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. )
Filed by the Registrantþx
Filed by a Party other than the Registranto¨
Check the appropriate box:
o Preliminary Proxy Statement
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þ Definitive Proxy Statement
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| ¨ | Preliminary Proxy Statement |
| ¨ | Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| x | Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
| ¨ | Soliciting Material Pursuant to §240.14a-12 |
DELTA PETROLEUM CORPORATION
PAR PACIFIC HOLDINGS, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other thanOther Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ No fee required.
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TABLE OF CONTENTS
DELTA PETROLEUM CORPORATION
370 SEVENTEENTH STREET, SUITE 4300
DENVER, COLORADO 80202
(303) 293-9133
PAR PACIFIC HOLDINGS, INC.
One Memorial Plaza, 800 Gessner Road, Suite 875
Houston, Texas 77024
May 17, 2011
Dear Delta Stockholders:
On behalf of the Board of Directors, it is a pleasure to invite you to attend the Annual Meeting of Stockholders to be held at 10:00 a.m. MDT on Tuesday, July 12, 2011, at the Company’s offices located at 370 17th Street, Suite 4300, Denver, Colorado 80202.
Business matters expected to be acted upon at the meeting are described in detail in the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement. Members of management will report on our operations, followed by a period for questions and discussion.
We hope you can attend the meeting. Regardless of the number of shares you own, your vote is very important. Please ensure that your shares will be represented at the meeting by signing and returning your proxy now, even if you plan to attend the meeting.
Thank you for your continued support.
Sincerely,
Carl E. Lakey
President and Chief Executive Officer
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On July 12, 2011June 2, 2016
TO THE STOCKHOLDERS OF DELTA PETROLEUM CORPORATION:
As a stockholder of Delta Petroleum Corporation, a Delaware corporation (“Delta” or the “Company”),Dear Stockholders:
We cordially invite you are invited to attend in person, or to be represented by proxy at, the Annual Meetingour 2016 annual meeting of Stockholders, tostockholders. The meeting will be held on Thursday, June 2, 2016, at the Company’s offices located at 370 17th Street, Suite 4300, Denver, Colorado 80202, on Tuesday, July 12, 2011, at 10:9:00 a.m. MDT for(Houston time), at The Westin Houston, Memorial City, 945 Gessner Road, Houston, Texas 77024. At the following purposes:meeting we will:
1. To elect Carl E. Lakey, Kevin R. Collins, Jerrie F. Eckelberger, Jean-Michel Fonck, Anthony Mandekic, James J. Murren, Jordan R. Smith, and Daniel J. Taylor to one-year terms onElect the Board of Directors or until their successors have been duly elected;Directors;
2. To consider and vote on a proposal to effect a reverse split of our Common Stock at a ratio of1-for-10 and a reduction in the number of authorized shares of Common Stock available for issuance from 600,000,000 to 200,000,000 by filing a certificate of amendment to our certificate of incorporation;
3. To consider and vote upon the ratification ofRatify the appointment of KPMGDeloitte & Touche LLP as theour independent registered public accounting firm for Delta for the fiscal year ending December 31, 2011;2016;
3. Act on a proposal to approve the Amended and Restated Par Pacific Holdings, Inc. 2012 Long-Term Incentive Plan that was previously approved by the Board of Directors and that, among other things, provides for an increase in the maximum number of shares of our common stock reserved and available for issuance by 2,400,000 shares; and
4. To conduct an advisory vote on executive compensation;
5. To conduct an advisory vote on the frequency of an advisory vote on executive compensation; and
6. To transact suchTransact any other business as may be properly broughtcome before the meeting and any postponements or adjournments thereof.
meeting.
Stockholders of Delta of recordwho owned our common stock at the close of business on May 13, 2011 are entitled toWednesday, April 6, 2016 may attend and vote at the meeting and all postponements or adjournments thereof.
One-third of the outstanding shares of Common Stock of Delta must be represented at the meeting to constitute a quorum. Therefore, all stockholders are urged either to attend the meeting or to be represented by proxy. If a quorum is not present at the meeting, a vote for adjournmentmeeting. A stockholders’ list will be taken amongavailable at our offices at One Memorial Plaza, 800 Gessner Road, Suite 875, Houston, Texas 77024 for a period of ten days prior to the stockholders present or represented by proxy. If a majority of the stockholders present or represented by proxy vote for adjournment, it is Delta’s intention to adjourn the meeting until a later date and to vote proxies received at such adjourned meeting(s).
To assure your representation at the Annual Meeting,meeting. We hope that you are urged to cast your vote, as instructed in the Notice Regarding the Availability of Proxy Materials, over the Internet as promptly as possible. You may also request a paper proxy card to submit your vote by mail, if you prefer. Any stockholder of record attending the Annual Meeting may vote in person, even if he or she has voted over the Internet or returned a completed proxy card.
Whether or not you expectwill be able to attend the meeting in person, yourperson.
Whether or not you plan to attend the meeting, please vote is very important. Please cast your vote regardlesselectronically via the Internet or by telephone, or, if you requested paper copies of the number of shares you hold.proxy materials, please complete, sign, date and return the accompanying proxy card in the enclosed postage-paid envelope. See “How do I cast my vote?” in the proxy statement for more details.
We look forward to seeing you at the meeting.
By Orderorder of the Board of Directors,
Senior Vice President, General Counsel and Secretary
Houston, Texas
April 21, 2016
PAR PACIFIC HOLDINGS, INC.
One Memorial Plaza, 800 Gessner Road, Suite 875
Houston, Texas 77024
Carl E. Lakey
President and Chief Executive Officer
Denver, Colorado
May 17, 2011
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
Important Notice Regarding the AvailabilityOur Board of Proxy MaterialsDirectors (the "Board") is soliciting proxies for the
Annual Meeting 2016 annual meeting of Stockholdersstockholders to be held on July 12, 2011
The Notice of Annual Meeting of Stockholders, Proxy Statement, and Annual Report to Stockholders for the fiscal year ended December 31, 2010 are availableThursday, June 2, 2016, athttps://materials.proxyvote.com/247907 andwww.deltapetro.com/proxy.html.
DELTA PETROLEUM CORPORATION
370 SEVENTEENTH STREET, SUITE 4300
DENVER, COLORADO 80202
(303) 293-9133
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JULY 12, 2011
This Proxy Statement is furnished in connection with the solicitation by the Board of Directors (our “Board” or our “Board of Directors”) of Delta Petroleum Corporation (“us,” “our,” “we,” “Delta” or the “Company”) of proxies to be voted at our Annual Meeting of Stockholders (the “Annual Meeting” or the “Meeting”) to be held on July 12, 2011, at the Company’s offices located at 370 17th Street, Suite 4300, Denver, Colorado 80202, at 10: 9:00 a.m. MDT,(Houston time), at The Westin Houston, Memorial City, 945 Gessner Road, Houston, Texas 77024, and at any postponementadjournments or adjournment thereof. Each holder of record at the close of business on May 13, 2011 of shares of our common stock, par value $0.01 per share (“Common Stock”), will be entitled to one vote for each share so held. As of May 13, 2011, there were 286,027,476 shares of Common Stock issued and outstanding.
Whether or not you are able to attend the Annual Meeting, you are urged to complete and return your proxy or voting instructions, which are being solicited by the Board of Directors and which will be voted as you direct on your proxy or voting instructions when properly completed.
We will pay all expenses of this proxy solicitation. In addition to this proxy solicitation, proxies may be solicited in person or by telephone or other means (including by our directors or employees without additional compensation). We will reimburse brokerage firms and other nominees, custodians and fiduciaries for costs incurred by them in distributing proxy materials to the beneficial owners of shares held of record by such persons.
The U.S. Securities and Exchange Commission (“SEC”) has adopted rules that allow us to mail a notice to our stockholders advising that our proxy statement, annual report to stockholders, electronic proxy card and related materials are available for viewing, free of charge, on the Internet. Stockholders may then access these materials and vote over the Internet. Stockholders may also request delivery of a full set of materials by mail or email on a one-time or ongoing basis. These rules give us the opportunity to serve you more efficiently by making the proxy materials available quickly online, reducing costs associated with printing and postage and reducing the environmental impact of providing information for our meeting.
We will begin mailing the required notice, called a Notice of Internet Availability of Proxy Materials (the “Notice”), to stockholders on or about June 2, 2011. The proxy materials will be posted on the Internet, athttps://materials.proxyvote.com/247907 and on our website atwww.deltapetro.com/proxy.html no later than the day we begin mailing the Notice. If you receive the Notice, you will not receive a paper or email copypostponements of the meeting. This proxy materials unless you request one in the manner set forth in the Notice.
The Noticestatement contains important information including:for you to consider when deciding how to vote on the matters brought before the meeting. Please read it carefully.
• The date, timePar Pacific Holdings, Inc. ("Par") will pay the costs of soliciting proxies from stockholders. Our directors, officers and locationregular employees may solicit proxies on behalf of the Annual Meeting;Par, without additional compensation, personally or by telephone.
• A brief description of the mattersQUESTIONS AND ANSWERS
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| Q: | Who can vote at the meeting? |
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| A: | The Board set April 6, 2016 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, April 6, 2016. On that date, there were 40,670,011 shares of our common stock outstanding and entitled to vote at the meeting. |
Q: What proposals will be voted on at the meeting;meeting?
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| • | A list of the proxy materials available for viewing onhttps://materials.proxyvote.com/247907 and the control number you will use to access the site; and |
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| • | Instructions on how to access and review the proxy materials online, how to vote your shares over the Internet, and how to get a paper or email copy of the proxy materials, if that is your preference. |
If your sharesA: Three proposals are held in an account at a brokerage firm, bank, broker-dealer or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice of Internet Availability of Proxy Materials willscheduled to be forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of votingvoted upon at the Annual Meeting. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account.
Shares of Common Stock held in a stockholder’s name as the stockholder of record may be voted in person at the Annual Meeting. Shares of Common Stock held beneficially in street name may be voted in person only if you obtain a legal proxy from the broker, trustee or nominee that holds your shares giving you the right to vote the shares.meeting:
Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your shares are voted without attending the Annual Meeting. If you are a stockholder of record, you may vote by submitting a proxy electronically via the Internet or, if you have requested a paper copy of these proxy materials, by returning the proxy or voting instruction card. If you hold shares beneficially in street name, you may vote by submitting voting instructions to your broker, trustee or nominee.
The presence at the Annual Meeting, in person or by proxy, of the holders of one-third of the shares of our Common Stock outstanding as of the record date will constitute a quorum. There must be a quorum for any action to be taken at the Annual Meeting (other than an adjournment or postponement of the Annual Meeting). Abstentions and broker non-votes (i.e., proxies from brokers or nominees indicating that such persons have not received instructions from the beneficial owner or other persons eligible to vote shares as to a matter with respect to which the brokers or nominees do not have discretionary power to vote) are counted as present for purposes of determining the presence or absence of a quorum for the transaction of business.
If a quorum is not present at the Annual Meeting, a vote for adjournment will be taken among the stockholders present or represented by proxy. If a majority of the stockholders present or represented by proxy vote for adjournment, it is our intention to adjourn the Annual Meeting until a later date and to vote proxies received at such adjourned meeting(s).
Votes cast in favor of and against proposed actions (whether in person or by proxy) will be counted for us by our Secretary at the Meeting, but this count may be at least partially based upon information tabulated for us by our transfer agent or others. The vote required to approve each proposal is as follows:
Proposal 1. In the election of directors (Proposal 1), the eight candidates will be elected by a plurality of affirmative votes. Abstentions and broker non-votes will have no effect on the election of directors.directors;
Proposal 2.The affirmative vote of a majority of the outstanding shares of Common Stock will be required to approve the proposal to effect a reverse stock split and reduce the number of authorized shares of Common Stock (Proposal 2). Abstentions and broker non-votes will have the effect of negative votes on Proposal 2.
Proposal 3. The affirmative vote of a majority of the Common Stock present at the meeting, in person or by proxy, will be required to approve the ratification of the appointment of KPMGDeloitte & Touche LLP as our independent auditorsregistered public accounting firm for the fiscal year ending December 31, 2011 (Proposal 3).2016; and
The approval of the Amended and Restated Par Pacific Holdings, Inc. 2012 Long-Term Incentive Plan ("Updated 2012 LTIP") that was previously approved by the Board of Directors and that, among other things, provides for an increase in the maximum number of shares of our common stock reserved and available for issuance by 2,400,000 shares.
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| Q: | Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials? |
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| A: | Pursuant to rules adopted by the Securities and Exchange Commission (the "SEC"), we have elected to provide access to our proxy materials over the Internet. Accordingly, on or about April 21, 2016 we are sending a Notice of Internet Availability of Proxy Materials to our stockholders of record and beneficial owners. All stockholders will have the ability, beginning on or about April 21, 2016, to access the proxy materials on the website referred to in the Notice of Internet Availability of Proxy Materials or request to receive a printed set of the proxy materials. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found in the Notice of Internet Availability of Proxy Materials. In addition, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. |
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| Q: | Can I vote my shares by filling out and returning the Notice of Internet Availability of Proxy Materials? |
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| A: | No. The Notice of Internet Availability of Proxy Materials identifies the items to be voted on at the meeting, but you cannot vote by marking the Notice of Internet Availability of Proxy Materials and returning it. The Notice of Internet Availability of Proxy Materials provides instructions on how to vote via the Internet, by telephone or by requesting and returning a paper proxy card, or by submitting a ballot in person at the meeting. |
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| Q: | How can I get electronic access to the proxy materials? |
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| A: | The Notice of Internet Availability of Proxy Materials will provide you with instructions regarding how to: |
View our proxy materials for the meeting on the Internet; and
Instruct us to send future proxy materials to you electronically by email.
Choosing to receive future proxy materials by email will save us the cost of printing and mailing documents to you and will reduce the impact of our annual meetings on the environment. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it.
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| A: | For stockholders whose shares are registered in their own names, as an alternative to voting in person at the meeting, you may vote via the Internet, by telephone or, for those stockholders who request a paper proxy card in the mail, by mailing a completed proxy card. The Notice of Internet Availability of Proxy Materials provides information on how to vote via the Internet or by telephone or request a paper proxy card and vote by mail. Those stockholders who request a paper proxy card and elect to vote by mail 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 our Board 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. |
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 proposal to approve the Updated 2012 LTIP. Your vote is especially important. If your shares are held by a broker, your broker in “street name” and you do notcannot vote your shares for the election of directors or the proposal to approve the Updated 2012 LTIP, unless you provide voting instructions. Therefore, please instruct your brokerage firm has authoritybroker regarding how to vote your unvoted shares on Proposal 3. these matters promptly. See “Vote Required” following each proposal for further information.
If theyou hold shares through a broker, does not vote your unvoted shares, there will be no effect on the vote because these broker non-votes are not consideredbank or other nominee and wish to be voting on the matter. Abstentions and broker non-votes will not be counted as votes cast or shares voting on Proposal 3 and will have no effect on the vote.
Proposal 4. The affirmativeable to vote of the majority of the Common Stock presentin person at the meeting, in person or by proxy, will be required to approve the advisory vote on executive compensation (Proposal 4). Abstentions and broker non-votes will not be counted as votes cast or shares voting on Proposal 4 and will have no effect on the vote.
Proposal 5. For Proposal 5, the option of one year, two years, or three years that receives the highest number of votes cast by stockholders will be considered by the Board of Directors when determining the frequency of future advisory votes on executive compensation (Proposal 5). Abstentions and broker non-votes will not be counted as votes cast or shares voting on Proposal 5 and will have no effect on the vote.
None of the proposals to be voted on at the Annual Meeting gives rise to dissenters’ rights.
You may revoke or change your proxy or voting instructions at any time before the Annual Meeting. To revoke your proxy, send a written notice of revocation or another signed proxy with a later date to the Secretary of the
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Company at Delta Petroleum Corporation, 370 Seventeenth Street, Suite 4300, Denver, Colorado 80202 before the beginning of the Annual Meeting. You may also automatically revoke your proxy by attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not in and of itself constitute revocation of a proxy. To revoke your voting instructions, submit new voting instructions to your broker, trustee or nominee; alternatively, if you have obtainedmust obtain a legal proxy from your broker, bank or other nominee giving you the right to vote your shares, you may attend the Annual Meeting and vote in person. All shares represented by a valid proxy received priorpresent it to the Annual Meeting will be voted.inspector of election with your ballot at the meeting.
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| Q: | Can I revoke or change my proxy? |
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| A: | 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: | How does the Board recommend I vote on the proposals? |
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| A: | The Board recommends you vote “FOR” each of the nominees to our Board of Directors, “FOR” the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016, and “FOR” the approval of the Updated 2012 LTIP. |
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| Q: | Who will count the vote? |
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| A: | The inspector of election will count the vote. Par’s Secretary will act as the inspector of election. |
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| A: | 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 and the proposal to approve the Updated 2012 LTIP. “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. |
Q:What vote is required to approve each item?
A: The following table sets forth the voting requirement with respect to each of the proposals:
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| Proposal 1 — Election of directors. | | The nine nominees for election as directors at the annual meeting who receive the greatest number of “FOR” votes cast by the stockholders, a plurality, will be elected as our directors. |
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| Proposal 2 — Ratification of appointment of independent registered public accounting firm. | | 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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| Proposal 3 — Approval of the Updated 2012 LTIP Plan. | | 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: | What does it mean if I get more than one Notice of Internet Availability of Proxy Materials? |
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| A: | Your shares are probably registered in more than one account. Please provide voting instructions for all Notices of Internet Availability of Proxy Materials, proxy and voting instruction cards you receive. |
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| Q: | How many votes can I cast? |
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| A: | On all matters you are entitled to one vote per share. |
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| Q: | Where can I find the voting results of the meeting? |
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| A: | 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 Securities and Exchange Commission within four business days of the meeting. |
Proposal 1
ELECTION OF DIRECTORS
PROPOSAL 1 — ELECTION OF DIRECTORS
General
OurAt the meeting, nine directors are elected annually by the stockholders to servebe elected. Each director is to hold office until the next annual meeting of stockholders andor until their respective successors are dulyhis successor is elected and qualified, or until the earlier of their death, resignation or retirement. Our bylaws provide that the number of directors comprising the whole Board shall from time to time be fixed and determined by resolution adopted by our Board. Our Board has established the size of the Board at fifteen directors, with four Board seats currently vacant.
Effective at the Annual Meeting, the Board of Directors has determined to reduce the size of the Board to eight directors. Given the sale of assets in 2010 and the corresponding reduction in Delta’s business operations, the Board believes that a smaller number of directors would be more reasonable and reduce the expenses related to the operation of the Board of Directors. Three of Delta’s current directors, Hank Brown, Aleron H. Larson, Jr. and Russell S. Lewis, have each agreed to not stand for re-election at the Annual Meeting in order to facilitate the reduction in the size of the Board of Directors.
Each of the eight nominees consented to be named as a nominee in this Proxy Statement, and we expect that each nominee will be able to serve if elected. If any nominee becomes unavailable or unwilling to accept his nomination for election for any reason, a substitute nominee may be proposed by our Board and the shares represented by proxy will be voted for any substitute nominee, unless the Board otherwise reduces the number of directors. Proxies cannot be voted for a greater number of persons than the number of nominees named below.
Pursuant to the terms of the Company Stock Purchase Agreement (the “Tracinda Agreement”), dated December 29, 2007, between Delta and Tracinda Corporation (“Tracinda”), Tracinda is entitled, at all times that it beneficially owns not less than ten percent of our outstanding Common Stock, to designate a number of nominees for election to serve on our Board of Directors and each of its Committees that is equal to Tracinda’s pro rata share of stock ownership in our Company multiplied by the number of directors on our Board or Committee, as the case may be, with any fractional number being rounded to the nearest whole number. Effective at the Annual Meeting, Tracinda will be entitled to designate three nominees. The persons designated by Tracinda for nomination for election to the Board are Anthony Mandekic, James J. Murren and Daniel J. Taylor, who are all currently directors.
The Role of the Nominating and Corporate Governance Committee in the Nomination Process
At the Annual Meeting, our stockholders will be asked to elect the eight director nominees for a one-year term expiring on the date of the next annual meeting of stockholders following the 2011 Annual Meeting of Stockholders. While our Board does not anticipate that any of the director nominees will be unable to stand for election as a director nominee at the Annual Meeting, if that occurs, proxies will be voted in favor of such other person or persons who are recommended by our Nominating and Corporate Governance Committee and designated by our Board. All of the director nominees currently are members of our Board; all of the director nominees have been recommended for re-election by our Nominating and Corporate Governance Committee and approved and nominated for re-election by our Board; and all of the director nominees have consented to serve if elected. Set forth below is information regarding the director nominees, which has been confirmed by each of them for inclusion in this Proxy Statement.
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In identifying and recommending nominees for positions on our Board, our Nominating and Corporate Governance Committee places emphasis on the following criteria, among others:
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| • | Judgment, character, expertise, skills and knowledge useful to the oversight of our business; |
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| • | Business or other relevant experience; and |
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| • | The extent to which the interplay of the nominee’s expertise, skills, knowledge and experience with that of other members of our Board will build a board that is effective, collegial and responsive to the needs of the Company. |
Our Nominating and Corporate Governance Committee does not set specific, minimum qualifications that nominees must meet in order for the Committee to recommend them to our Board, but rather believes that each nominee should be evaluated based on his or her individual merits, taking into account the needs of the Company and the composition of our Board. In considering diversity, we consider diversity of viewpoints, backgrounds and experience. We do not, however, have any formal policy regarding diversity in identifying nominees for a directorship, but rather, consider it among the various factors relevant to any particular nominee. Our Nominating and Corporate Governance Committee evaluates possible candidates in detail and suggests individuals to explore in more depth. In the event that we decide to fill a vacancy that exists or we decide to increase the size of the Board, we identify, interview and examine, and make recommendations to the Board regarding, appropriate candidates. We identify potential candidates principally through suggestions from the Company’s directors and senior management. Our President and Board members may also seek candidates through informal discussions with third parties. We also consider candidates recommended or suggested by stockholders.
qualified. The Nominating and Corporate Governance Committee, determined that: Jordan R. Smith shouldwhich consists solely of directors that are independent as defined in the listing standards of the NYSE MKT, recommended the nine directors to our Board of Directors. Based on that recommendation, the Board nominated such directors for election at the meeting. The nominees have consented to be nominated becauseand have expressed their intention to serve if elected. We believe that all of his experiencethe nominees possess the professional and personal qualifications necessary for board service, and have highlighted particularly noteworthy attributes for each nominee in the oil and gas business; Mr. Kevin R. Collins because of his business experience and acumen with respectindividual biographies below. We have no reason to financial matters; Mr. Carl E. Lakey because of his oil and gas experience and his position as President and Chief Executive Officerbelieve that any of the Company; Mr. Jean-Michel Fonck because of his experience in the oil and gas business; and Mr. Jerrie F. Eckelberger because of his business experience and knowledge of legal matters. It was acknowledged that, although Messrs. Daniel J. Taylor, Anthony Mandekic and James J. Murren are designated as nominees by Tracinda pursuant to its contractual relationship with the Company, each of them is imminently qualifiedwill be unable to serve as a Directorif elected to office and, brings significant outside business experience to our knowledge, the nominees intend to serve the entire term for which election is sought. Only the nominees or substitute nominees designated by the Board that has provedwill be eligible to be invaluable instand for election as directors at the past.meeting.
Board Leadership StructureNominees
The Board’s current leadership structure separatesCertain information regarding the positionsnominees is set forth below:
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| | | | | | |
| Name | | Age | | Position | | Director Since |
Melvyn N. Klein (1)(4) | | 73 | | Chairman of the Board | | 2014 |
Robert S. Silberman (1)(3)(4) | | 58 | | Vice-Chairman of the Board | | 2014 |
Curtis V. Anastasio (1)(2) | | 59 | | Director | | 2014 |
Timothy Clossey (2)(3) | | 57 | | Director | | 2014 |
L. Melvin Cooper (2)(4) | | 61 | | Director | | 2012 |
Walter A. Dods, Jr. (3) | | 74 | | Director | | 2015 |
| Joseph Israel | | 44 | | Director, Senior Vice President | | 2015 |
| William Monteleone | | 32 | | Director, Senior Vice President of Mergers & Acquisitions | | 2012 |
William C. Pate(1) | | 52 | | Director, President and Chief Executive Officer | | 2014 |
| |
| (1) | Member, Executive Committee of Chairman of the Board and principal executive officer. Daniel Taylor, a designee of Tracinda Corporation, serves as our Chairman of the Board and Carl E. Lakey serves as our President. The Board of Directors. |
| |
| (2) | Member, Audit Committee of our Board of Directors. |
| |
| (3) | Member, Compensation Committee of our Board of Directors. |
| |
| (4) | Member, Nominating and Corporate Governance Committee of our Board of Directors. |
Melvyn N. Klein has determined our leadership structure based on factors suchserved as the experience of the applicable individuals, the current business and financial environment faced by the Company, particularly in view of its financial condition and industry conditions generally, Mr. Taylor’s role on the Board since the consummation of the Tracinda investment in February 2008, and other relevant factors. After considering these factors, the Company determined that separating the positions of Chairman of the Board and principal executive officer is the appropriate leadership structure at this time. The Board, through the Chairman, is currently responsible for the strategic direction of the Company. The President is currently responsible for the day to day leadership and performance of the Company, while the Chairman of the Board provides guidance to the President, sets the agenda for the Board meetings and presides over meetings of the Board. The Board believes that this structure is appropriate under current circumstances because it allows management to make the operating decisions necessary to manage the business, while helping to keep a measure of independence between the oversight function of our Board of Directors since June 2014. Mr. Klein is a private investor and operating decisions.the founder of Melvyn N. Klein Interests and the President of JAKK Holding Corp., and was the managing general partner of the investment GKH Partners, L.P. from 1987 until 2008. Mr. Klein currently serves as a member of the board of directors of Anixter International, Inc., a New York Stock Exchange listed company. Mr. Klein has been an attorney and counselor-at-law since 1968, and he is currently a member of the State Bar of Texas. Earlier in his career, he was a McKinsey & Company consultant and a senior officer of Donaldson, Lufkin and Jenrette, Inc. Mr. Klein has been the President and CEO of two American Stock Exchange listed companies: Altamil Corporation and Eskey, Inc. Additionally, among others, Mr. Klein was the controlling shareholder, co-founder, or a significant partner in a number of companies in several fields, including American Medical International, Inc. (subsequently merged to create Tenet Healthcare); UGHC/Arcus (subsequently sold to Koch Industries, Inc.-Flint Hills Resources, LP. and the balance merged with Iron Mountain), Savoy Pictures Entertainment, Inc. (subsequently merged with IAC Interactive), Hanover Compressor Company (subsequently merged to create Exterran Holdings Corp.), Cockrell Oil & Gas, L.P. (assets subsequently sold to UNOCAL), and Santa Fe Energy Resources, Inc. (subsequently merged in part with Chevron and in part with Devon Energy). Mr. Klein was appointed by President Reagan to the Executive Committee of the President’s Private Sector Survey on Cost Control in the Federal Government (Grace Commission) and by President Clinton to the U.S. State Department’s Advisory Committee on International Economic Policy. Mr. Klein received a Doctor of Jurisprudence degree from Columbia University and a Bachelor of Arts degree with Highest Honors in Economics from Colgate University. He also studied at the London School of Economics and Political Science and completed the coursework
for a master’s degree at The Board feels that this structure provides an appropriate balanceJohns Hopkins University School of strategic direction, operational focus, flexibility and oversight.
The Board’s Role in Risk Oversight
ItAdvanced International Studies. Mr. Klein is management’s responsibility to manage risk and bringa member of the Philosophical Society of Texas. Mr. Klein brings to the Board of Directors’ attention any material risksleadership and extensive public company board experience (Anixter International, Inc., Altamil Corporation, American Medical International, Inc., Hanover Compressor Company, Santa Fe Energy Resources, Inc. and others), which contributes to his familiarity with current issues and assists in his identifying and addressing appropriate corporate governance practices for us. Mr. Klein's experience in senior positions within the public sector also adds to the Company. TheBoard's depth and perspective.
