CJ 2018 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS Employment Agreements We maintain employment agreements with each of our executive officers and also enter into award agreements with each recipient of an equity award that governs the terms and conditions of that award under the MIP. Each of our Named Executive Officers has an employment agreement which generally provide that the Named Executive Officers are eligible to receive the following compensation and benefits, however wholly subject to the discretion and approval of the Compensation Committee: (i) an annualized base salary; (ii) an annual short-term incentive cash bonus award with a designated target value (and a target value range with respect to the CEO only) based on a specified percentage of annual base salary and the achievement of certain performance targets set forth by the Compensation Committee, provided , however , that the Compensation Committee has discretion to establish different targets as it deems appropriate; and provided , further that the Compensation Committee has discretion to determine that up to 50% of the value of any annual cash bonus will be paid in C&J common stock and the remainder be paid in cash; (iii) an annual long-term incentive equity award with a designated target value of no less than the executive’s “Total Cash Compensation,” which is the sum of (a) the executive’s annualized base salary for the prior calendar year and (b) the annual cash incentive bonus award paid to the Named Executive Officer in the prior calendar year (other than Mr. Gawick, whose calculation is the sum of (a) Mr. Gawick’s annualized base salary for the prior calendar year and (b) the greater of the annual cash incentive bonus award paid to Mr. Gawick in either of the prior two calendar years); (iv) special, discretionary bonuses as may be determined solely by our Board; (v) employee benefits for the executive and the executive’s eligible family members that we ordinarily provide to similarly situated employees (including, but not limited to, medical and dental insurance, retirement plans, disability insurance and life insurance); and (vi) other fringe benefits and perquisites that are deemed appropriate. The following table enumerates the compensation components that each of the Named Executive Officers was eligible to receive for the 2017 fiscal year based on the terms of such NEO’s employment agreement and the determination of the Compensation Committee. The total compensation earned by each Named Executive Officer in 2017 is reported in “Executive Compensation Tables” and is also illustrated above for our CEO. Named Executive Officer Annual Base Salary(1) Annual STI Cash Bonus Award Target Value (% of Salary)(2) Annual LTI Equity Award Target Value (% of Total Cash Compensation)(3) Donald Gawick $875,000 150-250% 350% E. Michael Hobbs $500,000 150% 250% Mark Cashiola $425,000 100% 200% Danielle Hunter $400,000 100% 200% Patrick Bixenman $362,000 100% 200% (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 the salaries for each of our Named Executive Officers. Those reductions remained in effect until July 1, 2017, at which time the 10% reduction was restored. Accordingly, each Named Executive Officer earned less than the stated amounts during 2017. (2) Each year, the Compensation Committee reviews the structure of the STIP and establishes the STI target values and incentive opportunities for the applicable performance fiscal year as it deems appropriate. In 2017, the Compensation Committee established C&J’s first performance-based STIP with financial and operational goals tied to the annual STI cash bonus opportunity. The Compensation Committee determined it was appropriate to apply the STI targets set forth in the employment agreements for the Named Executive Officers for the 2017 STIP. The Compensation Committee reviewed the STIP structure at the end of 2017 and established reduced STI target value and cash bonus opportunities (as a percentage of total direct compensation) for the Named Executive Officers for purposes of the 2018 STIP, described under “—Actions Taken for the 2018 Fiscal Year.” (3) In February 2017, the Named Executive Officers and other employees received the special, one-time Emergence Grants with values based on these LTI targets calculated on the reduced salaries then in effect. In December 2017, the Named Executive Officers and other members of senior management received annual LTI equity awards. Balancing the desire to include performance-based awards and the need to increase executive stock ownership, the Compensation Committee established increased LTI equity award opportunities (as a percentage of total direct compensation) for the Named Executive Officers for purposes of this grant, described under “—Actions Taken for the 2018 Fiscal Year.” Base Salary Each NEO’s base salary is provided for in the respective employment agreement as a fixed component of compensation that may be annually adjusted by the Compensation Committee. Salary reviews are conducted annually to evaluate each executive; however individual salaries are not necessarily adjusted each year. We generally do not adjust base salaries for our Named Executive Officers based strictly on Company performance, rather we generally target base salaries at approximately the “median” of our peer group. That said, the Compensation Committee does consider company performance and gives weight to other factors as well, including: • Sustained performance, contribution and leadership; C&J ENERGY SERVICES, INC. 2018 PROXY STATEMENT 37