during the three completed fiscal years of the Company immediately preceding the date of the applicable Accounting Restatement. For purposes of the Claw Back Policy, “incentive-based compensation” means any compensation (whether in cash, common stock, or otherwise) to an officer of the Company, that is granted, earned, vested or for which the amount is determined, wholly or in part, on the attainment by the Company of (i) any measure that is determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, (ii) any measure that is derived wholly or in part from such measures, or (iii) the Company’s stock price and total stockholder return.

Anti-Hedging Policy

We prohibit the NEOs and other executives from engaging in transactions designed to insulate them from changes in the Company’s stock price. Therefore, the Company has an anti-hedging policy that prohibits our NEOs from entering into transactions that include (without limitation) equity swaps or short sales of our securities, margin accounts or pledges of our securities, and hedges or monetization transactions involving our securities that are designed to hedge or offset any decrease in the market value of the Company’s securities. In addition, the purchase or sale of puts, calls, options, or other derivative securities based on the Company’s securities is prohibited under this policy, and borrowing against any account in which our securities are held is prohibited.

Benefits & Perquisites

Our NEOs also generally participate in other benefit plans on the same terms as all of our other employees. These plans include employee benefit plans maintained by the Company, including the 401(k) program, the medical insurance and reimbursement program, the group term life insurance program, and the group disability program.

Our NEOs also receive an automobile allowance in the amount of $21,000 per year for Messrs. Stewart, Powell and DeBonis, and $20,400 per year for Messrs. Drummond and McDonald.

2018 Risk Assessment

Each year, the Company performs a detailed risk analysis of each of its compensation programs. If warranted, the Compensation Committee will recommend changes to address concerns or considerations raised in the risk review

 

28 | Keane Group, Inc.

process. Changes may be recommended for the program design or its oversight and administration in order to mitigate unreasonable risk, if any is determined to exist. The Compensation Committee has concluded that the Company’s compensation arrangements do not encourage any employees to take unnecessary and excessive risks. We do not believe that any risks arising from our compensation policies and practices are reasonably likely to have a material adverse effect on the Company.

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee is or has at any time during the past year been an officer or employee of ours. None of our executive officers serves as a member of the Compensation Committee or board of directors of any other entity that has an executive officer serving as a member of our board of directors or Compensation Committee.

Impact of Tax and Accounting

We regularly consider the various tax and accounting implications of our compensation plans. When determining the amount of long-term incentives and equity grants to executives and employees, the compensation costs associated with the grants are reviewed, as required by the Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC 718”).

Section 162(m) of the Internal Revenue Code (the “Code”) generally prohibits any publicly held corporation from taking a federal income tax deduction for compensation paid in excess of $1 million in any taxable year to the CEO, the CFO and the next three highest compensated officers for such year and any employee who was covered under Section 162(m) of the Code in a prior year. The Compensation Committee believes that it is important for it to retain maximum flexibility in designing compensation programs that are in the best interest of the Company and its stockholders. Therefore, the Compensation Committee, while considering tax deductibility as a factor in determining compensation, may not limit compensation to $1 million in any taxable year if it believes that the compensation is commensurate with the performance of the covered employee.

 

2019 Proxy Statement | 29

Executive Compensation Tables

Summary Compensation Table

 

   

