UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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[X]
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Filed by a Party other than the Registrant
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Check
the appropriate box:
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Preliminary Proxy Statement
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Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
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[X]
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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SUPERIOR
DRILLING PRODUCTS, INC.
(Name
of Registrant as Specified in Its Charter)
(Name
of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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[X]
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No fee required.
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Fee computed on
table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class
of securities to which transaction applies:
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(2)
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Aggregate number
of securities to which transaction applies:
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(3)
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Per unit price or
other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4)
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Proposed maximum
aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously
with preliminary materials:
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Check box if any
part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of
its filing.
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(1)
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Amount previously
paid:
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(2)
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Form, Schedule or
Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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SUPERIOR
DRILLING PRODUCTS, INC
1583
South 1700 East
Vernal,
Utah 84078
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held August 3, 2018
Dear
Stockholders:
We
cordially invite you to attend our 2018 annual meeting of stockholders. The meeting will be held on August 3, 2018 at 9:00 a.m.
(Mountain time), at our corporate offices at 1583 South 1700 East, Vernal, Utah 84078. At the meeting we will:
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1.
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Elect
one Class I member of the Board of Directors to serve until our 2021 meeting of the stockholders;
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2.
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Ratify
the appointment of Moss Adams LLP as our independent registered public accounting firm for the fiscal year ending December
31, 2018; and
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3.
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Transact
any other business as may properly come before the meeting.
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Stockholders
who owned our common stock at the close of business on June 1, 2018 may attend and vote at the meeting. A stockholders’
list will be available at our offices at 1583 South 1700 East, Vernal, Utah 84078 for a period of ten days prior to the meeting.
We hope that you will be able to attend the meeting in person.
Your
vote is important. Whether or not you expect to attend the meeting, please sign and date the enclosed proxy card and return it
to us promptly. A stamped envelope has been provided for your convenience. Alternatively, you may vote via the telephone or the
Internet by following the instructions set forth on the enclosed proxy card. The prompt return of proxies will ensure a quorum
and save us the expense of further solicitation.
We
look forward to seeing you at the meeting.
By order of the Board of
Directors,
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/s/
Annette Meier
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Annette D. Meier
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Secretary
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June
15, 2018
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YOUR
VOTE IS IMPORTANT
Your
vote is important. We urge you to review the accompanying Proxy Statement carefully and to submit your proxy as soon as possible
so that your shares will be represented at the meeting.
SUPERIOR
DRILLING PRODUCTS, INC.
1583
South 1700 East
Vernal,
Utah 84078
PROXY
STATEMENT
INFORMATION
CONCERNING SOLICITATION AND VOTING
Our
Board of Directors is soliciting proxies for the 2018 annual meeting of stockholders to be held on August 3, 2018 at 9:00 a.m.
(Mountain time), at our corporate offices at 1583 South 1700 East, Vernal, Utah 84078, and at any adjournments or postponements
of the meeting. This proxy statement contains important information for you to consider when deciding how to vote on the matters
brought before the meeting. Please read it carefully.
We
will pay the costs of soliciting proxies from stockholders. Our directors, officers and regular employees may solicit proxies
on behalf of us, without additional compensation, personally or by telephone.
QUESTIONS
AND ANSWERS
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Q:
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Who can vote
at the meeting?
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A:
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The Board of Directors
set June 1, 2018 as the record date for the meeting. You can attend and vote at the meeting if you were a common stockholder
at the close of business on the record date, June 1, 2018. On that date, there were 24,535,155 shares of our common stock
outstanding and entitled to vote at the meeting.
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Q:
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What proposals
will be voted on at the meeting?
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A:
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Two proposals are
scheduled to be voted upon at the meeting:
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The election of
one Class I member of the Board of Directors to serve until our 2021 meeting of the stockholders; and
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The ratification
of the appointment of Moss Adams LLP as our independent registered public accounting firm for the fiscal year ending December
31, 2018.
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Q:
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How do I cast
my vote?
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A:
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If your shares are
registered directly in your name with our transfer agent, you are considered the registered stockholder for those shares.
As the registered stockholder, you have the right to vote those shares and we will send you the proxy materials and a proxy
card. You should sign and return the mailed proxy card in the prepaid and addressed envelope that was enclosed with the proxy
materials, and your shares will be voted at the meeting in the manner you direct. In the event that you return a signed proxy
card on which no directions are specified, your shares will be voted as recommended by the Board of Directors on all matters,
and in the discretion of the proxy holders as to any other matters that may properly come before the meeting or any postponement
or adjournment of the meeting. We do not know of any other business to be considered at the meeting other than the proposals
noted herein.
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If
your shares are registered in the name of a broker, bank or other nominee (typically referred to as being held in “street
name”), you will receive instructions from your broker, bank or other nominee that must be followed in order for your broker,
bank or other nominee to vote your shares per your instructions. Many brokerage firms and banks have a process for their beneficial
holders to provide instructions via the Internet or over the telephone. If Internet or telephone voting is unavailable from your
broker, bank or other nominee, please complete and return the enclosed voting instruction card in the addressed, postage paid
envelope provided.
In
the event you do not provide instructions on how to vote, your broker may have authority to vote your shares. Under the rules
that govern brokers who are voting with respect to shares that are held in street name, brokers have the discretion to vote such
shares on routine matters, but not on non-routine matters. Routine matters include the ratification of the appointment of independent
auditors, but not the election of directors or the ratification of the Plan Amendment.
Your vote is especially important
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If your shares are held by a broker, your broker cannot vote your shares for the election of directors unless you provide voting
instructions. Therefore,
please
instruct your broker regarding how to vote your shares on this matter promptly
. See “Vote Required” following
each proposal for further information.
If
you hold shares through a broker, bank or other nominee and wish to be able to vote in person at the meeting, you must obtain
a legal proxy from your broker, bank or other nominee and present it to the inspector of election with your ballot at the meeting.
Q:
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What voting methods
are available?
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A:
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We send proxy cards
to all registered stockholders to enable them to vote their shares. Stockholders who submit a proxy card need not vote at
the meeting. However, we will pass out written ballots to any registered stockholder or holder of a legal proxy who wishes
to vote in person at the meeting. Alternatively, you may vote via the telephone or the Internet by following the instructions
set forth on the enclosed proxy card.
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Q:
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Can I vote by
telephone or via the Internet?
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A:
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Yes, you may vote
via the telephone or the Internet by following the instructions set forth on the enclosed proxy card.
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Q:
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Are the proxy
materials available on the Internet?
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A:
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Pursuant to the
rules of the Securities and Exchange Commission (the “SEC”), we are providing access to our proxy materials both
by sending you this full set of proxy materials, including a proxy card, and by notifying you of the availability of our proxy
materials on the Internet. This proxy statement and a copy of our Annual Report on Form 10-K for the year ended December 31,
2017 are available on the “Investors” section of our web site at
www.sdpi.com
. Additionally, and in accordance
with SEC rules, we maintain the proxy materials on our website in a manner that will not infringe on your anonymity if you
access them.
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Q:
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Can I revoke
or change my proxy?
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A:
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Yes. You may revoke
or change a previously delivered proxy at any time before the meeting by delivering another proxy with a later date, by voting
again via the Internet or by telephone, or by delivering written notice of revocation of your proxy to our Secretary at our
principal executive offices before the beginning of the meeting. You may also revoke your proxy by attending the meeting and
voting in person, although attendance at the meeting will not, in and of itself, revoke a valid proxy that was previously
delivered. If you hold shares through a broker, bank or other nominee, you must contact that nominee to revoke any prior voting
instructions. You also may revoke any prior voting instructions by voting in person at the meeting if you obtain a legal proxy
as described above.
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Q:
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How does the
Board recommend I vote on the proposals?
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A:
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The Board recommends
you vote “
FOR
” the Class I member nominee to our Board of Directors and “
FOR
” the ratification
of the appointment of Moss Adams LLP as our independent registered public accounting firm for the fiscal year ending December
31, 2018.
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Q:
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Who will count
the vote?
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A:
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The inspector of
election will count the vote. Our Secretary will act as the inspector of election.
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Q:
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What is a “quorum?”
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A:
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A quorum is the
number of shares that must be present to hold the meeting. The quorum requirement for the meeting is a majority of the outstanding
shares as of the record date, present in person or represented by proxy. Your shares will be counted for purposes of determining
if there is a quorum if you are present and vote in person at the meeting; or have voted on the Internet, by telephone or
by properly submitting a proxy card or voting instruction card by mail. Abstentions and broker non-votes also count toward
the quorum. An abstention will have the same practical effect as a vote against the ratification of the appointment of our
independent registered public accounting firm. “Broker non-votes” occur when brokers, banks or other nominees
that hold shares on behalf of beneficial owners do not receive voting instructions from the beneficial owners prior to the
meeting and do not have discretionary voting authority to vote those shares. Annette and Troy Meier (the “Meiers”)
currently control approximately 41.9% of the voting power entitled to vote at the meeting. Accordingly, the Meiers have a
substantial portion of the voting power to constitute a quorum at the meeting and to ensure the approval of the proposals
described below.
