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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

Filed by the Registrant ☒                   Filed by a Party other than the Registrant ☐

Check the appropriate box:

EXTERRAN CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

OUR CORE VALUES

Our core values guide our actions as individuals and as a company. The foundation of our values is our commitment to people and safety. Together they shape our culture, results and reputation.

Dear Fellow Shareholders,

The events of 2020 caused us to change how we work, live and socialize. We faced challenges presented not only by the global pandemic but also by the supply/demand energy imbalance and commodity price collapse. In the midst of batting down the hatches to face the global headwinds, our CEO instituted daily crisis management actions to address the health and safety of our employees and took on additional responsibilities following the departure of our COO, reflecting his steadfast belief that we were all in this together and that together we would get through it.

Despite this difficult environment, our field teams worked tirelessly with our customers to safely continue operation of vital facilities, and our sales team never stopped, booking the largest product sales order in the Company’s history and renewing over $200 million of contract operations in Latin America. We also pushed forward in our strategic transformation, divesting our U.S. compression fabrication business, focusing on higher margin product lines, and accelerating the development and growth of our water treatment business and technology. The dedication and team efforts exhibited by all of our management and employees are what sets Exterran apart, not just in a year of unending challenges, but also in our strategic transformation into an energy industrial services company offering sustainable solutions to our customers.

We remained keenly focused on our corporate and social responsibility and our efforts to develop and promote a long-term sustainable business, including maintaining a workplace where all employees feel welcome and supported.  We published our first Sustainability Report in 2020, and continued our efforts to reduce our environmental impact and develop additional sustainable products and services to assist our customers in doing the same. We also formed a diversity and inclusion team comprised of global employees to further augment our employee engagement and development efforts and drive a more inclusive workforce. In addition, our top-tier safety culture led to another year of outstanding safety metrics and global ISO re-certifications.  

The one thing that did not change in 2020 is our Board’s belief that strong governance is critical to the maintenance and growth of a strong organization. Our Board remains diverse by gender, ethnicity, nationality and experience, with a strong lead independent director. Company risks, opportunities and global strategy, including sustainability and talent development efforts, are overseen by the board and its Audit Committee, Human Capital & Compensation Committee, and Nominating, Governance & Sustainability Committee.

During 2020, we reached out to many of you, our investors, as we believe a constructive dialogue with our shareholders is an invaluable resource. Our Board and management appreciated your input and look forward to continuing our conversations with you. This proxy statement contains information on how to reach us throughout the year, as well as information about matters that are proposed for a vote and how to join us at our annual meeting. As you will note, our annual meeting is being held virtually this year due to continuing health and wellness concerns.

On behalf of the Board of Directors, management and employees, thank you for your investment in Exterran and for your continued trust and support, as we continue in our efforts to transition into an energy industrial services company offering environmentally sustainable solutions to our customers and working with all our stakeholders in the energy transition.

Sincerely,

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

ITEMS OF BUSINESS:

We have adopted a virtual format for our 2021 Annual Meeting. In order to attend the Annual Meeting, you must register in advance at www.proxydocs.com/EXTN prior to the deadline of April 27, 2021 at 5:00 PM, Eastern Daylight Time. Upon completing your registration, you will receive further instructions via email, including your unique links that will allow you access to the meeting and will also permit you to submit questions.

YOUR VOTE IS IMPORTANT.  Whether or not you plan to attend the Annual Meeting of Shareholders, we urge you to submit your vote via Internet, telephone or mail.  

By Order of the Board of Directors,

Kelly M. Battle

Vice President, General Counsel and Corporate Secretary

Exterran Corporation

Houston, Texas

March 17, 2021

The following is a summary of certain key information in our Proxy Statement. For complete information, please review this Proxy Statement and our Annual Report on Form 10-K for the year ended December 31, 2020. In this Proxy Statement, we refer to Exterran Corporation as “Exterran,” the “Company,” “we” or “us.”

For additional information about the 2021 Annual Meeting of Shareholders see Frequently Asked Questions about the Meeting and Voting beginning on page 74.

For telephone and Internet voting, you will need the control number included on your Notice, proxy card or voting instruction form that accompanied your proxy materials. Internet and telephone voting is available until commencement of the meeting (8:00 AM, Central Daylight Time on April 28, 2021) for all shares

Our Business

Exterran is a global systems and process company headquartered in Houston, Texas and operating in approximately 25 countries, offering solutions in the oil, gas, water and power markets. We are a leader in natural gas process and treatment and compression products and services. We provide produced water treatment, onsite power generation and other critical midstream infrastructure solutions worldwide.

Our Director Nominees

The Exterran Board of Directors (the “Board”) is comprised of eight members. Each of the nominees is currently a director. We believe their varied backgrounds, skills and experiences contribute to a balanced and diverse Board that is able to provide effective oversight of our Company and our senior executive team. Our director nominees’ skills and expertise include:

The following chart sets forth information with respect to our eight nominees standing for election.

2020 Business Highlights

2020 was a year of operating and business challenges driven by the pandemic and oil and gas markets. Despite these challenges, the Company was able to secure its largest product sales order in Company history, renew over $200 million in contract operations contracts, move significantly in our strategic transformation to a higher margin business with the sale of our U.S. compression fabrication business, and focus on reducing SG&A. Our 2020 financial highlights include:

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Executive Compensation Highlights

Below are highlights of our executive compensation programs. For additional information on our executive compensation programs, policies and executive compensation, please review our “Compensation Discussion and Analysis” (“CD&A”) and related tables beginning on page 27.

Corporate Governance Highlights

The Board is committed to sound and effective corporate governance practices and continually reviews best practices and views of our shareholders on various issues. Following is a summary of our key governance policies and practices, including changes we have implemented after considering input received from our shareholders and other stakeholders:

Corporate, Social and Environmental Responsibility Highlights

Our approach to corporate, social and environmental responsibility and sustainability revolves around maintaining an excellent safety performance, limiting our environmental footprint, leveraging innovation to provide environmentally efficient solutions to our customers and supporting our employees and communities. By aligning our business strategy with our desire to support our people, environment, customers and communities, we can make a positive impact and create value for our Company and its stakeholders.

In 2020, we published our first annual Sustainability Report detailing our Environmental, Social and Governance (“ESG”) approach. We encourage you to read our Sustainability Report at:

https://exterran.com/content/docs/Sustainability/Exterran_Sustainability_Report_2020.pdf

Environment. Exterran is committed to minimizing the impact of our activities on the environment including the sustainable use of resources. At Exterran, environmental sustainability means creating long-term value for our customers and stakeholders by providing innovative critical midstream infrastructure solutions to customers worldwide in a manner that protects and preserves the environment. Exterran’s products and services allow customers to

sustainably move, process and treat oil and natural gas, treat produced water, and convert on site excess gas to power for local use. With our products, customers lower their environmental footprint by increasing their cleaner fuel sources and reducing flaring, facilities emissions and dependence on freshwater consumption for their operations.

