CJ 2018 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS In connection with the negotiation of the Named Executive Officer employment agreements during the Chapter 11 Proceeding, the Named Executive Officers each agreed that the Chapter 11 Proceeding does not constitute a change in control under their respective employment agreements. For more detailed information regarding our severance and change in control benefits under the employment agreements and other compensation arrangements in effect for our Named Executive Officers during 2017, please read “Executive Compensation—Potential Payments upon Termination or Change in Control” under “Executive Compensation Tables.” Stock Ownership Guidelines In August 2017, our Compensation Committee approved and adopted stock ownership guidelines for each of our non-employee directors and executive officers, which include our Named Executive Officers, to further link the long-term reward of the Company’s directors and executive officers to stockholder value. We believe it is in the Company’s best interest to require that our directors and executive officers have significant ownership in C&J’s common stock, and it is appropriate to provide direction as to the level of ownership considered satisfactory. • Our CEO is required to own C&J common stock in an amount equal to or in excess of five times his annual base salary. • Each of our Chief Financial Officer, Chief Operating Officer, Chief Administrative Officer and General Counsel, as well as any President or Executive Vice President reporting directly to our CEO or any of the foregoing persons is required to own an amount of C&J common stock equal to or in excess of three times their annual base salary. • Each of our non-employee directors is required to own C&J common stock in an amount equal to or in excess of five times their annual cash retainer. • One of our non-employee directors, Mr. Michael Zawadzki, is employed by one of our largest stockholders and does not receive compensation for his service as a non-employee director and thus is not subject to our stock ownership guidelines. The following forms of equity interests in the Company count towards satisfaction of our stock ownership guidelines: • Shares of common stock owned directly by the director or executive officer, including shares acquired (i) through open market purchase, (ii) on vesting of restricted stock or earned performance awards, shares acquired, (iii) on settlement of restricted stock units, or (v) through the exercise of stock options; • Shares of common stock owned indirectly by the director or executive officer (e.g., by a spouse or other immediate family member or held in trust for the benefit of the director or officer, or such person’s spouse or other immediate family member), whether held separately or jointly; • Issued and held, but unvested restricted stock and restricted stock units; provided, however, that for executive officers, only 60% of such restricted stock / restricted stock units shall be counted in order to account for the deduction of applicable taxes; and • 60% of earned but unvested incentive and performance awards that will be settled in shares of common stock (to account for the deduction of applicable taxes). • Unexercised stock options (whether vested or unvested) and unearned, unvested incentive or performance awards do not count towards satisfaction of our stock ownership guidelines. On an annual basis, the Compensation Committee will review whether the directors and executive officers are in compliance with the required ownership thresholds. Each non-employee director and executive officer has five years to satisfy the foregoing ownership thresholds starting from the later of (i) August 4, 2017 and (ii) the date elected or appointed to a participating position. Tax Deductibility of Executive Compensation As part of its role in determining the amounts and type of compensation to grant to the Named Executive Officers, the Compensation Committee has historically taken into consideration the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which provided that public companies were not be able to deduct certain compensation in excess of $1,000,000 that was paid to their Chief Executive Officer or the three other most highly compensated executive officers (other than the Chief Financial Officer) unless the compensation was “performance-based” within the meaning of Section 162(m) of the Internal Revenue Code. Section 162(m) of the Internal Revenue Code was modified by the Tax Cuts and Jobs Act to delete the exception for performance- based compensation for all arrangements that are not deemed to be grandfathered pursuant to the Tax Cuts and Jobs Act, therefore we do not expect Section 162(m) of the Internal Revenue Code to have a significant impact on our compensation decisions with respect to the 2018 year and going forward. The Compensation Committee considers its primary goal to design compensation 42 C&J ENERGY SERVICES, INC. 2018 PROXY STATEMENT