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Q:
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What happens
if there is not a quorum at the meeting?
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A:
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Pursuant to our
bylaws, the meeting may be adjourned by the chairman of the meeting to reconvene at the same or some other place. If the adjournment
is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the
adjournment shall be given to each stockholder of record entitled to vote at the meeting. If the adjournment is for less than
30 days, no additional notice will be delivered.
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Q:
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What vote is
required to approve each item?
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A:
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The following table
sets forth the voting requirement with respect to each of the proposals:
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Proposal
1 — Election of Class I Member of the Board of Directors.
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The
nominee for election at the annual meeting who receives the greatest number of “FOR” votes cast by the stockholders,
a plurality, will be elected as the Class I member of the Board of Directors.
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Proposal
2 — Ratification of appointment of independent registered public accounting firm.
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To
be approved by stockholders, this proposal must receive the affirmative “FOR” vote of the holders of a majority
of the shares represented at the meeting, in person or by proxy, and entitled to vote.
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Q:
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What does it
mean if I get more than one proxy card?
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A:
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Your shares are
probably registered in more than one account. You should vote each proxy card you receive. We encourage you to consolidate
all your accounts by registering them in the same name, social security number and address. This can be accomplished by contacting
your stock broker.
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Q:
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How many votes
can I cast?
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A:
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On all matters you
are entitled to one vote per share.
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Q:
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Where can I find
the voting results of the meeting?
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A:
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The preliminary
voting results will be announced at the meeting. The final results will be published in a Current Report on Form 8-K to be
filed by us with the SEC within four business days of the meeting.
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Proposal
1
ELECTION
OF DIRECTORS
We
have classified our Board of Directors into three classes. Directors in each Class I, Class II and Class III are elected to serve
for staggered three-year terms, after an initial term of one year, two years and three years, respectively, and until either they
are re-elected or their successors are elected and qualified or until their earlier resignation or removal. Only one class of
directors will be elected at each annual meeting of the stockholders.
At
the meeting, one Class I member of the Board of Directors are to be elected. Based on the recommendation of the Nominating and
Corporate Governance Committee, the Board has recommended Michael Ronca for election as Class I director with his term to expire
at our 2021 annual meeting of stockholders or until his earlier resignation or removal.
The
nominee has consented to being nominated and have expressed his intention to serve if elected. We believe that the nominee possesses
the professional and personal qualifications necessary for board service, and have highlighted particularly noteworthy attributes
for the nominee in his biography below. We have no reason to believe that the nominee will be unable to serve if elected to office
and, to our knowledge, the nominee intends to serve the entire term for which election is sought. Only the nominee or substitute
nominees designated by the Board will be eligible to stand for election as directors at the meeting.
Nominee
Michael
Ronca
. Mr. Ronca has served as a Class I director since 2014, and is Chairman of the Nominating and Governance Committee.
He also serves on the Audit Committee and Compensation Committee of our Board of Directors. Mr. Ronca has over 30 years of experience
as an executive building and monetizing businesses. Since 2009, Mr. Ronca has served as President and Chief Executive Officer
of EagleRidge Energy, LLC, an oil and gas exploration and development company active in north and central Texas. Previously, he
served as Chairman of BAS Oil & Gas, a private company active in developing reserves in the Barnett Shale trend in North Texas.
Mr. Ronca has a long history of participating in the energy industry starting with his time at Tenneco Inc., where he served as
the Assistant to the Chairman and CEO and later established a new oil and gas division which operated throughout the offshore
and onshore Gulf Coast region. He later executed a leveraged buyout with the backing of private equity and soon after took the
company public on the NYSE under the name of Domain Energy where he also served as President and CEO. In 1998, Domain Energy merged
into Range Resources where Mr. Ronca served as Chief Operating Officer for several years. Mr. Ronca has a BS degree from Villanova
University and an MBA in Finance from Drexel University.
Mr.
Ronca was selected to serve on our Board of Directors because of his strong experience within the oil and gas industry.
Directors
All
of the current members of the Board of Directors are listed in the following table, and certain information concerning those directors,
except Mr. Ronca, who is also a director nominee, follows the table:
Name
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Age
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Position
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G. Troy Meier
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56
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Board Chair, Class
III Director (term expires at 2020 Annual Meeting) and Chief Executive Officer
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Annette Meier
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55
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Class II Director
(term expires at 2019 Annual Meeting), President and Chief Operating Officer
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James R. Lines
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56
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Class II Director
(term expires at 2019 Annual Meeting)
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Robert Iversen
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63
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Class III Director
(term expires at 2020 Annual Meeting)
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Michael V. Ronca
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64
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Class I Director
(term expires at 2018 Annual Meeting) and Class I Director Nominee
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G.
Troy Meier.
Mr. Meier has served as our Board Chair, one of our Class III Directors and Chief Executive Officer since
2014. Mr. Meier has over 35 years of experience in the oil and gas industry. Mr. Meier and co-founder Annette Meier founded our
predecessor company in 1999. Since that time through the present, Mr. Meier has spearheaded the development of our new manufacturing
business and our research and development activities. As our chief innovator, Mr. Meier has been responsible for not only inventing,
but also designing, engineering and manufacturing industry specific machinery and processes and has several patent applications
pending. Previously, in 1993, Mr. Meier started our predecessor company, Rocky Mountain Diamond, after thirteen years with Christensen
Diamond and its successors. At Christensen Diamond, Mr. Meier established overseas factories in Ireland, Venezuela and China.
In addition, Mr. Meier designed tools to improve efficiency both in the plants and in the field. Previously, Mr. Meier had been
Christensen Diamond’s first drill bit fabricator specialist and by age 28, was made the Northern Region design engineer
responsible for designing drill bits, core systems, centric bits, nozzle systems and related products. As the co-founder, Mr.
Meier for the last six years has focused 100% of his attention on our development and growth.
Mr.
Meier was selected to serve on our Board of Directors and as the Board Chair because of his extensive industry experience, his
role as our co-founder and chief innovator, and his and Ms. Meier’s majority shareholding. Mr. Meier is married to Annette
Meier.
Annette
Meier.
Ms. Meier has served as our Class II Director, President and Chief Operating Officer since 2014. Ms. Meier has
over 22 years of experience in the oil and gas industry. Since our inception in 1999 to the present, Ms. Meier has managed all
of our day-to-day operations and business. In 2008, Ms. Meier envisioned and co-created “CHUCK,” our custom shop management
and inventory program software. Ms. Meier was also instrumental to the development of the “nucleus grinding system”
that is currently utilized in our new manufacturing processes. In 2005, Ms. Meier served as the creator and chief architect of
the Ropers Business Park, the state-of-the-art campus that houses our remanufacturing and new manufacturing facilities in Vernal,
Utah. Ms. Meier’s understanding of our business processes resulted in her designing and facilitating the SMART FACILITY
layout, process and control systems within the manufacturing plant. Previously, in 1993, Ms. Meier co-founded and managed our
predecessor company, Rocky Mountain Diamond. As the co-founder, Ms. Meier for the last six years has focused 100% of her attention
on our development and growth. In 2015, Ms. Meier was elected to serve on the Governors Office of Economic Development Board
(GOED) for the State of Utah. Ms. Meier has been the recipient of numerous state, local and industry awards over the years that
recognized her for innovation and leadership.
Ms.
Meier was selected to serve on our Board of Directors because of her extensive industry experience, her role as our co-founder
and substantial knowledge of our day-to-day operations, and her and Mr. Meier’s majority shareholding. Ms. Meier is married
to G. Troy Meier.
James
Lines.
Mr. Lines has served as a Class II director since December 2016, and is Chairman of the Audit Committee. He
also serves on the Compensation Committee and the Nominating and Governance Committee of our Board of Directors.
Mr.
Lines has served as President and Chief Executive Officer of Graham Corporation since January 2008. Graham designs,
manufactures and sells critical equipment for the energy, defense and
chemical/petrochemical industries. Previously,
Mr. Lines served as Graham’s President and Chief Operating Officer since June 2006. Mr. Lines has served Graham in
various capacities since 1984, including Vice President and General Manager, Vice President of Engineering and Vice President
of Sales and Marketing. Prior to joining its management team, he served Graham as an application engineer and sales engineer
as well as a product supervisor. Mr. Lines holds a B.S. in Aerospace Engineering from the State University of New York at
Buffalo.
Mr.
Lines was selected by the Board of Directors due to his extensive experience in growing a midsize business, as well as his background
in manufacturing and engineering in the energy industry.
Robert
E. Iversen.
Mr. Iversen has served as a Class III Director since 2014, Lead Director since December 2016 and has been
the Chairman of the Compensation Committee since joining the Board. He has also been a member of the Audit Committee and the Nominating
and Governance Committee since 2014. Mr. Iversen has broad executive and operational management experience in the sales, service,
and manufacturing sectors of the global upstream oil and gas industry. Currently, Mr. Iversen is a partner and president of CTI
Energy Services, LLC of Springtown, Texas, a drilling services company he started in 2011. Mr. Iversen has strong experience in
the development and commercialization of new technology products and in company marketing and advertising programs. Previously,
Mr. Iversen collaborated with G. Troy Meier as a partner and senior vice president in Tronco Energy Services from 2008 to 2011.