Our global operations are certified to ISO 14001:2015 environmental management standard and our facilities are audited by an independent third-party entity to verify our compliance with this standard. Building on the ISO 14001 certification of our facilities worldwide, we conserve resources, optimize energy and water consumption, minimize waste generation, promote recycling, and minimize harmful air emissions including greenhouse gases. To provide a good foundation for our sustainability initiative Exterran has chosen to support the United Nations Sustainable Development Goals (SDGs). Our goals, including our 2021 short-term incentive goals, focus on obtaining objective environmental data to build a more quantifiable reduction in our environmental footprint.

Health, Safety, Wellbeing. We are committed to protecting the safety and wellbeing of our employees, improving the quality of lives for all and fostering an organization that is sustainable for the long term. In support of this goal, in 2020 we established our Five Pillars of Well-being: Physical, Financial, Social, Community and Career. Through these goals, we aim to:

The Company’s actions throughout the COVID-19 pandemic (the “pandemic”) clearly exemplify our commitment to these goals. Quickly adapting to the unprecedented conditions and taking effective actions to protect and provide for our employees, the Company:

With robust reporting processes in place, we are able to track and monitor COVID-19 cases involving our field and office personnel as they develop throughout our global operations. Leaders at all levels received weekly updates. Our Board received bi-weekly reports during much of 2020, and presently receive updates at each meeting.  When cases are reported, employees who might have had direct contact are notified, and the crisis management team is involved

on a daily basis with affected employees, managers and other stakeholders. In addition, employees receive training and communications about COVID-19 and its prevention from various executive leaders, including our CEO.

We also maintain our ISO-certified global One Exterran Management System, which provides a global set of safety standards that operationalize our core values, and our Goal Zero™ safety initiatives and process safety programs. We track safety performance across all our operations and our global safety performance is an element of our short-term incentive compensation. We are constantly pushing to improve our safety performance and in 2020, we had 342 incident free days and 12 recordable incidents compared to 317 incident free days and 17 recordable incidents in 2019.

Human Capital Management, Labor and Human Rights. We work to enable our colleagues to reach their full potential by fostering a culture of mutual respect and security, an inclusive and diverse work environment, professional development opportunities, safe working conditions and fair hiring and labor standards. Our full time employees receive annual performance reviews, designed to provide additional guidance and encourage open feedback.  Separate from performance reviews, we evaluate a large segment of our employee population annually to further identify talent for development and/or promotion. In 2020, we continued our focus on training and leadership development of our employees through our global Learning Management System and external programs. We provide leadership development training programs for senior managers and executives, conducted by a qualified third party, in order to further enhance the capabilities of our current and future leaders.

Our Board and management value diversity in gender, ethnicity, race, national origin and geography to foster support of the needs and viewpoints of our global customers, employees, governments and other stakeholders. In 2020, we formed a diversity and inclusion committee, which together with our Exterran’s Women’s Forum are designed to further develop our diverse workforce. Through these platforms, we provide additional educational and development opportunities by means of meetings, speakers and group training activities. We also use the committee’s work to educate and communicate to our workforce globally regarding diversity and inclusion, including through global communications by our CEO and in our quarterly global town hall presentations. We provide training opportunities through the Energy Workforce and Technology Council’s (“EWTC,” formerly the Petroleum Equipment and Services Association (“PESA”)) leadership programs, and ESG and Diversity and Inclusion Committees. In 2020, Exterran officers chaired these committees.  Through Exterran Cares™, in 2020 our Company and employees contributed to and volunteered in a wide range of community service projects and activities across our global operating regions.

We are committed to upholding labor and human rights both internally and externally. We ask our customers and suppliers to adhere to our Code of Conduct, which includes human rights and anti-trafficking standards. We have adopted global equal employment opportunity and anti-harassment policies. We are a member of the Oil & Gas Trafficking Awareness Group (OGTAG) working collaboratively with our industry, local officials, law enforcement, non-profits, and communities to combat human trafficking.

PROPOSAL 1 - Election of Eight Directors

The Board, acting on the recommendation of our Nominating, Governance & Sustainability Committee, has nominated the eight individuals named below for election as directors. Each of the nominees is currently a director.

Each director nominee has consented to being named in this Proxy Statement and to serve as a director if elected. If for any reason one or more of these nominees is unavailable as a candidate or unable to serve when election occurs, the persons designated as proxies on the enclosed proxy card, in the absence of contrary instructions by shareholders, will in their discretion vote the proxies for the election of any of the other nominees or for a substitute nominee or nominees, if any, selected by the Board.

Your Board unanimously recommends that shareholders vote “FOR” the election of each of the nominees to the Board as set forth in this proposal.

A majority of the votes cast at the Annual Meeting is required to elect each director nominee. Our Bylaws and Corporate Governance Principles require that any nominee who receives a greater number of “against” votes than “for” votes must submit his or her resignation for consideration by our Board. Abstentions and broker non-votes are not considered to be cast, and therefore will have no effect on the election of directors.

Director Nominee Qualifications

Each director nominee brings a strong and unique background and set of qualifications and skills to our Board, giving the Board as a whole, a diverse group of leaders with competence and experience in a wide variety of areas. All of our directors are expected to understand the interests and needs of our customers and communities and to provide effective oversight of our social responsibilities to our stakeholders, and therefore this fundamental understanding and oversight are not included as competencies in the director skills matrix below.

The ✓ indicates that the item is a specific recent qualification, skill or experience that the director nominee brings to the Board. The lack of a ✓ for a particular item does not mean that the director nominee does not possess that qualification, characteristic, skill or experience. We look to each nominee to be knowledgeable in these areas.

Our 2021 Director Nominees

The following pages contain information regarding each of the nominees for director, including professional highlights and qualifications.

Exterran’s Board of Directors

Our Company is committed to sound corporate governance policies and practices, designed and routinely assessed to enable the Company to operate its business responsibly, compete more effectively, sustain our success and build long-term shareholder value. The Company is governed by our Board and its committees, who together provide oversight and guidance with respect to our overall performance, strategic direction and key business objectives and risks. Directors discharge their responsibilities at Board and committee meetings, and through ongoing communication with each other and with management throughout the year.

Our Board Structure

Role of Lead Independent Director. Consistent with industry best practices and in accordance with the Company’s Corporate Governance Principles, the Board has a Lead Independent Director to ensure that the Company maintains a corporate governance structure with appropriate independence and balance. Mr. Goodyear presently serves as Lead Independent Director. The Lead Independent Director is elected by the independent directors, and presides at the executive sessions of the independent directors, which are held in conjunction with each regularly scheduled meeting of the Board.  In addition, the Lead Independent Director:

Separation of Executive Chair and CEO Roles. The Board recognizes the time, effort and energy that our CEO is required to devote to his position, as well as the commitment required to serve as our Executive Chair, and has therefore divided these roles. The Board believes this structure is appropriate for the Company because of the size and composition of the Board, the scope and complexity of our operations and the responsibilities of the Board and management. Mr. Sotir serves as Executive Chair and presides over the regular sessions of the Board and the executive sessions of the Board, held at every regularly scheduled Board meeting.