Name and Principal Position (a)		Year (b)					Salary ($) (c)					Bonus ($) (1) (d)					Stock Awards ($) (2) (e)					Option Awards ($) (3) (f)					Non- Equity Incentive Plan Compensation ($) (4) (g)					Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (h)					All Other Compensation ($) (5) (i)					Total ($) (j)
James C. Stewart Executive Chairman*				2018					1,000,000					—					2,797,978					1,538,873					1,000,000			—							30,625					6,367,476
				2017					813,077					80,000					7,065,139					1,324,629					3,333,334			—							45,000					12,661,179
				2016					640,000					133,333					—					—					1,466,667			—							30,742					2,270,742
Robert W. Drummond Chief Executive Officer				2018					292,308					800,000					5,779,943					—					885,000			—							7,452					7,764,703
Gregory L. Powell President and Chief Financial Officer				2018					800,000					—					2,132,334					1,172,003					800,000			—							30,625					4,934,962
				2017					571,539					140,000					5,825,334					1,077,362					2,933,334			—							39,000					10,586,569
				2016					360,000					233,333					—					—					1,306,667			—							29,673					1,929,673
M. Paul DeBonis Jr. Advisor to the Chairman**				2018					350,000					—					756,103					409,512					350,000			—							28,842					1,894,456
				2017					292,885					20,000					2,135,156					347,998					1,033,334			—							45,000					3,874,373
				2016					240,000					33,333					—					—					466,667			—							29,223					769,223
Kevin M. McDonald Executive Vice President, Legal Counsel & Secretary				2018					400,000					—					810,892					443,017					400,000			—							30,025					2,083,934
				2017					338,750					—					1,169,372					497,470					527,768			—							38,719					2,572,079

 

*	Prior to August 6, 2018, Mr. Stewart served as the Company’s Chief Executive Officer.

 

**	Prior to September 4, 2018, Mr. DeBonis served as the Company’s Chief Operating Officer.

 

(1)	Reflects a monthly retention payment to each of Messrs. Stewart, Powell and DeBonis through June 2017 and a sign on bonus paid to Mr. Drummond pursuant to his Executive Employment Agreement.

 

(2)

Reflects the grant date fair value calculated in accordance with ASC 718 of the restricted stock units granted to the NEOs in each of fiscal years 2018 and 2017 and of the deferred stock awards granted to each of Messrs. Stewart, Powell and DeBonis in fiscal year 2017. See Note 12—Stock- Based Compensation in our audited consolidated and combined financial statements included in our 2018 10-K for a discussion of the assumptions used in the valuation of such awards.

 

(3)

Reflects the grant date fair value calculated in accordance with ASC 718 of the stock option granted to the NEOs in each of fiscal years 2018 and 2017. See Note 12—Stock-Based Compensation in our audited consolidated and combined financial statements included in our 2018 10-K for a discussion of the assumptions used in the valuation of such awards.

 

(4)

For fiscal year 2018, these amounts reflects 100% of the annual target bonus for each NEO (other than Mr. Drummond) payable under our 2018 Executive Bonus Program. For fiscal year 2018, this amount reflects the sign on bonus described in Mr. Drummond’s Executive Employment Agreement. For fiscal year 2017, these amounts reflect (a) bonus payments earned in fiscal year 2017 under our Value Creation Plan to Messrs. Stewart, Powell and DeBonis and (b) an amount equal to 200% of the annual target bonus for each NEO payable under our 2017 Executive Bonus Program. For the fiscal year ended December 31, 2016, these amounts reflect (a) bonus payments earned in fiscal year 2016 under our Value Creation Plan and (b) amounts paid to the NEOs under our annual bonus plan for such fiscal year.

 

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(5)	A detailed breakdown of “All Other Compensation” is provided in the table below:

 

Name		Year					Automobile Allowance ($)					401(k) Plan Company Contribution ($)					Severance ($)					Expenses ($) (a)					Total ($)
James C. Stewart				2018					21,000					9,625					—					—					30,625
				2017					21,000					24,000					—					—					45,000
				2016					21,000					9,742					—					—					30,742
Robert W. Drummond				2018					7,452					—					—					—					7,452
Gregory L. Powell				2018					21,000					9,625					—					—					30,625
				2017					21,000					18,000					—					—					39,000
				2016					21,000					8,673					—					—					29,673
M. Paul DeBonis Jr.				2018					21,000					7,842					—					—					28,842
				2017					21,000					24,000					—					—					45,000
				2016					21,000					8,223					—					—					29,223
Kevin M. McDonald				2018					20,400					9,625					—					—					30,025
				2017					20,400					18,319					—					—					38,719

 

2019 Proxy Statement | 31

Grants of Plan Based Awards in Fiscal Year 2018

 