Robert S. Silberman has served as the Vice Chairman of our Board of Directors since April 2015 and has oversight responsibility through its Audit Committee which
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oversees the Company’s risk policies and processes relating to the financial statements and financial reporting processes and the guidelines, policies and processes for mitigating those risks.
Nominees
The following individuals are nominees to serve onserved as a member of our Board of Directors:
| | | | | | | | |
Name
| | Age
| | Positions
| | Period of Service as a Director
|
|
Carl E. Lakey | | | 49 | | | President, ChiefDirectors since August 2014. Mr. Silberman has been Executive Officer and Director | | August 2010 to Present |
Kevin R. Collins | | | 54 | | | Director | | March 2005 to Present |
Jerrie F. Eckelberger | | | 66 | | | Director | | September 1996 to Present |
Jean-Michel Fonck | | | 69 | | | Director | | May 2009 to Present |
Anthony Mandekic | | | 69 | | | Director | | May 2009 to Present |
James J. Murren | | | 49 | | | Director | | February 2008 to Present |
Jordan R. Smith | | | 75 | | | Director | | October 2004 to Present |
Daniel J. Taylor | | | 54 | | | Chairman of the Board | | February 2008 to Present |
The following is biographical information as to the business experience of each of the nominees for director.
Carl E. LakeybecameBoard of Directors of Strayer Education, Inc. since May 2013, Chairman of its Board from February 2003 to May 2013 and its Chief Executive Officer from March 2001 until May 2013. Strayer Education, Inc. is an education services company, whose main operating asset, Strayer University, is a leading provider of the Company effective as of July 6, 2010graduate and became a Director of the Companyundergraduate degree programs focusing on August 4, 2010.working adults. Mr. Lakey most recentlySilberman has served as Senior Vice Presidenta director of Operations for DeltaCovanta since December 2004 and has been with the Company since 2007. Prior to joining Delta, Mr. Lakey served from 2001 to 2007 in various capacities with El Paso Production Company, most recently as the Manager of Operations and Engineering for its Western Onshore Division. Prior to that, he served in various capacities with Mobil and ExxonMobil from 1985 to 2001. He receivedis a bachelor’s degree in Petroleum Engineering from Colorado School of Mines in 1985.
Kevin R. Collinscurrently serves as Executive Vice President and Chief Financial Officer of Bear Tracker Energy, a position he has held since July 1, 2010. Prior to his current position, Mr. Collins served as President and Chief Executive Officer of Evergreen Energy, Inc. from September 2006 until his retirement on June 1, 2009. He also served on Evergreen’s Board of Directors until he resigned effective July 1, 2009. Prior to that, he served as Evergreen’s Executive Vice President — Finance and Strategy from September 2005 to September 2006, and acting Chief Financial Officer from November 2005 until March 31, 2006. From 1995 until 2004, Mr. Collins was an executive officer of Evergreen Resources, Inc., serving as Executive Vice President and Chief Financial Officer until Evergreen Resources merged with Pioneer Natural Resources Co. in September 2004. He became a Certified Public Accountant in 1983 after receiving his Bachelor of Science degree in Business Administration and Accounting from the University of Arizona. Mr. Collins has over 13 years of public accounting experience and has also served as Vice President and a board member of the Colorado OilCompensation Committee and Gas Association, President of the Denver Chapter of the Institute of Management Accountants, and a board member and Chairman of the Finance Committee of the Independent Petroleum Associationboard of Mountain States.directors of Covanta. Mr. Silberman has been a managing director of EGI since March 2014. From 1995 to 2000, Mr. Silberman held several senior positions, including President and Chief Operating Officer at CalEnergy Company, Inc., an independent energy producer. Mr. Silberman has also held senior positions within the U.S. Department of Defense, including Assistant Secretary of the Army. Mr. Silberman is a member of the Council on Foreign Relations. Mr. Silberman’s positions as a current executive chairman and formerly as a long-tenured chief executive officer and board member of public companies, coupled with his financial background and experience investing in and growing energy and project development businesses, as well as his experience in the public sector, combine to provide valuable insight and perspective to both the Board and management.
Jerrie F. Eckelbergeris an investor, real estate developer and attorney who has practiced law in the State of Colorado since 1971. He graduated from Northwestern University with a Bachelor of Arts degree in 1966 and received his Juris Doctor degree in 1971 from the University of Colorado School of Law. From 1972 to 1975, Mr. Eckelberger was a staff attorney with the Eighteenth Judicial District Attorney’s Office in Colorado. From 1975 to the present, Mr. Eckelberger has been engaged in the private practice of law in the Denver area. Mr. Eckelberger previously served as an officer, director and corporate counsel for Roxborough Development Corporation. Since March, 1996, Mr. Eckelberger has engaged in the investment and development of Colorado real estate through several private companies in which he is a principal.
Jean-Michel Fonckis President of Geopartners SAS, a service company for petroleum studies located in France, and is consulting with the firm of JMF-Conseil SARL to various oil companies since 2001. Mr. Fonck was previously employed by TOTAL SA (“TOTAL”), serving in various capacities there from 1968 until 2000. During his tenure at TOTAL, he worked in Paris in mathematical applications to geology and exploration venture appraisals, in Indonesia as chief geologist, in Argentina and Egypt as exploration manager and in Paris again as
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division manager for Exploration New Ventures and International Exploration Coordination. In 1991, Mr. Fonck became President and CEO of the TOTAL exploration and production branch in Houston, and then returned to Paris in 1994 to serve as Vice President of Exploration and Reservoir Evaluation for the TOTAL group. Mr. Fonck graduated from Ecole des Mines (Nancy) in 1963.
Anthony Mandekiccurrently serves as the Secretary/Treasurer of Tracinda Corporation and has held such position since Tracinda Corporation’s inception in 1976. Mr. Mandekic also currently serves as Chairman of the Lincy Foundation, a charitable organization founded by Mr. Kerkorian, andCurtis V. Anastasio has served as its Chief Financial Officera member of our Board of Directors since June 2014. Mr. Anastasio served as the Vice Chairman of our Board of Directors from September 2014 to April 2015. He is currently the Executive Chairman of GasLog Partners LP, a subsidiary of GasLog Ltd, a growth-oriented international owner, operator and manager of liquefied natural gas (LNG) carriers, providing support to international energy companies as part of their LNG logistics chain. Appointed Executive Chairman in February 2014, Mr. Anastasio led the successful initial public offering of the company in May 2014. Mr. Anastasio also serves as a Director since 1989.founding director of The Chemours Company, a global leader in titanium technologies, fluoroproducts and chemical solutions which was spun off from DuPont effective July 1, 2015. Since May of 2006 heJanuary 2014, Mr. Anastasio has served asalso been a member of the Board of Directors of MGM Resorts Internationalthe Federal Reserve Bank – Dallas. He previously served as President and CEO of NuStar Energy L. P., a publicly traded master limited partnership based in San Antonio, Texas. Mr. Anastasio was the President and CEO of NuStar Energy, L.P. from the time he led the initial public offering in April 2001, until he retired from the company on December 31, 2013. Since joining a predecessor of NuStar in 1988, he has held various positions in the upstream and downstream oil and gas industry, which have included responsibility for supply, trading, transportation, marketing, development and legal. Mr. Anastasio received a Juris Doctorate degree from Harvard Law School in 1981 and a Bachelor of Arts degree, Magna Cum Laude, from Cornell University in 1978. After graduation, he practiced corporate law in New York City. Mr. Anastasio brings to the Board extensive experience in public companies generally, and with over 27 years of experience in the upstream and downstream oil and gas industry, invaluable industry knowledge and insight in investing and growing oil and gas businesses. Further, Mr. Anastasio brings a deep knowledge of finance and economic markets to the Board.
Timothy Clossey has served as a member of its Executiveour Board of Directors since June 2014. Mr. Clossey is the President and owner of Spirit Technologies, a management coaching and engineering consulting services company. Mr. Clossey previously served as Production Manager and Major Projects Director for BP Cherry Point. He was a consultant to the Board at SaltChuck Resources on merger and acquisition opportunities; a board member at Timec, Inc., where Mr. Clossey chaired the Audit Committee, Diversityorganized and chaired a Special Committee of Outside Directors and served on the Compensation Committee. In MayMr. Clossey served as President and CEO of ARCO Marine, Inc. ("ARCO"). As VP Corporate Strategic Planning, Downstream for ARCO, Mr. Clossey was responsible for strategic planning for all of ARCO’s downstream companies. As Vice President of Engineering, Technology and R&D at ARCO, his role was responsible for leading ARCO’s Engineering and Research Center in Anaheim, California. As Manager, Clean Fuels Development Task Force at ARCO, Mr. Clossey lead the reformulated gasoline research and development efforts at the Technical Center as well as served in the government relations role working with industry associations such as Western States Petroleum Association and the American Petroleum Institute as well as all Federal and State agencies working on reformulated gasoline regulations throughout the nation. Mr. Clossey graduated from Harvard Business School with an Executive Masters of Business Administration. He received his Bachelors of Science degree in Chemical Engineering Summa Cum Laude from Washington State University. Mr. Clossey's extensive and detailed experience in operational aspects of the petroleum refining industry provide the Board with insight into the operation, development, and growth of our businesses.
L. Melvin Cooper has served as a member of our Board of Directors since August 2012. Currently, Mr. Cooper serves as the Senior Vice President and Chief Financial Officer of Forbes Energy Services Ltd. (NASDAQ: FES)("Forbes"), a public company in the energy services industry. Prior to joining Forbes in 2007, Mr. Mandekic became ChairmanCooper served as President or CFO of the MGM Mirage Compensation Committee,various companies involved in site preparation for oil and also becamegas exploration companies, supplying products and services to new home builders, and supply chain management. Mr. Cooper has been a Director of Flotek Industries, Inc. (NYSE: FTK)("Flotek"), a member of the MGM MirageAudit Committee and the Corporate Governance and Nominating Committee in 2009. Mr. Mandekic isof Flotek since October 2010 and has been a graduatemember of the UniversityCompensation Committee of Southern California with a bachelor’s degree in Science-Accounting and is a Certified Public Accountant.
James J. MurrenisFlotek since 2011. In 2011, Mr. Cooper received the Chairman and CEOBoard Leadership Fellow designation from the National Association of MGM Resorts International. HeCorporate Directors (“NACD”) where he is also a member of the Board of Directors of the NACD Houston area Tri-City Chapter. Mr. Cooper earned a degree in accounting from Texas A&M University-Kingsville (formerly Texas A&I) in 1975. Mr. Cooper has been a Certified Public Accountant since May 1977. Mr. Cooper brings to the Board extensive experience in the energy industry as well as significant accounting, operating, financial and management experience and provides valuable insight on a range of operational, financial and accounting issues.
Walter A. Dods, Jr. has served as a member of our Board of Directors since June 2015. Mr. Dods was Chairman of the Board of First Hawaiian Bank from January 2005 until his retirement in December 2008. Mr. Dods currently serves as Chairman of the Board of Matson, Inc., a leading provider of ocean transportation and logistics services, a position he has held since January 2010, and as a director of Matson, Inc. since 1989. He also currently serves on the boards of Bancwest Corporation, Bank of the West, First Hawaiian Bank (past Chairman), Hawaiian Telcom (past Chairman), Pacific Guardian Life, Pohaku Pa’a, and Servco Pacific Inc. Additionally, Mr. Dods serves on several civic and community boards throughout the State of Hawaii, including Chaminade University of Honolulu. Mr. Dods was a shareholder of Koko’oha Investments, Inc. ("Koko'oha"), which is now known as Par Hawaii, Inc., and the Chairman of the Boards of each of Koko’oha and Mid Pac Petroleum, LLC, a wholly-owned subsidiary of Koko’oha, until our acquisition of Koko’oha in April 2015. In 2004, Mr. Dods was awarded the Order of the Rising Sun, with Gold and Silver Star, an imperial honor from the Government of Japan. Mr. Dods received a bachelor’s degree in business administration from the University of Hawaii. Mr. Dods' deep knowledge of the Hawaiian markets where we operate, ocean transportation and logistics, and the assets we acquired from Koko'oha and Mid Pac Petroleum provide the Board with experience and insight into the operation, development, and growth of our businesses. Further, his experience as a chairman or member of publicly held company boards of directors provides the Board with knowledge of governance and other related matters.
Joseph Israelhas served as our Senior Vice President since October 2015, as a member of our Board of Directors since January 2015, and as our President and Chief Executive CommitteeOfficer from January 2015 until October 2015. Prior to that, Mr. Israel served as Senior Vice President of MGM Resorts International.Hunt Refining Company ("Hunt") from August 2011 to November 2014. Prior to joining Hunt, Mr. Murren previouslyIsrael served in the following capacities for MGM Resorts International: President(1999-2008),various roles with Alon USA Energy, Inc. ("Alon") from August 2000 to July 2011, including most recently as Chief Operating Officer(2007-2008), Chief Financial Officer(1998-2007), and Treasurer(2001-2007). from September 2008 to July 2011. Prior to joining Alon, Mr. Israel held positions with several Israeli government entities beginning in 1995, including the Israeli Land Administration, the Israeli Fuel Administration and most recently as Economics and Commerce Vice President of Israel’s Petroleum Energy Infrastructure entity. Mr. Israel received a Masters of Business Administration and a Bachelor of Arts in Economics from the Hebrew University of Jerusalem. Additionally, Mr. Israel has completed business courses at the Center of Management Research at Harvard University and The College of Petroleum & Energy Studies at Oxford. Mr. Israel brings to the Board over 20 years of experience in the petroleum refining industry, and his employment at MGM Resorts International, Mr. Murren spent 14 years on Wall Streetin-depth knowledge of the issues, opportunities and challenges facing us provides direction and focus to the Board of Directors regarding the operation and development of our business.
William Monteleone has served as a top-rankedmember of our Board of Directors since August 2012 and as our Senior Vice President of Mergers & Acquisitions since January 2015. Prior to that, Mr. Monteleone served as our Chief Executive Officer from June 2013 to January 2015. Mr. Monteleone joined EGI as an Associate in 2008 and continued serving EGI in a limited role after becoming our Chief Executive Officer in September 2013 until his resignation from EGI in August 2014. Previously, Mr. Monteleone worked for Banc of America Securities LLC from 2006 to 2008 where he was involved in a variety of debt capital raising transactions, including leveraged buyouts, corporate-to-corporate acquisitions and other debt financing activities. At EGI, he was responsible for evaluating potential new investments and monitoring existing investments. In addition to our Board, Mr. Monteleone serves on the Board of Directors for the following privately held companies: Wapiti Oil and Gas, LLC and Kuwait Energy Company. Mr. Monteleone graduated Magna Cum Laude from Vanderbilt University with a bachelor's degree. Mr. Monteleone brings to the board investment banking experience and expertise with mergers and acquisitions, which assists us with the evaluation of potential investments and acquisition opportunities.
William C. Pate has served as our President and Chief Executive Officer since October 2015 and as a member of our Board of Directors since December 2014. Mr. Pate was previously Co-President of Equity Group Investments, a division of Chai Trust Company, LLC ("EGI"). Mr. Pate had been employed by EGI or its predecessors in various capacities since 1994. Mr. Pate has served as a director of Covanta Holding Corporation, a publicly held international owner/operator of energy-from-waste and power generation facilities ("Covanta"), since 1999 and is the Chair of the Finance Committee of the Board of Directors of Covanta and is also a member of the Audit Committee and the Public Policy and Technology Committee of the Board of Directors of Covanta. Mr. Pate has announced he will not stand for re-election to the Covanta Board of Directors. He was the Chairman of the Board of Directors of Covanta from October 2004 through September 2005. Mr. Pate has previously served on the boards of directors of Exterran Holdings, Inc., Adams Respiratory Therapeutics, MiddleBrook Pharmaceuticals and CNA Surety Corp., as well as those of several private companies associated with EGI. Mr. Pate began his professional career at The First Boston Corporation as a financial analyst in the natural resources mergers and acquisitions group. Subsequently, he was employed as an associate at The Blackstone Group where he worked on private equity analystinvestments and was appointed to Directormerger advisory assignments. Mr. Pate holds a Juris Doctorate degree from the University of ResearchChicago Law School and Managing Director of Deutsche Bank. Mr. Murren received a Bachelor of Arts degree from Harvard College. Mr. Pate brings to the Board familiarity with all aspects of capital markets, financial transactions and investing in Art Historya range of businesses across domestic and Urban Studies from Trinity Collegeinternational markets. His experience as a board member of other public and private companies provides additional perspective on governance issues.
Director Independence
The listing standards of the NYSE MKT require that our Board of Directors be comprised of at least a majority of independent directors. For a director to be considered independent under those standards, the Board must affirmatively determine that the director does not have any material relationship with us.
Based on these standards, our Board of Directors has affirmatively determined that Melvyn N. Klein, Robert S. Silberman, Curtis V. Anastasio, Timothy Clossey, L. Melvin Cooper, and Walter A. Dods, Jr. are independent. Messrs. Anastasio, Clossey, Cooper and Dods have no relationship with us except as directors and stockholders, and Messrs. Klein and Silberman have only the additional relationships described below. In determining the independence of Messrs. Klein and Silberman, the Board engaged in 1983.the following analysis.
Mr. Silberman is a Managing Director of EGI. EGI is affiliated with ZCOF Par Petroleum Holdings, L.L.C., Zell Credit Opportunities Master Fund, L.P., and EGI Investors L.L.C., beneficial owners of approximately 30.9% of our common stock as of April 6, 2016, as described under "Security Ownership of Certain Beneficial Owners." Additionally, certain affiliates of EGI were lenders under our delayed draw term loan credit agreement. Mr. Silberman is also a director of Covanta, which may be an affiliate of Chai Trust. The Board reviewed the independence of Mr. Silberman. In particular, the Board reviewed payments made by us to ZCOF Par Petroleum Holdings, L.L.C., Zell Credit Opportunities Master Fund, L.P., and EGI Investors, L.L.C. or their affiliates within the past three years, and Mr. Silberman’s role in EGI. The Board determined that these relationships do not interfere with Mr. Silberman's independent and objective oversight of Par's management or promotion of management’s accountability to Par’s stockholders or with his exercise of independent judgment as a director. Therefore, the Board concluded that Mr. Silberman qualifies as an independent director under applicable SEC rules and regulations and NYSE MKT listing standards.
The Board also reviewed the grants on October 12, 2015 of 150,000 stock options to each of Messrs. Klein and Silberman as compensation for board service, and noted that certain directors, including Mr. Klein, have direct and indirect relationships with entities with other directors of the company. The Board determined that these relationships do not interfere with Mr. Silberman or Mr. Klein's independent and objective oversight of Par's management or promotion of management’s accountability to Par’s stockholders or with his exercise of independent judgment as a director. Therefore, the Board concluded that Mr. Silberman and Mr. Klein each qualifies as an independent director under applicable SEC rules and regulations and NYSE MKT listing standards.
Board Leadership Structure and Role in Risk Oversight
Jordan R. Smithis PresidentOur Board of Ramshorn Investments, Inc., a wholly owned subsidiaryDirectors believes that it should be free to choose the Chairman of Nabors Drilling USA LP located in Houston, Texas, where he is responsible for drilling and development projects in a number of producing basins in the United States. He has served in such capacity for more than the past five years. Mr. Smith has served on the Board in any way that seems best for Par at any given period of time. Therefore, our Board of Directors does not have a policy regarding whether the role of the University of Wyoming Foundation and the Board of the Domestic Petroleum Council, and is also FounderCEO and Chairman of the American Junior Golf Association. HeBoard should be separate and, if they are to be separate, whether the Chairman of the Board should be selected from the non-employee directors or be an employee.
As set forth in our Corporate Governance Guidelines, our Board of Directors is responsible for the oversight of the company and its business, including risk management. Together with the Board’s standing committees, the Board is responsible for ensuring that material risks are identified and managed appropriately. The Board and its committees regularly review material strategic, operational, financial, compensation and compliance risks with our senior management. The Audit Committee has oversight responsibility for financial risk (such as accounting, finance, internal controls, tax strategy, and hedging), and also served as a directoroversees compliance with our Code of Clayton Williams Energy, Inc. from July 2000Business Conduct and Ethics and with applicable laws and regulations. The Compensation Committee oversees compliance with our compensation plans, and the Nominating and Corporate Governance Committee oversees compliance with our corporate governance principles. Each of the committees report to the present. Mr. Smith received Bachelor and Master degrees in Geology fromBoard regarding the Universityareas of Wyoming in 1956 and 1957, respectively.
risk they oversee.
Daniel J. TaylorCommunicating with our Board of Directors
Stockholders and other parties interested in communicating directly with the non-employee members of our Board of Directors may do so by writing to: Corporate Secretary, c/o Par Pacific Holdings, Inc., One Memorial Plaza, 800 Gessner Road, Suite 875, Houston, Texas 77024. The Board maintains a process for handling letters received by Par and addressed to non-employee members of the Board. Under that process, our Corporate Secretary will forward such communication to the full Board of Directors or to any individual director or directors to whom the communication is directed unless the communication is threatening or illegal, uses profane language or is similarly inappropriate, in which case the Corporate Secretary has been an executive of Tracinda Corporation since February 2007 and has served as a Director of MGM Resorts International since March 2007. Mr. Taylor doesthe authority to discard the communication or take appropriate legal action regarding the communication.
Although we do not have a specific titleformal policy regarding attendance by members of the Board at Tracinda but his primary responsibilities include assisting withour annual meeting of stockholders, we encourage directors to attend. All of the managementthen-current members of Tracinda’s investments. He was initially employed by Tracinda from May 1991 until July 1997, and has been employed in his current position at Tracinda since February 2007. During the interim period he was employed byMetro-Goldwyn-Mayer Inc., a then public corporation (“MGM”), first as Executive Vice President-Finance, and then as Chief Financial Officer from August 1997 to April 2005, at which time MGM was sold. He then served as PresidentBoard of MGM until January 2006. Mr. Taylor received a Bachelor of Science degree in Business Administration with an emphasis in Accounting from Central Michigan University in 1978. He served as a director of Inforte Corp. until July 2007.
All directors will hold office until the nextDirectors attended our 2015 annual meeting of stockholders.
Required Vote
The eight persons receiving the highest number of“FOR”votes from stockholders in the election of directors at the Annual Meeting will be elected.
Recommendation of the Board of Directors
Our Board of Directors recommends that you vote“FOR” the re-election of each of Carl E. Lakey, Kevin R. Collins, Jerrie F. Eckelberger, Jean-Michel Fonck, Anthony Mandekic, James J. Murren, Jordan R. Smith and Daniel J. Taylor for director to serve on our Board of Directors.
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CORPORATE GOVERNANCE
Board MembershipCommittee Activity, Structure and Director Independence
Our Board of Directors has determined that each of Kevin R. Collins, Jerrie F. Eckelberger, Jean-Michel Fonck, Anthony Mandekic, James J. Murren, Jordan R. Smith and Daniel J. Taylor qualifies as an independent director under rules promulgated by the United States Securities and Exchange Commission (the “SEC”) and The NASDAQ Stock Market listing standards, and has concluded that none of these directors has a material relationship with the Company that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Compensation
During the fiscal year ended December 31, 2010,2015, our Board of Directors met on fourteen occasions, either in person or by telephone conference call, and acted by written consent on one occasion. Each of our currentheld 9 meetings. All directors attended at least 75% of the aggregate total of meetings of the Board of Directors and the committees on which he served during his service term, withthey served. The Board has adopted committee charters and Corporate Governance Guidelines that, among other matters, describe the exceptionsresponsibilities and certain qualifications of Mr. Murren, who attended 57%our directors. Our committee charters and Corporate Governance Guidelines are available on our website at www.parpacific.com. Copies may also be obtained by writing to our Corporate Secretary at our principal executive offices. There are currently four standing committees of the Board meetings, 33% ofBoard: the meetings ofAudit Committee, the Compensation Committee, and did not attend the only meeting ofExecutive Committee, and the Nominating and Corporate Governance Committee;Committee. Committee membership and Mr. Smith, who attended 71%the functions of the Board meetings, 67% of the meetings of the Audit Committee, 67% of the meetings of the Compensation Committeethose committees are described below. In accordance with applicable SEC rules and 100% of the meetings of the Nominatingregulations and Corporate Governance Committee.
Directors standing for election are encouraged to attend the Annual Meeting of Stockholders. Of the eleven directors standing for election at the Annual Meeting of Stockholders held on May 25, 2010, two attended the meeting.
Committees of the Board of Directors
Our Board of Directors has established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. The full text ofNYSE MKT listing standards, all of the charters of the Board Committees is available on the Company’s website atwww.deltapetro.com. The Board has determined that each of the directors who serve on thesethe Audit, Compensation or Nominating and Corporate Governance Committees ishave been determined by the Board, in its business judgment, to be “independent” underfrom the company and its management. The NASDAQ Stock Market listing standards. Thechart below identifies directors who currently serve onwere members of each committee at the end of these Committees are as follows:2015, the number of meetings held by each committee during the year and the chairs of each committee:
|
| | | | |
| Name | Audit | Compensation | Nominating and Corporate Governance | Executive |
| Melvyn N. Klein (Chairman) | | | X | C |
| Robert S. Silberman (Vice Chairman) | | C | C | X |
| Curtis V. Anastasio | C, FE | | | X |
| Timothy Clossey | X | X | | |
| L. Melvin Cooper | X, FE | | X | |
| Walter A. Dods, Jr. | | X | | |
| Joseph Israel | | | | |
| William Monteleone | | | | | | Nominating and
|
| William C. Pate | | | | | | Corporate
X |
| 2015 Meetings | Six | Audit
Six | Four | Compensation
| | Governance
|
Name of Director
| | Committee | | Committee | | Committee |
|
Kevin R. Collins | | Chairman | | Member | | Member |
Jerrie F. Eckelberger | | Member | | Chairman | | Member |
Russell S. Lewis | | Member | | Member | | Member |
Jordan R. Smith | | Member | | Member | | Chairman |
James J. Murren | | — | | Member | | Member |
Daniel J. Taylor | | Member | | — | | Member |
Hank Brown | | — | | Member | | — |
Anthony Mandekic | | — | | Member | | —Two |
C = Committee Chair
FE = Financial Expert
X = Committee Member
Audit Committee. We have a standing Audit Committee established in accordance with applicable SEC and NASDAQ Stock Market rules.. The Audit Committee oversees and monitors our independent audit process and assists the Board of Directors in fulfilling its responsibilities with respect to matters involving the accounting, financial reporting and internal control functions of the Company and its subsidiaries. It is also charged with the responsibility for reviewing all related party transactions for potential conflicts of interest. A discussion of the rolecurrent members of the Audit Committee is provided under “Report ofare Curtis V. Anastasio (Chairman), L. Melvin Cooper and Timothy Clossey, and the Audit Committee.”
The Board has determined that each of Messrs. Lewis and Collins is an “audit committee financial expert” as defined by rules adopted by the SEC.
The Audit Committee met six times in fiscal year 2010.
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Compensation Committee. The Compensation Committee reviews the performance of our executives, sets compensation and compensation-related policies and makes recommendations to the Board of Directors in the area of executive compensation and for all employees, on bonus and equity incentives. The specific nature of the Compensation Committee’s roles and responsibilities as they relate to executive officers is set forth under “Compensation Discussion and Analysis.”
The Compensation Committee met on five occasions either in person or by telephone conference call, and acted by written consent on one occasion in fiscal year 2010.
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee makes recommendations to the Board of Directors regarding the persons who shall be nominated for election as directors. The Committee has not established any minimum qualifications for persons to be considered for nomination but will be guided by the following criteria: that the individual (i) be of the highest character and integrity, (ii) be free of any conflict of interest that would violate any applicable law or regulation or interfere with proper performance of the responsibilities of a director, (iii) possess substantial and significant experience that would be of particular importance to Delta in the performance of the duties of a director, (iv) have sufficient time available to devote to the affairs of Delta, and (v) have a desire to represent the balanced best interests of the stockholders as a whole.