Director Independence

Board Members. Our Corporate Governance Principles provide that at least a majority of the Board must consist of independent directors, which reflects the NYSE governance listing standards. The Nominating, Governance & Sustainability Committee assesses director independence each year by considering all direct and indirect business relationships between Exterran and each director (including his or her immediate family), as well as relationships with other for-profit and not-for-profit entities and organizations and related party transactions, to determine whether any such relationship or transaction would prohibit a director from being independent under SEC rules, NYSE listing standards and the Company’s Corporate Governance Principles.

During the Nominating, Governance & Sustainability Committee’s most recent review of independence, it was provided information regarding transactions with any related parties as determined through a search of our accounting records as well as the responses to the director and officer questionnaires.  These relationships were reviewed by the Nominating, Governance & Sustainability Committee and approved by the Audit Committee, and none are required to be reported in this Proxy Statement.

Based on the recommendation of the Nominating, Governance & Sustainability Committee, the Board determined that each of the following current directors are independent: Messrs. Goodyear, Gouin, Ryan, Soliman, Seaver, and Ms. Gomes Yell. Mr. Sotir is not independent because he is the Executive Chair of the Company, and Mr. Way is not independent because he is the President and Chief Executive Officer of the Company.

Heightened Standards for Committee Members. In addition to the general independence requirements of the SEC and NYSE, all members of the Audit, Human Capital & Compensation and Nominating, Governance & Sustainability Committees must meet the heightened independence standards imposed by the SEC and NYSE applicable to members of such committees. Each member of the Audit, Human Capital & Compensation, and Nominating, Governance & Sustainability Committees meets these heightened independence standards and each member of the Human Capital & Compensation Committee also qualifies as a non-employee director under Rule 16b-3 of the Securities Exchange Act of 1934. In addition, all of the members of our Audit Committee are financially literate and four of the members qualify as “audit committee financial experts” under the federal securities laws, and pursuant to our Audit Committee Charter, none of our Audit Committee members serve on the audit committee of more than two other public companies.

Our Board Committees

The Board has designated an Audit Committee, a Human Capital & Compensation Committee and a Nominating, Governance & Sustainability Committee to assist in the discharge of the Board’s responsibilities. The Board and the committees of the Board are governed by our Code of Conduct, our Corporate Governance Principles and the applicable committee charters, each of which are available to the public on our website at www.exterran.com or in print by submitting a written request to Exterran Corporation, 11000 Equity Drive, Houston, Texas 77041, Attention: Corporate Secretary.

Board Committee Responsibilities. The purpose and responsibilities of each committee are summarized in the table below:

Board Committee Membership. Members of each committee are recommended by the Nominating, Governance & Sustainability Committee, except for members of the Nominating, Governance & Sustainability Committee which are recommended by the Lead Independent Director. Committee members are elected by the Board at its first meeting following the annual meeting of shareholders to serve for one-year terms. All of the current members of our committees are independent. The following reflects the membership of our current committees:

Director Attendance

Board and Committee Meetings.  We expect members of the Board to attend all Board meetings. In 2020, the Board held 10 meetings, and its committees held the number of meetings listed in the table above. All current directors attended, both individually and as a group, 100% of the Board meetings and at least 75% of each Board committee on which they served during calendar year 2020.

Annual Shareholders Meeting. While we do not have a formal requirement relating to director attendance at our annual meeting of shareholders, all directors are expected to attend. All of our current Board members virtually attended our 2020 Annual Meeting of Shareholders.

Executive Session of the Independent Directors.  The independent directors meet in executive session with the Lead Independent Director presiding (separate from management) at least four times a year. The executive sessions of the independent directors are held in conjunction with each regularly scheduled meeting of the Board, and any other meeting as determined by the Lead Independent Director. The independent directors met in executive session five times in 2020.

Selection of Director Candidates

The selection of qualified directors is fundamental to the Board’s successful oversight of the Company’s strategy and enterprise risks.  Therefore, it is critical to select candidates who bring diverse viewpoints and perspectives, and exhibit the range of skills, personal attributes and expertise sufficient to provide sound and prudent guidance with respect to the Company’s strategic needs. Our priorities for recruiting new directors evolve over time based on the Company’s strategic needs and current composition of our Board. Our Nominating, Governance & Sustainability Committee, charged with reviewing the composition of the Board, considers among other factors the criteria shown in the table on page 9, as well as a candidate’s character, diversity, judgment, ethics, integrity and time commitment.  In 2020, the Company adopted the Rooney Rule to require each pool of qualified candidates from which Board nominees are chosen to include candidates who bring gender, racial and/or ethnic diversity if selected.

Directors must be committed to enhancing the long-term interests of our shareholders and other stakeholders and should not be biased towards the interests of any particular stakeholder. Board members should also be prepared to travel, to attend meetings of the Board and its committees, and be ready to dedicate sufficient time to prepare in advance of such meetings to allow them to make an effective contribution to the meetings. Further, Board members should ensure that they are not otherwise committed to other activities which would make a commitment to the Board impractical or inadvisable. Director candidates also should satisfy the independence, qualification and composition requirements of the Board and its committees, as required by applicable law, rules and regulations of the NYSE, the SEC and our Corporate Governance Principles.

The Nominating, Governance & Sustainability Committee screens and recommends candidates for nomination by the full Board. The Committee is assisted in its efforts by a recognized, qualified search firm and a Board search committee appointed by the Board, who assist in identifying and evaluating candidates that satisfy the Board’s criteria.

Periodically our Board engages an independent qualified firm to assist our Board in the evaluation of its current skills and needed competencies as our Company grows its global presence in the energy and industrial services sectors.  As the Company’s business needs evolve, the Board will continue to consider the Board’s skill sets and needs and identify director candidates with desired additional capabilities and diversity.

Shareholders who wish to recommend a candidate to the Nominating, Governance & Sustainability Committee or submit nominees for election at an annual or special meeting should follow the procedures described on page 73. The Nominating, Governance & Sustainability Committee will review the qualifications and experience of each recommended director candidate using the same criteria for candidates proposed by our search firm, directors, Board search committee or management.

Diversity Policy for Director Candidates. The Nominating, Governance & Sustainability Committee places great emphasis on diversity of personal and professional experiences, skills, nationality, gender, ethnicity, race, education and backgrounds, and actively considers diversity in the recruitment and nomination of directors. The Nominating, Governance & Sustainability Committee believes that judgment and perspectives offered by a diverse board of directors improves the quality of the Board’s decision-making and helps the Board respond more effectively to the needs of the Company’s stakeholders, including its shareholders, employees, customers and communities, enhancing the Company’s business performance.  The Company utilizes the Rooney Rule to assist in seeking diverse qualified candidates from which Board nominees are chosen.  

Director Retirement Policy and Term Limits

To facilitate proactive Board succession planning and refreshment, our Corporate Governance Principles provide for a mandatory retirement age of 75.

Director Orientation and Continuing Education

Upon joining the Board, as part of our onboarding process new directors participate in a detailed director orientation program that introduces them to the Company. The Nominating, Governance & Sustainability Committee oversees our program to onboard new directors, which includes a detailed review of Company information and materials, meetings with management and a tour of our facilities. This orientation enables new directors to become familiar with the Company’s business and strategic plans; significant financial matters; core values, including our Code of Conduct, compliance programs and corporate governance practices; and other key policies and practices, including workplace safety, risk management, investor relations, human capital management and sustainability efforts.