From 2002 to 2008, he served as President and other C-level positions with Ulterra Drilling Technologies (Fort Worth, Texas),
INRG (Houston, Texas) and NQL Energy Services (Nisku, Alberta). In 1994, Mr. Iversen and partners purchased the U.S. division
of DBS Stratabit, a small, underperforming diamond bit company, where, as President until 2002, he built it into a top tier provider
of high technology products. Mr. Iversen previously held numerous executive positions in marketing, technology and engineering
at various divisions of the Baker Hughes companies, and their predecessors, from 1980 through 1994. Mr. Iversen holds a Bachelor
of Science Petroleum Engineering, Montana Tech, as well as numerous technical and executive post-graduate certifications.
Mr.
Iversen was selected to serve on our Board of Directors because of his strong experience with start-up companies and the development
and commercialization of new technology products. Mr. Iversen further brings his broad executive and operational management expertise
in the oil and gas industry.
Director
Independence
The
majority of the members of the Board of Director, at any given time, must qualify as “independent” under NYSE American
rules.
Our
Board of Directors has undertaken a review of the independence of each of our directors and director nominees and has affirmatively
determined that each of our other non-employee directors, which include Messrs. Lines, Ronca and Iversen, are “independent,”
as defined by the NYSE American rules. Under the NYSE American rules, a director can be independent only if (a) the director does
not trigger a categorical bar to independence and (b) our Board of Directors affirmatively determines that the director does not
have a relationship which, in the opinion of our Board of Directors, would interfere with the exercise of independent judgment
by the director in carrying out the responsibilities of a director. Based on information provided by the directors and the director
nominees concerning their background, employment and affiliations, our Board of Directors has determined that the non-employee
directors do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities
of a director. In making this determination, our Board of Directors considered the current and prior relationships that each of
the non-employee directors has with us, and all other facts and circumstances our Board of Directors deemed relevant in determining
independence, including any beneficial ownership of our capital stock by each of the non-employee directors.
Board
Leadership Structure
Our
Board of Directors has adopted our Corporate Governance Guidelines, which is available on our website,
www.sdpi.com
in
the “Corporate Governance” subsection of the “Investors” section. Our Corporate Governance Guidelines
provide that one of our independent directors should serve as our Lead Independent Director at any time when our Chief Executive
Officer serves as the Chairman of our Board of Directors, or if the Chairman is not otherwise independent. Because Mr. Meier is
our Chairman, our Board of Directors has appointed Mr. Iversen to serve as our Lead Independent Director. Mr. Iversen has served
as our Lead Independent Director since 2016. As Lead Independent Director, Mr. Iversen has presided over periodic meetings of
our independent directors, served as a liaison between our Chairman and our independent directors and performed such additional
duties as our Board of Directors might otherwise determine and delegate.
Our
Board of Directors believes that our Chief Executive Officer is best situated to serve as Chairman of the Board because he is
the director most familiar with our business and industry, and the director most capable of effectively identifying strategic
priorities and leading the discussion and execution of our strategy. Independent directors and management have different perspectives
and roles in strategy development. Our independent directors bring experience, oversight and expertise from outside the Company
and the oil and gas industry, while the Chief Executive Officer brings Company-specific experience and expertise. Our Board of
Directors believes that the combined role of Chairman of the Board and Chief Executive Officer promotes strategy development and
execution, and facilitates information flow and communication between senior management and the Board of Directors, which are
both essential to effective governance.
One
of the key responsibilities of the Board of Directors is to develop a strategic direction for us and to hold management accountable
for the execution of our strategy once it is developed. The Board of Directors believes that the combined role of Chairman and
Chief Executive Officer, together with our having a Lead Independent Director, is in the best interest of the stockholders because
it provides the appropriate balance between strategy development and independent oversight of management.
Board
of Directors and Risk Oversight
In
the normal course of its business, we are exposed to a variety of risks, including market risks relating to changes in commodity
prices, interest rates, political risks and credit and investment risk. The Board oversees our strategic direction, and in doing
so considers the potential rewards and risks of our business opportunities and challenges, and monitors the development and management
of risks that impact our strategic goals. The Audit Committee assists the Board in fulfilling its oversight responsibilities by
monitoring the effectiveness of our systems of financial reporting, auditing, internal controls and legal and regulatory compliance.
The Nominating and Governance Committee assists the Board in fulfilling its oversight responsibilities with respect to the management
of risks associated with Board organization, membership and structure, succession planning for our directors and executive officers
and corporate governance. The Compensation Committee assists the Board in fulfilling its oversight responsibilities by overseeing
our compensation policies and practices.
Communicating
with our Board of Directors
Stockholders
and other interested parties may communicate by writing to: Superior Drilling Products, Inc., P.O. Box 1656, Vernal, Utah 84078.
Stockholders may submit their communications to the Board, any committee of the Board or individual directors on a confidential
or anonymous basis by sending the communication in a sealed envelope marked “Stockholder Communication with Directors”
and clearly identify the intended recipient(s) of the communication.
Our
Secretary will review each communication and other interested parties and will forward the communication, as expeditiously as
reasonably practicable, to the addressees if: (1) the communication complies with the requirements of any applicable policy adopted
by the Board relating to the subject matter of the communication; and (2) the communication falls within the scope of matters
generally considered by the Board. To the extent the subject matter of a communication relates to matters that have been delegated
by the Board to a committee or to an executive officer of the Company, then our Secretary may forward the communication to the
executive officer or chairman of the committee to which the matter has been delegated. The acceptance and forwarding of communications
to the members of the Board or an executive officer does not imply or create any fiduciary duty of the Board members or executive
officer to the person submitting the communications.
Information
may be submitted confidentially and anonymously, although the Company may be obligated by law to disclose the information or identity
of the person providing the information in connection with government or private legal actions and in other circumstances. The
Company’s policy is not to take any adverse action, and not to tolerate any retaliation, against any person for asking questions
or making good faith reports of possible violations of law, our policies or our Code of Business Conduct and Ethics.
Annual
Meeting Attendance
Although
we do not have a formal policy regarding attendance by members of the Board at our annual meeting of stockholders, we encourage
directors to attend. Two of our directors attended the 2017 annual meeting of stockholders.
Board
and Committee Activity, Structure and Compensation
Our
Board of Directors is governed by our Certificate of Incorporation, Bylaws, charters of the standing committees of the Board of
Directors and the laws of the State of Utah.
During
2017, our Board of Directors held six meetings. All directors attended at least 75% of the total meetings of the Board and the
committees on which they served. There are currently three standing committees of the Board: the Audit Committee, the Compensation
Committee and the Nominating and Corporate Governance Committee. Members serve on these committees until their resignation or
until as otherwise determined by our Board of Directors. The composition of the Board committees comply with the applicable rules
of the NYSE American and applicable law. Our Board of Directors has adopted written charter for each of the standing committees,
which can be found in the “Corporate Governance” subsection of the “Investors” section of our website
at
www.sdpi.com
. In addition to the above governing documents, our Code of Business Conduct and Ethics that applies to
all of our employees, as well as each member of the Board, can also be found in the “Corporate Governance” subsection
of the “Investors” section of our website at
www.sdpi.com
The composition and responsibilities of each of the
standing committees of our Board of Directors are as follows:
Audit
Committee
. Our Audit Committee is comprised solely of “independent” directors, as defined under and required by
Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the NYSE American rules. Our
Audit Committee is directly responsible for, among other things, the appointment, compensation, retention and oversight of our
independent registered public accounting firm. The oversight of our independent public accounting firm includes reviewing the
plans and results of the audit engagement with the firm, approving any additional professional services provided by the firm and
reviewing the independence of the firm. Commencing with our first report on internal controls over financial reporting, the Committee
will be responsible for discussing the effectiveness of the internal controls over financial reporting with our independent registered
public accounting firm and relevant financial management. The members of this Committee are, and during the year ended December
31, 2017, were, Messrs. Lines, Iversen and Ronca, with Mr. Lines serving as committee chair. Our Board of Directors has determined
that Mr. Lines qualifies as an “audit committee financial expert,” as defined by the rules under the Exchange Act.
The Audit Committee held five meetings in 2017.
Nominating
and Governance Committee.
Our Nominating and Governance Committee consists solely of “independent” directors,
as defined under and required by NYSE MKT rules. The Nominating and
Governance
Committee is responsible for, among other things, identifying individuals qualified to become Board members; selecting or recommending
to the Board of Directors director-nominees for each election of directors; developing and recommending to the Board of Directors
criteria for selecting qualified director candidates; considering committee member qualifications, appointments and removals;
recommending corporate governance principles, codes of conduct and compliance mechanisms; providing oversight in the evaluation
of the Board of Directors and each committee; and developing an appropriate succession plan for our chief executive officer. The
members of this Committee are, and during the year ended December 31, 2017, were, Messrs. Lines, Ronca and Iversen, with Mr. Ronca
serving as committee chair. The Nominating and Governance Committee held three meetings in 2017.