The Nominating and Corporate Governance Committee met one time in fiscal year 2010.
Stockholder Nominations of Directors
Stockholders who wish to recommend a director candidate to serve on the Board of Directors to the Nominating and Corporate Governance Committee should submit a letter addressed to the chairperson of the Nominating and Corporate Governance Committee no later than 120 days prior to the date of the next Annual Meeting of Stockholders. The notice shall contain the following information:
| | |
| • | The name of the nominating stockholder(s) and the address, phone number ande-mail address at which the nominating stockholder(s) can be contacted. |
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| • | Evidence of the number of shares of Delta’s Common Stock held by the nominating stockholder(s), a statement of how long the nominating stockholder(s) has held those shares, and a statement that the nominating stockholder(s) will continue to hold those shares at least through our next annual meeting of stockholders. |
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| • | The candidate’s full name, together with the address, phone number ande-mail address at which the candidate can be contacted. |
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| • | A statement of the candidate’s qualifications and experiences and any other qualities that the nominating stockholder(s) believes that the candidate would bring to the Board. |
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| • | A description of any relationship and all arrangements or understandings, if any, between the nominating stockholder(s) and the candidate and any other person or persons with respect to the candidate’s proposed service on the Board. |
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| • | Information that is relevant to the independence of the recommended candidate (such as affiliated transactions or relationships). |
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| • | Any proceedings adverse to Delta, including legal proceedings, to which the recommended candidate or an associate is a party. |
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| • | Information regarding whether the nominating stockholder(s) or recommended candidate has plans to submit proposals for Delta or seeks to address any personal interest involving Delta. |
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| • | The candidate’s resume, which must include at a minimum a detailed description of the candidate’s business, professional or other appropriate experience for at least the last ten (10) years, a list of other boards of directors on which the candidate currently serves or on which he or she served in the last ten (10) years, and undergraduate and post-graduate educational information. |
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| | |
| • | A written statement, signed by the candidate, agreeing that if he or she is selected by the Committee and the Board, he or she will (i) be a nominee for election to the Board, (ii) provide all information necessary for us to include in our proxy statement under applicable SEC or NASDAQ rules, and (iii) serve as a director if he or she is elected by stockholders. |
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| • | Any additional information that the nominating stockholder(s) believes is relevant to the Committee’s consideration of the candidate. |
A nominee for director should be a person of integrity and be committed to devoting the time and attention necessary to fulfill his or her duties to Delta. The Nominating and Corporate Governance Committee will evaluate the independence of directors and potential directors, as well as their business experience, understanding of and experience in the energy industry, personal skills, or specialized skills or experience, relative to those of the then-current directors. Diversity of background and experience, including diversity of race, ethnicity, international background, gender and age, are also important factors in evaluating candidates for Board membership. The Committee will also consider issues involving possible conflicts of interest of directors or potential directors, the results of interviews of selected candidates by members of the Committee and the Board, and the totality of the circumstances.
Code of Ethics
during 2015. Our Board of Directors adopted a Code of Business Conduct and Ethics in November 2003 (amended in October 2004 and January 2007), which applies tohas determined that all of our executive officers, directors and employees. A copythe members of the Codecommittee are independent under the listing standards of Business Conductthe NYSE MKT and Ethicsthe rules of the SEC, and that Messrs. Anastasio and Cooper are audit committee financial experts under the rules of the SEC. The committee operates under a written charter adopted by our Board of Directors. The committee assists the Board in overseeing (i) the integrity of Par’s financial statements, (ii) Par’s compliance with legal and regulatory requirements, (iii) the independent registered public accounting firm’s qualifications and independence, and (iv) the performance of Par’s internal auditors (or other personnel responsible for the internal audit function) and Par’s independent auditor. In so doing, it is available onthe responsibility of the committee to maintain free and open communication between the directors, the independent registered public accounting firm and the financial management of Par. The committee has the sole authority to select, evaluate, appoint or replace the independent registered public accounting firm and has the sole authority to approve all audit engagement fees and terms. The committee pre-approves all permitted non-auditing services to be provided by the independent auditors; discusses with management and the independent auditors our website atwww.deltapetro.comfinancial statements and any disclosures and SEC filings relating thereto; reviews the integrity of our financial reporting process; establishes policies for the hiring of employees or by writingformer employees of the independent registered public accounting firm; and investigates any matters pertaining to our Secretary at 370 Seventeenth Street, Suite 4300, Denver, Colorado 80202.the integrity of management.
Compensation Committee Interlocks and Insider Participation
No member. The current members of the Compensation Committee has ever been an officer of Delta or any of its subsidiaries,are Robert S. Silberman (Chairman), Walter A. Dods, Jr. and no Delta employee served on the Compensation Committee during the last fiscal year. The Company does not have any interlocking relationships between its executive officersTimothy Clossey, and the compensation committee and the executive officers and compensation committee of any other entities, nor has any such interlocking relationship existed in the past.
Certain Relationships and Related Transactions
Review, Approval or Ratification of Transactions with Related Persons
Themet six times during 2015. Our Board of Directors has recognizeddetermined that transactions between the Company and certain related persons present a heightened riskall of conflicts of interest. In order to ensure that the Company acts in the best interests of its stockholders, the Board has delegated the review and approval of related party transactions to the Audit Committee in accordance with the Company’s written Audit Committee Charter. After its review, the Audit Committee will only approve or ratify transactions that are fair to the Company and not inconsistent with the best interests of the Company and its stockholders. Any director who may be interested in a related party transaction shall recuse himself from any consideration of such related party transaction.
Transactions with Related Persons
During fiscal years 2001 and 2000, Aleron H. Larson, Jr., an officer of the Company at the time, guaranteed certain borrowings which have subsequently been repaid. As consideration for the guarantee of the Company’s indebtedness, Mr. Larson was assigned a 1% overriding royalty interest (“ORRI”) in the properties acquired with the proceeds of the borrowings. Mr. Larson earned approximately $90,000 for his 1% ORRI during the year ended December 31, 2010.
Stockholder Communications with the Board of Directors
Stockholders wishing to contact the Board of Directors or specified members or Committees of the Board should send correspondence to Secretary, Delta Petroleum Corporation, 370 Seventeenth Street, Suite 4300, Denver, Colorado 80202. All communications so received from stockholders of the Company will be forwarded to
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the members of the Boardcommittee are independent under the listing standards of Directors orthe NYSE MKT and the rules of the SEC. Each of the members of the committee is considered to be a specific director or Committee if so designated by the stockholder. A stockholder who wishes to communicate with a specific director or Committee should send instructions asking that the material be forwarded to the director or to the appropriate committee chairman. All stockholders are also encouraged to communicate directly with both officers and directors regarding issues affecting the Company at the Annual Meeting of Stockholders.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a)“non-employee director” under Rule 16b-3 of the Securities Exchange Act of 1934, as amended requires our executive officers, directors and persons who beneficially own more than ten percent (10%) of a registered class of our equity securities, to file initial reports of ownership of Delta securities and reports of changes in ownership of Delta securities with the SEC.
To our knowledge, during the fiscal year ended December 31, 2010, our officers and directors complied with all applicable Section 16(a) filing requirements.
These statements are based solely on a review of the copies of such reports furnished to us by our officers and directors and their written representations that such reports accurately reflect all reportable transactions.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
STOCKHOLDERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table presents information concerning persons known by us to own beneficially 5% or more of our issued and outstanding Common Stock as of April 26, 2011.
| | | | | | | | | |
| | | Amount and Nature
| | Percent of
|
Name and Address | | of Beneficial Ownership | | Class(1) |
| |
| Tracinda Corporation(2) | | | 93,797,701 | | | | 32.8 | % |
150 South Rodeo Drive, Suite 250
Beverly Hills, CA 90212 | | | | | | | | |
| | |
(1) | | We have authorized 600,000,000 shares of $.01 par value Common Stock, of which 286,027,476 shares were issued and outstanding as of April 26, 2011. We also have authorized 3,000,000 shares of $.01 par value preferred stock, of which no shares are outstanding. |
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(2) | | This disclosure is based on an amendment to Schedule 13D filed with the SEC on April 21, 2011. The Schedule 13D was filed on behalf of Tracinda Corporation and Kirk Kerkorian, both of which reported having sole voting and dispositive power over 93,797,701 shares. Tracinda Corporation is wholly owned by Kirk Kerkorian. |
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Security Ownership of Management
The following table contains information about the beneficial ownership (unless otherwise indicated) of our Common Stock as of April 26, 2011 by:
| | |
| • | each of our current directors and nominees for director; |
|
| • | each named executive officer; and |
|
| • | all current directors and current executive officers as a group. |
| | | | | | | | | |
| | | Amount and
| | |
| | | Nature of
| | |
| | | Beneficial
| | Percent of
|
Name and Address of Beneficial Owner(1) | | Ownership(2) | | Class(3) |
| |
| Carl E. Lakey | | | 1,704,515 | (4) | | | * | |
| Kevin K. Nanke | | | 1,682,796 | (5) | | | * | |
| Stanley F. Freedman | | | 1,162,345 | (6) | | | * | |
| Aleron H. Larson, Jr. | | | 520,491 | (7) | | | * | |
| Daniel J. Taylor | | | 336,432 | (8) | | | * | |
| Russell S. Lewis | | | 294,413 | (9) | | | * | |
| John R. Wallace | | | 250,000 | (10) | | | * | |
| Kevin R. Collins | | | 219,017 | (11) | | | * | |
| Jerrie F. Eckelberger | | | 202,772 | (12) | | | * | |
| Jordan R. Smith | | | 202,772 | (13) | | | * | |
| Hank Brown | | | 181,254 | (14) | | | * | |
| James J. Murren | | | 154,254 | (15) | | | * | |
| Anthony Mandekic | | | 133,527 | (16) | | | * | |
| Jean-Michel Fonck | | | 123,527 | (17) | | | * | |
| All current executive officers and directors as a Group (13 persons) | | | 6,918,115 | (18) | | | 2.41 | % |
| | |
* | | Represents beneficial ownership of less than one percent 1.0% of the outstanding shares of our Common Stock. |
|
(1) | | The address of these persons is c/o Delta Petroleum Corporation, 370 17th Street, Suite 4300, Denver, Colorado 80202. |
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(2) | | If a stockholder holds options or other securities that are exercisable or otherwise convertible into our Common Stock within 60 days of April 26, 2011, we treat the Common Stock underlying those securities as owned by that stockholder, and as outstanding shares when we calculate the stockholder’s percentage ownership of our Common Stock. However, we do not consider that Common Stock to be outstanding when we calculate the percentage ownership of any other stockholder. |
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(3) | | We have 600,000,000 shares of $.01 par value Common Stock, of which 286,027,476 shares were issued and outstanding as of April 26, 2011. We also have an authorized capital of 3,000,000 shares of $.01 par value preferred stock, of which no shares are outstanding. |
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(4) | | Includes 167,780 shares of Common Stock owned directly and 1,286,735 unvested restricted shares owned by Mr. Carl E. Lakey. Also includes options to purchase 250,000 shares of Common Stock that are currently exercisable or exercisable within 60 days of April 26, 2011. |
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(5) | | Includes 338,662 shares of Common Stock owned directly and 1,119,134 unvested restricted shares owned by Mr. Nanke. Also includes options to purchase 225,000 shares of Common Stock that are currently exercisable or exercisable within 60 days of April 26, 2011. |
|
(6) | | Includes 177,411 shares of Common Stock owned directly and 984,934 unvested restricted shares owned by Mr. Freedman. |
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| | |
(7) | | Includes 150,491 shares of Common Stock owned by Mr. Larson directly. Also includes options to purchase 370,000 shares of Common Stock that are currently exercisable or exercisable within 60 days of April 26, 2011. Also includes 4,500 shares held by his daughter. |
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(8) | | Includes 336,432 shares of Common Stock owned directly by Mr. Taylor. |
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(9) | | Includes 240,413 shares of Common Stock owned directly by Mr. Lewis and options to purchase 54,000 shares of Common Stock that are currently exercisable or exercisable within 60 days of April 26, 2011. |
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(10) | | Includes 250,000 shares of Common Stock owned directly by Mr. Wallace. Mr. Wallace resigned from all his positions as a director, officer, and employee of Delta on July 6, 2010. |
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(11) | | Includes 219,017 shares of Common Stock owned directly by Mr. Collins. |
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(12) | | Includes 188,772 shares of Common Stock owned directly by Mr. Eckelberger and options to purchase 14,000 shares of Common Stock that are currently exercisable or exercisable within 60 days of April 26, 2011. |
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(13) | | Includes 188,772 shares of Common Stock owned directly by Mr. Smith and options to purchase 14,000 shares of Common Stock that are currently exercisable or exercisable within 60 days of April 26, 2011. |
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(14) | | Includes 181,254 shares of Common Stock owned directly by Mr. Brown. |
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(15) | | Includes 154,254 shares of Common Stock owned directly by Mr. Murren. |
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(16) | | Includes 133,527 shares of Common Stock owned directly by Mr. Mandekic. |
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(17) | | Includes 123,527 shares of Common Stock owned directly by Mr. Fonck. |
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(18) | | Includes all warrants, options and shares referenced in footnotes (4) through (17) above, except for footnote (10), as if all warrants and options had been exercised and as if all resulting shares were voted as a group. |
PLAN INFORMATION
We maintain the following equity-based compensation plans: 2008 New-Hire Equity Incentive Plan and 2009 Performance and Equity Incentive Plan. Our stockholders approved the 2009 Plan, and the 2008 New-Hire Equity Incentive Plan was approved solely by our Board of Directors.
The following table sets forth our equity compensation plans in the aggregate, the number of shares of our Common Stock subject to outstanding options and rights under these plans, the weighted-average exercise price of outstanding options, and the number of shares remaining available for future award grants under these plans as of December 31, 2010:
| | | | | | | | | | | | | |
| | | | | | | | | Number of Securities
| |
| | | | | | | | | Remaining Available
| |
| | | Number of Securities
| | | Weighted-Average
| | | for Issuance Under
| |
| | | to be Issued Upon
| | | Exercise Price of
| | | Equity Compensation
| |
| | | Exercise of Outstanding
| | | Outstanding
| | | Plans (Excluding
| |
| | | Options, Warrants and
| | | Options, Warrants
| | | Securities Reflected
| |
| | | Rights
| | | and Rights
| | | in Column (a))
| |
Plan Category | | (a) | | | (b) | | | (c) | |
| |
| Equity compensation plans approved by security holders | | | 1,608,000 | | | $ | 7.26 | | | | 19,826,710 | |
| Equity compensation plans not approved by security holders | | | — | | | | — | | | | 472,109 | |
| | | | | | | | | | | | | |
| Total | | | 1,608,000 | | | | | | | | 20,298,819 | |
| | | | | | | | | | | | | |
Compensation Discussion and Analysis
Overview
The following Compensation Discussion and Analysis describes the material elements of compensation for the named executive officers identified in the Summary Compensation Table below. As more fully described below, the Compensation Committee of the Board of Directors reviews and recommends to the full Board of Directors the total direct compensation programs for our named executive officers. Our chief executive officer also reviews the base salary, annual bonus and long-term compensation levels for the other named executive officers.
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Compensation Philosophy and Objectives
Our compensation philosophy has been to encourage growth in our oil and natural gas reserves and production, encourage growth in cash flow and profitability, and enhance stockholder value through the creation and maintenance of compensation opportunities that attract and retain highly qualified executive officers. To achieve these goals, the Compensation Committee believes that the compensation of executive officers should reflect the growth and entrepreneurial environment that has characterized our industry in the past, while ensuring fairness among the executive management team by recognizing the contributions each individual executive makes to our success.
Based on these objectives, the Compensation Committee has recommended an executive compensation program that includes the following components:
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| • | a base salary at a level that is competitive with the base salaries being paid by other oil and natural gas exploration and production enterprises that have some characteristics similar to Delta and could compete with Delta for executive officer level employees; |
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| • | annual incentive compensation to reward achievement of Company objectives, individual responsibility and productivity, high quality work, reserve growth, performance and profitability and that is competitive with that provided by other oil and natural gas exploration and production enterprises that have some characteristics similar to Delta; and |
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| • | long-term incentive compensation in the form of stock-based awards that is competitive with that provided by other oil and natural gas exploration and production enterprises that have some characteristics similar to Delta. |
As described below, the Compensation Committee, with the assistance of an outside compensation consultant, periodically reviews data about the compensation of executives in the oil and gas industry. Based on these reviews, we believe that the elements of our executive compensation program have been comparable to those offered by our industry competitors.
Outside Advisor
The Compensation Committee has retained Effective Compensation Incorporated, or ECI, as an outside advisor to review our executive compensation program including base salary, bonus and equity compensation practices and to assist in ongoing development of our executive compensation philosophy. The Compensation Committee developed a group of oil and gas exploration and production companies with certain characteristics similar to Delta and that could potentially compete with Delta for executive officer level employees with which to compare compensation programs. ECI has performed analyses of compensation levels for these peer companies. Most recently, this group of companies has included the following:
Berry Petroleum Company
Bill Barrett Corporation
Forest Oil Corporation
Rosetta Resources, Inc.
Venoco, Inc.
Cimarex Energy Co., SM Energy Company and Whiting Petroleum Corp., which were previously part of the peer group, were removed from the group and Rosetta Resources, Inc. and Venoco, Inc. were added to the group in order to provide a peer group of companies with characteristics more similar to Delta.
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Elements of Delta’s Compensation Program
The three principal components of Delta’s compensation program for its executive officers, base salary, annual incentive compensation and long-term incentive compensation in the form of stock-based awards, are discussed below.
Base Salary. Base salaries (paid in cash) for our executive officers have been established based on the scope of their responsibilities, taking into account competitive market compensation paid by the peer companies for similar positions. We have reviewed our executives’ base salaries in comparison to salaries for executives in similar positions and with similar responsibilities at companies that have certain characteristics similar to Delta. Base salaries are reviewed annually, and typically are adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance, experience and other criteria.
The Compensation Committee reviews with the chief executive officer his recommendations for base salaries for the named executive officers, other than himself, each year. New base salary amounts have historically been based on an evaluation of individual performance and expected future contributions and a review of survey data provided by ECI to ensure competitive compensation against the external market, including the companies in our industry with which we compete. The Compensation Committee has targeted base salaries for executive officers, including the chief executive officer, to be competitive with the base salaries being paid by other oil and natural gas exploration and production enterprises that have some characteristics similar to Delta. We believe this is critical to our ability to attract and retain top level talent.
In July 2009, ECI provided a comprehensive review of our compensation structure, including 2010 compensation. Our executive officer compensation was compared to data from the annual proxies and subsequent disclosures of comparable companies, as well as compensation surveys prepared by ECI. In connection with this review, in November 2009, the Compensation Committee made a recommendation to the Board of Directors that the base salary of each of the named executive officers be increased by 6% effective January 1, 2010. This recommendation was based on the Compensation Committee’s determination that such an increase was fair and necessary for Delta to be competitive with other companies and because there had been no salary increase in 2009 due to the general economic environment and low oil and gas commodity prices. The increases brought the base salaries for our named executive officers to a level that the Compensation Committee, after reviewing the ECI analysis, concluded were generally competitive with those being paid by other oil and natural gas exploration and production companies with certain characteristics similar to Delta.
In November 2010, the Compensation Committee made a recommendation to the Board of Directors that the base salary of each of the named executive officers be increased by 3% effective January 1, 2011. This recommendation was based on the Compensation Committee’s determination that such an increase was fair and necessary for Delta to be competitive with other oil and gas companies with certain characteristics similar to Delta. In March 2011, ECI provided a comprehensive review of our compensation structure in place for 2011. Our executive officer compensation for 2011 was compared to data from the annual proxies and subsequent disclosures of comparable companies, as well as compensation surveys prepared by ECI. Base salaries for our named executive officers were generally compared to comparable positions or comparable pay rank. For 2011, our named executive officers’ base salaries were determined to be generally competitive with the base salaries being paid by other oil and natural gas exploration and production enterprises that have some characteristics similar to Delta, except for our chief executive officer’s salary, which was determined to be less than what such peer companies paid their principal executive officers, which the Compensation Committee determined to be appropriate because Mr. Lakey had been recently appointed to the CEO position.
Annual Incentive Compensation. In prior years, we utilized a performance-based annual incentive plan referred to as the Capital Management System (“CMS”), which was modified in 2009 to include certain CMS components as well other specified performance targets, and referred to as the Annual Bonus Award Plan. The CMS contained objective goals based on the Company’s net present value of the Company’s proved reserve base and adding new proved producing reserves through the drilling of non-proved properties and the acquisition of proved reserves. The Annual Bonus Award Plan was a discretionary bonus plan that gave the Board of Directors full discretion as to whether bonuses were to be paid, and if it was determined bonuses were to be paid, the amounts of such bonuses for named executive officers were 25% tied to fixed metrics and 75% discretionary. The fixed metrics
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under the Annual Bonus Award Plan consisted of the net present value objective, but changed the new reserve objective to an objective based on the rate of return on all of the Company’s oil and gas wells, regardless of reserve category.
For 2009, the 25% fixed metric portion of the bonus consisted of CMS Goal 1 and CMS Goal 2 which each represented 25% and the remaining 50% consisted of accomplishing specific transactions that increase the value of the Company. As under the CMS, the minimum threshold for CMS Goal 1 was 95% of our reserve base. The minimum threshold for Goal 2 was an overall rate of return of at least 10%. The specific transactions category was subjective and was based on a review of accomplishments during the year. In February 2010, the Compensation Committee determined that the goals for the named executive officers for the portion of bonuses under the fixed matrix category had been met as follows: CMS Goal 1 of 95% — 78%; New CMS Goal 2 — 0%; and specific transactions — 50%. Based on this assessment, the Compensation Committee determined that overall the targets for the named executive officers had been met and recommended that the full 25% portion of their bonuses be paid. In making its recommendations with regard to the discretionary portion of the named executive officers bonuses, the Compensation Committee considered a number of factors including the practices of competing companies, the current commodity price levels, the market price of Delta’s common stock, and the Company’s financial condition.
In 2010, the Company was facing severe capital constraints affecting our business and was involved in a strategic alternative process that made it difficult to set objective goals under the Annual Bonus Award Plan adopted in 2009. Accordingly, at the conclusion of the strategic alternatives process in August 2010, the Board of Directors paid a special bonus to the named executive officers for their extraordinary efforts in connection with such process and the resulting sale of assets. These special bonuses were as follows: Carl Lakey — $250,000; Kevin Nanke — $200,000 and Stanley F. Freedman — $150,000.
In addition, in November 2010 the Compensation Committee recommended that, given the Company’s challenges, the annual incentive bonus awards for 2010 be 100% discretionary and take into account positive and negative factors during 2010. The full target bonus for each of the named executive officers was set at 70% of his base salary.
In April 2011, the Compensation Committee recommended, and the Board of Directors approved, that a total of $1,600,000 be paid for annual bonuses for 2010 to all of Delta’s employees and that each of the named executive officers receive a bonus equal to approximately 58% of his base salary. In making this recommendation, the Compensation Committee evaluated performance of the executive officers for 2010, the amount of the bonuses paid for calendar year 2009 performance to these particular officers, total cash compensation paid to the executive officers, bonuses and total cash compensation paid for the same type of positions by peer and similar companies provided to the Compensation Committee by its compensation consultant, and metrics illustrative of the effect of the performance on the value of Delta. The Compensation Committee also took into consideration the cash bonus payments made in August 2010 upon completion of the strategic alternatives process.
Long Term Incentive Compensation. We believe the use of stock-based awards creates an ownership culture that encourages the long-term performance of our executive officers. In December 2009, our stockholders approved the 2009 Performance and Equity Incentive Plan (the “2009 Plan”"Exchange Act"). The 2009 Plan is designed to be an omnibus plan allowing Delta to grant a wide range of compensatory awards including stock options, stock appreciation rights, phantom stock, restricted stock, stock bonuses and cash bonuses to persons who contribute, and are expected to contribute, to our success and to create stockholder value, including the named executive officers.
September 2010 Retention Stock Awards
In September 2010, restricted stock awards were made under the 2009 Plan to all of the employees of Delta, including the named executive officers, all of which will vest on July 1, 2011. In its recommendations to the Board of Directors concerning shares granted in September 2010, the Compensation Committee based the recommended number of shares on the market price of Delta’s Common Stock at that time. In recommending the awards to the named executive officers, the Compensation Committee took into account prior year awards of restricted stock, base salaries, bonuses and long term incentive compensation awarded to executive officers by companies with some characteristics similar to Delta.
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The number of restricted shares granted to each of the named executive officers in September 2010 was as follows:
| | | | | | | | | |
| | | Number of Shares of
| | Fair Market Value
|
Named Executive Office | | Common Stock Granted | | on Date of Grant |
| |
| Carl E. Lakey, President & CEO | | | 1,000,000 | | | $ | 700,000 | |
| Kevin K. Nanke, Treasurer & CFO | | | 800,000 | | | | 560,000 | |
| Stanley F. Freedman, Executive Vice | | | 700,000 | | | | 490,000 | |
| President, General Counsel and Secretary | | | | | | | | |
Performance Share Awards
In February 2007, the named executive officers (other than Mr. Lakey who was not an officer at such time) received performance share grants providing that the shares of restricted Common Stock awarded vest if the market price of Delta stock reaches and maintains certain price levels during the10-year period following the date of grant (the “Term”). The awards were intended to provide incentive compensation to the named executive officers tied to significant increases in stockholder value. The price thresholds chosen were $40, $50, $60, $75 and $90. The grants provided that if the market price for Delta’s Common Stock reached and remained at these price thresholds for a certain period, then the associated Common Stock award would vest. These awards were based on the principle that stock price increases would reward both the stockholders and the executive officers.
As of March 31, 2009, four of the tranches of performance shares had been forfeited because the vesting conditions had not been met within the required periods. The only shares of Common Stock included in the performance share grants that continued to be outstanding for the named executive officers were those included in the first tranche. The first tranche of restricted Common Stock was to vest in full as of the date that the average daily closing price of our Common Stock on NASDAQ equals or exceeds $40.00 for trading days within any period of 90 calendar days during the Term, provided that the average closing price over the last 20 trading days of such period shall have equaled or exceeded $40.00.
The numbers of shares held by the named executive officers under the performance shares grants as of December 31, 2010 was as follows:
| | | | |
| | Number of Shares
|
Named Executive Officer
| | of Common Stock |
|
Kevin K. Nanke | | | 40,000 | |
Stanley F. Freedman | | | 40,000 | |
In April 2011, Messrs. Nanke and Freedman offered to forfeit their remaining performance shares, and Delta’s Board of Directors accepted that offer.
Change in Control and Severance. We have employment agreements with each of our executive officers pursuant to which the officer will receive benefits if his employment is terminated (other than for misconduct) due to death, disability, and certain employment terminations following a change in control. The details and amount of such benefits are described in “Employment Agreements” and “Change in Control Agreements” below.
Other Benefits. All employees may participate in our 401(k) Retirement Savings Plan, or 401(k) Plan. Each employee may make before tax contributions in accordance with the Internal Revenue Service limits. We provide this 401(k) Plan to help our employees save a portion of their cash compensation for retirement in a tax efficient manner. Effective January 1, 2010, Delta agreed to make a matching contribution in an amount equal to 100% of the employee’s elective deferral contribution below 3% of the employee’s compensation and 50% of the employee’s elective deferral that exceeds 3% of the employee’s compensation but does not exceed 6% of the employee’s compensation.
All fulltime employees, including our named executive officers, may participate in our health and welfare benefit programs, including medical, dental and vision care coverage, disability insurance and life insurance.
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Accounting and Tax Considerations
Our restricted stock award policies have been impacted by the implementation of Statement of Financial Accounting Standards No. 123(R), which we adopted on July 1, 2005.