Continuing education opportunities are provided to keep directors updated with information about the Company’s sector, corporate governance and ESG related developments, critical strategic issues and evolving risks facing the Company, and other matters relevant to Board service. To enhance the Board’s understanding of some of the unique issues affecting our business, we invite outside experts and our regional leaders to meet and discuss key topics with our Board. In addition, when pandemic related travel restrictions are eased, directors are invited to visit our operating locations, tour our facilities and interact directly with the personnel responsible for our day-to-day operations, and to attend other key corporate and industry events to enhance their understanding of the Company and its competitors. Directors also participate in the National Association of Corporate Directors (NACD) of which the Company is a member, and are encouraged to attend, at our expense, third-party director education programs sponsored by the NACD and other recognized organizations.

Board Access to Independent Accountants, Senior Management, Employees and External Advisors

Directors have complete access to our independent accounting firm, senior management and other employees, including our compliance, legal and internal audit employees. They also have direct access to external counsel, advisors and experts of their choice with respect to any issues relating to the Board’s discharge of its duties.

Our Board’s Governance Roles

The Board’s Role in Risk Oversight

While our management team is responsible for the day-to-day management of risk, the Board has broad oversight responsibility and an active role, both as a whole and through its committees, in overseeing management of the Company’s risks efforts. In this role, the Board receives regular reports from members of management on areas of significant risk relevance to us, including financial, operational, strategic, environmental, climate, water, health and safety, cybersecurity, employee development and succession, diversity and inclusion, and social risks and concerns, in order to satisfy itself that the Company’s risk management processes are functioning as intended and the Company is promoting a culture of ethical, prudent decision-making. The Board’s involvement in reviewing, approving and monitoring our fundamental financial and business strategies, as contemplated by our Corporate Governance Principles, is also important to the determination of the types and appropriate levels of risk we undertake.

In connection with its ongoing risk oversight, the Board annually reviews an Enterprise Risk Management report provided by management, which assesses current risks, including ESG- and cyber-related risks most significant to the Company and mitigation of those risks. The Company retains an independent cybersecurity advisor to provide additional oversight and further the Company’s mitigation of cybersecurity risks.

The Board has delegated to individual Board committees certain of its risk oversight responsibilities, as shown below. All Board committees are comprised solely of independent directors and generally assist with oversight of risks matters within their respective areas of responsibility.

Each of these committees receives regular reports from management, which assist in its oversight of risk and ESG matters in its respective area of responsibility.

While each committee is responsible for evaluating certain risks matters and overseeing the management of such matters, the entire Board maintains responsibility for certain risks (including most environmental, climate, and water and certain social risks) and is regularly informed through committee reports about risk delegated to each committee. This enables the Board and its committees to coordinate this oversight role, particularly with respect to interrelationships.

How our Board and Committees Evaluate their Performance

Each year, the Board and each committee conduct an annual self-evaluation to assess performance and effectiveness and consider opportunities for improvement. This process, overseen by the Nominating, Governance & Sustainability Committee, is reviewed annually and includes completion of a comprehensive questionnaire by each member and one-on-one director discussions conducted by the Chair of the Nominating, Governance & Sustainability Committee.

In addition, the Board periodically retains qualified independent third parties to assist with its evaluation process. In these instances, Directors are interviewed by the third-party, give feedback on individual directors, committees and the Board, and responded to questions designed to elicit information to be used in improving Board effectiveness.

Collective results and comments gained during the evaluation process are synthesized and reviewed (on an anonymous basis) by the Nominating, Governance & Sustainability Committee (as it relates to the Board and all committees), and with each committee (as it relates to such committee). Following these reviews, results are presented to the full Board for discussion and determination of appropriate action items.

Matters considered as part of the evaluations and interviews include the following:

Our Commitment to Stakeholder Engagement and Investor Outreach

Exterran is committed to engaging in constructive and meaningful conversations with our shareholders, employees, customers, vendors and the communities in which we operate in order to build long-term relationships. The Board values the input and insights of our stakeholders, and regularly monitors investor sentiment, shareholder voting results, and trends in governance, executive compensation, regulatory, environmental, social and other matters to identify potential topics to discuss with our stakeholders. One or more members of management engage with our larger shareholders following proxy season to actively solicit input on a range of issues. A Board member also participates in certain of these discussions.  Members of management and local employees also communicate with many of our customers, vendors and communities in which we operate to understand and share information and concerns. Following these discussions, our stakeholders’ views are reviewed with our senior management and Board to evaluate any identified risks and opportunities and determine needed enhancements to the Company’s policies, practices, procedures and disclosures.

In 2020, we actively reached out to several of our largest shareholders together representing more than 50% of our outstanding common stock, and held virtual and telephone meetings with many of these shareholders. Several of these discussions included our Human Capital & Compensation Committee Chair. We discussed various topics and gained valuable feedback during these meetings, which was provided to the Board, relevant Board committees and senior management members.

After considering feedback received from investors in 2020, we implemented the following changes:

In addition to our governance-related outreach, throughout the year our Vice President of Investor Relations, frequently together with our CEO or CFO, engaged with analysts and institutional investors, through telephonic and virtual one on one meetings, conferences, conference calls, and non-deal road shows.

The diagram below represents our ongoing stakeholder outreach process.

Our 2020 Advisory Say-On-Pay Vote

The Company conducts an annual advisory vote on executive compensation. While this vote is not binding, the Human Capital & Compensation Committee believes that an annual say-on-pay advisory vote offers shareholders the opportunity to express their views regarding the Company’s executive compensation programs and the Human Capital & Compensation Committee’s decisions on executive compensation. At our 2020 Annual Meeting of Shareholders, over 80% of the votes cast with respect to our say-on-pay proposal were voted in favor of the compensation of the Company’s NEOs. Given this response, the Company actively engaged shareholders regarding our NEO’s compensation and took certain actions as outlined further in our CD&A.

Corporate Governance Documents and Code of Conduct

Our Corporate Governance Principles, Code of Conduct, Certificate of Incorporation, Bylaws and Board committee charters form the framework of our corporate governance. Our Code of Conduct is applicable to our Board, officers, employees and contractors, and a copy is provided to every employee and to our contractors in local languages. Our Code of Conduct reflects our beliefs, including our beliefs in fundamental human rights, protecting the rights of minority groups and women, and fair wages for our employees. Our employees are required regularly (at least annually) to receive training and certify that they have read, understand and will comply with our Code of Conduct, and contractors are required to also agree in writing to comply with the Code of Conduct.

Our Ethics Helpline, proactively communicated to our employees and administered by a third-party, is available in several languages and provides an anonymous grievance mechanism for our employees to voice concerns or violations of our Code of Conduct anonymously. The Helpline is monitored daily by our compliance department, and all concerns received are recorded and addressed in accordance with a standard protocol. A Helpline summary together with key action items is provided to our senior management and the Board on a regular basis. Additionally,

we have ongoing training programs for our management and employees on ethics, anti-corruption, anti-bribery, human rights, work-place harassment, and other risks associated with our business and operations. All of our governance documents are available at www.exterran.com and in print to any shareholder who requests a copy from the Company’s Corporate Secretary.