Compensation
Committee.
Our Compensation Committee consists solely “independent” directors, as defined under and required by
the NYSE MKT rules, “non-employee directors” under Section 16 of the Exchange Act and “outside directors”
for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). The Compensation Committee
is responsible for, among other things, supervising and reviewing our affairs as they relate to the compensation and benefits
of our executive officers and non-employee directors. In carrying out these responsibilities, the Compensation Committee reviews
all components of executive compensation for consistency with our compensation philosophy and with the interests of our stockholders.
The members of this Committee are, and during the year ended December 31, 2017, were Messrs. Lines, Ronca and Iversen, with Mr.
Iversen serving as committee chair. The Compensation Committee held six meetings in 2017.
Role
of the Board, Compensation Committee and our Executive Officers
Executive
compensation decisions are typically made on an annual basis by the Compensation Committee with input from our Chief Executive
Officer, our Chief Operating Officer and our Chief Financial Officer. Specifically, after reviewing relevant market data and surveys
within our industry, our CEO, COO and CFO typically provide recommendations to the Compensation Committee regarding the compensation
levels for our existing named executive officers (including themselves) and our executive compensation program as a whole. Our
CEO, COO and CFO attend all Compensation Committee meetings. After considering these recommendations, the Compensation Committee
typically meets in executive session and adjusts base salary levels, cash bonus awards and determines the amount of any equity
grants for each of our named executive officers. In making executive compensation recommendations, our CEO, COO and CFO consider
each named executive officer’s performance during the year, the Company’s performance during the year, as well as
comparable company compensation levels. While the Compensation Committee gives considerable weight to our CEO’s, COO’s
and CFO’s recommendations on compensation matters, the Compensation Committee has the final decision-making authority on
all executive compensation matters. No other officers have assumed a role in the evaluation, design or administration of our executive
officer compensation program.
Role
of External Advisors
No
external advisors were engaged by the Board or any of its committees during the years ended December 31, 2016 or 2017.
Director
Nominations Process.
Our
Bylaws contain provisions that address the process by which a stockholder may nominate an individual to stand for election to
our Board of Directors at our annual meeting of stockholders. Historically, we have not had a formal policy concerning stockholder
nominations of individuals to stand for election to the Board, other than the provisions contained in our Bylaws. Although we
have received one recommendation from a stockholder requesting that the Board or the Nominating and Governance Committee consider
a candidate for inclusion among the slate of nominees in this proxy statement, we believe that no formal policy, in addition to
the provisions contained in our Bylaws, concerning stockholder recommendations is needed.
In
addition to stockholder nominations, the Nominating and Governance Committee may utilize a variety of methods for identifying
potential nominees for directors, including considering potential candidates who come to their attention through current officers,
directors, professional search firms or other persons. Once a potential nominee has been identified, the Nominating and Governance
Committee evaluates whether the nominee has the appropriate skills and characteristics required to become a director in light
of the then current make-up of the Board. This assessment includes an evaluation of the nominee’s judgment and skills, such
as experience at a strategy/policy setting level, financial sophistication, leadership and objectivity, all in the context of
the perceived needs of the Board at that point in time. Our Board of Directors believes that at a minimum all members of the Board
should have the highest professional and personal ethics and values. In addition, each member of the Board must be committed to
increasing stockholder value and should have enough time to carry out his or her responsibilities as a member of the Board.
Our
Bylaws provide that nominations for the election of directors may be made by any stockholder entitled to vote in the election
of directors; provided, however, that a stockholder may nominate a person for election as a director at a meeting only if written
notice of such stockholder’s intent to make such nomination has been given to our Secretary as described in “Deadline
for Receipt of Stockholder Proposals” in this proxy statement. Each notice must set forth: (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares
of our capital stock which are owned beneficially or of record by the person (if any), and (iv) a description of all arrangements
or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant
to which the nominations are to be made by the stockholder, (b) as to the stockholder giving the notice, (i) the name and address,
as they appear on our books, of such stockholder and (ii) the class and number of our shares that are beneficially owned by such
stockholder and that are owned of record by such stockholder; and (c) a representation that the stockholder is a holder of record
of our stock entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to introduce the director
nominee.
Compensation
of Directors.
Our employee directors are not separately compensated for their service as a director. In 2017, each of
our non-employee directors received 58,140 shares of restricted common stock for his service as a director. In addition to receiving
shares of stock, our non-employee directors received the following cash fees: Mr. Iversen, $76,831; Mr. Ronca, $52,500; and Mr.
Lines $45,851. In addition, a former director, Terrance Cryan, received $17,668 of compensation in 2017 for his service in 2016.
The members of the Board are entitled to reimbursement of expenses incurred in connection with attendance at Board and committee
meetings in accordance with Company policy.
The
following table summarizes the annual compensation for our non-employee directors during 2017.
Name
(a)
|
|
Fees
Earned
or Paid
in Cash
(b)
|
|
|
Stock
Awards
(c) (1)
|
|
|
Option
Awards
(d)
|
|
|
Non-Equity
Incentive
Plan
Compensation
(e)
|
|
|
Nonqualified
Deferred
Compensation
Earnings
(f)
|
|
|
All
Other
Compensation
(g)
|
|
|
Total
(h)
|
|
Terence Cryan (2)
|
|
$
|
17,668
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
17,668
|
|
James R. Lines
|
|
$
|
47,775
|
|
|
$
|
75,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
120,851
|
|
Robert Iversen
|
|
$
|
76,831
|
|
|
$
|
75,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
151,831
|
|
Michael V. Ronca
|
|
$
|
52,500
|
|
|
$
|
75,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
127,500
|
|
|
(1)
|
Reflects the aggregate
grant date fair value computed in accordance with FASB ASC Topic 718 of awards granted by the Board of Directors. See Note
12 Share-Based Compensation in the consolidated financial statements for the year ended December 31, 2017 included in our
Annual Report on Form 10-K for the year then ended. The grant date fair value for restricted stock awards is based on the
closing price of our common stock on the grant date (December 4, 2017), which was $1.29 per share, respectively. As of December
31, 2017, Mr. Iverson and Mr. Ronca each held an aggregate of 155,004 outstanding shares of restricted stock and Mr. Lines
held an aggregate of 58,140 outstanding shares of restricted stock. Mr. Iverson’s and Mr. Ronca’s restricted stock
awards have the following vesting schedule: a) for the shares granted on August 10, 2015:
33
1/3% of the shares of restricted common stock vested on the first anniversary of the date of grant, 33 1/3% of the shares
of restricted common stock vested on the second anniversary of the date of grant and 33 1/3% of the shares of restricted common
stock will vest on the third anniversary of the date of grant
, b) for the shares granted on November 10, 2016:
33
1/3% of the shares of restricted common stock vested on the first anniversary of the date of grant, 33 1/3% of the shares
of restricted common stock will vest on the second anniversary of the date of grant and 33 1/3% of the shares of restricted
common stock will vest on the third anniversary of the date of grant
in each case, so long as the director continues
to serve on the Board through such date, and c) for the shares granted on December 4, 2017:
33
1/3% of the shares of restricted common stock will vest on the first anniversary of the date of grant, 33 1/3% of the shares
of restricted common stock will vest on the second anniversary of the date of grant and 33 1/3% of the shares of restricted
common stock will vest on the third anniversary of the date of grant
in each case, so long as the director continues
to serve on the Board through such date. Mr. Lines restricted stock awards will vest
in
accordance with the following vesting schedule:
for the shares granted on December 4, 2017:
33
1/3% of the shares of restricted common stock will vest on the first anniversary of the date of grant, 33 1/3% of the shares
of restricted common stock will vest on the second anniversary of the date of grant and 33 1/3% of the shares of restricted
common stock will vest on the third anniversary of the date of grant
in each case, so long as the director continues
to serve on the Board through such date.
|
|
|
|
|
(2)
|
Mr. Cryan completed
his Board tenure on December 15, 2016 but received certain compensation during the year ended December 31, 2017.
|
Vote
Required
The
nominee for election as Class I director at the annual meeting who receive the greatest number of votes cast by the stockholders,
a plurality, will be elected as our Class I director. As a result, broker non-votes and abstentions will not be counted in determining
which nominees received the largest number of votes cast. You may vote “FOR” the nominee, “AGAINST” the
nominees or withhold your vote for the nominee.
Board
Recommendation
Our
Board of Directors recommends a vote “
FOR
” the Class I director nominee to the Board.
Proposal
2
RATIFICATION
OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
General
The
Audit Committee has selected Moss Adams LLP (“Moss Adams”), independent registered public accounting firm, to audit
our consolidated financial statements for the fiscal year ending December 31, 2018. Hein & Associates, LLP (“Hein”)
served as our independent registered public accounting firm for the fiscal years ended December 31, 2016, 2015, 2014 and 2013.