							Estimated Future 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					All Other Option Awards: Number of Securities Underlying					Exercise or Base Price of Option					Grant Date Fair Value of Stock and Option
Name		Grant Date					Threshold ($)					Target ($)					Maximum ($)(2)					Threshold ($)					Target ($)					Maximum ($)(2)					or Units (#)(3)					Options (#)(4)					Awards ($/Share)					Awards ($)(5)
James C. Stewart									500,000					1,000,000					5,000,000					—					—					—					—					—					—					—
				3/1/2018					—					—					—					—					—					—					152,200					—					—					2,378,886
									—					—					—					—					—					—					—					179,100					15.63					1,331,843
				8/6/2018					—					—					—					—					—					—					29,576					—					—					419,092
									—					—					—					—					—					—					—					30,709					14.17					207,030
Robert W. Drummond									—					885,000	(6)				—					—					—					—					—					—					—					—
				8/6/2018					—					—					—					—					—					—					407,900	(7)				—					—					5,779,943
Gregory L. Powell									400,000					800,000					5,000,000					—					—					—					—					—					—					—
				3/1/2018					—					—					—					—					—					—					116,100					—					—					1,814,643
									—					—					—					—					—					—					—					136,500					15.63					1,015,056
				8/6/2018					—					—					—					—					—					—					22,420					—					—					317,691
									—					—					—					—					—					—					—					23,280					14.17					156,946
M. Paul DeBonis Jr.									175,000					350,000					5,000,000					—					—					—					—					—					—					—
				3/1/2018					—					—					—					—					—					—					35,400					—					—					553,302
									—					—					—					—					—					—					—					41,600					15.63					309,350
				8/6/2018					—					—					—					—					—					—					14,312					—					—					202,801
									—					—					—					—					—					—					—					14,857					14.17					100,161
Kevin M. McDonald									200,000					400,000					5,000,000					—					—					—					—					—					—					—
				3/1/2018					—					—					—					—					—					—					41,500					—					—					648,645
									—					—					—					—					—					—					—					48,800					15.63					362,892
				8/6/2019					—					—					—					—					—					—					11,450					—					—					162,247
									—					—					—					—					—					—					—					11,885					14.17					80,125

 

(1)

Amounts represent the range of annual cash incentive awards the NEO was potentially entitled to receive based on the achievement of performance goals for fiscal year 2018 under the 2018 Executive Bonus Program as more fully described in “—Compensation Discussion and Analysis—2018 Annual Incentives.” The amounts actually paid are reported in the Non-Equity Incentive Plan column of the Summary Compensation table. Pursuant to the 2018 Executive Bonus Plan, performance below a specific threshold will result in no payment with respect to that performance goal.

 

(2)	Reflects the maximum bonus payable to any executive under the Company’s Executive Incentive Bonus Plan.

 

(3)	Represents restricted stock units granted to the NEOs, as described in “—Compensation Discussion and Analysis—2018 Long-Term Incentives.”

 

(4)	Represent stock options granted to the NEOs, as described in “—Compensation Discussion and Analysis—2018 Long-Term Incentives.”

 

(5)	Reflects the grant date fair value as calculated in accordance with ASC 718. Assumptions used in the valuation of equity-based awards are discussed in “Note 12—Stock-Based Compensation” in our audited consolidated and combined financial statements included in our 2018 10-K.

 

(6)

Pursuant to the Executive Employment Agreement with Mr. Drummond, Mr. Drummond’s bonus is calculated in part based on a contractual amount set forth in the Executive Employment Agreement, which amount is reflective of the bonus that he forfeited with his prior employer, and the remainder based on the Company’s performance under the 2018 Executive Bonus Program.

 

(7)

Includes 161,013 restricted stock units that are subject to three year vesting, the first 33% of which became vested on December 31, 2018, and the remaining restricted stock units will become vested on December 31 of each of 2019 and 2020, 85,874 restricted stock units that are subject to two year vesting and will become vested on August 6 of each of 2019 and 2020, and 161,013 units that vest in their entirety on December 31, 2020.

 

32 | Keane Group, Inc.