Communication with our Board

Our Board and management believe strongly in the benefits of listening and communicating continually with a wide array of shareholders and stakeholders.  We therefore provide a variety of means to enable this, including via:

Attention: Corporate Secretary

Relevant communications are distributed to the Board, or to any individual committee, director or directors, as appropriate, depending on the facts and circumstances outlined in the communication. In that regard, the Board has requested that certain items unrelated to the duties and responsibilities of the Board should be excluded or redirected, as appropriate, such as: business solicitations or advertisements; mass mailings; job resumes and other forms of job inquiries; spam; and surveys. In addition, material that is unduly hostile, threatening, potentially illegal or similarly unsuitable will be excluded; however, any communication that is excluded will be made available to any director upon request.

Our Human Capital & Compensation Committee (the “Committee”) is responsible for recommending non-employee director compensation to the full Board for approval. The Company uses a combination of cash and equity compensation to attract and retain qualified candidates to serve on the Board.

Guiding Principles

We designated non-employee director compensation based on the following principles:

Annual Review Process. The Committee annually reviews non-employee director compensation with the advice of its independent compensation consultant and makes recommendations to the Board for any changes it considers appropriate. In making such recommendations, the Committee considers the type and amount of compensation paid to non-employee directors by comparable companies and time required for directors to fulfill their duties to the Company, in addition to the principles described above. As Executive Chair of the Board, Mr. Sotir is an officer, but not an employee, of the Company. Mr. Way, who is both a director and our President and Chief Executive Officer, does not receive additional compensation for his service on the Board.

Stock Ownership Guidelines. The Board believes the alignment of directors’ interests with those of our shareholders is strengthened when Board members are also shareholders. This view is reflected in the compensation arrangements for non-employee directors, which provide for the payment of a majority of the compensation of non-employee directors in shares of Exterran common stock. The Board also has adopted guidelines that require each director to own an amount of our common stock equal to at least five times the annual cash retainer amount (which at December 31, 2020 equals $287,500 of our common stock) within five years of his or her election to the Board. Both directly-owned shares and unvested restricted stock count toward satisfaction of this policy. We measure the stock ownership of our directors annually in October. As of December 31, 2020, all of our directors are in compliance with or on track to meet this ownership requirement.

Director Compensation

Annual Cash Retainer. Director compensation levels are reviewed annually by the Committee. Each of our non-employee directors receive an annual retainer equal to $57,500 as well as a payment of $7,500 for each Committee membership. In May 2020, in light of market conditions and the pandemic, the Committee determined to reduce the annual retainers payable to our non-employee directors in respect of their service as members of the Board by 25% for the second half of 2020, to $50,312. Due to the significant time required by the Executive Chair to fulfill his responsibilities as a result of the Company’s decision to divide the roles of Executive Chair and CEO, our Executive Chair received an additional annual retainer of $200,000. The Lead Independent Director received an additional annual retainer of $25,000. The chairs of the Audit Committee, Human Capital & Compensation Committee and Nominating, Governance & Sustainability Committee each received additional annual retainers of $15,000, $15,000 and $10,000, respectively. All retainers were paid in equal quarterly installments.

Equity-Based Compensation. All non-employee directors also receive an annual grant of common stock. In March 2020, the Committee approved an annual grant of fully-vested common stock to non-employee directors valued at approximately $125,000 on the date of grant in respect of their service in 2020. The number of shares awarded was determined based on the market closing price of our common stock on the applicable grant date.  The directors may also elect to receive all or a portion of their retainer and other fees in stock and to defer their receipt of such stock, by receiving phantom units that become payable in stock on the deferral date.

Other Benefits. The Company reimburses non-employee directors for their out-of-pocket expenses in attending Board and committee meetings and director education programs. Our directors do not receive tax gross ups on any benefits they receive. Directors also are covered under the Company's travel insurance program.

2020 Director Compensation Table. The following table shows the total compensation earned by each non-employee director for their service during 2020:

The following provides information regarding our NEOs as of March 1, 2021.

This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation objectives, philosophy, practices and programs and explains the factors considered by the Human Capital & Compensation Committee ("Committee") in making executive compensation decisions under those programs during 2020. This CD&A focuses on the compensation of our NEOs for 2020 who are listed below.

* Mr. Saligram voluntarily resigned from the Company in September 2020.

This CD&A should be read together with the compensation tables and related disclosures under “Executive Compensation Tables” beginning on page 55.

CD&A Table of Contents

Executive Summary

CD&A Highlights

2020 Business Highlights

2020 provided a very difficult operating environment, driven by the pandemic and exacerbated by the supply and demand imbalance within oil and gas commodities. Despite these challenges, the Company was able to secure its largest product sales order in the Company's history, renew over $200 million in contract operation contracts, divest its U.S. compression fabrication business, and publish its first annual Corporate Sustainability Report, while maintaining its commercial and operational capabilities. By balancing short-term cost actions with continued investments in its business, including water business technologies, the Company continued to position itself for future success.

In early 2020 upon the onset of the pandemic, our management team and Board took quick and decisive actions to focus on employee health and safety, and protect the Company’s core business.  These actions included a strong crisis management rhythm during the height of the pandemic, including:

These rhythms and protocols allowed the Company to keep our employees safe while maintaining focus on the business and operations. Our continued emphasis on safety throughout the pandemic is exemplified by our outstanding TRIR with incident free days recording 342 and overall TRIR at 0.25 for the year.

While the Company was able to keep most of its operating facilities open during the pandemic, travel restrictions disrupted our and our customers’ business capabilities. The Company, and our customers, faced challenges largely around project execution with limited access to work sites causing delays in execution. Customers also lowered spending and delayed new projects. Given the challenges presented, the Company's financial results declined year-over-year, and driven by energy market conditions prior to the pandemic, we entered 2020 with lower backlog than 2019. Despite these declining results, we maintained strong financial liquidity with approximately $40 million of cash on hand and approximately $73 million available under our credit facility at year-end. We also amended our credit facility in 2020 to adjust the definition of EBITDA used for our financial covenants, allowing inclusion of certain anticipated earnings during construction of new contract operations projects and providing additional liquidity for our growing number of commercial opportunities.

Despite these difficulties, the Company continued to move ahead in its strategic transformation to higher margin business lines that create additional shareholder value. We took a significant step forward during the year with the sale of our U.S. compression fabrication business assets during the fourth quarter.  We also continued our Company’s multi-year transition to the Cloud to enable operating efficiencies, faster data flow, and access to more in-depth data.