We have structured our compensation program to comply with Internal Revenue Code Sections 162(m) and 409A. Under Section 162(m) of the Internal Revenue Code, a limitation is placed on tax deductions of any publicly-held corporation for individual compensation to certain executives of such corporation exceeding $1,000,000 in any taxable year, unless the compensation is performance-based. If an executive officer is entitled to nonqualified deferred compensation benefits that are subject to Section 409A, and such benefits do not comply with Section 409A, then the benefits are taxable in the first year they are not subject to a substantial risk of forfeiture. In such case, the executive officer is subject to regular federal income tax, interest and an additional federal income tax of 20% of the benefit included in income. Delta has no individuals with non-performance based compensation paid in excess of the Internal Revenue Code“outside director” under Section 162(m) tax deduction limit.
COMPENSATION COMMITTEE REPORT
The following Compensation Committee Report does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report.
The Compensation Committee of the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of SECRegulation S-K with management. The Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report onForm 10-K.
Respectfully submitted by the Compensation Committee of the Board of Directors:
Jerrie F. Eckelberger (Chairman)
Hank Brown
Russell S. Lewis
Anthony Mandekic
James J. Murren
Kevin R. Collins
Jordan R. Smith
17
EXECUTIVE COMPENSATION
Executive Officers of Delta
Our executive officers and their respective ages are as follows:
| | | | | | | | |
Name
| | Age
| | Positions
| | Period of Service
|
|
Carl E. Lakey | | | 49 | | | President, Chief Executive Officer and Director | | July 2010 to Present |
Kevin K. Nanke | | | 46 | | | Treasurer and Chief Financial Officer | | December 1999 to Present |
Stanley F. Freedman | | | 62 | | | Executive Vice President, General Counsel and Secretary | | January 2006 to Present |
The following is biographical information as to the business experience of each of our current executive officers.
Carl E. Lakey, President, Chief Executive Officer and Director, joined Delta in April 2007 as Senior Vice President of Operations prior to spending six years managing operations for El Paso’s Western Onshore Division and sixteen years at ExxonMobil in various operational and technical positions. He received a Bachelor of Science degree in Petroleum Engineering from Colorado School of Mines in 1985.
Kevin K. Nanke, Treasurer and Chief Financial Officer, joined Delta in April 1995 as our Controller and has served as the Treasurer and Chief Financial Officer of Delta and Amber Resources since 1999. Since April 1, 2005 he has also served as Chief Financial Officer, Treasurer and Director of DHS. Since 1989, he has been involved in public and private accounting with the oil and gas industry. Mr. Nanke received a Bachelor of Arts degree in Accounting from the University of Northern Iowa in 1989. Prior to working with Delta, he was employed by KPMG LLP. He is a member of the Colorado Society of CPA’s and the Council of Petroleum Accounting Society.
Stanley F. (“Ted”) Freedmanhas served as Executive Vice President, General Counsel and Secretary since January 1, 2006 and has also served in those same capacities for DHS since that same date. He also serves as Executive Vice President and Secretary of Amber Resources and formerly as a director of Direct Petroleum Exploration, Inc., a privately-held oil and gas company with projects in Morocco, Bulgaria, Russia and southeastern Colorado. He graduated from the University of Wyoming with a Bachelor of Arts degree in 1970 and a Juris Doctor degree in 1975. From 1975 to 1978, Mr. Freedman was a staff attorney with the United States Securities and Exchange Commission. From 1978 to December 31, 2005, he was engaged in the private practice of law, and was a shareholder and director of the law firm of Krys Boyle, P.C. in Denver, Colorado.
18
Summary Compensation Table
The following table sets forth summary information concerning compensation awarded to, earned by, or accrued for services rendered to the Company in all capacities by our principal executive officer, principal financial officer, our one other executive officer, and our former chief executive officer who served during fiscal year 2010 (collectively, the “named executive officers”), for fiscal years 2008, 2009 and 2010:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Non-Equity
| | | | |
| | | | | | | | | Stock
| | Option
| | Incentive Plan
| | All Other
| | |
Name and
| | | | Salary
| | Bonus
| | Awards
| | Awards
| | Compensation
| | Compensation
| | Total
|
Principal Position | | Year | | ($) | | ($) | | ($)(1) | | ($)(1) | | ($)(2) | | ($)(3) | | ($) |
| |
| Carl E. Lakey, | | | 2010 | | | $ | 338,585 | | | $ | — | | | $ | 700,000 | | | $ | — | | | $ | 480,500 | | | $ | 19,768 | | | $ | 1,538,853 | |
| President and Chief | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Executive Officer* | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Kevin K. Nanke, | | | 2010 | | | | 328,600 | | | | — | | | | 560,000 | | | | — | | | | 395,000 | | | | 25,339 | | | | 1,308,939 | |
| Treasurer and Chief | | | 2009 | | | | 297,083 | | | | — | | | | 793,637 | | | | — | | | | 169,900 | | | | 25,939 | | | | 1,286,559 | |
| Financial Officer | | | 2008 | | | | 310,000 | | | | — | | | | 1,276,558 | | | | — | | | | 13,563 | | | | 74,293 | | | | 1,674,414 | |
| Stanley F. Freedman, | | | 2010 | | | | 293,750 | | | | — | | | | 490,000 | | | | — | | | | 323,500 | | | | 21,259 | | | | 1,128,509 | |
| Executive Vice President, | | | 2009 | | | | 263,542 | | | | — | | | | 703,930 | | | | — | | | | 141,800 | | | | 21,859 | | | | 1,131,131 | |
| General Counsel and Secretary | | | 2008 | | | | 275,000 | | | | — | | | | 1,448,594 | | | | — | | | | 12,031 | | | | 69,325 | | | | 1,804,950 | |
| John R. Wallace, | | | 2010 | | | | 216,417 | | | | — | | | | — | | | | — | | | | — | | | | 1,610,847 | | | | 1,827,264 | |
| Former President and | | | 2009 | | | | 335,417 | | | | — | | | | 895,987 | | | | — | | | | 180,500 | | | | 24,307 | | | | 1,436,211 | |
| Chief Operating Officer** | | | 2008 | | | | 350,000 | | | | — | | | | 2,027,847 | | | | — | | | | 15,313 | | | | 69,555 | | | | 2,462,715 | |
| | |
* | | Mr. Lakey became President and Chief Executive Officer on July 6, 2010. |
|
** | | Mr. Wallace resigned as President and Chief Operating Officer on July 6, 2010. |
|
(1) | | These amounts shown represent the aggregate grant date fair value for stock awards and option awards granted to the named executive officers computed in accordance with FASC ASC Topic 718. |
|
(2) | | The amounts reflect the cash bonus awards to the named executive officers, discussed above under the heading “Elements of Delta’s Compensation Program” under the caption “Annual Incentive Compensation.” Awards under the Company’s bonus plans were accrued and earned in the year represented and paid in the following year. |
|
(3) | | Amounts in the “All Other Compensation” column consist of the following payments we paid to or on behalf of the named executive officers: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Company
| | | | Auto
| | | | Severance
| | |
| | | | | Contributions to
| | Auto
| | Maintenance
| | Health
| | Agreement
| | |
| | | | | Retirement Plans
| | Allowance
| | and Insurance
| | Club
| | Payments
| | Total
|
Name | | Year | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) |
| |
| Carl E. Lakey* | | | 2010 | | | $ | 5,961 | | | $ | 9,000 | | | $ | 4,807 | | | $ | — | | | $ | — | | | $ | 19,768 | |
| | | | 2009 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | 2008 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Kevin K. Nanke | | | 2010 | | | | — | | | | 18,000 | | | | 4,939 | | | | 2,400 | | | | — | | | | 25,339 | |
| | | | 2009 | | | | — | | | | 18,000 | | | | 5,539 | | | | 2,400 | | | | — | | | | 25,939 | |
| | | | 2008 | | | | 47,000 | | | | 18,000 | | | | 6,893 | | | | 2,400 | | | | — | | | | 74,293 | |
| Stanley F. Freedman | | | 2010 | | | | — | | | | 18,000 | | | | 3,259 | | | | — | | | | — | | | | 21,259 | |
| | | | 2009 | | | | — | | | | 18,000 | | | | 3,859 | | | | — | | | | — | | | | 21,859 | |
| | | | 2008 | | | | 47,000 | | | | 18,000 | | | | 4,325 | | | | — | | | | — | | | | 69,325 | |
| John R. Wallace** | | | 2010 | | | | — | | | | 9,000 | | | | 1,847 | | | | — | | | | 1,600,000 | (1) | | | 1,610,847 | |
| | | | 2009 | | | | — | | | | 18,000 | | | | 6,307 | | | | — | | | | — | | | | 24,307 | |
| | | | 2008 | | | | 47,000 | | | | 18,000 | | | | 4,555 | | | | — | | | | — | | | | 69,555 | |
| | |
* | | Mr. Lakey became President and Chief Executive Officer on July 6, 2010. |
|
** | | Mr. Wallace resigned as President and Chief Operating Officer on July 6, 2010. |
|
(1) | | Amounts paid to Mr. Wallace under his severance agreement. See details below under “Severance Agreement”. |
19
Grants of Plan-Based Awards
The following table provides additional information about restricted stock awards and equity and non-equity incentive plan awards granted to our named executive officers during fiscal 2010.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Option
| | Stock
| | Grant Date
|
| | | | | | | | | | | Awards
| | Awards
| | Fair
|
| | | | | | | | | | | Number of
| | Number of
| | Value of
|
| | | Grant Date
| | Estimated Future Payouts Under
| | Shares of
| | Shares of
| | Stock and
|
| | | or
| | Non-Equity Incentive Plan Awards(1) | | Stock or
| | Stock or
| | Option
|
| | | Performance
| | Threshold
| | Target
| | Max
| | Units
| | Units
| | Awards
|
Name | | Period | | ($) | | ($) | | ($) | | (#) | | (#) | | ($)(4) |
| |
| Carl E. Lakey, | | | 01/01/10- | | | $ | 68,250 | | | $ | 273,000 | | | $ | 546,000 | | | | — | | | | — | | | $ | — | |
| President and Chief | | | 12/31/10 | | | | — | | | | — | | | | — | | | | 250,000 | (2) | | | — | | | | 109,206 | |
| Executive Officer* | | | 07/06/10 | | | | — | | | | — | | | | — | | | | — | | | | 1,000,000 | (3) | | | 700,000 | |
| | | | 09/16/10 | | | | | | | | | | | | | | | | | | | | | | | | | |
| Kevin K. Nanke, | | | 01/01/10- | | | | 59,000 | | | | 236,000 | | | | 472,000 | | | | — | | | | — | | | | — | |
| Treasurer and Chief | | | 12/31/10 | | | | — | | | | — | | | | — | | | | — | | | | 800,000 | (3) | | | 560,000 | |
| Financial Officer | | | 09/16/10 | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stanley F. Freedman, | | | 01/01/10- | | | | 52,550 | | | | 210,200 | | | | 420,400 | | | | — | | | | — | | | | — | |
| Executive Vice President, | | | 12/31/10 | | | | — | | | | — | | | | — | | | | — | | | | 700,000 | (3) | | | 490,000 | |
| General Counsel and | | | 09/16/10 | | | | | | | | | | | | | | | | | | | | | | | | | |
| Secretary | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| John R. Wallace, | | | 01/01/10- | | | | 61,250 | | | | 245,000 | | | | 490,000 | | | | — | | | | — | | | | — | |
| Former President and Chief | | | 12/31/10 | | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating Officer** | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
* | | Mr. Lakey became President and Chief Executive Officer on July 6, 2010. |
|
** | | Mr. Wallace resigned as President and Chief Operating Officer on July 6, 2010. |
|
(1) | | For 2010, Non-Equity Incentive Plan Awards were determined at the full discretion of the Company, with a threshold, target and maximum bonus potential set forth above. In April 2011, the 2010 bonuses were paid as described above in “Compensation Discussion and Analysis”. |
|
(2) | | Options were granted pursuant to the 2009 Plan and vested upon issuance on July 6, 2010. Options are exercisable for ten years from the date of issuance, subject to continuing employment or service with the Company as defined in the 2009 Plan, and certain other conditions. |
|
(3) | | Shares of restricted stock that vest in full on July 1, 2011. |
|
(4) | | The grant date fair value of option and stock awards were computed in accordance with FAS 123R. |
20
Outstanding Equity Awards at Fiscal Year-End
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| | | | | | | | | | | | | | | | | Equity
|
| | | | | | | | | | | | | | | | | Incentive
|
| | | | | | | | | | | | | | | | | Plan
|
| | | | | | | | | | | | | | | Equity
| | Awards:
|
| | | | | | | | | | | | | | | Incentive
| | Market
|
| | | | | | | | | | | | | | | Plan
| | or Payout
|
| | | | | | | | | | | | | Market
| | Awards:
| | Value of
|
| | | | | | | | | | | | | Value of
| | Number
| | Unearned
|
| | | | | | | | | | | | | Shares or
| | of Unearned
| | Shares,
|
| | | Number of
| | Number of
| | | | | | Number of
| | Units of
| | Shares,
| | Units or
|
| | | Securities
| | Securities
| | | | | | Shares or
| | Stock
| | Units or Other
| | Other
|
| | | Underlying
| | Underlying
| | | | | | Units of
| | that
| | Rights
| | Rights
|
| | | Unexercised
| | Unexercised
| | Option
| | | | Stock that
| | have
| | that have
| | that
|
| | | Options
| | Options
| | Exercise
| | Option
| | have not
| | not
| | Not
| | have
|
| | | (#)
| | (#)
| | Price
| | Expiration
| | Vested
| | Vested(6)
| | Vested
| | Not Vested
|
Name | | Exercisable | | Unexercisable | | ($) | | Date | | (#) | | ($) | | (#) | | ($) |
| |
| Carl E. Lakey, | | | 250,000 | | | | — | | | | 0.79 | | | | 07/06/20 | | | | 1,301,734 | (1) | | | 989,318 | | | | — | | | | — | |
| President and Chief | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Executive Officer* | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Kevin K. Nanke, | | | 55,000 | | | | — | | | | 3.29 | | | | 01/09/11 | | | | 1,119,134 | (2) | | | 880,942 | | | | 40,000 | (3) | | | 1,600,000 | |
| Treasurer and Chief | | | 137,500 | | | | — | | | | 5.29 | | | | 08/26/13 | | | | | | | | | | | | | | | | | |
| Financial Officer | | | 87,500 | | | | — | | | | 15.34 | | | | 12/21/14 | | | | | | | | | | | | | | | | | |
| Stanley F. Freedman, | | | — | | | | — | | | | — | | | | — | | | | 984,934 | (4) | | | 778,950 | | | | 40,000 | (5) | | | 1,600,000 | |
| Executive Vice | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| President, General | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Counsel and Secretary | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| John R. Wallace, | | | 200,000 | | | | — | | | | 5.44 | | | | 12/03/13 | | | | — | | | | — | | | | — | | | | — | |
| Former President and | | | 87,500 | | | | — | | | | 15.34 | | | | 12/21/14 | | | | | | | | | | | | | | | | | |
| Chief Operating Officer** | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
* | | Mr. Lakey became President and Chief Executive Officer on July 6, 2010. |
|
** | | Mr. Wallace resigned as President and Chief Operating Officer on July 6, 2010. |
|
(1) | | The vesting dates for Mr. Lakey’s unvested restricted stock awards at fiscal year-end are as follows: 15,000 shares vest on 4/23/11, 1,138,868 shares vest on 7/1/11, 15,000 shares vest on 4/23/12 and 132,866 shares vest on 7/1/12. |
|
(2) | | The vesting dates for Mr. Nanke’s unvested restricted stock awards at fiscal year-end are as follows: 967,900 shares vest on 7/1/11 and 151,234 shares vest on 7/1/12. |
|
(3) | | The first and only remaining tranche of Mr. Nanke’s equity incentive plan awards consisting of 40,000 shares vests as of the date that the average daily closing price of our common stock on NASDAQ equals or exceeds $40.00 for trading days within any period of 90 calendar days during the term of the award, provided that the average closing price over the last 20 trading days of such period shall have equaled or exceeded $40.00. On April 20, 2011, these shares were voluntarily forfeited by Mr. Nanke. |
|
(4) | | The vesting dates for Mr. Freedman’s unvested restricted stock awards are as follows: 850,800 shares vest on7/1/11 and 134,134 shares on 7/1/12. |
|
(5) | | The first and only remaining tranche of Mr. Freedman’s equity incentive plan awards consisting of 40,000 shares vests as of the date that the average daily closing price of our common stock on NASDAQ is traded equals or exceeds $40.00 for trading days within any period of 90 calendar days during the term of the award, provided that the average closing price over the last 20 trading days of such period shall have equaled or exceeded $40.00. On April 20, 2011, these shares were voluntarily forfeited by Mr. Freedman. |
|
(6) | | Based on the closing price of our common stock on December 31, 2010 of $0.76 per share. |
21
Option Exercises and Stock Vested
The following table provides information about the value realized by the named executive officers for option award exercises and stock award vesting during fiscal 2010.
| | | | | | | | | | | | | | | | | |
| | | | | | | Stock Awards
| | |
| | | Option Awards
| | | | Number of Shares
| | Value
|
| | | Number of Shares
| | Value Realized
| | Acquired
| | Realized
|
| | | Acquired on Exercise
| | on Exercise
| | on Vesting
| | on Vesting
|
Name | | (#) | | ($) | | (#) | | ($) |
| |
| Carl E. Lakey* | | | — | | | | — | | | | 224,619 | | | $ | 195,888 | |
| Kevin K. Nanke | | | — | | | | — | | | | 261,839 | | | | 214,708 | |
| Stanley F. Freedman | | | — | | | | — | | | | 234,133 | | | | 191,989 | |
| John R. Wallace** | | | — | | | | — | | | | 238,768 | | | | 195,790 | |
| | |
* | | Mr. Lakey became President and Chief Executive Officer on July 6, 2010. |
|
** | | Mr. Wallace resigned as President and Chief Operating Officer on July 6, 2010. |
Employment Agreements
Carl Lakey. On July 15, 2010, we entered into an Amended and Restated Employment Agreement with Carl Lakey, who was appointed as the Company’s Chief Executive Officer on July 6, 2010. The Amended and Restated Employment Agreement amended Mr. Lakey’s previous employment agreement dated as of October 1, 2009. The initial term of Mr. Lakey’s amended agreement was through December 31, 2010, and such term automatically extends for additional one year terms thereafter unless notice of termination is given by either party at least sixty days prior to the end of the then-applicable term. The base annual salary for Mr. Lakey provided for in the amended agreement is $390,000. Mr. Lakey is also entitled to a bonus based on a percentage of his base salary as determined by the Compensation Committee of the Board of Directors upon satisfaction of performance criteria established by the Compensation Committee.
In the event Mr. Lakey’s employment is terminated other than for “cause” or if he resigns for “good reason” (both as defined in the agreement), then Mr. Lakey will be entitled to receive a payment equal to two times the sum of his annual base salary and his average annual bonus. In the event that Mr. Lakey’s agreement is not renewed at the end of any term, then at the time that his employment is terminated Mr. Lakey will receive the same severance payment as stated above, reduced proportionately by the number of months that Mr. Lakey continues to be employed by the Company after expiration of the applicable term. The agreement also includes non-solicitation and non-competition obligations on the part of Mr. Lakey that survive for one year following the date of termination.
Kevin K. Nanke. On May 5, 2005, we entered into an employment agreement with Kevin K. Nanke, our Chief Financial Officer. The initial term of employment under Mr. Nanke’s employment agreement was through December 31, 2006, and the term automatically extends for additional one-year terms thereafter unless either party gives notice of termination at least 60 days prior to the end of a term. The current term expires on December 31, 2011. The base annual salary payable under the employment agreement for Mr. Nanke is currently $337,145. Mr. Nanke is entitled to receive bonuses based on a percentage of his base salary as determined by the Compensation Committee of the Board of Directors upon satisfaction of performance criteria established by the Compensation Committee.
In the event the employment of Mr. Nanke is terminated other than for cause or if he resigns for “good reason” (both as defined in the agreement), then he will be entitled to receive a payment equal to two times his annual base salary, annual automobile allowance and his average annual bonus for the three fiscal years preceding the fiscal year in which the termination occurs, but not less than the greater of Mr. Nanke’s (i) highest annual target bonus during any of these three preceding fiscal years or (ii) target bonus for the fiscal year in which the termination occurs. In the event that his employment agreement is not renewed and he is terminated within 24 months following the last day of employment under the expired employment agreement, at the time that his employment is terminated Mr. Nanke will receive the same payment as stated above, reduced proportionately by the number of months he continues to be employed by us during such 24 month period. The employment agreement also includes non-solicitation and non-competition obligations on the part of Mr. Nanke that survive for one year following the date of termination.
22
Stanley F. Freedman. On January 11, 2006, we entered into an employment agreement with Stanley F. Freedman, who became Executive Vice President, General Counsel and Secretary of Delta on January 3, 2006. The initial term of employment under Mr. Freedman’s employment agreement was through December 31, 2006, and the term automatically extends for additional one-year terms thereafter unless either party gives notice of termination at least 60 days prior to the end of a term. The current term expires on December 31, 2011. The base annual salary payable under the employment agreement for Mr. Freedman is currently $300,245. He also received 40,000 shares of restricted Common Stock pursuant to the terms of his employment agreement that vested three years after the date of grant. Mr. Freedman is entitled to receive bonuses based on a percentage of his base salary, as determined by the Compensation Committee of the Board of Directors, upon satisfaction of performance criteria established by the Compensation Committee.
In the event the employment of Mr. Freedman is terminated other than for cause (as defined in the Employment Agreement) or if he resigns for “good reason” (as defined in the Employment Agreement), then he will be entitled to receive a payment equal to two times his annual base salary, annual automobile allowance and his average annual bonus for the three years preceding the fiscal year in which the termination occurs, but not less than the greater of his (i) highest annual target bonus during any of these three preceding fiscal years or (ii) target bonus for the fiscal year in which the termination occurs. In the event that his Employment Agreement is not renewed and he is terminated within 24 months following the last day of employment under the expired Employment Agreement, at the time that his employment is terminated he will receive the same payment as stated above, reduced proportionately by the number of months he continues to be employed by us during such 24 month period. The Employment Agreement also includes non-solicitation and non-competition obligations on the part of Mr. Freedman that survive for one year following the date of termination.
Change in Control Agreements
On April 30, 2007, we entered into Change in Control Executive Severance Agreements (“CIC Agreements”) with Messrs. Nanke and Freedman, and on October 1, 2009, we entered into a CIC Agreement with Mr. Lakey, which provide that, following a change in control of the Company as defined in the CIC Agreements and the termination of employment of the executive officer during the period beginning 6 months prior to and ending 24 months after the change in control, the executive officer would not receive a payment under the Employment Agreement. Instead, he would receive a payment equal to three times his annual base salary, annual automobile allowance and his average annual bonus for the three years preceding the fiscal year in which the change in control occurs, but not less than the greater of that executive officer’s (i) highest annual target bonus during any of these three preceding fiscal years or (ii) target bonus for the fiscal year in which the change in control occurs, in addition to the continuation of certain benefits including medical insurance and other benefits provided to the executive officer for a period of three years. The CIC Agreements also include non-solicitation and non-competition obligations on the part of the executive officer that survive for one year following the date of termination. The CIC Agreements also provide that if a payment under the CIC Agreements would be subject to excise tax payments, the executive officer will receive agross-up payment equal to such excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, and all taxes, including any interest, penalties or income tax imposed on thegross-up payment.
The CIC Agreements define a change in control as the occurrence of any of the following: (1) any Person becomes a beneficial owner of 35% or more of Delta’s voting securities, except as the result of any acquisition of voting securities by Delta or any acquisition of voting securities of Delta directly from Delta (as authorized by the Board); (2) the persons who constitute the incumbent Board cease for any reason to constitute at least a majority of the Board unless such change was approved by at least two-thirds (2/3) of the incumbent Board; (3) the consummation of a reorganization, merger, share exchange, consolidation, or sale or disposition of all or substantially all of the assets of Delta unless the persons who beneficially own the voting securities of Delta immediately before that transaction beneficially own, immediately after the transaction, at least 70% of the voting
23
securities of Delta or any other corporation or other entity resulting from or surviving the transaction; or (4) Delta’s stockholders approve a complete liquidation or dissolution of Delta or a sale of substantially all of its assets.
Amendments to Employment Agreements and Change in Control Agreements
On December 29, 2010, Delta entered into amendments (the “Amendments”) to the employment agreements and CIC agreements with Carl E. Lakey, Kevin K. Nanke and Stanley F. Freedman. These Amendments are intended to bring the CIC agreements and the employment agreements into compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”"Tax Code"). The committee operates under a written charter under which the committee, among other things, has the following authority: (i) to review and approve Par's goals relating to the chief executive officer’s compensation, evaluate the chief executive officer’s performance under those goals and set the chief executive officer’s compensation; (ii) to evaluate, review and approve the compensation structure and process for our other officers and the officers of our subsidiaries; (iii) to evaluate, review and recommend to our Board any changes to, or additional, stock-based and other incentive compensation plans; (iv) to engage independent advisors to assist the members of the committee in carrying out their duties; and (v) to recommend inclusion of the Compensation Discussion and Analysis in this proxy statement or our Annual Report on Form 10-K, as applicable.
Compensation Committee Interlocks and Insider Participation
Robert S. Silberman, Timothy Clossey, Walter A. Dods, Jr., L. Melvin Cooper, Jake Mercer and related guidance issuedMelvin N. Klein served on the Compensation Committee in 2015. No member of the committee has served as one of our officers or employees at any time. None of our executive officers serve, or in the past fiscal year has served, as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving on our Board of Directors or Compensation Committee.
Executive Committee. The current members of the Executive Committee are Melvyn N. Klein (Chairman), Curtis V. Anastasio, William C. Pate and Robert S. Silberman, and the committee met twice during 2015. The committee operates under a written charter adopted by the Internal Revenue Service.Board. The Amendments revisecommittee is responsible for exercising the timingpowers and duties of paymentsthe Board between Board meetings and while the Board is not in session, and implementing the policy decisions of the Board, but does not have the authority to be made upon a separation from service andapprove certain actions on behalf of the timing and amountBoard, including (i) filling vacancies or changing membership of payments to be made if agross-up is due to the executive due to the effect of Code Sections 280G and 4999, amend the provisions related to the six-month waiting period required under Code Section 409 with respect to payments to certain specified key employees upon a separation from service, and make other technical revisions in conformance with Code Section 409A. In addition, certain provisions were amended to ensure that payments under the CIC and employment agreements would not be duplicated.
Severance Agreement
On October 19, 2010, Delta entered into a Severance Agreement with John R. Wallace, Delta’s former President and Chief Operating Officer. Mr. Wallace resigned from all of his positions as a director, officer and employee of Delta andBoard or any of its subsidiaries ascommittees, (ii) changing the size of the closeBoard or any of business on July 6, 2010. In considerationits committees, (iii) electing or removing elected officers or directors or changing their compensation, (iv) amending our certificate of incorporation or bylaws, (v) adopting an agreement providing for Mr. Wallace’s resignationthe merger or consolidation of Par or recommending to the stockholders the sale, lease or exchange of all or substantially all of Par’s property and his agreementassets, (vi) recommending to (a) relinquish certain rightsthe stockholders a dissolution of Par or a revocation of a dissolution, (vii) declaring a dividend, authorizing the issuance of stock (except pursuant to specific authorization by the Board), (viii) those matters which are expressly delegated to another committee of the Board, or
(ix) matters which, under his employment agreement, hischange-in-control agreement, certain stock agreements, and any and all rights he may have hadthe General Corporation Law of the State of Delaware, our certificate of incorporation or our bylaws cannot be delegated by the Board to any other salary, bonus or other compensation, and (b) make himself reasonably available to answer questions and assist in transitional matters, Delta paid Mr. Wallace $1,600,000 in cash and agreed to maintain continued group health plan coverage under COBRA for Mr. Wallace. The Severance Agreement also contains mutual releases and non-disparagement provisions, as well as other customary terms.a committee of the Board.