The Audit Committee selected Hein to serve as the Company’s independent registered public accounting firm for the fiscal
year December 31, 2017. Effective November 16, 2017, Hein combined with Moss Adams LLP (“Moss Adams”). As a result
of this transaction, and as discussed in more detail below, on November 16, 2017, Hein resigned as the independent registered
public accounting firm for the Company. Concurrent with such resignation, the Company engaged Moss Adams as its independent registered
public accounting firm for the Company’s fiscal year ended December 31, 2017. The decision to engage Moss Adams as the Company’s
independent registered public accounting firm was approved by the Audit Committee. We are asking the stockholders to ratify the
appointment of Moss Adams as our independent registered public accounting firm for the fiscal year ending December 31, 2018. Moss
Adams was appointed by the Audit Committee in accordance with its charter.
In
the event stockholders fail to ratify the appointment, the Audit Committee may reconsider this appointment. Even if the appointment
is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent accounting firm at
any time during the year if the Audit Committee determines that such a change would be in our and our stockholders’ best
interests.
The
Audit Committee has approved all services provided by Moss Adams. Representatives of Moss Adams plan to attend the annual meeting
and will be available to answer appropriate questions. Its representatives also will have an opportunity to make a statement at
the meeting if they so desire, although it is not expected that any statement will be made.
Audit
Fees
The
following table sets forth the fees incurred by us in fiscal years 2017 and 2016 for services performed by Moss Adams and Hein:
|
|
2017
|
|
|
2016
|
|
Audit Fees (1)
|
|
$
|
128,628
|
|
|
$
|
272,339
|
|
Audit Related Fees
|
|
|
—
|
|
|
|
—
|
|
Tax Fees
|
|
|
—
|
|
|
|
—
|
|
All Other Fees
(2)
|
|
|
81,811
|
|
|
|
80,798
|
|
Total Fees
|
|
$
|
353,137
|
|
|
$
|
353,137
|
|
(1)
|
Hein incurred $24,465
in audit fees and Moss Adams incurred $104,163 in audit fees for the year ended December 31, 2017. All audit fees
were incurred by Hein for the year ended December 31, 2016.
|
|
|
(2)
|
All fees were incurred
by Hein.
|
Change
in Registrant’s Certifying Accountant
Hein’s
audit report on the financial statements as of and for the years ended December 31, 2016 and 2015 contained no adverse opinion
or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles. In addition,
at no point during the two fiscal years ended December 31, 2016 and 2015 or the subsequent interim period through November 16,
2017 were there any disagreements with Hein on any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedures, which disagreement(s), if not resolved to the satisfaction of Hein, would have caused it to make
reference to the subject matter of the disagreement(s) in connection with its reports.
As previously disclosed
in Item 9A of the Company’s Form 10-K filed on March 31, 2017 for the fiscal year ended December 31, 2016, we identified
one material weakness in internal control over financial reporting relating to the lack of staffing and appropriate accounting
expertise within its accounting department. Management believes the lack of accounting and financial personnel amounts to a material
weakness in its internal control over financial reporting and their ability to adequately prepare financial statements and disclosures,
and a lack of accounting expertise to appropriately apply GAAP for complex and non-routine transactions. The same material weakness
was also identified and disclosed in Item 9A of the Company’s Form 10-K filed on March 18, 2016 for the fiscal year ended
December 31, 2015. No other “reportable events” as such term is defined in Item 304(a)(1)(v) of Regulation S-K have
occurred during the two prior fiscal years. This material weakness was remediated as of December 31, 2017.
Hein
was provided a copy of the above disclosures and furnished the Company with a letter addressed to the SEC stating whether it agrees
with the above statements. A copy of the letter from Hein dated November 17, 2017 was attached hereto as Exhibit 16.1 to our Current
Report on Form 8-K filed on the same date.
During
the fiscal years ended December 31, 2016 and 2015 and the subsequent interim period prior to the engagement of Moss Adams, the
Company did not consult with Moss Adams regarding either (i) the application of accounting principles to a specific completed
or contemplated transaction, or the type of audit opinion that might be rendered on the Company’s consolidated financial
statements and neither a written report was provided to the Company or oral advice was provided that Moss Adams concluded was
an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue
or (ii) any matter that was either the subject of a disagreement as defined in (a)(1)(iv) of Item 304 of Regulation S-K and the
related instructions to Item 304 of Regulation S-K or a reportable event as that term is defined in (a)(1)(v) of Item 304 of Regulation
S-K.
Audit
Committee Report
The
Audit Committee assists our Board of Directors in overseeing (i) the integrity of our financial statements, (ii) our compliance
with legal and regulatory requirements, (iii) the independent auditor’s qualifications and independence, and (iv) the performance
of our internal auditors (or other personnel responsible for the internal audit function) and independent auditor. In so doing,
it is the responsibility of the committee to maintain free and open communication between the directors, the independent auditor
and our financial management. The committee is directly responsible for the appointment, compensation, retention and oversight
of the work of the independent auditor for the purpose of preparing or issuing an audit report or performing other audit, review
or attest services for us. The independent auditor reports directly to the committee.
Management
is responsible for the preparation, presentation, and integrity of our consolidated financial statements, accounting and financial
reporting principles, internal control over financial reporting, and procedures designed to ensure compliance with accounting
standards, applicable laws, and regulations. Management is also responsible for objectively reviewing and evaluating the adequacy,
effectiveness, and quality of our system of internal control over financial reporting. Our independent auditor, Moss Adams LLP,
is responsible for performing an independent audit of the consolidated financial statements.
The
committee’s responsibility is to monitor and oversee these processes and the engagement, independence and performance of
our independent auditor. The committee relies, without independent verification, on the information provided to it and on the
representations made by management and the independent auditor.
The
committee has met with our independent auditor and discussed the overall scope and plans for their audit. The committee met with
the independent auditor to discuss matters required to be discussed with audit committees under generally accepted auditing standards,
including, among other things, matters related to the conduct of the audit of our consolidated financial statements and the matters
required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA,
Professional Standards
, Vol.
1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
Our
independent auditor also provided to the committee the written disclosures and the letter required by applicable standards of
the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the committee concerning
independence, and the committee discussed with the independent auditor its independence. When considering the independence of
Moss Adams LLP, the committee considered the non-audit services provided to the Company by the independent auditor and concluded
that such services are compatible with maintaining the auditor’s independence.
The
committee has reviewed and discussed our audited consolidated financial statements for the fiscal year ended December 31, 2017
with management and Moss Adams LLP. Based on the committee’s review of the audited consolidated financial statements and
the meetings and discussions with management and the independent auditors, and subject to the limitations on the committee’s
role and responsibilities referred to above and in the Audit Committee Charter, the committee recommended to our Board of Directors
that our audited consolidated financial statements be included in our Annual Report on Form 10-K as filed with the SEC.
AUDIT
COMMITTEE
James
R. Lines
Robert
Iversen
Michael
V. Ronca
Audit
Pre-Approval Policy
The
charter of the Audit Committee and its pre-approval policy require that the Audit Committee review and pre-approve the Company’s
independent registered public accounting firm’s audit fees, audit-related fees, tax fees and fees for other services. The
Chairman of the Audit Committee has the authority to grant pre-approvals, provided such approvals are within the pre-approval
policy and are presented to the Audit Committee at a subsequent meeting. For the year ended December 31, 2017, the Audit Committee
approved 100% of the services described above under the captions “Audit Fees,” “Audit Related Fees,” “Tax
Fees” and “All Other Fees.”
Vote
Required
The
approval of the ratification of the appointment of Moss Adams LLP as our independent registered public accounting firm for the
fiscal year ending December 31, 2018 requires the affirmative vote of the holders of a majority of the shares represented at the
meeting, in person or by proxy, and entitled to vote. As a result, abstentions will have the same practical effect as votes against
this proposal. Broker non-votes will have no effect on the outcome of this proposal. However, because brokers generally have discretionary
authority to vote on the ratification of our independent auditors, broker non-votes are generally not expected to result from
the vote on this proposal. For the approval of the ratification of the appointment of Moss Adams, you may vote “FOR”
or “AGAINST” or abstain from voting.
Board
Recommendation
The
Board recommends that you vote “
FOR
” the ratification of appointment of Moss Adams LLP as our independent registered
public accounting firm for the fiscal year ending December 31, 2018.