Highlights include:

Shareholder Engagement; Changes to Executive Compensation

Since 2017, Exterran has been requesting input from its shareholders at its annual meeting via an annual advisory vote to approve its executive compensation program. Prior to 2020, the Company received no less than 90% of shareholders approving such program each year. In contrast, in 2020, 80.26% of the votes cast at our annual meeting of shareholders voted in favor of our executive compensation program, far below our expectations. The Company strongly values its shareholders’ interests and values, and therefore, in response to this vote, we contacted shareholders representing over 50% of our outstanding stock and met with many of these shareholders to discuss their concerns and questions regarding our executive compensation program. Many of these discussions included the Chair of the Committee. During these discussions, certain consistent themes and concerns emerged. The Board, Company management and the Committee considered carefully all of the feedback, reviewed internal and external circumstances, and advice and recommendations of our independent compensation consultant, and made the following changes to our 2021 executive compensation program:

A Year of Change and the Impact on Our Executive Compensation

As discussed above, the Company expected 2020 to be a transformative year; however, we could not have predicted the unprecedented impact of the pandemic on our business and our performance measures. Even during this difficult time, our executives were able to stay the course in transforming our business to one of higher margin business lines, including sustainable solutions, building a foundation for future success. Given our small, high-quality executive team, we were further impacted by the departure of our COO to become a CEO of a larger energy services company. The executive team, however, was able to react quickly and reassign his responsibilities without adding headcount.  

Our CEO not only took on many of the COO’s responsibilities, but also voluntarily reduced his base pay. Our Board also voluntarily reduced their annual retainer.

In addition, although the Company met, and even exceeded, many of the performance goals, as discussed below in “2020 Executive Compensation Decisions,” the Committee considered various factors when making decisions about 2020 executive compensation:

With this backdrop, and knowing that 2020 incentive plan goals were set during a period of relative stability and when the Company had a larger business platform, the Committee determined that the proper action to take with respect to the Company’s 2020 incentive plans was:

As a result, actual STI awards paid ranged between 58% and 73% of target, depending on the individual contributions of each NEO. Performance units granted for 2019 under the LTI program vested at 100% of target.

Compensation Governance Best Practices

Our compensation program adheres to a high standard of compensation governance including the following best practices.

What We Pay and Why

Executive Compensation Philosophy

Our compensation philosophy is guided by the following principles:

Competition for Talent. One of the primary considerations of the Committee in overseeing our executive compensation program is the need to attract, retain and motivate our executives and future leaders, in line with similar executive positions at other companies. As discussed above in the Business Highlights, the Company is in a period of transformation, and strong, consistent, historically knowledgeable leadership in this period of change is key to the future success of the Company. Our leaders are in the peak years of their careers, very skilled, and highly sought after in the industry as well as by other leading companies. In 2020, our COO left to become the CEO of a larger energy services company. Instead of hiring or promoting another executive to the role of COO, the Company was able to backfill this role, primarily through our CEO taking on additional responsibilities and expanding the roles of other key leaders. Due to the very narrow pool of key executives at the Company, the Committee considers it even more imperative to set competitive pay for our current NEOs.

Compensation

Elements At-A-Glance. Consistent with our philosophy and to support our objectives, our program includes a mix of fixed and variable compensation elements to provide alignment with both Company short- and long-term business and strategic goals and the Company’s shareholders. The Committee establishes the performance measures and performance ranges for the variable compensation elements. Individual realized compensation is based primarily on market-based compensation, Company performance and individual performance.

The Committee believes a compensation program weighted towards variable, at-risk compensation ensures executive officers’ goals are appropriately aligned with the Company’s business objectives, strategic priorities and the creation

of long-term shareholder value. Target 2020 total compensation for our CEO and other NEOs is heavily weighted towards variable compensation.

Compensation Mix. The Committee believes a compensation program weighted towards variable, at-risk compensation ensures executive officers’ goals are appropriately aligned with the Company’s business objectives, strategic priorities and the creation of long-term shareholder value. Target 2020 total compensation for our CEO and other NEOs is heavily weighted towards variable compensation.

Linking CEO Pay and Performance. A key component of our executive compensation philosophy is the link between compensation and overall business results and shareholder value creation. We strive to clearly communicate this to our shareholders and believe that looking at realized and realizable pay in the following different contexts can illustrate this point effectively:

Over his tenure with the Company, the actual realized pay our CEO has received has been closely aligned with Company performance. Specifically, in 2019 and 2020, as shown as follows, our CEO’s actual realized pay was approximately 51% and 37% of target.

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Realized pay for a given year is calculated as: (1) base salary paid; (2) actual STI earned in that year (and paid in March of the following year, as shown in the Summary Compensation Table); and (3) the value of LTI, time-based and performance-based, that vested in that year (which was granted in prior years). Based on the stock price as of last trading day of the year.

In addition, our CEO’s realized pay aligns directly with our yearly TSR, as show as follows:

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TSR for a given year is calculated as the Company stock price on the last trading day of the year in comparison to the Company stock price ($16.05) on the last trading day of 2015.

Further, our CEO’s realizable compensation is within the pay for performance “fairway” and aligns with Company performance, reflective of the significant portion of Mr. Way’s compensation that is performance-based.  The following chart summarizes our CEO realizable pay versus TSR performance for the Company and our compensation peer group.

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Realizable pay is the value of short-term cash compensation delivered over a given period (salary plus annual incentives earned) plus the value of all long-term incentive grants awarded over the performance period as of the end of the full period (including both shares/cash earned and shares/cash outstanding) independent of when options were exercised or shares actually vested.  Realized pay for the above chart is calculated as: (1) base salary is the actual salary paid per the Summary Compensation Table; (2) STI is the actual payout earned; (3) stock options are the value of in-the-money grants during the three year period valued as of December 31, 2019; (4) time-based LTI as the face value of grants during the three year period valued as of December 31, 2019; and (5) performance-based LTI as the target value for awards still outstanding as of December 31, 2019, the realized value for performance periods beginning and ending within the three-year period

2020 Executive Compensation Decisions

Base Salary

The Committee determines the base salaries for our NEOs based upon compensation competitive data, performance considerations and advice from our independent compensation consultant. The Committee also considers internal pay equity but has not established a predetermined formula for this purpose.

Based on the CEO's recommendations and prior to the onset of the pandemic, the Committee did not increase base salaries in 2020. In mid-2020, due to the decline in the market and the stress on the Company from the pandemic, Mr. Way requested his base salary be decreased 25% from $825,000 to $618,250 for the remainder of the year. His full base salary was reinstated in January 2021.

In 2020, all employees, including our NEOs, were paid for 27 pay periods, rather than the normal 26, due to banking holidays.  This additional pay period caused an increase in NEO annual base salary by one additional pay period amount.

The following table contains the 2018, 2019, and 2020, base salaries of our NEOs:

Annual Short-Term Incentive (“STI”) Program

For 2020, our NEOs were eligible to earn annual incentive awards under the Company’s annual STI program based upon the level of achievement across a set of Company-wide performance measures and the NEO’s individual performance.

2020 STI Target Amounts. Our performance-based incentives encourage our management team to pursue objectives consistent with the overall short-term goals and strategy the Board has approved for the Company. The Committee reviews individual STI targets annually using competitive data from our peer group and our independent compensation consultant’s insights into the marketplace. The Company’s STI pool can range from 0% to 150% of target based on Company performance, and NEOs may earn STI cash payouts ranging from 0% to 200% of their individual target opportunity based on Company performance and adjusted for individual performance. 2020 annual STI targets remain unchanged since 2018.