Potential Payments Upon Termination or Change in ControlNominating and Corporate Governance Committee.
The following table reflects the potential payments and benefits upon termination (i) for cause, and (ii) other than for cause or death, disability or retirement, within and not within the period beginning six months prior to and ending 24 months following a change in control (“Measurement Period”) of Delta under the respective CIC Agreement for each named executive officer. The amounts payable assume termination of employment on December 31, 2010.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Not Within the Measurement
| | |
| | | | | Within the Measurement Period | | | | | | Period | | |
| | | | | Acceleration
| | | | | | | | | | Acceleration
| | | | | | |
| | | | | of Options
| | | | Excise
| | | | | | of Options
| | | | Excise
| | |
| | | Severance
| | & Stock
| | | | Tax &
| | | | Severance
| | & Stock
| | | | Tax &
| | |
| | | & Bonus
| | Awards
| | Benefits
| | Gross-Ups
| | Total
| | & Bonus
| | Awards
| | Benefits
| | Gross-Ups
| | Total
|
| | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) |
| |
| Carl E. Lakey | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For Cause | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Not For Cause | | | 1,989,000 | | | | 989,318 | | | | 141,487 | | | | 850,202 | | | | 3,970,007 | | | | 1,427,500 | | | | 989,318 | | | | 94,325 | | | | 850,202 | | | | 3,361,345 | |
| Kevin K. Nanke | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For Cause | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Not For Cause | | | 1,719,440 | | | | 880,942 | | | | 141,226 | | | | — | | | | 2,741,607 | | | | 1,239,190 | | | | 880,942 | | | | 94,151 | | | | — | | | | 2,214,283 | |
| Stanley F. Freedman | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For Cause | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Not For Cause | | | 1,531,250 | | | | 778,950 | | | | 144,727 | | | | 671,413 | | | | 3,129,339 | | | | 1,065,790 | | | | 778,950 | | | | 96,485 | | | | 671,413 | | | | 2,612,638 | |
| | |
* | | “Cause” is defined in the CIC Agreement, and “Not For Cause” means resignation by the executive for Good Reason (as defined in the CIC Agreement) or termination of the executive by the Company without Cause. |
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Director Compensation
The following table sets forth a summary of the compensation we paid to our non-employee directors in 2010:
| | | | | | | | | | | | | |
| | | Fees Earned
| | Stock
| | |
| | | or Paid in Cash
| | Awards
| | Total
|
Name | | ($) | | ($)(1) | | ($) |
| |
| Hank Brown | | | 52,500 | | | | 49,920 | | | | 102,420 | |
| Kevin R. Collins | | | 60,000 | | | | 84,920 | | | | 144,920 | |
| Jerrie F. Eckelberger | | | 60,000 | | | | 49,920 | | | | 109,920 | |
| Jean-Michel Fonck | | | 50,000 | | | | 29,952 | | | | 79,952 | |
| Aleron H. Larson Jr. | | | 50,000 | | | | 49,920 | | | | 99,920 | |
| Russell S. Lewis | | | 52,500 | | | | 49,920 | | | | 102,420 | |
| Anthony Mandekic | | | 52,500 | | | | 29,952 | | | | 82,452 | |
| James J. Murren | | | 52,500 | | | | 49,920 | | | | 102,420 | |
| Jordan R. Smith | | | 55,000 | | | | 49,920 | | | | 104,920 | |
| Daniel J. Taylor | | | 52,500 | | | | 90,665 | | | | 143,165 | |
| | |
(1) | | On the first business day of 2010 each of the non-employee directors except for Messrs. Mandekic and Fonck (but including Mr. Taylor) received a grant of 48,000 shares of common stock, and each of Messrs. Mandekic and Fonck received a grant of 28,800 shares of common stock as equity compensation for their services as directors during 2010. Mr. Taylor also received a grant of 39,178 shares of common stock on the first business day of 2010 as equity compensation for his services as Board Chairman during 2010. On September 16, 2010, Mr. Collins also received 50,000 shares of common stock for his role as chairman of the special committee overseeing the strategic alternatives process which resulted in the July 2010 sale of oil and gas properties. The fair value of such Common Stock was computed based on the closing price on the date the award vests. |
Annual Retainers
In 2010, each non-employee director of the Company received an annual retainer of $50,000. For 2011, the annual retainer has been set to remain at $50,000, and it is anticipated that it will be paid in cash on a monthly basis.
Each Board Committee chair also receives an additional retainer each year in the following amounts: chair of the Audit Committee and chair of the Compensation Committee, $10,000; and chaircurrent members of the Nominating and Corporate Governance Committee $5,000. In addition, each non-employee director who is not a chairman but serves on one or more Committees of the Board receives an annual retainer of $2,500.are Robert S. Silberman (Chairman), Melyvn N. Klein and L. Melvin Cooper. The additional retainer amounts are also paid to the directors in cash in equal monthly installments. The Company reimburses the directors for costs incurred by them in traveling to Board and Committee meetings.
Stock Grants
In addition, at the discretion of the Board of Directors, each non-employee director is eligible to receive an annual grant of shares of Common Stock. For 2011, each non-employee Director is entitled to receive 75,000 shares and, in addition, the non-executive Chairman of the Board is entitled to receive 90,000 shares for services rendered in 2011. The shares are to be issued on the first business day of 2012 and pro-rated in the event of the earlier termination of any Director to such date and issued within ten days thereof. All such Common Stock is granted pursuant to the Company’s 2009 Performance and Equity Incentive Plan. Each grant of Common Stock is fully vested upon grant.
Indemnification of Directors
Pursuant to the Company’s certificate of incorporation, the Company provides indemnification of its directors and officers to the fullest extent permitted under the Delaware General Corporation Law and provides certain indemnification to its executive officers under their employment agreements. The Company believes that this indemnification is necessary to attract and retain qualified directors and officers.
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Narrative Disclosure of Compensation Policies and Practices as they Relate to Risk Management
In accordance with the requirements ofRegulation S-K, Item 402(s), to the extent that risks may arise from the Company’s compensation policies and practices that are reasonably likely to have a material adverse effect on the Company, we are required to discuss those policies and practices for compensating the employees of the Company (including employees that are not named executive officers) as they relate to the Company’s risk management practices and the possibility of incentivizing risk-taking. We have determined that the compensation policies and practices established with respect to the Company’s employees are not reasonably likely to have a material adverse effect on the Company and, therefore, no such disclosure is necessary. The Compensation Committee and the Board are aware of the need to routinely assess our compensation policies and practices and will make a determination as to the necessity of this particular disclosure on an annual basis.
PROPOSAL 2 — AUTHORIZATION FOR AMENDMENT OF OUR CERTIFICATE OF
INCORPORATION TO EFFECT A REVERSE STOCK SPLIT AND TO REDUCE
THE NUMBER OF AUTHORIZED SHARES OF OUR COMMON STOCK
Overview
committee met four times during 2015. Our Board of Directors has unanimously approveddetermined that all of the members of the committee are independent under the listing standards of the NYSE MKT and the rules of the SEC. The committee operates under a proposalwritten charter adopted by the Board. The committee is responsible for determining the qualifications, skills and other expertise required to enable usbe a director, identifying and recommending qualified candidates to amend our certificate of incorporation to effect a reverse stock split of all outstanding shares of our Common Stock at an exchange ratio of1-for-10. You are now being asked to vote upon an amendment to our certificate of incorporation to effect this reverse stock split. Therefore, a vote “FOR” Proposal 2 will constitute approval of an amendment to our certificate of incorporation providing for the combination of ten shares into one share of Common Stock.
If Proposal 2 is approved, the Board will have the authority, but not the obligation, in its sole discretion and without any further action on the partfor nomination as members of the stockholders,Board, recommending to effect the reverse stock split, at any time it believes to be most advantageous to the Company and its stockholders. This proposal would give the Board the corporate governance principles applicable to Par, and leading the Board in its annual self-evaluations and recommends nominees to serve on each committee of the Board. The committee, among other things, has the authority to implement one,evaluate candidates for the position of director, retain and terminate any search firm used to identify director candidates and review and reassess the adequacy of our corporate governance procedures.
Director Nominations Process. In identifying candidates for positions on the Board, the Nominating and Corporate Governance Committee generally relies on suggestions and recommendations from members of the Board, management and stockholders. In 2015, we did not use any search firm or pay fees to other third parties in connection with seeking or evaluating Board nominee candidates.
The committee does not set specific minimum qualifications for director positions. Instead, the committee believes that nominations for election or re-election to the Board should be based on a particular candidate's merits and our needs after taking into account the current composition of the Board. When evaluating candidates annually for nomination for election, the committee considers an individual's skills, diversity, independence from us, experience in areas that address the needs of the Board, and ability to devote adequate time to Board duties. The committee does not specifically define diversity, but not more than one, reverse stock split. A reverse stock split would be effectedvalues diversity of experience, perspective, education, race, gender and national origin as part of its overall annual evaluation of director nominees for election or re-election. Whenever a new seat or a vacated seat on the Board is being filled, candidates that appear to best fit the needs of the Board and the company are identified and, unless such individuals are well known to the Board, they are interviewed and further evaluated by the filingcommittee. Candidates selected by the committee are then recommended to the full Board. After the Board approves a candidate, the Chair of the amendmentcommittee extends an invitation to the certificate of incorporation withcandidate to join the Secretary of State of the State of Delaware. The Board will retain the authority not to effect the amendment to the certificate of incorporation even if we receive stockholder approval. Thus, subject to stockholder approval, the Board may, at its discretion, file the amendment to effect a reverse stock split or abandon it and effect no reverse stock split if it determines that such action is not in the best interests of the Company and its stockholders. If the amendment to the certificate of incorporation is not filed with the Secretary of State of the State of Delaware prior to the Company’s 2012 Annual Meeting of Stockholders, the reverse stock split will be deemed abandoned, without any further effect.Board.
The Board’s decision as to whether and when to effect the reverse stock split will be based, in part, on prevailing market conditions, existing and expected trading prices for our common stock, and the Company’s compliance with the minimum bid price continued listing requirements of The NASDAQ Capital Market.
Under our current certificate of incorporation, we are authorized to issue up to 600,000,000 shares of Common Stock. As of May 13, 2011, there were 286,027,476 shares of our Common Stock outstanding and 1,503,000 shares reserved for future issuance upon conversion or exercise of options, warrants and other securities that are exercisable or convertible into our Common Stock. If the Board implements the reverse stock split, the number of shares of Common Stock outstanding, and the number of shares of Common Stock underlying such convertible securities, will be reduced to one tenth of the current numbers. The Board believes that if the reverse stock split were implemented, 600,000,000 shares would be an excessive number of shares to be authorized for issuance without stockholder approval. Consequently, if the reverse split is implemented, the proposed amendment to our certificate of incorporation would simultaneously reduce the authorized shares of Common Stock we could issue to 200,000,000 shares, as described in more detail below.
The text of the proposed amendment to our certificate of incorporation is attached to this Proxy Statement as Appendix A. By approving this amendment, stockholders will enable us to make amendments to our certificate of incorporationPreviously, pursuant to which ten outstanding shares would be combined into one share of our Common Stock. The Board may also elect to file no amendment to our certificate and to effect no reverse split.
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If Proposal 2 is approved by thea stockholders and following such approval the Board determines that effecting a reverse stock split is in the best interests of us and our stockholders, the reverse stock split will become effective upon filing an amendment to our certificate of incorporation with the Secretary of State of the State of Delaware. Except for adjustments that may result from the treatment of fractional shares as described below, each stockholder will hold the same percentage of our outstanding Common Stock immediately following the reverse stock split as that stockholder held immediately before the reverse stock split. The par value of our Common Stock would remain unchanged at $0.01 per share.
Reasons for the Reverse Split
The Board believes that a reverse stock split may be desirable for a number of reasons. Foremost, a reverse stock split may help maintain the Company’s listing on The NASDAQ Capital Market®.
On August 9, 2010, we received a notification from NASDAQ stating that the minimum bid price of our Common Stock had been below $1.00 per share for 30 consecutive business days and that we therefore were not in compliance with the minimum bid price requirement for continued listing set forth in NASDAQ Listing Rule 5450(a)(1) (the “Minimum Bid Price Rule”). In response to such notice, we filed an application to transfer the listing of our Common Stock from The NASDAQ Global Market® to The NASDAQ Capital Market®.
On January 31, 2011, we announced that NASDAQ had approved our application to transfer our stock listing from The NASDAQ Global Market® to The NASDAQ Capital Market®. The transfer was effective at the opening of the market on February 1, 2011. In connection with the transfer to The NASDAQ Capital Market®, and in accordance with NASDAQ Listing Rule 5810(c)(3)(A), we were granted an additional grace period by NASDAQ until August 8, 2011 to regain compliance with the Minimum Bid Price Rule, which would occur if our Common Stock closed at or above $1.00 for 10 consecutive trading days. If compliance is not regained within the additional grace period, NASDAQ would notify us of its determination to delist our Common Stock, which decision may be appealed to a NASDAQ Listing Qualifications Panel.
If we do not satisfy NASDAQ’s continued listing requirements, including the requirement to maintain a closing bid price of $1.00 per share, our Common Stock may be delisted from NASDAQ. The delisting of our Common Stock may result in the trading of our Common Stock on theover-the-counter markets such as the OTC Bulletin Board (OTCBB) or the Pink OTC Markets Inc. A delisting of our Common Stock from NASDAQ could materially reduce the liquidity of our Common Stock, not only in the number of shares that could be bought and sold, but also through delays in the timing of the transactions and reductions in securities analysts and media coverage. This may reduce the demand for our Common Stock and significantly destabilize the price of our Common Stock. In addition, a delisting could materially adversely affect our ability to raise additional capital.
The Board expects that a reverse stock split of our Common Stock will increase the market price of our Common Stock so that we are able to maintain compliance with the Minimum Bid Price Rule. We believe that the approval of this proposal would significantly reduce our risk of not meeting this continued listing standard in the future. However, the effect of a reverse split upon the market price of our Common Stock cannot be predicted with any certainty, and the history of similar stock split combinations for companies in like circumstances is varied. It is possible that the per share price of our Common Stock after the reverse split will not rise in exact proportion to the reduction in the number of shares of our Common Stock outstanding resulting from the reverse stock split, and there can be no assurance that the market price per share post-reverse split will either exceed or remain in excess of the $1.00 minimum bid price for a sustained period of time. The market price of our Common Stock is based also on other factors that are unrelated to the number of shares outstanding, including our future performance. In addition, there can be no assurance that we will not be delisted due to a failure to meet other continued listing requirements even if the market price per share post-reverse split of our Common Stock remains in excess of $1.00. Notwithstanding the foregoing, the Board believes that the proposed reverse stock split, when implemented, will result in the market price of our Common Stock rising to the level necessary to satisfy the $1.00 minimum bid price requirement. In addition, we believe that if our Common Stock maintains a closing bid price of $1.00 per share as required by NASDAQ rules, we will meet all continued listing requirements.
The increased market price of our Common Stock expected as a result of implementing a reverse stock split may improve the marketability and liquidity of our Common Stock and engender interest and trading in our
27
Common Stock. Because of the trading volatility often associated with low-priced stocks, many brokerage houses and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. Some of those policies and practices may function to make the processing of trades in low-priced stocks economically unattractive to brokers. Additionally, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, the current average price per share of our Common Stock can result in individual stockholders paying transaction costs representing a higher percentage of their total share value than would be the case if the share price were substantially higher.
Certain Risks Associated With the Reverse Stock Split
While our Board believes that our Common Stock would trade at higher prices after the consummation of a reverse stock split, there can be no assurance that the increase in the trading price will occur, or, if it does occur, that it will equal or exceed ten times the market price of the Common Stock prior to the reverse stock split. In some cases, the total market value of a company following a reverse stock split is lower, and may be substantially lower, than the total market value before the reverse stock split. In addition, the fewer number of shares that will be available to trade could possibly cause the trading market of the Common Stock to become less liquid, which could have an adverse effect on the price of the Common Stock. We cannot provide any assurance that our Common Stock will meet the NASDAQ Capital Market continued listing requirements following the reverse stock split. The market price of our Common Stock is based on our performance and other factors, some of which may be unrelated to the number of our shares outstanding.
In addition, there can be no assurance that the reverse stock split will result in a per share price that will attract brokers and investors who do not trade in lower priced stock.
Effects of the Reverse Stock Split
After the effective date, if any, of the proposed reverse stock split, each stockholder will own a reduced number of shares of our Common Stock. However, the proposed reverse stock split will affect allagreement, certain of our stockholders uniformly and will not reduce any stockholder’s percentage ownership interest in us, except for minor adjustments that may result from any of our stockholders owning a fractional share as described below. Proportionate voting rights and other rights and preferenceshad the right to designate members of the holdersBoard. Pursuant to that agreement, Messrs. Monteleone and Silberman were the designees of our Common Stock will not be reduced byZell Credit Opportunities Fund, L.P. (“ZCOF”) and its affiliates, and Messrs. Cooper and Mercer were the proposed reverse stock split (other than stockholders that receive cash in lieudesignees of fractional shares). For example, a holder of 2% ofWhitebox Advisors, LLC (“Whitebox”) and its affiliates. All other candidates standing for election were the voting power of the outstanding shares of Common Stock immediately prior to the reverse stock split would continue to hold at least 2% of the voting power of the outstanding shares of Common Stock immediately after the reverse stock split provided the stockholder does not own any fractional shares. The number of stockholders of record will not be affected by the proposed reverse stock split (except to the extent that any stockholder holds only a fractional share interest and receives cash for such interest).
Although the proposed reverse stock split will not reduce the rights of stockholders or any stockholder’s proportionate equity interest in us (subject to the treatment of fractional shares), it will reduce the total number of shares of Common Stock outstanding and, if Proposal 2 is approved, the number of authorized shares of Common Stock will also be reduced. The number of authorized shares of Common Stock will be reduced from 600 million to 200 million.
The proposed reverse stock split will reduce the number of shares of Common Stock available for issuance under our Employee Stock Purchase Plan and the Stock Incentive Plan in place at the effective time of the reverse stock split in proportion to the1-for-10 exchange ratio. We also have outstanding stock options and warrants to purchase shares of our Common Stock. Under the terms of those outstanding stock options and warrants, the proposed reverse stock split will reduce the number of shares of Common Stock issuable upon exercise of such options and warrants in proportion to the1-for-10 exchange ratio of the reverse stock split and will increase proportionately the exercise price of such outstanding stock options and warrants. In connection with the proposed reverse stock split, the number of shares of Common Stock issuable upon exercise or conversion of outstanding stock options and warrants will be rounded to the nearest whole share, and no cash payment will be made in respect of such rounding.
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Because the number of issued and outstanding shares of Common Stock will decrease as a result of the reverse stock split, the proposed amendments to our certificate of incorporation would decrease the number of authorized but unissued shares of Common Stock. The reduction to 200 million shares is not proportionate to the ratio of the reverse stock split. Specifically, the authorized common stock would be reduced to a third of the amount currently authorized, while the shares outstanding would be reduced to a tenth of the current number. This means that, as a proportionate matter, additional shares of authorized Common Stock would be available for issuance at the discretiondesignees of our Board of Directors from time to time for corporate purposes such as raising additional capital and settling outstanding obligations, acquisitions of companies or assets and sales of stock or securities convertible into or exercisable for Common Stock.
The following table illustrates the approximate effect that a reverse stock split and reduction in authorized shares would have had on our Common Stock as of May 13, 2011:
| | | | | | | | | |
| | | Prior to the
| | After the
|
| | | Reverse
| | Reverse
|
| | | Stock Split | | Stock Split |
| |
| Issued and Outstanding | | | 286,027,476 | | | | 28,602,747 | |
| Reserved for Issuance | | | 1,503,000 | | | | 150,300 | |
| Treasury Shares | | | 33,000 | | | | 3,300 | |
| Total Authorized Shares | | | 600,000,000 | | | | 200,000,000 | |
| Shares Available for Issuance | | | 312,436,524 | | | | 171,243,653 | |
| Shares Available for Issuance as a % of Total Authorized | | | 52.1 | % | | | 85.6 | % |
The number of shares held by each individual stockholder will be reduced if the reverse stock split is implemented. This will increase the number of stockholders who hold less than a “round lot,” or 100 shares. Typically, the transaction costs to stockholders selling “odd lots” are higher on a per share basis. Consequently, the reverse stock split could increase the transaction costs to existing stockholders in the event they wish to sell all or a portion of their shares.
Our Common Stock is currently registered under Section 12(g) of the Securities Exchange Act of 1934, as amended, and we are subject to the periodic reporting and other requirements of the Exchange Act. The proposed reverse stock split will not affect the registration of the Common Stock under the Exchange Act. If the proposed reverse stock split is implemented, our Common Stock will continue to be reported on The NASDAQ Capital Market® under the symbol “DPTR” (although NASDAQ will add the letter “D” to the end of the trading symbol for a period of 20 trading days to indicate that the reverse stock split has occurred).
Effective Date
The proposed reverse stock split and reduction in our authorized Common Stock would become effective as of 5:00 p.m. Eastern time on the date on which a certificate of amendment to our certificate of incorporation is filed with the office of the Secretary of State of the State of Delaware. Except as explained below with respect to fractional shares, on the effective date, shares of Common Stock issued and outstanding immediately prior thereto will be combined and converted, automatically and without any action on the part of the stockholders, into new shares of Common Stock in accordance with the reverse stock split ratio determined by the Board.
Payment for Fractional Shares
Stockholders will not receive fractional post-reverse stock split shares in connection with the reverse stock split. Instead, Corporate Stock Transfer, Inc., our transfer agent for the registered stockholders (the “Transfer Agent”), will aggregate all fractional shares and arrange for them to be sold as soon as practicable after the effective time of the reverse stock split at the then prevailing prices on the open market on behalf of those stockholders who would otherwise be entitled to receive a fractional share. We expect that the Transfer Agent will cause the sale to be conducted in an orderly fashion at a reasonable pace and that it may take several days to sell all of the aggregated fractional shares of Common Stock. After completing the sale, stockholders will receive a check payment from the Transfer Agent in an amount equal to the stockholder’s pro rata share of the total net proceeds of these sales. We will
29
pay all commissions, transfer taxes andout-of-pocket costs incurred in connection with the sale of the aggregated fractional shares of our Common Stock, including the expenses and compensation of the Transfer Agent.
If you are entitled to a payment in lieu of any fractional share interest, a check will be mailed to you at your registered address as soon as practicable after the effective date. By signing and cashing this check, you will warrant that you owned the shares for which you received a cash payment. This cash payment is subject to applicable federal and state income tax and state abandoned property laws. In addition, you will not be entitled to receive interest for the period of time between the effective date of the reverse stock split and the date you receive your payment.
After the reverse stock split, a stockholder will have no further interest in the Company with respect to their cashed-out fractional shares. A person otherwise entitled to a fractional interest will not have any voting, dividend or other rights except to receive payment as described above.
Effect on Beneficial Holders of Common Stock (i.e., stockholders who hold in “street name”)
Upon effectiveness of the reverse stock split, we intend to treat shares held by stockholders in “street name,” through a bank, broker or other nominee, in the same manner as registered stockholders whose shares are registered in their own names. Banks, brokers or other nominees will be instructed to effect the reverse stock split for their beneficial holders holding our Common Stock in “street name.” However, these banks, brokers or other nominees may have different procedures than registered stockholders for processing the reverse stock split and making payment for fractional shares. If a stockholder holds shares of our Common Stock with a bank, broker or other nominee and has any questions in this regard, stockholders are encouraged to contact their bank, broker or other nominee.
Effect on Registered “Book-Entry” Holders of Common Stock (i.e. stockholders that are registered on the Transfer Agent’s books and records but do not hold stock certificates)
Certain of our registered holders of Common Stock may hold some or all of their shares electronically in book-entry form with the Transfer Agent. These stockholders do not have stock certificates evidencing their ownership of the Common Stock. They are, however, provided with a statement reflecting the number of shares registered in their accounts.
If a stockholder holds registered shares in book-entry form with the Transfer Agent, no action needs to be taken to receive post-reverse stock split shares or cash payment in lieu of any fractional share interest, if applicable. If a stockholder is entitled to post-reverse stock split shares, a transaction statement will automatically be sent to the stockholder’s address of record indicating the number of shares of Common Stock held following the reverse stock split.
If a stockholder is entitled to a payment in lieu of any fractional share interest, such payment will be made as described above under “Payment for Fractional Shares.”
Effect on Certificated Shares
Stockholders holding shares of our Common Stock in certificate form will be sent a transmittal letter by the Transfer Agent after the effective time of the reverse stock split. The letter of transmittal will contain instructions on how a stockholder should surrender his or her certificate(s) representing shares of our Common Stock (“Old Certificates”) to the Transfer Agent in exchange for certificates representing the appropriate number of whole shares of post-reverse stock split Common Stock (“New Certificates”). No New Certificates will be issued to a stockholder until such stockholder has surrendered all Old Certificates, together with a properly completed and executed letter of transmittal, to the Transfer Agent. No stockholder will be required to pay a transfer or other fee to exchange his, her or its Old Certificates.
Stockholders will then receive a New Certificate(s) representing the number of whole shares of Common Stock to which they are entitled as a result of the reverse stock split. Until surrendered, we will deem outstanding Old Certificates held by stockholders to be cancelled and only to represent the number of whole shares of post-reverse stock split Common Stock to which these stockholders are entitled.
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Any Old Certificates submitted for exchange, whether because of a sale, transfer or other disposition of stock, will automatically be exchanged for New Certificates. If an Old Certificate has a restrictive legend on the back of the Old Certificate(s), the New Certificate will be issued with the same restrictive legends that are on the back of the Old Certificate(s).
If a stockholder is entitled to a payment in lieu of any fractional share interest, such payment will be made as described above under “Payment for Fractional Shares.”
Stockholders should not destroy any stock certificate(s) and
should not submit any stock certificate(s) until requested to do so.
Accounting Consequences
The par value per share of our Common Stock will remain unchanged at $0.01 per share after the reverse stock split. As a result, on the effective date of the reverse split, the stated capital on our balance sheet attributable to the Common Stock will be reduced proportionally, based on the exchange ratio of the reverse stock split, from its present amount, and the additional paid-in capital account will be credited with the amount by which the stated capital is reduced. The per share Common Stock net income or loss and net book value will be increased because there will be fewer shares of our Common Stock outstanding. We do not anticipate that any other accounting consequences would arise as a result of the reverse stock split.
No Appraisal Rights
Under the Delaware General Corporation Law, our stockholders are not entitled to dissenters’ rights with respect to our proposed amendments to our certificate of incorporation to effect the reverse split, and we will not independently provide our stockholders with any such rights.
Potential Anti-Takeover Effect; Possible Dilution
The increase in the number of unissued authorized shares available to be issued could, under certain circumstances, have an anti-takeover effect. For example, shares could be issued that would dilute the stock ownership of a person seeking to effect a change in the compositioncommittee of our Board under that agreement, other than Mr. Dods. The agreement was terminated as of Directors or contemplatingApril 7, 2015.
Our bylaws contain provisions that address the process by which a tender offer or other transactionstockholder may nominate an individual to stand for election to the combinationBoard at our annual meeting of the Company with another company. The reverse stock split proposal is not being proposed in response to any effort of which we are aware to accumulate shares of our common stock or obtain control of us, nor is it part of a plan by management to recommend a series of similar amendments to our Board of Directors and stockholders.
The holders of our common stock do not have preemptive rights to subscribe for additional securities that may be issued by the Company, which means that current stockholders We do not have a prior rightformal policy concerning stockholder nominations of individuals to purchase any additional shares from time to time issued by the Company. Accordingly, if our Board of Directors elects to issue additional shares of common stock, such issuance could have a dilutive effect on the earnings per share, voting power and equity ownership of current stockholders.