OTHER
INFORMATION
Principal
Stockholders
The
following table presents certain information as of June 1, 2018, as to:
|
●
|
each stockholder
known by us to be the beneficial owner of more than five percent of our outstanding shares of common stock,
|
|
|
|
|
●
|
each director and
director nominee,
|
|
|
|
|
●
|
each executive officer
named in the Summary Compensation Table, and
|
|
|
|
|
●
|
all current directors
and named executive officers as a group.
|
|
|
Shares
Beneficially Owned
(1)
|
|
Name
and Address of Beneficial Owner
(3)
|
|
Number
|
|
|
Percent
of
Class
(2)
|
|
FMR LLC
(4)
245 Summer Street
Boston, Massachusetts 02210
|
|
|
2,409,569
|
|
|
|
9.8
|
%
|
Reid Walker
(5)
3953 Maple Avenue, Suite 150
Dallas, Texas 75219
|
|
|
1,689,400
|
|
|
|
6.9
|
%
|
G. Troy Meier
(6)
|
|
|
10,275,845
|
|
|
|
41.9
|
%
|
Annette Meier
(7)
|
|
|
10,195,770
|
|
|
|
41.6
|
%
|
Christopher D. Cashion
(8)(14)
|
|
|
318,626
|
|
|
|
1.3
|
%
|
James R. Lines
(10)(11)
|
|
|
71,140
|
|
|
|
*
|
|
Robert Iversen
(9)(12)
|
|
|
226,525
|
|
|
|
*
|
|
Michael V. Ronca
(9)(13)
|
|
|
167,052
|
|
|
|
*
|
|
All directors and executive officers as a group
(6 persons)
|
|
|
11,059,188
|
|
|
|
45.1
|
%
|
|
*
|
Less than 1%
|
|
|
|
|
(1)
|
Except as otherwise
indicated, all shares are beneficially owned, and the sole investment and voting power is held, by the person named. This
table is based on information supplied by officers, directors and principal stockholders and reporting forms, if any, filed
with the SEC on behalf of such persons.
|
|
|
|
|
(2)
|
Based on 24,535,155
shares outstanding as of June 1, 2018.
|
|
|
|
|
(3)
|
Unless otherwise
indicated, the address of all beneficial owners of our shares of common stock set forth above is 1583 South 1700 East, Vernal,
Utah 84078.
|
|
(4)
|
Based
on a Schedule 13G/A filed with the SEC on February 13, 2018 by FMR LLC, Fidelity Small Cap Growth Fund, Select Energy
Services Portfolio, Edward C. Johnson III and Abigail P. Johnson. Mr. Johnson is a Director and the Chairman of FMR LLC
and Ms. Johnson is a Director, the Vice Chairman, the Chief Executive Officer and the President of FMR LLC. Members of
the family of Mr. Johnson, including Ms. Johnson, are the predominant owners, directly or through trusts, of Series B
voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other
Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common
shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their
ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson
family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC.
Neither
FMR LLC nor Mr. Johnson nor Ms. Johnson has the sole power to vote or direct the voting of the shares owned directly by
the various investment companies registered under the Investment Company Act (“Fidelity Funds”) advised by
Fidelity Management & Research Company, a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity
Funds’ Boards of Trustees. Fidelity Management & Research Company carries out the voting of the shares under
written guidelines established by the Fidelity Funds’ Boards of Trustees.
|
|
|
|
|
(5)
|
Based on a Schedule
13D/A filed with the SEC on October 12, 2016 by Reid Walker, D4D LLC, a Texas limited liability company, and Hard 4 Holdings,
LLC, a Texas limited liability company of which Mr. Walker is the manager and 100% beneficial owner. Of the total 1,657,143
shares, 1,114,286 shares of common stock and a warrant exercisable for 357,143 shares of common stock held by Hard 4 Holdings,
LLC, which Mr. Walker shares dispositive or voting power over, and Mr. Walker personally owns 185,714 additional shares of
the Company.
|
|
|
|
|
(6)
|
Includes (i) 5,641,510
shares of common stock indirectly owned through his ownership in Meier Family Holding Company, LLC, and (ii) 3,173,350 shares
of common stock indirectly owned through his ownership in Meier Management Company, LLC. Also includes 163,813 shares of vested
restricted common stock, 137,833 shares of unvested restricted common stock, and 65,742 shares issuable pursuant to vested
stock options.
50% of the unvested restricted stock will vest on
November 10,
2018, and the balance will vest on November 10, 2019
.
|
|
|
|
|
(7)
|
Includes (i) 5,641,510
shares of common stock indirectly owned through her ownership in Meier Family Holding Company, LLC, and (ii) 3,173,350 shares
of common stock indirectly owned through her ownership in Meier Management Company, LLC. Also includes 126,308 shares of vested
restricted common stock, 102,771 shares of unvested restricted common stock, and 58,234 shares issuable pursuant to vested
stock options.
50% of the unvested restricted stock will vest on November
10, 2018, and the balance will vest on November 10, 2019.
|
|
(8)
|
Includes
76,135
of restricted common stock that vests in accordance with the following vesting schedule: 33 1/3% of the shares of restricted
common stock vested on November 10, 2017, 33 1/3% of the shares of restricted common stock will vest on November 10, 2018,
and 33 1/3% of the shares of restricted common stock will vest on November 10, 2019. Also includes 93,023 of restricted
common stock that vests in accordance with the following vesting schedule: 33 1/3% of the shares of restricted common stock
will vest on December 4, 2018, 33 1/3% of the shares of restricted common stock will vest on December 4, 2019, and 33 1/3%
of the shares of restricted common stock will vest on December 4, 2020.
|
|
|
|
|
(9)
|
Includes (a)
23,734
shares of restricted common stock that vests
in accordance with the following
vesting schedule: 33 1/3% of the shares of restricted common stock vested August 10, 2016, 33 1/3% of the shares of restricted
common stock vested on August 10, 2017 and 33 1/3% of the shares of restricted common stock will vest on August 10, 2018 and
(b) 54,380 of restricted common stock that vests in accordance with the following vesting schedule: 33 1/3% of the shares
of restricted common stock vested on November 10, 2017, 33 1/3% of the shares of restricted common stock will vest on November
10, 2018, and 33 1/3% of the shares of restricted common stock will vest on November 10, 2019. Also includes 58,140 of restricted
common stock that vests in accordance with the following vesting schedule: 33 1/3% of the shares of restricted common stock
will vest on December 4, 2018, 33 1/3% of the shares of restricted common stock will vest on December 4, 2019, and 33 1/3%
of the shares of restricted common stock will vest on December 4, 2020.
|
|
|
|
|
(10)
|
Includes
58,140
of restricted common stock that vests in accordance with the following vesting schedule: 33 1/3% of the shares of restricted
common stock will vest on December 4, 2018, 33 1/3% of the shares of restricted common stock will vest on December 4, 2019,
and 33 1/3% of the shares of restricted common stock will vest on December 4, 2020.
|
|
|
|
|
(11)
|
The address of Mr.
Lines is 1110 Ransom Road, Lancaster, New York 14086.
|
|
|
|
|
(12)
|
The address of Mr.
Iversen is 4928 FM 1374 Road, Huntsville, Texas 77340.
|
|
|
|
|
(13)
|
The address of Mr.
Ronca is 17318 Chagall Lane, Spring, Texas 77379.
|
|
|
|
|
(14)
|
The address of Mr.
Cashion is 20615 Sundance Springs Lane, Spring, Texas 77379.
|
Executive
Officers and Key Employees
Our
executive officers serve at the direction of our Board of Directors. All of our executive officers and key employees are listed
in the following table, and certain information concerning those officers, except for Mr. Meier and Ms. Meier, who are also members
of the Board of Directors, follows the table:
Name
|
|
Age
|
|
Position
|
G. Troy Meier
|
|
56
|
|
Board Chair, Class
III Director and Chief Executive Officer
|
Annette Meier
|
|
55
|
|
Class II Director,
President and Chief Operating Officer
|
Christopher D. Cashion
|
|
62
|
|
Chief Financial
Officer
|
Christopher
D. Cashion.
Mr. Cashion has over 35 years of experience in the fields of accounting, finance and private equity. Mr. Cashion
joined us in March 2014 to serve as our Chief Financial Officer on a full-time basis. Previously, Mr. Cashion worked as an independent
financial and business consultant since 1998. From January 2013 through February 2014, Mr. Cashion was the Chief Financial Officer
for Surefire Industries USA LLC, a Houston-based hydraulic fracturing equipment manufacturing company. Previously, from January
2005 to August 2012, Mr. Cashion provided chief financial officer services to five start-up portfolio companies owned by the Shell
Technology Venture Fund, a private equity fund. Prior to his tenure with the start-up portfolio companies, Mr. Cashion worked
for the First Reserve Corporation, a private equity firm, from 1991 to 1993. Mr. Cashion worked with Baker Hughes, Inc. from 1981
to 1991 and with Ernst & Young from 1977 to 1981. Mr. Cashion holds a B.S. in Accounting from the University of Tennessee
and an M.B.A. in Finance and International Business from the University of Houston. Mr. Cashion has been a Certified Public Accountant
since 1979.
Named
Executive Officer Compensation
Summary
Compensation Table.
The following table summarizes the compensation of our principal executive officer, as well as our
other two most highly compensated executive officers, for the fiscal years ended December 31, 2017 and 2016. We refer to these
individuals throughout this proxy statement as the “named executive officers.”