2020 STI Company Performance Measures. The Committee sets performance measures, weightings and targets at the beginning of each year and discusses performance quarterly. Generally, the target goals for financial and operational performance measures are based upon the Company’s approved business plan for the year and reflect performance improvements relative to the prior year outcomes. Goal thresholds reflect the minimum level of performance at which the Committee believes payout is warranted. Goal maximums are intended to provide stretch goals that challenge management to achieve exceptional performance. The Committee also reviews the effects on the annual incentive plan due to various risks and opportunities recognized at the time the plan is set, assuring plan targets that are determined reflect the appropriate balance of risks and opportunities and confirming targets are aligned with the expectations communicated to investors.

In early 2020, the Board and Committee determined to modify 2020 STI measures from 2019 to increase the weighting of EBITDA, As Adjusted, from 45% to 50% and replace the Cash Flow Conversion measure with the two strategic metrics discussed below. In combination, these financial and strategic performance measures complement the metrics used for performance-based units in driving achievement of multi-year strategic initiatives. The Committee selected these metrics because they:

For 2020, the Committee adopted the following metrics for the 2020 STI program

2020 STI Awards. The STI payout for our leadership team, including our NEOs, is calculated using the following formula. We strongly believe that focusing on corporate performance, rather than business unit or region performance reinforces our core value of collaboration and helps build an aligned and focused company.

2020 STI Company Performance Goals and Results.  The below chart describes the specific 2020 metrics and Company performance results.  

Notwithstanding the unprecedented challenges faced by the Company due to the pandemic, our senior executives continued to exhibit strong and decisive leadership and successfully navigated the Company through this unsettled time, protecting our customers, employees and assets while continuing to implement the Company’s business transformation. Despite the dedicated work of our executives, the Company’s EBITDA, As Adjusted, for the measurement period was below threshold at $134 million.

When setting these goals in early 2020, the Committee believed that these measures were rigorous yet achievable in light of our forecast and macroeconomic and industry environments. Upon review in early 2021 the Committee determined that the Company’s failure to meet threshold for this measure was caused primarily by the unanticipated financial and operational impact of the pandemic, and did not reflect the amount of work and extraordinary performance of our executives and the broader team. Further, consistent with generally accepted accounting practices, the Committee carefully reviewed extraordinary items related to the pandemic, to determine whether to exercise discretion and exclude any of these items in calculating the EBITDA, As Adjusted, measure, in order to correctly reflect business performance. After its review, the Committee determined to exclude from EBITDA, As Adjusted, for purposes of calculating this measure, specific, quantitative amounts directly related the following items: changes in schedules, which pushed EBITDA recognition to 2021, force majeure events, severance-related costs, negative currency impact, and certain outsized bad debt reserves. After adding back only these specific values, the EBITDA, As Adjusted, was at or near target. Giving effect to these adjustments to EBITDA, As Adjusted, together with the Committee’s awareness of the consistent excellent performance and leadership exhibited by the Company’s NEOs during a time of market flux and the pandemic, the Committee determined to adjust the EBITDA, As Adjusted, measure to threshold level.

The Company achieved the Business Transformation measure by completing the sale of its U.S. compression fabrication business in late 2020, continuing its move towards a business focused on higher margin, sustainable product and service offerings. The Company did not achieve the threshold measure for the Scalable Water Business metric, another key factor in it business transformation; although due in part to the pandemic. The Committee determined not to adjust this measure.

As part of the Company’s continued emphasis on Health, Safety, Security and the Environment (HSSE), for 2020, the Committee also set an HSSE metric comprised of 10 measures. These measures included: (1) incident-free days, (2) workers compensation claims (improvement over prior year), (3) incident severity (improvement over prior year), (4) environmental (reportable incidents), (5) procedural and policy audits, (6) customer feedback on HSSE, (7) ISO compliance audit, (8) incident reporting compliance, (9) investigations compliance, and (10) action items from incidents. Certain metrics have a range of performance levels and payout (threshold, target, maximum) while others are binary (completed or not completed) with a payout of 0% or 100%. The threshold, target and maximum payout levels for the metrics with performance ranges were structured, so that if the Company achieved threshold performance on these performance-range metrics, and did not complete the binary metric, the total payout would be 50% of target. If the Company achieved maximum performance on these performance range metrics, and completed the binary metric, the total payout would be 150% of target. Based on this scaling, the Committee considered a calculation of 5 to meet threshold, 10 to meet target and 15 for maximum payout.

In 2020, the Company met, or exceeded, target performance for eight of the 10 HSSE metrics (achieving above maximum performance on four of these metrics) during an exceptionally challenging year. Due to COVID-19 restrictions on travelling and the ensuing inability to conduct physical inspections of sites, the Company could not complete the procedural and policy audit measure, and the Committee used its discretion and considered this metric as having met threshold. Calculating all HSSE metrics, the combined performance was between target and maximum achievement at 12, a weighted result of 13.

2020 STI Individual Performance Results. Individual performance adjustments (positive or negative) for our NEOs and officers are approved by the Committee after considering our CEO's recommendations (other than for himself), contributions to the Company's financial and operational success during the year, performance in his or her primary area of responsibility, and individual leadership as an executive team member. Jointly, the Committee and the Executive Chair use the same approach for determining the CEO’s individual adjustment.

2020 performance highlights for our NEOs include:

Mr. Way demonstrated leadership of the strategic direction of the Company, including:

Mr. Barta led the finance, tax, treasury, information technologies and investor relations functions and made significant contributions to the Company's strategic direction, including:

Mr. George led the development of the water business line and execution of Company strategic and sustainability initiatives, and new product development, including:

The Committee approved the following 2020 STI payouts based on Company STI performance results, as well as each executive’s individual foregoing performance achievements. Mr. Saligram did not receive a STI payout as he left the Company in September 2020.

The Committee used its discretion to increase Mr. Way’s compensation from a performance factor of 58% to a payout of 73% of target due to the superior effort of Mr. Way during this difficult year, as outlined above.

Long-Term Incentive (“LTI”) Equity-Based Program

Our LTI program is designed to motivate our global senior leaders to execute their responsibilities in accordance with the Company’s core values, business objectives and strategy, and align to leaders’ interests with creating long-term value for shareholders. Long-term incentives also assist in retaining our executive team.

The program is designed such that officers have a significant portion of their 2020 LTI award at risk as shown below:

Our 2020 LTI Program. Consistent with the design of our prior performance-based LTI program, the Committee determined to:

2020 LTI Awards. The table below shows the target annual LTI award values granted for fiscal 2020 for each of the NEOs: Award amounts were determined based on the closing price of our common stock on the date of grant on March 4^th, 2020 which was $7.27:

Target LTI award opportunities have not been increased from 2018 levels, with the exception of Mr. Saligram's 2019 target LTI which was increased due to his promotion to COO.