Board Discretion to Implement the Reverse Stock Split
If the proposed reverse stock split is approved at the Annual Meeting, our Board of Directors may, in its sole discretion, at any time priorstand for election to the 2012 Annual MeetingBoard, other than the provisions contained in our bylaws. Since our emergence from bankruptcy and except as provided by our stockholders agreement, which was terminated as of Stockholders, authorizeApril 7, 2015, we have not received any recommendations from stockholders requesting that the filingBoard consider a candidate for inclusion among the slate of the amendmentnominees in any year, and therefore we believe that no formal policy, in addition to the certificateprovisions contained in our bylaws, concerning stockholder recommendations is needed.
Our bylaws provide that nominations for the election of incorporation with the Secretary of State of the State of Delaware. Notwithstanding the approval of the form of the amendment to the certificate of incorporation at the Annual Meeting, our Board of Directorsdirectors may in its sole discretion, determine not to implement the reverse stock split.
Required Vote
The affirmative vote of stockholders having a majority of the voting power of all outstanding shares of our Common Stockbe made by any stockholder entitled to vote at the Annual Meeting is required to approve the reverse stock split and reduction in
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authorized shares of Common Stock. As a result, abstentions and broker non-votes will have the same effect as negative votes.
Recommendation of the Board of Directors
Our Board of Directors unanimously recommends a vote“FOR”approval of the proposal enabling Delta to amend the certificate of incorporation to effect a reverse stock split at a ratio ofone-for-ten any time prior to the 2012 Annual Meeting of Stockholders, and to reduce the number of authorized shares from 600 million to 200 million.
PROPOSAL 3 — APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Subject to ratification by our stockholders, the Audit Committee has selected the firm of KPMG LLP, Suite 2700, 707 17th Street, Denver, Colorado 80202, as our independent registered public accounting firm to examine and audit our financial statements for the fiscal year ending December 31, 2011. This firm has audited our financial statements for more than eight years and is considered to be well qualified. The selection of such firm as our independent registered public accounting firm is being submitted for ratification at the Annual Meeting.
Action by stockholders is not required for the appointment of the independent registered public accounting firm, but the ratification of its appointment is being submitted by the Audit Committee in order to give our stockholders an opportunity to vote on the designation of auditors. In the event this proposal is defeated, the stockholder vote will not be binding on the Company but may be considered by our Audit Committee when it considers selecting other auditors for the next fiscal year. However, because of the difficulty and expense of making any substitution of auditors after the beginning of the fiscal year, KPMG’s appointment for the 2011 fiscal year will be permitted to stand unless the Audit Committee finds other reasons for making a change.
A representative of KPMG LLP will be present at the Annual Meeting with the opportunity to make a statement if he or she desires to do so and will also be available to respond to appropriate questions.
Principal Accountant Fees and Services
The following table summarizes the aggregate fees billed by KPMG LLP for the 2010 and 2009 fiscal years:
| | | | | | | | | |
| | | Fiscal Year Ended
| | | Fiscal Year Ended
| |
| | | December 31,
| | | December 31,
| |
| | | 2010 | | | 2009 | |
| |
| Audit fees | | $ | 684,000 | | | $ | 723,000 | |
| Audit-related fees | | | 5,000 | | | | 167,000 | |
| Tax fees | | | 196,652 | | | | 116,000 | |
| All other fees | | | — | | | | — | |
| | | | | | | | | |
| Total | | $ | 884,652 | | | $ | 1,006,000 | |
| | | | | | | | | |
Audit Fees. Fees for audit services consisted of the audit of our annual financial statements and reports on internal controls required by the Sarbanes-Oxley Act of 2002 and reviews of our quarterly financial statements.
Audit Related Fees. Fees billed for audit related services related to professional services rendered by KPMG LLP for assurance and related services that are reasonably related to the performance of the audit or review of Delta’s financial statements but are not included in audit fees above.
Tax Fees. Fees for tax services consisted of tax preparation for Delta and its subsidiaries.
Audit Committee Pre-Approval Policy
The Company’s independent registered public accounting firm may not be engaged to provide non-audit services that are prohibited by law or regulation to be provided by it, nor may the Company’s independent registered public accounting firm be engaged to provide any other non-audit service unless it is determined that the
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engagement of the principal accountant provides a business benefit resulting from its inherent knowledge of the Company while not impairing its independence. Our Audit Committee must pre-approve permissible non-audit services. During fiscal year 2010, our Audit Committee approved 100% of the non-audit services provided to Delta by its independent registered public accounting firm.
Required Vote
Ratification of the appointment of KPMG LLP as our independent auditors for fiscal year 2011 requires the affirmative vote of a majority of the votes cast in person or by proxy at the Annual Meeting.
Recommendation of the Board of Directors
Our Board of Directors recommends that you vote“FOR”ratification of the appointment of KPMG LLP as our independent auditors for the fiscal year ending December 31, 2011.
REPORT OF THE AUDIT COMMITTEE
The following Report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report.
The Audit Committee is currently comprised of Kevin R. Collins (Chairman), Jerrie F. Eckelberger, Russell S. Lewis, Jordan R. Smith and Daniel J. Taylor. The Audit Committee is responsible for overseeing and evaluating the Company’s financial reporting process on behalf of the Board of Directors, selecting and retaining the independent auditors, and overseeing and reviewing the internal audit function of the Company.
Management has the primary responsibility for the Company’s financial reporting process, accounting principles, and internal controls, as well as preparation of the Company’s financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). The independent auditors are responsible for performing auditselection of the Company’s consolidated financial statements and the effectiveness of the Company’s internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States) and issuing reports thereon. The Audit Committee is responsible for overseeing the conduct of these activities. It is not the Audit Committee’s duty or responsibility to conduct auditing or accounting reviews or procedures or to independently verify the representations made by management and the independent auditors. The Audit Committee’s considerations and discussions with management and the independent auditors do not assure that the Company’s financial statements are presented in accordance with GAAP or that the audits of the annual financial statements and the effectiveness of the Company’s internal control over financial reporting have been carried out in accordance with the standards of the Public Company Accounting Oversight Board (United States), or that the independent auditors are, in fact, “independent.”
The Audit Committee has met and held discussions with management and the independent auditors on a regular basis. The Audit Committee plans and schedules its meetings with a view to ensuring that it devotes appropriate attention to all of its responsibilities. The Audit Committee’s meetings include, whenever appropriate, executive sessions with the independent auditors without the presence of the Company’s management. The Audit Committee has reviewed and discussed with both management and the independent auditors the Company’s consolidated financial statements as of and for the year ended December 31, 2010, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of the disclosures in the financial statements. Management advised the Audit Committee that the financial statements were prepared in accordance with GAAP. The Audit Committee has relied on this representation, without independent verification, and on the representations of the independent auditors included in their report on the consolidated financial statements.
The Audit Committee discussed with the independent auditors the matters required todirectors. To be discussed pursuant to Statement of Auditing Standards No. 114, “The Auditor’s Communication With Those Charged With Governance,” as amended by Statement of Auditing Standards No. 89, “Audit Adjustments” and Statement of Auditing Standards No. 90, “Audit Committee Communications.” The independent auditors have provided to the Audit Committee the
33
written disclosures and the letter required by Public Company Accounting Oversight Board (PCAOB) Rule 3526, “Communication with Audit Committees Concerning Independence,” and the Audit Committee has discussed with the independent auditors their independence. The Audit Committee has also considered whether the independent auditors’ provision of other non-audit services to the Company is compatible with maintaining auditor independence. The Audit Committee has concluded that the provision of non-audit services by the independent auditors was compatible with the maintenance of independence in the conduct of their auditing functions.
Based upon its review and discussions with management and the independent auditors and the reports of the independent auditors, and in reliance upon such information, representations, reports and opinions, the Audit Committee recommended that the Board of Directors approve the audited financial statements for inclusion in the Company’s annual report onForm 10-K for the year ended December 31, 2010, and the Board of Directors accepted the Audit Committee’s recommendations.
Members of the Audit Committee:
Kevin R. Collins (Chairman)
Jerrie F. Eckelberger
Russell S. Lewis
Jordan R. Smith
Daniel J. Taylor
PROPOSAL 4 — ADVISORY VOTE ON EXECUTIVE COMPENSATION
(THE SAY ON PAY VOTE)
Pursuant to the requirements of the Dodd-Frank Act, Delta seeks a non-binding advisory vote from holders of our Common Stock to approve the compensation of its named executive officers as described in the Compensation Discussion and Analysis and the Executive Compensation sections of this Proxy Statement. This proposal is also referred to as “the say on pay vote.”
As more fully described in the Compensation Discussion and Analysis section, our executive compensation programs are designed to attract, motivate, and retain our named executive officers, who are critical to our success. We believe that the various elements of our executive compensation program work together to promote our goal of ensuring that total compensation should be related both to Delta and individual performance.
Shareholders are urged to read the “Compensation Discussion and Analysis” section of this Proxy Statement, beginning on page 12, which discusses how our executive compensation policies implement our compensation philosophy, and the “Executive Compensation” section of this Proxy Statement beginning on page 18, which contains tabular information and narrative discussion about the compensation of our named executive officers, for additional details about our executive compensation programs. The Compensation Committee and the Board believe that these policies are effective in implementing our compensation philosophy and in achieving its goals.
We are asking our stockholders to indicate their support for our executive compensation as described in this Proxy Statement. This proposal gives our stockholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we are asking our stockholders to approve, on an advisory basis, the following resolution:
“RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the Company’s Named Executive Officers, as disclosed in this Proxy Statement, including the Compensation Discussion and Analysis, the executive compensation tables, and the narrative discussion under “Executive compensation” contained in the Proxy Statement.”
Because your vote is advisory, it will not be binding upon the Board. However, the Board values stockholders’ opinions and the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.
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Required Vote
Approval of Proposal 4 requires the affirmative vote of a majority of the votes cast in person or by proxy at the Annual Meeting.
Recommendation of the Board of Directors
The Board of Directors recommends a vote“FOR”the advisory vote on executive compensation.
PROPOSAL 5 — ADVISORY VOTE ON THE FREQUENCY OF HOLDING
THE SAY ON PAY VOTE
In addition to the advisory vote on executive compensation set forth in Proposal No. 4 above, the Dodd-Frank Act requires that stockholders have the opportunity to vote on how often they believe the advisory vote on executive compensation should be held in the future.
The Board believes that holding an advisory vote on executive compensation every year is the most appropriate policy for our stockholders and Delta at this time. Holding an annual advisory vote best enables the Board and the Compensation Committee to thoughtfully evaluate and respond to stockholder input and effectively implement any changes to Delta’s executive compensation program that they may deem necessary or appropriate.
While the Board recommends that stockholders vote to hold the say on pay vote every year, the voting options are to hold the say on pay vote every year, every two years or every three years. Stockholders may also abstain from voting on this proposal.
Because your vote is advisory, it will not be binding upon the Board. However, the Board values stockholders’ opinions and will consider the outcome of the vote when determining the frequency of the say on pay vote. While the Board is making a recommendation with respect to this proposal, stockholders are being asked to vote on the choices specified above, and not whether they agree or disagree with the Board’s recommendation.
Required Vote
For Proposal 5, the option of one year, two years, or three years that receives the highest number of votes cast by stockholders will be considered by the Board of Directors when determining the frequency of future advisory votes on executive compensation.
Recommendation of the Board of Directors
The Board of Directors recommends a vote for holding the say on pay vote EVERY YEAR.
STOCKHOLDER PROPOSALS
Any stockholder proposals to be included in the Board of Directors’ solicitation of proxies for the Annual Meeting of Stockholders to be held in May 2012 must be received by Stanley F. Freedman, Executive Vice President and Secretary, at 370 Seventeenth Street, Suite 4300, Denver, Colorado 80202, no later than January 1, 2012 in order to be included in the proxy statement and proxy relating to that meeting. Such proposals must comply with all of the requirements of SEC Rule14a-8.
In accordance with the Company’s Bylaws, in order for a stockholder to present any matter before the Annual Meeting to be held in May 2012 that is not to be included in the proxy statement and proxy,timely, a stockholder’s notice of such matter must be delivered to the Secretaryor mailed and received at the Company’sour principal executive offices (see preceding paragraph) not less than ninety90 days nor more than one hundred twenty120 days prior to the date of the meeting; provided, however, that in the event that public disclosure of the date of the meeting is first made less than one hundred100 days prior to the date of the meeting, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth day following the day on which such public disclosure of the date of the meeting was made. To be in proper written form, a stockholder’s notice regarding nominations of persons for election to the Board must set forth (a) as to each proposed nominee, (i) the name, age, business address and residence address of the nominee, (ii) the principal occupation or employment of the nominee, (iii) the class or series and number of shares of our capital stock which are owned beneficially or of record by the nominee and (iv) any other information relating to the nominee that would be required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder; and (b) as to the stockholder giving the notice, (i) the name and record address of such stockholder, (ii) the class or series and number of shares of our capital stock which are owned beneficially or of record by such stockholder, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.
Compensation of Directors. Our three employee directors are not separately compensated for their service as directors. Our non-employee directors receive an annual cash retainer of $62,500 and an annual retainer of $62,500 paid in common stock, provided that the non-employee directors may elect, at their option, to increase the stock component of the retainer with a corresponding reduction in the cash component of the retainer. Our Chairman receives total annual compensation of $200,000, with $100,000 in cash and $100,000 in common stock. The cash component of the retainer is paid quarterly and the stock component is paid quarterly at the beginning of the period to which the compensation relates in grants of restricted stock with a one-year vesting schedule from the date of grant. In addition, the Chairman of the Audit Committee receives an additional annual retainer of $20,000 and the members of the Audit Committee (other than the Chairman) receive an annual retainer of $7,000, such retainers paid quarterly in cash. The Chairman of the Compensation Committee receives an annual retainer of $15,000 and the Chairman of the Nominating and Corporate Governance Committee receives an annual retainer of $5,000. There are no fees for the members of any other committee or for attendance at meetings. Non-employee directors are also eligible to participate in the Stock Purchase Plan (the “SPP”) and the Par Petroleum Corporation Directors’ Deferred Compensation Plan, which is an unfunded compensation plan allowing non-employee directors to defer the payment of compensation to a future date. See “Stock Purchase Plan” below for a summary of the material terms of the SPP.
The following table sets forth a summary of the compensation that we paid to our non-employee directors in 2015:
|
| | | | | | | | | | | | | | | |
| Name | Fees Earned or
Paid in Cash ($) | | Stock Awards ($) (1) | | Option Awards
($) (1) | | Total ($) |
| Melvyn N. Klein (2) (3) | $ | 102,500 |
| | $ | 139,986 |
| | $ | 114,988 |
| | $ | 357,474 |
|
| Curtis V. Anastasio | $ | 172,500 |
| | $ | 78,120 |
| | $ | — |
| | $ | 250,620 |
|
| Timothy Clossey (3) | $ | 23,125 |
| | $ | 209,374 |
| | $ | 211,020 |
| | $ | 443,519 |
|
| L. Melvin Cooper | $ | 76,250 |
| | $ | 62,502 |
| | $ | — |
| | $ | 138,752 |
|
| Jake Mercer (4) | $ | — |
| | $ | 78,264 |
| | $ | — |
| | $ | 78,264 |
|
| William C. Pate (5) | $ | 65,000 |
| | $ | 46,882 |
| | $ | — |
| | $ | 111,882 |
|
| Robert S. Silberman (2) | $ | 81,250 |
| | $ | 62,502 |
| | $ | — |
| | $ | 143,752 |
|
| Walter A. Dods, Jr. (3) (6) | $ | 31,250 |
| | $ | 231,252 |
| | $ | 431,423 |
| | $ | 693,925 |
|
| |
| (1) | These amounts reflect the aggregate grant date fair value, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation (ASC 718), of awards pursuant to the 2012 Long Term Incentive Plan. Assumptions used in the calculation of these amounts are included in “Note 15– Stockholders’ Equity” to our audited financial statements for the fiscal year ended December 31, 2015 included in our 2015 Annual Report on Form 10-K filed with the SEC on March 3, 2016. As of December 31, 2015, Messrs. Klein, Anastasio, Clossey, Cooper, Pate, Silberman, and Dods had 7,157, 4,854, 7,512, 3,204, 6,485, 6,485 and 10,153 shares of restricted stock outstanding, respectively. As of December 31, 2015, Messrs. Klein, Anastasio, Clossey, Pate, Silberman, and Dods had 165,291, 167,123, 22,666, 786,454, 186,454, and 45,270 stock options outstanding, respectively, including grants of stock options subject to shareholder approval. |
| |
| (2) | Messrs. Klein and Silberman each received grants of 150,000 stock options on October 12, 2015 in recognition of time spent and duties performed by the Chairman and Vice-Chairman of the Board, respectively, in connection with Par's transition to Par Pacific Holdings, Inc. and in respect of future acquisitions and related transactions. The stock options are subject to shareholder approval and therefore have not yet been valued under ASC 718. These options will vest ratably over a 3-year period on October |
35
12, 2016, 2017 and 2018 with 100% accelerated vesting for certain events such as a change in control of the company.
| |
| (3) | Mr. Klein was granted 2,031 shares of restricted stock ($39,990) and 15,291 stock options ($114,988) on September 10, 2015 in connection with his participation in the SPP. Mr. Dods was granted 8,569 shares of restricted stock ($200,000) and 45,270 stock options ($431,423) on December 3, 2015 in connection with his participation in the SPP. Mr. Clossey was granted 4,308 shares of restricted stock ($99,989) and 22,666 stock options ($211,020) on December 14, 2015 in connection with his participation in the SPP. These awards will each vest ratably over a two-year period on each anniversary of the date of grant with 100% accelerated vesting for certain events such as a change in control of the company. |
| |
| (4) | Mr. Mercer resigned from the Board effective as of June 3, 2015. |
| |
| (5) | Mr. Pate was a non-employee director until October 20, 2015, when he joined the company as its President and Chief Executive Officer. Amounts only include compensation earned by Mr. Pate as a non-employee director. |
| |
| (6) | Mr. Dods joined the Board on June 3, 2015. |
Vote Required
The nine nominees for election as directors at the annual meeting who receive the greatest number of votes cast by the stockholders, a plurality, will be elected as our directors. 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” all nominees, “AGAINST” all nominees or withhold your vote for any one or more of the nominees.
Board Recommendation
Our Board of Directors recommends a vote “FOR” all nine nominees to the Board.
Proposal 2
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
General
The Audit Committee has selected Deloitte & Touche LLP, independent registered public accounting firm, to audit our consolidated financial statements for the fiscal year ending December 31, 2016. Deloitte & Touche has served as our independent registered public accounting firm since December 6, 2013. We are asking the stockholders to ratify the appointment of Deloitte & Touche as our independent registered public accounting firm for the fiscal year ending December 31, 2016. Deloitte & Touche 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 Par’s and our stockholders’ best interests.
The Audit Committee has approved all services provided by Deloitte & Touche. Representatives of Deloitte & Touche 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 2014 and 2015 for services performed by Deloitte & Touche LLP:
|
| | | | | | | |
| | 2014 | | 2015 |
Audit Fees(1) | $ | 1,651,710 |
| | $ | 2,026,758 |
|
Audit Related Fees(2) | 75,750 |
| | 155,817 |
|
Tax Fees(3) | — |
| | — |
|
All Other Fees(4) | 302,013 |
| | 4,500 |
|
| Total Fees | $ | 2,029,473 |
| | $ | 2,187,075 |
|
| |
| (1) | Audit fees are fees paid to Deloitte & Touche LLP for professional services related to the audit and quarterly reviews of our financial statements and for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements. |
| |
| (2) | Audit related fees are fees paid to Deloitte & Touche LLP for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements that are not reported above under “Audit Fees.” |
| |
| (3) | Tax fees are fees paid for tax compliance (including filing state and federal tax returns), tax advice and tax planning. Tax fees do not include fees for services rendered in connection with the audit. |
| |
| (4) | Other fees paid to Deloitte & Touche LLP for the fiscal year ended December 31, 2014 include $257,962 for information technology advisory services, $40,000 for a network penetration study and $4,051 for a subscription to an accounting research tool. Other fees for the fiscal year ended December 31, 2015 include fees for a subscription to an accounting research tool. |
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of
Independent Registered Public Accounting Firm
Our independent registered public accounting firm may not be engaged to provide non-audit services that are prohibited by law or regulation to be provided by it, nor may our independent registered public accounting firm be engaged to provide any other non-audit service unless it is determined that the engagement of the principal accountant provides a business benefit resulting from its inherent knowledge of us while not impairing its independence. Our Audit Committee must pre-approve permissible non-audit services. During each of the periods
ended in fiscal years 2015 and 2014, our Audit Committee approved 100% of the non-audit services provided to us by our independent registered public accounting firm.
Audit Committee Report
The Audit Committee assists our Board of Directors in overseeing (i) the integrity of Par’s financial statements, (ii) Par’s compliance with legal and regulatory requirements, (iii) the independent registered public accounting firm’s qualifications and independence, and (iv) the performance of Par’s internal auditors (or other personnel responsible for the internal audit function) and Par’s independent registered public accounting firm. In so doing, it is the responsibility of the committee to maintain free and open communication between the directors, the independent registered public accounting firm and the financial management of Par. The committee is directly responsible for the appointment, compensation, retention and oversight of the work of the independent registered public accounting firm for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for Par. The independent registered public accounting firm reports directly to the committee.
Management is responsible for the preparation, presentation, and integrity of Par’s 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 Par’s system of internal control over financial reporting. Par’s independent auditor, Deloitte & Touche LLP, is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States. The independent auditor is also responsible for expressing an opinion on the effectiveness of Par’s internal control over financial reporting. The committee’s responsibility is to monitor and oversee these processes and the engagement, independence and performance of Par’s 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, with and without management present, to discuss the independent auditor’s opinion about the effectiveness of Par’s internal control over financial reporting. The committee also discussed with the independent auditor 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 Par’s consolidated financial statements and the matters required to be discussed by the statement on Auditing Standards No. 16, Communication with Audit Committees, as adopted by the Public Company Accounting Oversight Board ("PCAOB").
Our independent auditor also provided to the committee the written disclosures and the letter required by applicable standards of the PCAOB regarding the independent auditor’s communications with the committee concerning independence, and the committee discussed with the independent auditor its independence. When considering Deloitte & Touche’s independence, the committee considered the non-audit services provided to Par by the independent auditor and concluded that such services are compatible with maintaining the auditor’s independence.
The committee has reviewed and discussed Par’s audited consolidated financial statements for the fiscal year ended December 31, 2015 with management and Deloitte & Touche. 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 Par’s audited consolidated financial statements be included in Par’s Annual Report on Form 10-K as filed with the SEC.
AUDIT COMMITTEE
Curtis V. Anastasio, Chairman
Timothy Clossey
L. Melvin Cooper
Vote Required
The approval of the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016 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 Deloitte & Touche LLP, you may vote “FOR” or “AGAINST” or abstain from voting.
Board Recommendation
The Board recommends that you vote “FOR” the ratification of appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016.
Proposal 3
PROPOSAL TO APPROVE THE AMENDED AND RESTATED PAR PACIFIC HOLDINGS, INC.
2012 LONG-TERM INCENTIVE PLAN
In February 2016, the Board, upon the recommendation of the Compensation Committee (the “Committee”), unanimously approved and adopted the Amended and Restated Par Pacific Holdings, Inc. 2012 Long-Term Incentive Plan, a copy of which is attached hereto as Appendix A and is incorporated by reference herein (the “Updated 2012 LTIP”), subject to the approval of our stockholders. The Updated 2012 LTIP amends and restates the company’s 2012 Long-Term Incentive Plan (the “Original Plan”). The Updated 2012 LTIP: (i) authorizes an additional 2,400,000 shares to be available for issuance with respect to awards under the Updated 2012 LTIP, (ii) authorizes the payment of certain cash awards under the Updated 2012 LTIP, (iii) updates and revises the company’s performance goals under Section 162(m) Internal Revenue Code of 1986, as amended (the “Tax Code”), and makes (iv) makes other nonmaterial revisions.
The Original Plan was established and adopted by the Board effective as of December 20, 2012 (the “Effective Date”) and amended effective as of November 4, 2015, subject to stockholder approval, to authorize an additional 2,400,000 shares to be available for issuance with respect to awards (the “Amendment”). The Original Plan, including the Amendment, was amended and restated as the Updated 2012 LTIP, by the Board effective as of February 16, 2016 subject to stockholder approval. Approval by the stockholders of the Updated 2012 LTIP includes approval of the Amendment by the stockholders.
The Committee and our Board believe that the Updated 2012 LTIP is integral to our compensation strategy. By increasing the aggregate number of shares that may be issued with respect to awards under the Updated 2012 LTIP, the company will have the flexibility that we need to keep pace with our competitors and to effectively recruit, motivate and retain the caliber of employees and directors essential for our success, including employee and director retention in connection with our acquisition strategy. While we are cognizant of the potential dilutive effect of compensatory share awards, we also recognize the significant motivational, retention and performance benefits that are achieved from making awards under the Updated 2012 LTIP.
The Original Plan, when adopted, authorized 1,600,000 shares of common stock for issuance (as adjusted for a subsequent reverse stock split). If approved by our stockholders, a total of 4,000,000 shares of common stock will be authorized for issuance under the Updated 2012 LTIP. As of April 6, 2016, awards representing 2,705,976 shares of common stock are outstanding pursuant to the Updated LTIP. Of this amount, (i) 1,742,785 shares are subject to outstanding options to purchase shares of our common stock at an average weighted exercise price of $20.13 per share and a weighted average contractual term of 4.2 years, including 1,101,543 million options to purchase shares of common stock that are subject to shareholder approval, and (ii) 963,191 shares representing restricted stock or restricted stock units. The company has not previously sought approval by stockholders of an increase in the amount of shares available for issuance under the Original Plan.
Description of the Updated 2012 LTIP
The description of the Updated 2012 LTIP set forth below is a summary of the material features of the Updated 2012 LTIP. This summary, however, does not purport to be a complete description of all the provisions of the Updated 2012 LTIP. The summary is qualified in its entirety by reference to the Updated 2012 LTIP, a copy of which is attached hereto as Exhibit A and incorporated herein by reference.
Highlights of the Updated 2012 LTIP
The Board recommends that our stockholders approve the Updated 2012 LTIP because it believes that employee and nonemployee director ownership in the company serves the best interests of all stockholders by promoting a focus on long-term increase in stockholder value. The Updated 2012 LTIP includes a number of provisions that we believe promote best practices by reinforcing the alignment of equity compensation arrangements for nonemployee directors, officers, and employees and stockholders’ interests. These provisions include, but are not limited to, the following:
No Discounted Awards. Awards that have an exercise price cannot be granted with an exercise price less than the fair market value on the grant date.
No Repricing Without Stockholder Approval. We cannot, without stockholder approval, reduce the exercise price of an award (except for adjustments in connection with a company recapitalization), and at any time when the exercise price of an award is above the market value of our common stock, we cannot, without stockholder approval, cancel and re-grant or exchange such award for cash, other awards or a new award at a lower (or no) exercise price.
No Evergreen Provision. There is no evergreen feature under which the shares of common stock authorized for issuance under the Updated 2012 LTIP can be automatically replenished.
No Automatic Grants. The Updated 2012 LTIP does not provide for “reload” or other automatic grants to recipients.
No Transferability. Awards generally may not be transferred, except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order, unless approved by the Committee.
No Tax Gross-Ups. The Updated 2012 LTIP does not provide for any tax gross-ups.
Minimum Vesting requirements. Subject to certain limited exceptions, awards under the Updated 2012 LTIP will be subject to a minimum vesting period of one year.
No liberal change-in-control definition. The change-in-control definition contained in the Updated 2012 LTIP is not a “liberal” definition that would be activated on mere stockholder approval of a transaction.