Summary
Compensation Table for Fiscal Years Ended December 31, 2017 and 2016
Name
and
Principal
Position
|
|
Year
|
|
Salary
|
|
|
Bonus
|
|
|
Stock
Awards (6)
|
|
|
Option
Awards
|
|
|
Non-Equity
Incentive Plan Compensation
|
|
|
All
Other Compensation
|
|
|
Total
|
|
G. Troy Meier
|
|
2017
|
|
$
|
332,500
|
(1)
|
|
$
|
701,219
|
(3)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,271
|
(10)
|
|
$
|
1,045,990
|
|
Chief Executive Officer
|
|
2016
|
|
$
|
297,135
|
(2)
|
|
$
|
—
|
|
|
$
|
200,447
|
(8)
|
|
$
|
35,364
|
(9)
|
|
$
|
—
|
|
|
$
|
9,971
|
(10)
|
|
$
|
542,917
|
|
Annette Meier
|
|
2017
|
|
$
|
297,500
|
(1)
|
|
$
|
584,906
|
(4)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,934
|
(11)
|
|
$
|
890,340
|
|
President and Chief Operating Officer
|
|
2016
|
|
$
|
266,173
|
(2)
|
|
$
|
—
|
|
|
$
|
149,457
|
(8)
|
|
$
|
31,266
|
(9)
|
|
$
|
—
|
|
|
$
|
3,989
|
(11)
|
|
$
|
450,885
|
|
Christopher Cashion
|
|
2017
|
|
$
|
210,000
|
(1)
|
|
$
|
97,031
|
(5)
|
|
$
|
120,000
|
(7)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,003
|
(12)
|
|
$
|
439,034
|
|
Chief Financial Officer
|
|
2016
|
|
$
|
188,769
|
(2)
|
|
$
|
—
|
|
|
$
|
73,849
|
(8)
|
|
$
|
21,231
|
(9)
|
|
$
|
—
|
|
|
$
|
9,678
|
(12)
|
|
$
|
293,527
|
|
|
(1)
|
For 2017, Mr. Meier,
Ms. Meier, and Mr. Cashion’s annual base salaries were $475,000, $425,000 and $300,000, respectively, and were reduced
for the entire year by 30% due to the downturn in the Oil and Gas Industry.
|
|
|
|
|
(2)
|
For 2016, Mr. Meier,
Ms. Meier, and Mr. Cashion’s annual base salaries were $475,000, $425,000 and $300,000, respectively, and were reduced
for the entire year by 30% due to the downturn in the Oil and Gas Industry. Additionally, Mr. Meier, Ms. Meier, and Mr. Cashion
received option awards in lieu of cash as part of their salary for 2016.
|
|
|
|
|
(3)
|
Relates to $368,719
bonus earned in 2014 and paid in 2017. Also relates to $332,500 bonus made in 2017 in lieu of granting annual incentive compensation
awards. Both bonuses were used to pay down interest and principal on related party note receivable. See Note 7 to our consolidated
financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017 for additional detail.
|
|
|
|
|
(4)
|
Relates to $329,906
bonus earned in 2014 and paid in 2017. Also relates to $255,000 bonus made in 2017 in lieu of granting annual incentive compensation
awards. Both bonuses were used to pay down interest and principal on related party note receivable. See Note 7 to our consolidated
financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017 for additional detail.
|
|
|
|
|
(5)
|
Relates to bonus
earned in 2014 and paid in 2017.
|
|
|
|
|
(6)
|
Reflects the aggregate
grant date fair value computed in accordance with FASB ASC Topic 718. See Note 12 to our consolidated financial statements
included in our Annual Report on Form 10-K for the year ended December 31, 2017 for additional detail regarding assumptions
underlying the value of these equity awards.
|
|
(7)
|
The grant date fair
value for restricted stock awards in 2017 was based on the closing price of our common stock on the grant date (December 4,
2017), which was $1.29 per share. The restricted stock awards will vest in accordance with the following vesting schedule:
33 1/3% of the shares of restricted common stock will vest on December 4, 2018, 33 1/3% of the shares of restricted common
stock will vest on December 4, 2019 and 33 1/3% of the shares of restricted common stock will vest on December 4, 2020.
|
|
|
|
|
(8)
|
The grant date fair
value for restricted stock awards in 2016 was based on the closing price of our common stock on the grant date (November 10,
2016), which was $0.97 per share. The restricted stock awards will vest in accordance with the following vesting schedule:
33 1/3% of the shares of restricted common stock vested on November 10, 2017, 33 1/3% of the shares of restricted common stock
will vest on November 10, 2018 and 33 1/3% of the shares of restricted common stock will vest on November 10, 2019.
|
|
|
|
|
(9)
|
During March 2016,
each of the named executive officers received three awards of stock options in lieu of base salary. The grant date fair value
for the stock option awards was based on the closing price of our common stock on each grant date: a) March 4, 2016, which
was $1.73 per share; b) March 18, 2016, which was $1.67 per share; and c) March 31, 2016, which was $1.37 per share. All options
vested 100% on the grant date and have a ten year term expiring on March 4, 2026, March 18, 2026 and March 31, 2026, respectively.
The fair value of the vested stock options were calculated using the Black-Scholes model with a volatility and discount rate
over the expected term of each employee.
|
|
|
|
|
(10)
|
Represents certain
company paid health care costs for G. Troy and Annette Meier and personal use of a company vehicle.
|
|
|
|
|
(11)
|
Represents personal
use of a company vehicle.
|
|
|
|
|
(12)
|
Represents certain
company paid health care costs.
|
Narrative
Disclosure to Summary Compensation Table.
See the footnotes to the Summary Compensation Table and “Employment Agreements
and Potential Benefits Upon Termination or Change-in-Control” for narrative disclosure with respect to the table, as well
as the below discussion.
Outstanding
Equity Awards for Year Ended December 31, 2017
The
following table shows the number of shares covered by exercisable and unexercisable stock awards held by our named executive officers
on December 31, 2017.
|
|
Option
Awards
|
|
|
|
|
Stock
Awards
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
|
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
|
|
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
($)
|
|
(a)
|
|
|
(b)
(4)
|
|
|
|
(c)
|
|
|
|
(d)
|
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
|
(h)
(1)
|
|
|
|
(i)
|
|
|
|
(j)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G. Troy Meier
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.73
|
|
|
03/04/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.67
|
|
|
03/18/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,081
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.37
|
|
|
03/31/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,833
|
|
|
$
|
133,698
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annette Meier
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.73
|
|
|
03/04/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.67
|
|
|
03/18/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,217
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.37
|
|
|
03/31/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102,771
|
|
|
$
|
99,688
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher Cashion
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.73
|
|
|
03/04/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.67
|
|
|
03/18/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,057
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.37
|
|
|
03/31/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,782
|
|
|
$
|
49,259
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,023
|
|
|
$
|
120,000
|
(3)
|
|
|
—
|
|
|
|
—
|
|
|
(1)
|
Reflects the aggregate
grant date fair value computed in accordance with FASB ASC Topic 718. See Note 12 to our consolidated financial statements
included in our Annual Report on Form 10-K for the year ended December 31, 2017 for additional detail regarding assumptions
underlying the value of these equity awards.
|
|
(2)
|
The grant date fair
value for restricted stock awards is based on the closing price of our common stock on the grant date (November 10, 2016),
which was $0.97 per share. The restricted stock awards have the
following vesting schedule:
33 1/3% of the shares of restricted common stock vested on November 10, 2017, 33 1/3% of the shares of restricted common
stock will vest on November 10, 2018 and 33 1/3% of the shares of restricted common stock will vest on November 10, 2019.
|
|
|
|
|
(3)
|
The grant date fair
value for restricted stock awards is based on the closing price of our common stock on the grant date (December 4, 2017),
which was $1.29 per share. The restricted stock awards will vest
in accordance with
the following vesting schedule:
33 1/3% of the shares of restricted common stock will vest on December 4, 2018, 33
1/3% of the shares of restricted common stock will vest on December 4, 2019 and 33 1/3% of the shares of restricted common
stock will vest on December 4, 2020.
|
|
|
|
|
(4)
|
During March 2016,
each of the named executive officers agreed to receive awards of stock options in lieu of base salary. The grant date fair
value for stock option awards was based on the closing price of our common stock on the grant date of a) March 4, 2016, which
was $1.73 per share; b) March 18, 2016, which was $1.67 per share; and c) March 31, 2016, which was $1.37 per share. All options
vested 100% on the grant date and have a ten year term expiring on March 4, 2026 March 18, 2026 and March 31, 2026, respectively.
The fair value of the vested stock options were calculated using the Black-Scholes model with a volatility and discount rate
over the expected term of each employee.
|
Employment
Agreements and Potential Benefits Upon Termination or Change-in-Control.
In
connection with our initial public offering, we planned to enter into employment agreements with each of our named executive officers,
and the forms of those agreements were filed with the SEC as exhibits to our registration statement on Form S-1. However, management
and the Board have continued to discuss and negotiate the final terms of those agreements and as of the date hereof, the agreements
have not been executed. As a result, none of the named executive officers currently has a contractual right to any of the benefits
described below. The employment agreements to be entered into with our named executive officers will provide for, among other
things, the payment of base salary, reimbursement of certain costs and expenses, and for each named executive officer’s
participation in our bonus plan and employee benefit plans.
With
the exception of G. Troy Meier’s and Annette Meier’s employment agreements, each agreement will provide for a term
of employment commencing on the date of the agreement and continuing (a) until we or the executive provide 30-days written notice
of termination to the other party, (b) upon termination by us for cause, or (c) upon the executive’s death or disability.
Except with respect to certain items of compensation, as described below, the terms of each agreement will be similar in all material
respects.