Timing of Long-Term Equity-Based Incentive Awards. Annual grants of equity awards are typically determined in Committee meetings held during the first quarter of each year. The Committee approved the annual 2020 equity-based grants on March 4, 2020 and units were determined using the closing price of the Company’s common stock on the NYSE at close of business the same day. This date was after the release of earnings information for the prior fiscal year. The Committee does not orchestrate the timing of equity grants to affect the value of compensation either positively or negatively. Executive officers do not play a role in the selection of grant dates.

2020 Time-Based Restricted Stock Units. The restricted stock unit awards granted vest in three substantially equal installments on the anniversary of the grant date, subject to continuous employment. As the NEOs have already met (or are on track to meet) their stock holding requirements, and to prevent dilution, any earned units were, and will be, cash-settled. The final payout amount is equal to the number of units vesting multiplied by the closing stock price on the date of vesting. Additional information regarding these awards, including treatment under certain terminations of employment or the occurrence of a change of control is provided below in “Potential Payments Upon Termination or Change of Control” and "2020 Grants of Plan-Based Awards."

2020 Performance-Based Restricted Stock Units. The performance stock units have a performance period of two years, and they vest on March 4, 2022, subject to performance achieved.  They are tied to the Company's stock price and will be cash-settled. The final payout amount is equal to the target number of performance units, adjusted for performance, multiplied by the stock price on the date of vesting.

For 2020, the Committee modified the performance measures for performance-based units to further align with the Company's strategy and creation of long-term shareholder value. Specifically the Committee replaced Operating Cash

Flow Conversion (from 2019) with Backlog Return on Asset (ROA) to further align with investors’ focus on returns. EBITDA Percentage Rate (weighted at 50%) remained the same.

The maximum possible Company performance is 200% of target, based on the Company’s performance against these measures. The Company does not disclose the measures of EBITDA Percentage Rate and Backlog Return on Assets due to the competitive harm, which could result from this disclosure. The Company expects to disclose these measures at payout.

Determination of Payout of 2019 Performance-Based Units.  The performance-based units granted in March 2019 were subject to continuous service and the achievement of performance measures. NEOs were entitled to receive a payout of 0% to 200% of target, dependent on the Company’s performance against the specified performance measures.

EBITDA Percentage Rate. Our 2020 EBITDA Percentage Rate performance was 21.8%, which includes EBITDA, As Adjusted of $134 million for the second year (2020) of the two-year performance period starting on January 1, 2019 divided by total revenue of $613 million for the same second year period. The target and maximum performances for this measure were increases of at least 1.5 and 2.5 EBITDA margin points respectively by the end of the performance

period. These metrics were set at levels to support the Company’s transformation to higher margin business lines. Although the metric was affected by the pandemic, the Committee chose not to adjust the metric. The resulting performance was a maximum performance payout factor of 200%.

Operating Cash Flow Conversion. The Operating Cash Flow Conversion measure resulted in zero payout, as the resulting performance was below the threshold performance level of at least 40%. Although the metric was affected by the pandemic, the Committee chose not to adjust the metric.

The aggregate realized value delivered to each NEO at vesting is determined by the number of units awarded (based on Company performance) and the stock price at vesting. The realized value delivered to each NEO upon vesting was substantially lower than target value due to Company performance being negatively affected by the industry downturn and related declines in stock price, and reflected our commitment to pay-for-performance and aligning the compensation of our executives with the interests of our shareholders.

The Committee determined to pay out performance units in cash subject to each recipient's consent. All NEOs consented to receive payout of performance units in cash.  

Changes for 2021

The Committee believes the fundamental structure of the Company’s compensation programs is aligned with shareholder interests and rewards continued improvements in strategic, financial and operational priorities. Therefore, no increases will be made in 2021 to NEO base pay, target STI levels (as a percent of base salary), or mix of time-vested and performance-vested LTI. 2020 time-vested awards and performance-vested awards will be tied to Exterran’s stock price and will be delivered in cash.

However, as described on pages 21, 22, 31, and 32, the Company strongly values its shareholders’ interests and considered the feedback it received during its 2019 and 2020 shareholder outreach efforts. In addition to the feedback, and after reviewing internal and external circumstances, and the advice and recommendations of our independent compensation consultant, the Committee made several changes to our 2021 executive compensation program, including adding ESG metrics to enhance the Company’s focus on specific goals, including goals to gather foundational data for additional reporting and quantifiable improvements in ESG metrics in the future. Specifically, the Company included metrics pertaining to publishing a second Sustainability Report with improved quantitative measures; implementing programs to allow gathering and tracking of certain social and human capital related data for better tracking and analysis; and similarly evaluation of consistent solid waste categories and processes to collect such data.

Annual STI Program. The Committee has adopted the following performance measures and weights for the 2021 STI program:

The design of the 2020 STI program will remain the same with independent metrics that will pay out 0% below threshold, 50% at threshold, 100% at target, and 150% at maximum performance. The Committee will have ability to adjust payments for individual performance, up to a maximum of 200% of target. The Company does not disclose the measures of EBITDA, As Adjusted and Bank Debt Leverage due to the competitive harm which could result from this disclosure. The Company expects to disclose these measures at payout.

The Committee considers Health, Safety, Security and the Environment (HSSE) to be a crucial focus of the Company in its ESG growth. To focus the Company, the Committee set forth 10 measures for HSSE.  Similar to 2020, these measures included: (1) incident free days, (2) incident severity (improvement over prior year), (3) environmental (reportable incidents), (4) leadership site visits and internal audits, (5) ISO compliance audit, (6) near miss reporting (improvement over prior year), (7) behavior based safety observations (improvement over prior year), (8) environmental and sustainability awareness training, (9) incident reporting compliance, and (10) investigations compliance.  Eight measures metrics have a range of performance levels and payout (threshold, target, maximum), while two are binary (completed or not completed) with a payout of 0% or 100%.  The threshold, target and maximum payout levels for the metrics with performance ranges have been structured so if the Company achieves threshold performance on these performance range metrics, and does not complete the binary metrics, the total payout will be 50% of target. If the Company achieves maximum performance on these performance range metrics, and completes the binary metrics, the total payout will be 150% of target.

In response to shareholder feedback, and as outlined above, the Committee added ESG metrics to enhance the Company’s focus on specific goals, including goals to gather foundational data for additional reporting and quantifiable improvements in ESG metrics in the future. Specifically the Company add metrics around publishing a second Sustainability Report with improved quantitative measures; implementing programs to allow gathering and tracking of

certain social and human capital related data for better tracking and analysis; and similarly evaluation of consistent solid waste categories and process to collect such data.

LTI Program. The Committee has adopted the following design for awards under the 2021 LTI program:

2021 Performance-Based Restricted Stock Units.

In response to shareholder feedback, the Committee approved the addition of a relative alignment metric to the LTI plan. Specifically, Company results are ranked against companies in the Performance Peer Group (listed below); 55th percentile performance is required to earn a target payout.

Consistent with prior years, each metric is independent and has a payout of 0% for below threshold, 50% at threshold, 100% at target, and 200% at maximum performance. Any earned units will be cash-settled to prevent dilution. The final payout amount is equal to the target number of performance units, adjusted for performance, multiplied by the stock price on the date of vesting.