“Double-trigger” change in control vesting. If awards granted under the Updated 2012 LTIP are assumed by a successor in connection with a change in control of the company, such awards will not automatically vest and pay out solely as a result of the change in control.
Limitation on amendments. No amendments to the Updated 2012 LTIP may be made without stockholder approval if any such amendment would materially increase the number of shares reserved or the per-participant award limitations under the Updated 2012 LTIP, diminish the prohibitions on repricing stock options or stock appreciation rights, or otherwise constitute a material change requiring stockholder approval under applicable laws, policies or regulations or the applicable listing or other requirements of the principal exchange on which the company’s shares are traded.
Administered by an independent committee. The Updated 2012 LTIP will be administered by the Committee, which is comprised entirely of independent directors. See page 9 for more information about the Committee.
Clawbacks. Awards based on the satisfaction of financial metrics that are subsequently reversed, due to a financial statement restatement or reclassification, are subject to forfeiture.
Shares Subject to the Updated 2012 LTIP
If the Updated 2012 LTIP is approved by our stockholders, the maximum number of shares of common stock that may be issued with respect to awards under the Updated 2012 LTIP will be 4,000,000. To the extent that an award terminates or is canceled prior to the vesting of the award (or if an award is forfeited), the shares subject to the award may be used again with respect to new awards granted under the Updated 2012 LTIP.
Administration
The Updated 2012 LTIP will continue to be administered by the Committee. The Committee has the full authority, subject to the terms of the Updated 2012 LTIP, to establish, amend, suspend, or waive such restrictions and conditions as it shall deem appropriate for the proper administration of the Updated 2012 LTIP, to designate participants under the Updated 2012 LTIP, to determine the number of shares subject to awards, to determine the type or types of awards to be granted to a participant, and to determine the terms and conditions of any award. The Committee may, however, authorize any one or more of its members or an officer of the company to execute and deliver documents on behalf of the Committee, or delegate to an officer the authority to make certain decisions under the Updated 2012 LTIP.
Eligibility
All employees, consultants, and directors of the company and its affiliates that perform services for us are eligible to be granted awards under the Updated 2012 LTIP. The selection of which eligible individuals will receive awards is within the sole discretion of the Committee.
Term of the Updated 2012 LTIP
The term of the Updated 2012 LTIP will expire on the earlier of (1) the date it is terminated by our Board; (2) the date all shares available for issuance under the Updated 2012 LTIP have been issued and all restrictions on such shares under the Updated 2012 LTIP have lapsed; and (3) December 20, 2022; provided, however, that with respect to any award tied to the additional 2,400,000 shares added pursuant to the Updated 2012 LTIP, those awards will be granted on or before November 5, 2025.
Limitations on Awards Granted to Recipient
No recipient may be granted options or stock appreciation rights (i) during any calendar year prior to December 31, 2015 with respect to more than 3,500,000 shares of common stock, and (ii) during any calendar year beginning after January 1, 2016, with respect to 350,000 shares. No recipient may be granted restricted stock awards, restricted stock unit awards, performance awards or other stock-based awards that are denominated in shares of common stock during any calendar year with respect to more than 250,000 shares of common stock. The maximum aggregate cash payout (including restricted stock units, stock appreciation rights, performance awards, other stock-based awards paid out in cash or cash awards) that may be made to any Participant with respect to awards granted (i) during any calendar year prior to December 31, 2015 shall be $8,000,000 and (ii) during any calendar year beginning after January 1, 2016, shall be $2,500,000. With respect to any option or stock appreciation right granted to a participant that is canceled, the number of shares of common stock subject to such option or stock appreciation right shall continue to count against the maximum number of shares of common stock that may be the subject of options or stock appreciation right granted to such participant hereunder to the extent such is required in accordance with Section 162(m) of the Tax Code.
In addition, no director of the company, except the chairman and the vice chairman of the Board, may be granted awards with an aggregate grant date value in excess of $375,000 in any calendar year. Such limitation does not apply to any cash retainer fees, including cash retainer fees converted into equity awards at the election of the Director.
Awards
The Updated 2012 LTIP is broad-based and flexible, providing for awards to be made in the form of (a) restricted stock and restricted stock units, (b) incentive stock options, which are intended to qualify under Section 422 of the Tax Code, (c) non-qualified stock options, which are not intended to qualify under Section 422 of the Tax Code, (d) stock appreciation rights, (e) performance awards, (f) performance shares, (g) performance units or (f) other stock-based awards that relate to or serve a similar function to the awards described above. Awards may be made on a standalone, combination or tandem basis. Additional information about some of the awards is set forth below.
Awards of Restricted Common Stock Awards and Restricted Stock Units. Awards of restricted common stock are shares of common stock awarded to the recipient, all or a portion of which are subject to a restriction period set by the Committee during which restriction period the recipient shall not be permitted to sell, transfer or pledge the restricted common stock. Restricted stock units are notional accounts that are valued solely by reference to shares of common stock, subject to a restriction period set by the Committee and payable in common stock, cash or a combination thereof. The restriction period for both restricted stock and restricted stock units may be based on period of service, performance of the recipient or the company, subsidiary, division or department for which the recipient is employed or such other factors as the Committee may determine.
Rights as a Stockholder. The award agreement may provide that a recipient of restricted common stock will possess all of the rights of a holder of common stock of the company, including the right to vote and receive dividends (subject to forfeiture). The recipient of restricted stock units shall not have any of the rights of a stockholder of the company; the Committee shall be entitled to specify with respect to any restricted stock unit award that upon the payment of a dividend by the company, the company will hold in escrow an amount in cash equal to the dividend that would have been paid on the restricted stock units had they been converted into the same
number of shares of common stock and held by the recipient on that date. Upon adjustment and vesting of the restricted stock unit, any cash payment due with respect to such dividends shall be made to the recipient.
Termination of Employment or Director Relationship. Generally, upon termination of employment or a director relationship for any reason during the restricted period, the recipient will forfeit the right to the shares of restricted common stock to the extent that the applicable restrictions have not lapsed at the time of such termination.
Common Stock Options
Types. Common stock options may be granted under the Updated 2012 LTIP to directors in the form of nonqualified stock options and to employees in the form of incentive stock options or nonqualified stock options.
Exercise Price. The per share exercise price for shares underlying common stock options will be determined by the Committee, provided that the exercise price must be at least equal to 100% of the fair market value per share of common stock on the date of grant. In the case of an incentive stock option granted to an employee who, at the time of grant, owns more than 10% of the total combined voting power of all classes of stock of the company, the per share exercise price must be at least equal to 110% of the fair market value per share of common stock on the date of grant.
Term of Option; Vesting. The term during which a common stock option may be exercised will be determined by the Committee, provided that no common stock option will be exercisable more than ten (10) years from the date of grant. In the case of an incentive stock option granted to an employee who, at the time of grant, owns more than 10% of the total combined voting power of all classes of stock of the company or its subsidiaries, the term of such common stock option may not be more than five (5) years. The Committee has full authority, subject to the terms of the Updated 2012 LTIP, to determine the vesting period or limitation or waiting period with respect to any common stock option granted to a participant or the shares purchased upon exercise of such option; provided, however, that such vesting restriction or limitation or waiting period shall not be less than one (1) year. In addition, the Committee may, for any reason, accelerate the exercisability of any common stock option.
Other Awards
Stock Appreciation Rights. The Committee may grant to an employee or a director a right to receive the excess of the fair market value of shares of the company’s common stock on the date the stock appreciation right is exercised over the fair market value of such shares on the date the stock appreciation right was granted. Such spread may, in the sole discretion of the Committee, be paid in cash or common stock or a combination of both.
Performance Awards. The Committee may grant performance awards to employees based on the performance of a recipient over a specified period. Such performance awards may be awarded contingent upon future performance of the company or its affiliates or subsidiaries during that period. A performance award may be in the form of common stock (or cash in an amount equal to the fair market value thereof) or the right to receive an amount equal to the appreciation, if any, in the fair market value of common stock over a specified period. Performance awards may be paid, in the Committee’s discretion, in cash or stock or some combination thereof. Each performance award will have a maximum value established by the Committee at the time the award is made. Unless otherwise provided in an award or by the Committee, performance awards terminate if the recipient does not remain an employee or director of the company, or its affiliates or subsidiaries, at all times during the applicable performance period.
Other Stock-Based Awards. The Committee may, in its discretion, grant other stock-based awards that are related to or serve a similar function to the awards described above.
Cash Awards. The Committee may, in its discretion, grant a cash award, which is an award to be settled only in cash, pursuant to an award agreement to any participant. The award agreement shall specify the vesting schedule for the cash award. The Committee, in its discretion may condition vesting on the satisfaction of performance goals. The terms of a cash award need not be the same with respect to each participant and need not relate to the fair market value of a share of stock.
Material Terms of Performance Goals for Qualified Performance-Based Compensation
Under Section 162(m) of the Tax Code, in order for the company to deduct compensation in excess of $1,000,000 that is paid in any year to any “covered employee,” such compensation must be treated as “qualified
performance-based,” within the meaning of Section 162(m) of the Tax Code. A “covered employee” is defined under Section 162(m) of the Tax Code as a company’s principal executive officer or any of such company’s three other most highly compensated executive officers named in the proxy statement (other than the principal executive officer or principal financial officer). Section 8.2(c) of the Updated 2012 LTIP sets forth the procedures the Committee should follow to avoid the deductibility limitations of Section 162(m) of the Tax Code when making long-term incentive performance awards under the Updated 2012 LTIP to current covered employees and employees whom the Committee anticipates may become covered employees between the time of grant and payment of the award. However, there can be no guarantee that amounts payable under the Updated 2012 LTIP will be treated as “qualified performance-based” compensation and the company reserves the flexibility to pay nondeductible compensation when necessary to achieve our compensation objectives.
Among other things, in order for an award under Section 8.2(c) of the Updated 2012 LTIP to be treated as “qualified performance-based” compensation that is not subject to the $1,000,000 cap, stockholder approval of the material terms of the performance goals is required at least every five (5) years. The material terms include the employees eligible to receive the compensation, a description of the performance criteria and the maximum amount of compensation that may be paid to any one employee. A description of the material terms for qualified performance-based compensation in the Updated 2012 LTIP follows.
Employees Eligible to Receive Compensation. A performance-based award under the Updated 2012 LTIP may be granted to employees (including officers) of the company, its subsidiaries and affiliates. In addition, a performance-based award may be granted to a person who is offered employment by the company or a subsidiary or affiliate of the company, provided that such award shall be immediately forfeited if such person does not accept such offer of employment within an established time period.
Performance Criteria. When making an award under the Updated 2012 LTIP, the Committee may designate the award as “qualified performance-based compensation,” which means that performance criteria must be satisfied in order for an employee to be paid the award. Qualified performance-based compensation may be made in the form of restricted common stock, restricted stock units, common stock options, performance shares, performance units or other stock equivalents. Section 8.2(c) of the Updated 2012 LTIP includes the performance criteria the Committee has adopted, subject to stockholder approval, for a “qualified performance-based compensation” award, which shall consist of objective tests based on one or more of the following: (A) pre-tax or after tax profit levels, including: earnings per share, earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization, net operating profits after tax, and net income; (B) total stockholder return; (C) return on assets, equity, capital or investment; (D) cash flow and cash flow return on investment; (E) cash from operating activities; (F) revenues; (G) financial return ratios; (H) profit returns and margins; (I) stock price; (J) stock price compared to a peer group of companies; (K) working capital; (L) selling, general and administrative expenses; (M) discounted cash flows; (N) productivity; (O) expense targets; (P) market share; (Q) cost control measures; (R) strategic initiatives; (S) economic value added and economic profit; (T) growth in earnings per share; (U) reserves added; (V)measures of customer satisfaction and customer service (W) changes between years or periods that are determined with respect to any of the above listed performance criteria; (X) net present value; and (Y) economic profit.
The Committee may establish performance goals applicable to awards based upon criteria in one or more of the following categories: (i) performance of the company as a whole, (ii) performance of a segment of the company’s business, and (iii) individual performance. Performance criteria for the company must relate to the achievement of predetermined financial, operational or strategic objectives for the company and its subsidiaries. Performance criteria for a segment of the company’s business must relate to the achievement of financial, operational or strategic objectives of the segment for which the participant is accountable. In order to qualify as performance-based under Section 162(m) of the Tax Code, the performance criteria will be established before 25% of the performance period has elapsed and will not be subject to change (although future awards may be based on different performance criteria). The performance periods may extend over one to five calendar years, and may overlap one another, although no two performance periods may consist solely of the same calendar years. Individual performance criteria will relate to a participant’s overall performance, taking into account, among other measures of performance, the attainment of individual goals and objectives. The performance goals may differ among participants and shall be established in accordance with Section 162(m) of the Tax Code.
Other Provisions
Withholding Obligations. The company may take such steps as are considered necessary or appropriate for the withholding of any federal, state, local or foreign taxes of any kind that the company is required by any law or regulation of any governmental authority to withhold in connection with any award under the Updated 2012 LTIP,
including, without limiting the generality of the foregoing, the withholding of all or any portion of any payment or the withholding of the issue of shares of common stock to be issued under the Updated 2012 LTIP, until such time as the recipient has paid the company for any amount the company is required to withhold with respect to taxes. Unless otherwise determined by the Committee, withholding obligations may be settled with vested common stock, including vested common stock that is part of the award that gives rise to the withholding requirement. The Committee may establish such procedures as it deems appropriate, including the making of irrevocable elections, for the settlement of withholding obligations with vested common stock.
Adjustments
The Committee will make appropriate adjustments in the event of any stock dividend or extraordinary cash dividend, stock split, reverse stock split, combination, reclassification or similar change in the capital structure of the company.
Termination or Amendment
The Committee may terminate or amend the Updated 2012 LTIP at any time; provided, however, that shareholder approval will be obtained for any amendment to the Updated 2012 LTIP to the extent necessary to comply with any applicable law, regulation or securities exchange rule. The Committee may also amend any outstanding award made under the Updated 2012 LTIP, provided that no change in any outstanding award may be made that would materially reduce the rights or benefits of the participant without the consent of the affected participant.
Certain United States Federal Income Tax Consequences
The following discussion is limited to a summary of the U.S. federal income tax provisions relating to the making, exercise and vesting of awards under the Updated 2012 LTIP and the subsequent sale of common stock acquired under the Updated 2012 LTIP. The tax consequences of awards may vary depending upon the particular circumstances, and it should be noted that the income tax laws, regulations and interpretations thereof change frequently. Participants should rely upon their own tax advisors for advice concerning the specific tax consequences applicable to them, including the applicability and effect of state, local, and foreign tax laws.
Nonstatutory Stock Options
There will be no federal income tax consequences to the optionee or to the company upon the grant of a stock option under the Updated 2012 LTIP. When the optionee exercises a stock option, however, he or she will recognize ordinary income in an amount equal to the excess of the fair market value of the common stock received upon exercise over the exercise price, and the company expects that it will be allowed a corresponding deduction. Any gain that the optionee realizes when he or she later sells or disposes of the option shares will be short-term or long-term capital gain, depending on how long the shares were held.
Incentive Stock Options
Generally, a participant will not recognize any income for federal income tax purposes at the time an incentive stock option is granted, or on the qualified exercise of an incentive option, but instead will recognize capital gain or loss upon the subsequent sale of shares acquired in a qualified exercise. The exercise of an incentive option is qualified if an optionee does not dispose of the shares acquired by such exercise within two (2) years after the incentive option grant date and one (1) year after the exercise date. We are not entitled to a tax deduction as a result of the grant or the exercise of qualified exercise of an incentive option.
Stock Appreciation Rights
A participant receiving a stock appreciation right will not recognize income, and the company will not be allowed a tax deduction, at the time the award is granted. When the participant exercises the stock appreciation right, the amount of cash and the fair market value of any shares of common stock received will be ordinary income to the participant and the company expects that it will be allowed a corresponding federal income tax deduction at that time.
Restricted Stock
Unless a participant makes an election to accelerate recognition of income to the date of grant as described below, the participant will not recognize income, and the company will not be allowed a tax deduction, at the time a restricted stock award is granted, provided that the award is subject to restrictions on transfer and is subject to a substantial risk of forfeiture. When the restrictions lapse, the participant will recognize ordinary income equal to the
fair market value of the common stock as of that date (less any amount he or she paid for the stock), and the company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Section 162(m) of the Tax Code. If the participant files an election under Section 83(b) of the Tax Code within 30 days after the date of grant of the restricted stock, he or she will recognize ordinary income as of the date of grant equal to the fair market value of the stock as of that date (less any amount paid for the stock), and the company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Section 162(m) of the Tax Code. Any future appreciation in the stock will be taxable to the participant at capital gains rates. However, if the stock is later forfeited, the participant will not be able to recover the tax previously paid pursuant to the Section 83(b) election. To the extent unrestricted dividends are paid during the restricted period under the applicable award agreement, any such dividends will be taxable to the participant at ordinary income tax rates and will be deductible by the company unless the participant has made a Section 83(b) election, in which case the dividends will thereafter be taxable to the participant as dividends and will not be deductible by the company.
Stock Units
A participant will not recognize income, and the company will not be allowed a tax deduction, at the time a stock unit award is granted. Stock unit awards are made in the form of restricted stock units. Upon receipt of shares of common stock (or the equivalent value in cash) in settlement of a stock unit award, a participant will recognize ordinary income equal to the fair market value of the common stock or other property as of that date, and the company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Section 162(m) of the Tax Code.
Cash-Based Awards
A participant will not recognize income, and the company will not be allowed a tax deduction, at the time a cash-based award is granted (for example, when the performance goals are established). Upon receipt of cash in settlement of the award, a participant will recognize ordinary income equal to the cash received, and the company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Section 162(m) of the Tax Code.
Section 409A
If an award is subject to Section 409A of the Tax Code (which relates to nonqualified deferred compensation plans), and if the requirements of Section 409A are not met, the taxable events as described above could apply earlier than described, and could result in the imposition of additional taxes and penalties. All awards that comply with the terms of the Updated 2012 LTIP, however, are intended to be exempt from the application of Section 409A of the Tax Code or meet the requirements of Section 409A in order to avoid such early taxation and penalties.
Tax Withholding
The company has the right to deduct or withhold, or require a participant to remit to the company, an amount sufficient to satisfy the company’s federal, state and local tax withholding obligations (including employment taxes) imposed by law with respect to any exercise, lapse of restriction or other taxable event arising as a result of the Updated 2012 LTIP. The Committee may, at the time the award is granted or thereafter, require or permit that any such withholding requirement be satisfied, in whole or in part, by delivery of, or withholding from the award, shares having a fair market value on the date of withholding equal to the amount required to be withheld for tax purposes.
Plan Benefits Under the Updated 2012 LTIP
Except as set forth below, the amount of any future benefits that may be received by any one individual or group of individuals under the Updated 2012 LTIP is not presently determinable. Such awards are within the discretion of the Committee, and the Committee has not determined future awards or who might receive them. As evidenced by our reasonable burn rate and the fact that we have not sought to authorize an increase in common shares since the adoption of the Original Plan on December 20, 2012, the Committee and the Board have been judicious in granting such awards and have displayed a sensitivity to minimizing the impact of the potential dilution that such awards could have on our stockholders. However, as the Updated 2012 LTIP does not contemplate the amount or timing of specific future equity awards, it is not possible to calculate the amount of subsequent dilution that may ultimately result from such awards.
The grants shown in the table below were made pursuant to the Updated 2012 LTIP (i) to the named executive officers, (ii) to the company's employees who are executive officers (in the aggregate), (iii) to the
company's non-employee directors (in the aggregate), and (iv) to the company's employees who are not executive officers (in the aggregate).
|
| | | | | | | |
| Name and Position | | Number of Options (1) | | Dollar Value of Shares (2) |
| William C. Pate - President, Chief Executive Officer and Director | | 750,000 |
| | $ | — |
|
| Joseph Israel - Senior Vice President | | — |
| | $ | — |
|
| William Monteleone - Senior Vice President of Mergers & Acquisitions | | 18,921 |
| | $ | 290,000 |
|
| Christopher Micklas - Chief Financial Officer | | 16,311 |
| | $ | 250,000 |
|
| James Matthew Vaughn - Senior Vice President and General Counsel | | 16,311 |
| | $ | 240,000 |
|
| Jim Yates - Senior Vice President, Marketing and Logistics | | — |
| | $ | — |
|
| Kelly Rosser - Vice President and Chief Accounting Officer | | — |
| | $ | — |
|
| All executive officers, as a group | | 801,543 |
| | $ | 780,000 |
|
| | | | | |
| All non-employee directors, as a group | | 300,000 |
| | $ | — |
|
| | | | | |
| All employees who are not executive officers, as a group | | — |
| | $ | — |
|
| |
| (1) | Each of the option grants set forth in the table above is subject to shareholder approval. |
| |
| (2) | Each of the stock grants set forth in the table above is also subject to shareholder approval. The number of shares of restricted stock to be issued to Messrs. Monteleone, Micklas and Vaughn upon receipt of shareholder approval is 12,614, 10,874, and 10,439, respectively. The number of shares to be granted was based on the dollar value of the share grants set forth above divided by the closing stock price on February 16, 2016, the date the awards were approved by the Compensation Committee of the Board of Directors. |
Potential Dilutive Impact of Plan
We are committed to effectively managing our employee equity compensation programs while minimizing stockholder dilution. For this reason, in administering our equity compensation program, we consider both our “burn rate” and our “overhang” in evaluating the impact of the program on our stockholders. We define “burn rate” as the number of equity awards granted during the year, divided by the weighted average number of shares of common stock outstanding during the period. The burn rate measures the potential dilutive effect of our equity grants. We define “overhang” as the number of full value awards granted (but not yet vested or issued) and stock options granted (but not yet exercised) divided by the number of shares of common stock outstanding at the end of the period.
Burn Rate Analysis
The Committee approved and recommended that the Board approve an increase of the number of available shares of common stock under the Original Plan by 2,400,000 shares to increase the total authorized shares to 4,000,000, based on its analysis that this amount is expected to be sufficient to cover awards for at least three years depending on the price of our common stock at the time of actual grants. The Board subsequently approved the Amendment which is included in the Updated 2012 LTIP, subject to approval by our stockholders. In setting the amount of shares subject to the Updated 2012 LTIP, the Committee and the Board considered the historical amounts of equity awards the company has granted in the past three years. Using grants under the Original Plan prior to the Amendment, without including grants which are subject to stockholder approval of the Updated 2012 LTIP under this Proposal 3, the company calculated its three-year average equity share usage at approximately 2.0% of the weighted average common shares outstanding. The Committee intends to manage the company’s burn rate by continuing to review institutional investor guidelines and market practices, and, in connection with that, believes the 2,400,000 shares of common stock for which stockholder approval is being sought represents an appropriate increase at this time.
Overhang Analysis
In setting the amount of additional shares included in the Updated 2012 LTIP, the Compensation Committee and the Board also considered the total amount of awards outstanding under existing grants. As of
December 31, 2015 (not including grants which are subject to stockholder approval of the Updated 2012 LTIP under this Proposal 3), awards covering an aggregate of 1,133,287 shares of common stock were outstanding under the Original Plan. Accordingly, our outstanding awards and shares available for issuance under the Original Plan, consisting of approximately 1.2 million shares of common stock (commonly referred to as the “overhang”), represented approximately 2.8% of our outstanding shares of common stock as of December 31, 2015, on a fully diluted basis. If stockholders approve the additional 2,400,000 shares of common stock under the Updated 2012 LTIP, the total potential overhang will be approximately 8.8% if such shares are awarded, which we believe is within industry norms.
Criteria Relied Upon for Equity Award Grant Decisions
In making its decisions regarding equity award grants, the Committee generally considers the scope of the potential grantee’s responsibility at the company, the relative internal value to the company of the position, the potential grantee’s experience, past performance, and expected future contributions to the company, the need to attract or retain the particular potential grantee, and, in the case of executive officers, peer group data provided by the Compensation Committee’s independent consultant. The Compensation Discussion and Analysis, found on pages 26 through 39 of this Proxy Statement, describes in further detail the criteria and measures used by the Committee in making equity award grant determinations for our named executive officers in 2015. These determinations are in turn submitted by the Committee to the Board of Directors for ratification. The Committee and Board of Directors intend to continue to consider the company’s equity expenditures in a manner that effectively attracts, retains, and motivates individuals to achieve long-term value creation in line with the interests of our stockholders.
Vote Required
The approval of the Updated 2012 LTIP 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 effect as votes against this proposal. Because brokers do not have discretionary authority to vote on this proposal, broker non-votes will not affect the outcome of the vote on this proposal. For the approval of this proposal, you may vote "FOR" or "AGAINST" or abstain from voting.
Board Recommendation
The Board recommends that you vote “FOR” the approval of the Updated 2012 LTIP.
OTHER INFORMATION
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial ownership of common stock as of April 6, 2016 of (i) each person who is known by us to own beneficially more than five percent of our outstanding shares of common stock, (ii) each Named Executive Officer, (iii) each of our directors and (iv) all of our directors and executive officers as a group. Unless otherwise noted, the mailing address of each person or entity named below who is known by us to beneficially own more than five percent (5%) of our outstanding shares of common stock is 800 Gessner Road, Suite 875, Houston, Texas 77024.
|
| | | | | | | |
| Beneficial holders | | Amount and Nature of Beneficial
Ownership(1) | |
| | | Number | | Percentage | |
| 5% Stockholders: | | | | | |
Zell Credit Opportunities Master Fund, L.P. (2) | | 12,571,038 |
| | 30.9 | % |
|
Whitebox Advisors, LLC (3) | | 7,846,023 |
| | 20.0 | % |
|
| Directors and Named Executive Officers: | | | | | |
| | | | | | |
| Curtis V. Anastasio (4) | | 87,775 |
| | * |
| |
| Timothy Clossey | | 34,799 |
| | * |
| |
| L. Melvin Cooper | | 12,559 |
| | * |
| |
| Walter A. Dods, Jr. | | 52,998 |
| | * |
| |
| Joseph Israel (5) | | 75,452 |
| | * |
| |
| Melvyn N. Klein | | 21,339 |
| | * |
| |
| Christopher Micklas (6) | | 70,158 |
| | * |
| |
| William Monteleone (7) | | 172,980 |
| | * |
| |
| William C. Pate (8) | | 60,669 |
| | * |
| |
| Kelly Rosser (9) | | 18,497 |
| | * |
| |
| Robert S. Silberman (10) | | 62,826 |
| | * |
| |
| James Matthew Vaughn (11) | | 64,015 |
| | * |
| |
| Jim Yates (12) | | 28,638 |
| | * |
| |
| All directors and executive officers as a group (13 persons) | | 762,705 |
| | 1.9 | % |
|
* Denotes less than 1% beneficially owned.
| |
| (1) | Based on 40,670,011 common shares outstanding as of April 6, 2016. |
| |
| (2) | Information based solely upon the Schedule 13D/A jointly filed with the SEC on November 24, 2015 by Zell Credit Opportunities Master Fund, L.P., Chai Trust Company, LLC, ZCOF Par Petroleum Holdings, L.L.C, and EGI Investors, L.L.C. Chai Trust Company, LLC is the sole member of EGI Investments, L.L.C.., and the general partner of Zell Credit Opportunities Master Fund, L.P., which is the sole member of ZCOF Par Petroleum Holdings, L.L.C. The address of these entities is Two North Riverside Plaza, Suite 600, Chicago, Illinois 60606. |
| |
| (3) | Information based solely upon the Form 4 jointly filed with the SEC on February 12, 2016 by Whitebox, Whitebox General Partner LLC ("WGP"), Whitebox Asymmetric Partners, L.P., Whitebox Multi-Strategy Partners, L.P., Whitebox Credit Advisor, LLC, Whitebox Relative Value Advisors, LLC, Pandora Select Partners, L.P., Whitebox Special Opportunities Fund, LP – Series O, Whitebox Institutional Partners, LP, and Whitebox Tactical Opportunities Fund, a series of Whitebox Mutual Funds a Delaware Statutory Trust. WGP is the general partner of the Whitebox funds and has voting and dispositive power over the shares held by Whitebox. The address of Whitebox is 3033 Excelsior Blvd., Minneapolis, MN 55416. Includes 345,135 shares issuable upon the exercise of warrants held by entities affiliated with Whitebox. |
| |
| (4) | Includes 58,562 shares issuable upon the exercise of vested options. |
| |
| (5) | Includes 31,999 shares issuable upon the exercise of vested options. |
| |
| (6) | Includes 14,159 shares issuable upon the exercise of vested options. |
| |
| (7) | Includes 55,615 shares issuable upon the exercise of vested options. |
| |
| (8) | Includes 18,227 shares issuable upon the exercise of vested options. |
| |
| (9) | Includes 3,425 shares issuable upon the exercise of vested options. |
| |
| (10) | Includes 18,227 shares issuable upon the exercise of vested options. |
| |
| (11) | Includes 10,254 shares issuable upon the exercise of vested options. |
| |
| (12) | Includes 2,875 stock options that will vest on May 8, 2016. |
Executive Officers
Our executive officers serve at the pleasure of our Board of Directors and are subject to annual appointment by the Board at its first meeting following the annual meeting of stockholders. All of our executive officers are listed in the following table, and certain information concerning those officers, except for Messrs. Pate, Israel and Monteleone, who are also members of the Board, follows the table:
|
| | | | |
| Name | | Age | | Position |
| William C. Pate | | 52 | | President, Chief Executive Officer and Director |
| Christopher Micklas | | 48 | | Chief Financial Officer |
| Joseph Israel | | 43 | | Senior Vice President |
| William Monteleone | | 32 | | Senior Vice President of Mergers & Acquisitions and Director |
| James Matthew Vaughn | | 43 | | Senior Vice President and General Counsel |
| Jim Yates | | 56 | | Senior Vice President of Marketing and Logistics |
| Kelly Rosser | | 40 | | Vice President and Chief Accounting Officer |
GENERAL AND OTHER MATTERSChristopher Micklas has served as our Chief Financial Officer since December 2103. Prior to that, Mr. Micklas served as the Chief Operating Office Finance Director and Director of Global LNG Finance at BG Group Plc from 2010 to November 2013, Chief Financial Officer of Ennis Paint from 2008 to 2010 and in various roles with Shell Oil Company from 2001 to 2008, including most recently as Finance Director, US Downstream from 2006 to 2008. Mr. Micklas holds a bachelor's degree in finance from Siena College.