In
addition to the base salaries shown above,
|
●
|
Mr. Meier’s
employment agreement provides for an annual review by our Board of Directors, and a performance bonus of 70% to 110% of his
base salary based on criteria to be established by the Compensation Committee and participate in our incentive plans.
|
|
|
|
|
●
|
Ms. Meier’s
employment agreement provides for an annual review by our Board of Directors, and a performance bonus of 70% to 110% of her
base salary based on criteria to be established by the Compensation Committee and participate in our incentive plans.
|
|
|
|
|
●
|
Mr. Cashion’s
employment agreement entitles him to receive up to a performance bonus based on criteria established by the Compensation Committee,
and to participate in our incentive plans.
|
Each
of the Meiers’ employment agreements will provide for customary and usual fringe benefits generally available to our executive
officers, and reimbursement for reasonable out-of-pocket business expenses, including the use of a company vehicle.
Change
of Control Provisions
. Each named executive officer’s employment agreement will also provide that in the event of a
Change in Control (as defined below), during the term of executive’s employment, (a) we are obligated to pay such executive
a single lump sum payment, within 30 days of the termination of such executive officer’s employment, equal to one year salary,
and (b) the executive’s equity awards, if any, shall immediately vest. “Change in Control” means approval by
our stockholders of:
(1)
(a) a reorganization, merger, consolidation or other form of corporate transaction or series of transactions, in each case, with
respect to which persons who were our stockholders immediately prior to such transaction do not, immediately thereafter, own more
than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated
company’s then outstanding voting securities, in substantially the same proportions as their ownership immediately prior
to such transaction, (b) our liquidation or dissolution, or (c) the sale of all or substantially all of our assets (unless such
reorganization, merger, consolidation or other corporate transaction, liquidation, dissolution or sale is subsequently abandoned);
or
(2)
the acquisition in a transaction or series or transactions by any person, entity or “group”, within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act, of more than 50% of either the then outstanding shares of common stock or the
combined voting power of our then outstanding voting securities entitled to vote generally in the election of directors (a “Controlling
Interest”), excluding any acquisitions by (a) us or our subsidiaries, (b) any person, entity or “group” that
as of the date of the amendments to the employment agreements owns beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act of a Controlling Interest, or (c) any of our employee benefit plans.
G.
Troy Meier’s and Annette Meier’s employment agreements will provide that (a) the non-competition covenant does not
apply following the termination of employment if their employment is terminated without cause or for good reason, (b) the non-solicitation
of employees covenant applies with respect to any current employee or any former employee who was employed by us within the prior
six months, and (c) the non-solicitation of customers covenant applies to all actual or targeted prospective clients of ours to
the extent solicited on behalf of any person or entity in connection with any business competitive with our business.
As
consideration and compensation to our executive officers for, and subject to each executive officer’s adherence to, the
above covenants and limitations, we have agreed to continue to pay the executive officer’s base salary in the same manner
as if they continued to be employed by us during the one-year non-competition period following the executive officer’s termination.
Payments
on Termination
. Except as noted above, upon termination of employment under these agreements, (a) we are only required to
pay each executive officer that portion of their respective annual base salary that have accrued and remain unpaid through the
effective date of the executive officer’s termination, and (b) we have no further obligation whatsoever to the executive
officer other than reimbursement of previously incurred expenses which are appropriately reimbursable under our expense reimbursement
policy. However, if employment termination is due to the executive’s death, we will continue to pay the executive’s
annual base salary for the period through the end of the calendar month in which death occurs to the executive’s estate.
Certain
Relationships and Related Party Transactions
Related
Party Transactions
Notes
Payable
In
2014, the Company issued notes payable to related parties in the amount of $2 million. The notes bear interest at 7.5% and were
scheduled to mature on January 2, 2017. The Company did not pay these notes upon maturity as the Company and the related parties
informally agreed to offset these notes payable with the related-party note receivable. During the year, the Company made principal
payments and interest payments of $80,000 related to the notes payable. Additionally, the Company applied $207,942 in principal
and interest due to the Company on the related party note receivable during the year ended December 31, 2017 and reduced the balance
to $0 as of December 31, 2017. For more information, see Note 6 to our consolidated financial statements included in our Annual
Report on Form 10-K for the year ended December 31, 2017.
Superior
Auto Body
On
January 1, 2016, the Company completed the divestiture of our interest in Superior Auto Body and Paint, LLC, by selling the remaining
ownership interests in the business operations to a third party. The Company received $101,400 in proceeds.
The
Company leased certain of its facilities to Superior Auto Body (“SAB”). We recorded rental income from the related
party in the amounts of $199,902 for the years ended December 31, 2016 and 2015. As discussed below, in 2017, we sold the facilities
that had been leased to SAB and accordingly, we will no longer receive this rental income.
In
2016, the Company recognized an impairment loss of $840,380 related to SAB. This loss was recorded in 2016 and the asset was
classified as held for sale. In February 2017, the Company sold real estate to SAB for the net proceeds of $2.5 million. The
cash received from the sale was used to pay down the $2.5 million loan balance on the property. As part of the sale, the
Company released 547,000 shares of the Meiers common stock from the collateral for the Tronco Note. Prior to the sale, the
Company held 8,814,860 common stock shares as collateral for the Tronco Note. After the sale in 2017, the Company holds
8,267,860 shares as collateral for the Tronco Note.
For more information, see Note 7 to our
consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31,
2017.
Policies
and Procedures for Related Party Transactions
Any
request for us to enter into a transaction with an executive officer, director, principal stockholder or any of such persons’
immediate family members or affiliates, in which the amount involved exceeds $120,000, must first be presented to our audit committee
for review, consideration and approval. All of our directors and executive officers are required to report to the audit committee
chair any such related person transaction. In approving or rejecting the proposed agreement, our audit committee shall consider
the facts and circumstances available and deemed relevant to the audit committee, including, but not limited to, costs and benefits
to us, the terms of the transaction, the availability of other sources for comparable services or products, and, if applicable,
the impact on a director’s independence. Our audit committee shall approve only those agreements that, in light of known
circumstances, are in, or are not inconsistent with, our best interests and the best interests of our stockholders, as our audit
committee determines in the good faith exercise of its discretion. If we should discover related person transactions that have
not been approved, the audit committee will be notified and will determine the appropriate action, including ratification, rescission
or amendment of the transaction.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of our equity securities
to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock. Officers, directors
and greater than 10% stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) reports they file.
To
our knowledge, based solely on review of the copies of such reports furnished to us and written representations that no other
reports were required, during the fiscal year ended December 31, 2017, our officers, directors and greater than 10% beneficial
owners timely filed all required Section 16(a) reports.
Other
Matters
Our
Annual Report to Stockholders on Form 10-K covering the fiscal year ended December 31, 2017, our Quarterly Reports on Form 10-Q
and other information are available on our website (
www.sdpi.com
) and may also be obtained by calling (435) 789-0594 or
writing to the address below:
Superior
Drilling Products, Inc.
P.O. Box 1656
Vernal, Utah 84078
The
persons designated to vote shares covered by our Board of Directors’ proxies intend to exercise their judgment in voting
such shares on other matters that may properly come before the meeting. Management does not expect that any matters other than
those referred to in this proxy statement will be presented for action at the meeting.
Deadline
for Receipt of Stockholder Proposals
If
you want to present a proposal from the floor at the 2019 annual meeting of stockholders or nominate a person for election to
the Board at such meeting, you must give us written notice no later than the close of business on May 6, 2019 and no earlier than
the opening of business on April 5, 2019, and follow the procedures outlined in our Bylaws. If the date of the 2019 annual meeting
of stockholders is more or less than 30 days from August 3, 2019, the one year anniversary of the 2018 annual meeting of stockholders,
your notice of a proposal will be timely if we receive it no earlier than the opening of business on the 120
th
day
before the actual date of such meeting and no later than the later of (i) the close of business on the 90
th
day before
the actual date of such meeting and (ii) the close of business on the tenth day following the date on which a written statement
setting forth the date of such meeting was mailed to the stockholders or the date on which it is first disclosed to the public.
If
we do not receive notice of your proposal within this time frame, our management will use its discretionary authority to vote
the shares it represents as the Board may recommend. You may request a copy of the provisions of the Bylaws governing the requirements
for notice at the below address.
If
instead of presenting your proposal or nominee at the meeting you want your proposal to be considered for inclusion in next year’s
proxy statement, you must submit the proposal so that it is received by June 24, 2019 and it must set forth the specific information
required by Rule 14a-8 or Rule 14a-18, as applicable, of Regulation 14A of the Exchange Act. If the date of the annual meeting
of stockholders for the fiscal year ending December 31, 2018 is more than 30 days from August 3, 2019, the one year anniversary
date of the 2017 annual meeting of stockholders, a notice will be timely if we receive it a reasonable time before we begin to
print and send our proxy materials for such meeting.
In
each case, your notice should be sent in writing to our Secretary at our principal executive offices at P.O. Box 1656, Vernal,
Utah 84078.
Sincerely,
/s/
Annette Meier
|
|
Annette Meier
|
|
Secretary
|
|
June
15, 2018
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