CJ 2018 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS CEO 2017 Total Realized Compensation. Due to the pay-for-performance philosophy and at-risk nature of our executive compensation program, the total compensation actually realized by our executives may be less than the total compensation required to be reported in this Proxy Statement in accordance with the rules of the SEC under “Executive Compensation Tables.” We calculate “realized compensation” for a given year by adding together: (1) actual base salary earned during the year, (2) the STI cash bonus awards earned for that year, (3) the value of restricted shares that vested during the year, valuing the shares based on the closing price of our common stock on the last business day of the year, (4) the gain on any stock options that were exercised during the year, based on the closing price of our common stock on the day of exercise, as compared to the exercise price of the stock option; and (5) the value of any perquisites and other compensation delivered during the year. The chart below shows that the total compensation actually realized by our CEO in 2017 was 29% of the required reported compensation for the year in “Executive Compensation Tables”. $831 $831 $2,111 $2,111 $13,190 $16,146 $4,748 $1,792 Base Salary Reported 1 Base Salary Realized 1 STI Awards Reported 2 STI Awards Realized 2 LTI Awards Reported 3 LTI Awards Realized 4 All Other Compensation Reported All Other Compensation Realized $14 $14 Total Reported Total Realized $0 $1000 $2000 $3000 $4000 $5000 $6000 $7000 $8000 $9000 $10000 $11000 $12000 $13000 $14000 $15000 $16000 $17000 (1) In March 2016 due to the severe industry downturn, the Company implemented reductions in base salaries for all employees, including a 10% reduction in salary for our CEO that remained in effect until July 1, 2017. (2) The incentive opportunity available to Mr. Gawick under the 2017 STIP had a value range of up to 250% of his annual base salary. Based on the Company’s performance under the established metrics, Mr. Gawick’s 2017 STI cash bonus award was calculated at approximately 235% of base salary earned during the year. Mr. Gawick also earned a special, one-time IPO Incentive Award. (3) Includes performance shares with a grant date fair value of $1,266,958; provided, however, that these shares will be earned, if at all, based on the Company’s ranking of total relative stockholder return over a three year performance period and, at the end of the performance period, this grant may actually settle for between zero and two shares for each share reported. Also includes stock options and restricted stock subject to time-based vesting schedules, a portion of which vested during the year. See “Executive Compensation Tables—Grants of Plan-Based Awards for the 2017 Fiscal Year” for more information. (4) See “Executive Compensation Tables—Option Exercises and Shares Vested in the 2017 Fiscal Year for more information.” Other key components of our executive compensation program include retirement benefits (the employer match component of the Company’s 401(k) plan which was eliminated in 2016 and the first half of 2017), health and welfare benefits (including medical and dental insurance, disability insurance and life insurance), and other limited and reasonable perquisites. We also provide severance payments upon termination by the Company without cause or by the executive for good reason, “double trigger” change in control benefits, as well as certain severance benefits upon an executive’s death or disability. No severance benefits are provided in the event of an executive’s termination with cause. Please see “Potential Payments Upon Termination or Change in Control” below for additional information. 36 C&J ENERGY SERVICES, INC. 2018 PROXY STATEMENT