James Matthew Vaughn has served as our Senior Vice President and General Counsel since July 2014. Prior to joining Par, Mr. Vaughn practiced law in the corporate practice group and bankruptcy section of Porter Hedges LLP for 14 years, where he was a partner for seven years and his practice focused on corporate reorganizations and restructurings, commodities marketing, transportation, hedging and derivatives, distressed corporate acquisitions, financings and refinancings and creditors’ rights. His practice also included general civil litigation in both federal and state courts. Mr. Vaughn has been listed as one of America’s leading lawyers by Chambers USA and The Best Lawyers in America. He is a fellow of the Litigation Counsel of America, and has also been recognized as one of the leading lawyers in Texas by Texas Super Lawyers and H Texas Magazine. Mr. Vaughn holds a bachelor’s degree from Texas A&M University and a juris doctorate from the University of Miami School of Law.
Jim Yates has served as our Senior Vice President of Marketing and Logistics since May 2015. From September 2007 until May 2015, Mr. Yates served as President and Chief Executive Officer of Mid Pac Petroleum, LLC, which was acquired by Par in 2015. Mr. Yates holds a bachelor's degree from the University of Oklahoma in business administration and a law degree from the University of Houston School of Law.
Kelly Rosser has served as our Vice President and Chief Accounting Officer since May 2014 and our Controller since February 2014. Prior to joining us, Ms. Rosser was employed by Dynegy Inc. as Managing Director and Assistant Controller since 2011 and Director of Technical Accounting since 2006. Prior to joining Dynegy Inc., Ms. Rosser was a Senior Audit Manager at KPMG LLP, where she focused on clients in the energy industry. Ms. Rosser is a Certified Public Accountant, licensed in the state of Texas. Ms. Rosser holds a bachelor's degree and a master's degree in accounting from Texas A&M University.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Introduction
This Compensation Discussion and Analysis is designed to provide our stockholders with an understanding of our compensation program, as well as to discuss the compensation earned by our named executive officers for 2015. Our Compensation Committee (the “Committee”) oversees our executive compensation program. The Committee reviews and establishes the compensation for our executive officers and is responsible for administering and awarding grants of equity awards under our existing stock incentive plans.
Our 2015 executive compensation program:
Aligns the interests of our executives with those of our stockholders through long-term stock-based awards and cash payouts linked to company performance; and
Reflected the transitional nature of the company in 2015 with the succession of our Chief Executive Officer and the development of our holding company structure with multiple operating segments.
2015 Key Business Highlights and Compensation Actions
Compensation for 2015 was primarily driven by our success in the following:
Strong financial performance with Adjusted EBITDA in 2015 of $110.4 million compared to negative Adjusted EBITDA of $(9.2) million in 2014;
Improved Adjusted Refining Margin of $192.4 million in 2015 compared to $83.9 million in 2014;
Improved business execution including increased on-island fuel sales volumes, increased retail fuel and merchandise sales, strong safety performance in all business units, and lower refinery production costs;
Successful completion of our acquisition of the Mid Pac Petroleum business which distributes gasoline and diesel fuel through more than 80 locations and four terminals in Hawaii in April 2015 and the successful integration of such business during 2015; and
Improved liquidity and financial condition through a new $115 million credit facility with KeyBank in December 2015, a $75 million registered direct offering in November 2015, and new inventory financing arrangements in the form of supply and offtake agreements with J. Aron & Company in June 2015.
Accordingly, our actions in 2015 reflected strong operating and safety performance, the significant improvements in financial performance, and the successful completion of the transactions described above as well as the internal restructuring and succession of our Chief Executive Officer. We expect that the core elements of our executive compensation program in the future will continue to incentivize the profitable operation of our refining, retail and logistics business segments, support our ongoing acquisition strategy and encourage the creation of stockholder value. The Committee is also committed to continued enhancements in response to executive compensation trends and regulatory developments. For a reconciliation of Adjusted EBITDA and Adjusted Refining Margin to the measures we believe to be the most directly comparable to those measures under GAAP, please see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations--Non-GAAP Performance Measures-Adjusted Net Income (Loss) and Adjusted EBITDA and - Adjusted Refining Margin” in our Annual Report on Form 10-K for the year ended December 31, 2015.
Named Executive Officers
For 2015, our named executive officers were:
William C. Pate, President and Chief Executive Officer;
Christopher Micklas, Chief Financial Officer;
Joseph Israel, former Chief Executive Officer, and current Senior Vice President and President and Chief Executive Officer of Par Petroleum, LLC;
William Monteleone, former Chief Executive Officer, and current Senior Vice President, Mergers & Acquisitions;
James Matthew Vaughn, Senior Vice President, General Counsel and Secretary;
Jim Yates, Senior Vice President of Marketing and Logistics; and
Kelly Rosser, Vice President and Chief Accounting Officer.
Our Philosophy on Executive Compensation
Our compensation for 2015 reflected the transitional nature of our business with the succession and transition of our Chief Executive Officer, the integration of the Mid Pac Petroleum business, and the receipt of additional equity capital
and improvement of our financing arrangements to position us to leverage the benefits of our significant tax attributes. Certain compensation arrangements in 2015 were heavily focused on equity compensation in order to immediately align the interests of new senior management with the interests of our stockholders and to emphasize our “pay for performance” philosophy. Our compensation philosophy is to provide competitive compensation packages that attract, retain and motivate talented executives and managers while aligning management's and stockholders' interests.
Our compensation programs are generally structured to provide a balanced portfolio of both cash and equity compensation elements. With significant new hires in 2015, however, we had a greater focus on initial equity compensation arrangements to attract and retain new hires, such as our Chief Executive Officer. In 2016, we expect that our overall compensation will involve multiple elements to deliver a total package, including cash and equity compensation components and incentives, to drive stockholder value. In addition, the Committee has and will retain discretion to make adjustments necessary to balance the overall performance of the company and the individual performance of our executive officers such that we maintain a “pay-for-performance” philosophy.
Due to the relatively short tenure of our named executive officers, we do not currently consider the size of previous equity-based grants and current equity holdings in current compensation decisions. The Committee does expect over time to begin to review tally sheets showing cumulative wealth associated with prior awards as it considers future grants when making long-term incentive award decisions and overall compensation decisions. The Committee generally applies its compensation philosophy and policies consistently in determining the compensation of each of our senior executive officers, while being mindful of individual differences such as experience, level of responsibility, potential contributions to future growth opportunities and individual performance, as well as the practical implications of arms-length negotiations at the time each executive officer is hired or promoted. Greater relative percentages of potential compensation are at risk for the most senior executive officers to reflect their respective areas and levels of responsibility for the company’s performance.
Consideration of Say-on-Pay Results
At the company’s annual meeting of stockholders held in June 2015, approximately 99.9% of the votes cast on the advisory vote to approve the compensation of our named executive officers were voted in favor of the proposal. The Committee believes that this affirms our stockholders' support for the company's approach to executive compensation and, therefore, we have not implemented any changes to our executive compensation program as a direct result of the advisory vote.
Our Process for Executive Compensation
The Committee oversees our executive compensation program. Each Committee member is an independent non-employee director and qualifies as an “outside director” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Tax Code”). The Committee develops and recommends to the Board the overall compensation package for our Chief Executive Officer and, with the additional assistance of our Chief Executive Officer, for each of our other executive officers. Our Chief Executive Officer does not participate in determining his compensation. Although objective criteria may be used, the Committee retains final discretion in determining the compensation of our executive officers. In general, the Committee makes its final award determinations based on company performance in the first quarter following the end of each fiscal year.
In implementing and administering the company's compensation philosophy, the Committee:
Reviews market data to assess the competitiveness of the company’s compensation policies;
Evaluates the company’s compensation policies compared to its peers and in the context of broader industry surveys;
Reviews the company’s performance against the company’s plans and budgets and considers the degree of attainment of performance goals and objectives; and
Reviews the individual performance of each executive officer.
The Committee makes significant decisions over multiple meetings, discussing conceptual matters, reviewing preliminary recommendations, reviewing final recommendations and reviewing advice of independent executive compensation and legal advisors before acting. The Committee also holds special meetings as necessary in order to perform its duties.
Role of the Chief Executive Officer
As part of its review and determination of the company’s compensation objectives, philosophy, programs and decisions, the Committee works with and receives advice and recommendations from our Chief Executive Officer (other than with respect to his own compensation). The Committee's charter provides that our Chief Executive Officer may attend meetings at which the compensation of other named executive officers is under consideration. In this capacity, the Chief Executive Officer may take the following actions:
Work with the Committee regarding the approval of all general compensation plans and policies, including pension, savings, incentive and equity-based plans;
Review and determine the respective corporate and individual goals and objectives for the other named executive officers relevant to their compensation;
Provide the Committee with an evaluation of the performance of the other named executive officers in light of their respective corporate and individual goals and objectives; and
Recommend to the Committee the compensation levels of the other named executive officers.
The Committee considers the recommendations of our Chief Executive Officer, together with the review by its independent compensation consultant, in making independent determinations regarding executive compensation.
Our Chief Executive Officer frequently attends Committee meetings, other than those portions that are held in executive session, but he is not present during voting or deliberations on matters involving his compensation in accordance with the Committee's charter.
Role of Compensation Committee Consultants
In January 2016, the Committee engaged Meridian Compensation Partners, LLC (“Meridian”) as its independent compensation consultant. Meridian advised the Committee in connection with (i) formation of a peer group, (ii) revisions to our long-term equity incentive plan to update it with current market practices and fair value transfer and burn rates associated with the proposed authorization of additional shares, and (iii) the review and assessment of pay-for-performance, stockholder alignment and executive retention goals of the Committee in approving compensation for 2015 performance that was paid in 2016. In addition, Meridian is providing advice on designing and implementing the company's executive compensation program for 2016, including with respect to compensation philosophy, objectives, annual and long-term plan designs and market pay levels. In compliance with SEC rules, the Committee has assessed the independence of Meridian and concluded that no conflict of interest exists that would prevent Meridian from independently representing the Committee. Meridian did not provide any services to the company in 2015. Meridian does not currently provide any services to the company other than the services provided directly to the Committee. Billing by Meridian is provided directly to, and approved for payment by, the Committee.
Benchmarking Executive Compensation
Our philosophy emphasizes “pay for performance” with achievement of competitive objectives driving executive officer pay, while being mindful of individual differences such as tenure and performance, as well as the practical implications of pay being the product of an arms-length negotiation at the time an executive officer is hired or promoted. At the Committee’s request, Meridian conducted a competitive review of our executive compensation program and was tasked by the Committee with developing a relevant peer group of companies for compensation purposes. Due to our holding company structure and strategy, with the objective to acquire other businesses to take advantage of the benefits offered by our significant NOLs, development of a relevant peer group of similarly-situated publicly-traded companies was challenging, due to the following:
our financial characteristics, including significant tax attributes, were difficult to match in a competitive marketplace; and
the significant year over year changes in the business resulting from the acquisition in April 2015 of the Mid Pac Petroleum business in Hawaii.
The Committee, in conjunction with Meridian, developed a peer group of the following 17 publicly-held companies in the following industries: (i) oil and gas refining and marketing, (ii) chemical commodities and specialty chemicals, and (iii) food retail. These companies have median annual revenues of approximately $3 billion and median market capitalization of approximately $1.1 billion.
|
| | |
| Alon USA Energy, Inc. | Delek U.S. Holdings, Inc. | Renewable Energy Group, Inc. |
| Axiall Corporation | FutureFuel Corp. | REX American Resources Corporation |
| Calumet Specialty Products Partners, LP | Green Plains, Inc. | SEACOR Holdings, Inc. |
| Casey’s General Stores, Inc. | Macquarie Infrastructure Corporation | Stepan Company |
| CVR Energy, Inc. | Methanex Corporation | Westlake Chemical Corporation |
| Darling Ingredients, Inc. | Pacific Ethanol, Inc. | |
The new peer group was used to benchmark 2015 total compensation levels of our senior executive officers and provide a framework for 2016 total compensation decisions and structures.
Beginning in 2016 we intend to design our incentive plans to provide the Committee with the flexibility to reward outstanding performance significantly above the targeted range. Conversely, when performance is below expectations, our plans will provide the Committee the flexibility to reduce compensation below the targeted range, and to allow the Committee the discretion to reduce or eliminate certain compensation elements.
Overview of Compensation Elements
The list below summarizes the general elements and characteristics of our executive compensation programs. Detailed narratives of these compensation elements are provided below under "Compensation Program Details."
Base salary: Base salary is determined by our philosophy, the position (skills, duties, responsibilities, etc.), market pay levels and trends, individual performance and prior salary;
Annual incentive awards: Variable compensation payable in cash (or at the discretion of the Committee, shares of restricted stock and/or stock options) following the fiscal year the pay is earned based upon the Committee’s determination in their discretion of performance; and
Long-term incentive awards: Variable compensation payable in time-vested and/or performance based shares of restricted stock and/or stock options.
Compensation Program Details
Base Salary
Base salary provides a secure fixed level of compensation in an amount that recognizes the role and responsibilities of the executive officer, as well as experience, performance and contributions. The Committee typically reviews the salaries of our named executive officers annually (in the fourth quarter or early the following year). The amount of any increase is based primarily on the named executive officer's performance, the level of his or her responsibilities and the external competitiveness of his or her base salary and overall total compensation. In addition, the Committee may review the salaries of our named executive officers in connection with a promotion or other change in responsibility. The Committee's review of these factors is subjective and no fixed value or weight is assigned to any specific factor when making salary decisions.
In 2015, the Committee increased Mr. Monteleone’s annual base salary to $350,000 in connection with his transition from Chief Executive Officer to Senior Vice President of Mergers and Acquisitions. Mr. Pate’s and Mr. Israel’s annual base salaries were established in their respective employment offer letters following arms’ length discussions and are set forth below under “Employment Arrangements with Named Executive Officers”.
Annual Incentive Awards
Our annual incentive awards are intended to motivate and reward our executive officers for achieving the company's financial and operational objectives through awards of cash, restricted stock and/or options to purchase our common stock.
In determining the compensation of our named executive officers in 2015, the Committee considered not only our operating and financial performance as a whole, but also management’s success in the following accomplishments:
Strong financial performance with Adjusted EBITDA in 2015 of $110.4 million compared to negative Adjusted EBITDA of $(9.2) million in 2014;
Improved Adjusted Refining Margin of $192.4 million in 2015 compared to $83.9 million in 2014;
Improved business execution including increased on-island fuel sales volumes, increased retail fuel and merchandise sales, strong safety performance in all business units, and lower refinery production costs;
Successful completion of our acquisition of the Mid Pac Petroleum business which distributes gasoline and diesel fuel through more than 80 locations in Hawaii and four terminals in April 2015 as well as the successful integration of such business during 2015; and
Improved our liquidity and financial condition through a new $115 million credit facility with KeyBank in December 2015, a $75 million registered direct offering in November 2015, and new inventory financing arrangements in the form of supply and offtake agreements with J. Aron & Company in June 2015.
Long-Term Incentive Awards
Long-term incentive awards are designed to align executive compensation with the interests of the company's stockholders by linking compensation to share price performance over a multi-year period and supporting the retention of our management team. These awards currently take the form of awards of restricted stock vesting pro rata over a period of four years conditioned upon continued employment. The Committee believes that awarding long-term incentive awards in the form of time-vested equity compensation encourages retention and aligns the interests of our named executive officers with the interests of our stockholders in creating incentives for long-term value creation. In the future, the Committee intends to continue to grant equity awards to executive officers in order to link the executive's long term interests to those of our stockholders to encourage stock ownership by executives as a means of aligning the executives' interests with those of our stockholders and to serve as a retention tool.
Stock option grants are also made to executive officers in connection with their initial hiring, as part of the annual equity incentive compensation program to certain executive officers and under other circumstances where deemed appropriate in the Committee's discretion. It has been the Committee's practice to approve all option grants at Committee meetings. For initial option grants made to our executive officers in connection with their employment by the company, the Committee approves the options at the time it approves the executive officer's overall compensation arrangement and the terms of his or her employment agreement, if any. Option grants are a high-risk, high return component of total compensation because stock options deliver value to an executive only if the share price is above the grant price after the date of vesting. Therefore, the stock options directly align executive officer and stockholder interests.
2015 Compensation Structure
Annual Target Goals
The Committee annually reviews and approves performance metrics and target goals supportive of our business strategies. The Committee expects to develop target goals that it believes are challenging but reasonably attainable. If the company achieves its targeted performance goal for each of the metrics, the payout percentage for the company portion of each named executive officer's target bonus is 100%. The maximum payout percentage for the company portion of each named executive officer's target bonus is 150%. If the threshold amounts are not achieved for a particular metric, no amount is to be paid for that metric. However, in each case, the Committee will retain discretion to modify or eliminate any incentive awards if the Committee determines such actions are warranted.
The Committee determines target annual incentive opportunities as part of its total compensation program to provide the company’s named executive officers total compensation with incentive compensation arrangements to drive strong operational performance and create stockholder value. Targets and awards may include annual cash incentive compensation, restricted stock and option bonus target opportunities tied to the company’s and their individual performance and each named executive officers roles and responsibilities.
2015 Annual Incentive Plan
The annual incentive plan has the following objectives:
To create and sustain employee ownership in and financial rewards tied to the success of the company;
To create alignment with critical success factors and core values of safety and environmental accountability; and
To recognize the importance of operational reliability in the financial success of the company.
In 2015, the functional elements of the annual incentive plan measured the following five key performance metrics to determine awards:
Safety performance;
Environmental performance;
Group Performance, including refining, marketing/logistics and corporate groups based upon the roles and responsibilities of employees, and with all named executive officers, other than Mr. Yates who was in the marketing/logistics group, within the corporate group;
Adjusted EBITDA; and
Individual Performance.
Given the importance of safety and environmental performance, those performance measures, as they apply to each group, are incorporated into the performance measures of Group Performance. To determine specific award levels in 2015, the annual incentive plan applied a formula which multiplied three measures (each targeted at 100%) to result in a targeted outcome of 100%. The bonus formula is as follows:
Bonus Outcome = Adjusted EBITDA x Group Performance x Individual Performance
The amount of each named executive officer’s bonus is then determined by the following formula:
Individual Bonus = Annual Base Salary x Target Percentage x Bonus Outcome
Adjusted EBITDA Component
The Adjusted EBITDA component of the bonus formula measures the company’s Adjusted Net Income (Loss), defined as net income (loss) excluding changes in the value of contingent consideration and common stock warrants, acquisition and integration expenses, lower of cost or net realizable value adjustments, inventory valuation adjustment which adjusts for timing differences to reflect the economics of our inventory financing agreements, unrealized (gains) losses on derivatives, impairment expense, loss on termination of financing agreements, release of valuation allowance due to the Mid Pac acquisition and gains (losses) on sales of assets, excluding interest, taxes, depreciation, depletion and amortization and equity (earnings) losses from Laramie Energy, LLC. Annual Adjusted EBITDA is targeted at 100% based upon the company’s budgeted annual Adjusted EBITDA for the upcoming year, with a threshold of 50% of target and a maximum award at 150% of target with linear interpolations between the minimum level and target and between the target and the maximum award level.
In 2015, the company’s actual Adjusted EBITDA of $110.4 million exceeded the $50.6 million target by more than 200% and was therefore capped at the maximum of payment level of 150% of target.
Group Performance Component
The Group Performance component of the bonus formula separately measures the performance of the refining, marketing/logistics and corporate operations of the company.
Refining Group
In 2015, the refining group performance was determined based upon various statistical and other performance measures of the following: 30% for safety performance; 30% for environmental performance; and 40% for group performance (measured by non-energy operating expenses, reliability, yield, turnaround cost achievement and turnaround schedule achievement). Overall, the refining group operated at 103.5% of target in 2015.
Marketing/Logistics Group
Due to different responsibility levels within the marketing/logistics group, performance of the group in 2015 was measured as follows:
| |
| (i.) | Marketing performance was determined based upon various statistical and other performance measures of the following: 20% for safety performance; 10% for environmental performance; and 70% for group performance focusing on non-energy operating expenses (excluding credit card fees), on-island sales, and retail fuel volumes; and |
| |
| (ii.) | Logistics performance was determined based upon various statistical and other performance measures of the following: 30% for safety performance; 30% for environmental performance; and 40% for group performance focusing on non-energy operating expenses and materials management standards. |
Overall, the marketing/logistics group as a whole operated at 136.1% of target.
Corporate Group
Due not only to their broad and expansive responsibilities and influence, but also the importance of their support to each of the refining and marketing/logistics groups, all of the named executive officers, other than Mr. Yates who was part of the marketing/logistics group, participate in the corporate group, with 80% of their performance measures determined equally by the performance measures of the refining and marketing/logistics groups and the remaining 20% subjectively determined by the Committee and tied to other corporate activities, including mergers and acquisitions, growth execution, systems development and capital and support activities.
Individual Performance Component
We also measured the performance of our named executive officers in 2015 by their personal contributions towards satisfaction of our strategic objectives, based upon each named executive officer’s specific job and responsibilities. Individual performance is determined on a 1 to 5 level basis, with 100% target bonus at level 3 and bonus targets ranging from a floor of 0% at level 1 and up to a maximum of 130% at level 5.
Within these guidelines, the importance of each category varied significantly between each named executive officer and the importance of such categories were assessed on an officer by officer basis in order to best correlate each such officer’s respective areas of responsibilities and the officer's ability to influence, control or impact results with the categories relating to such responsibilities. Determinations within each of these categories are based upon subjective judgments of both individual and, where applicable, business area performance.
In determining achievement of individual performance towards these strategic objectives, the Committee receives an initial assessment from our Chief Executive Officer of each named executive officer’s performance with respect to each of the business goals for the preceding year. This recommendation is then reviewed by the Committee in connection with its determination of each named executive officer’s incentive cash award. Many of the factors that influence determinations are subjective, are based upon positive and negative developments occurring during the prior year and vary from year to year based upon our goals and actions undertaken or desired to be taken within such period.
Individual targets, individual performance and non-equity incentive awards relating to 2015 performance for named executive officers were as follows:
|
| | | | | | | | | | | | | |
| Named Executive Officer | | Annual Incentive Plan Group Metric (%) | | Individual Metric (%) | | Annual Incentive Plan Target (% of base salary) | | 2015 Non-Equity Incentive Award |
William C. Pate (1) | | 100.0 | % | | 100 | % | | 100 | % | | $ | 98,630 |
|
Christopher Micklas (2) | | 120.9 | % | | 134 | % | | 40 | % | | $ | 220,000 |
|
Joseph Israel (3) | | 120.9 | % | | 99 | % | | 75 | % | | $ | 405,000 |
|
| William Monteleone | | 120.9 | % | | 99 | % | | 50 | % | | $ | 210,000 |
|
| James Matthew Vaughn | | 120.9 | % | | 126 | % | | 40 | % | | $ | 185,000 |
|
| Jim Yates | | 136.1 | % | | 102 | % | | 75 | % | | $ | 220,000 |
|
| Kelly Rosser | | 120.9 | % | | 115 | % | | 30 | % | | $ | 94,500 |
|
______________________________________________________
| |
| (1) | Mr. Pate’s 2015 compensation arrangements were set forth in his employment letter. For further details, see "Employment Agreements - William C. Pate" below. |
| |
| (2) | Mr. Micklas' 2015 non-equity incentive award includes an increase of 4% in his individual metric as a result of compensation benchmarking assessment. |
| |
| (3) | Mr. Israel’s 2015 compensation arrangements were set forth in his amended employment letter. For further details, see "Employment Agreements - Joseph Israel" below. |
Awards paid in the first quarter of 2016 under the 2015 Annual Incentive Plan reflect awards based upon individual performance in 2015.
Overall Performance
In February 2016, the Committee confirmed the cash incentive awards in accordance with the bonus formula as part of the annual compensation process. Based on the foregoing, solely for strategic related performance in 2015, the aggregate performance towards achievement of strategic objectives relating to the non-equity incentive award was determined to be approximately 120.9% of the target for each named executive officer other than Mr. Pate, who was measured at 100% of target consistent with his October 12, 2015 employment offer letter and Mr. Yates, who was measured at 136.1% of target due to his performance in the marketing group.
The Committee retains the discretion to make adjustments to the results for any given year. Reasons for adjustments could include removing the effects of unanticipated events, such as accounting changes, project restructurings, timing of working capital, payments of cash awards in subsequent calendar years but relating back to the prior calendar year, balance sheet adjustments and similar items, which unless excluded would produce unintended consequences that are inconsistent with the goals of aligning the interests of named executive officers with our stockholders and of providing financial incentives to named executive officers to effectively implement our business plan and goals. The Committee did not make any adjustments in 2015.
While budgets and operational targets are reset each year and reviewed and approved by the Board, the Committee seeks to set financial performance target levels for purposes of the annual incentive cash awards that continue to challenge management, but are achievable if certain conditions are satisfied, including, in particular, the following:
we continue to operate our business consistent with the historically high standards of efficiency, production, safety and environmental performance;
we continue to control our costs of conducting our business and operations;
we complete our refining turnarounds on-time and on-budget;
external market forces and pricing are consistent with expectations (at the time we establish our annual budgets) in key areas, including supply and demand fundamentals in the markets where we sell our products and purchase feedstocks; and
we do not experience unforeseen events, such as weather, flooding, accidents or fires at our facilities, acts of God, pandemics, natural disasters, terrorism or other casualty events, that have a material adverse impact on our financial results.
Consequently, our ability to achieve the “target” level of bonus formula components each year is heavily dependent not only upon factors within our control, but also upon other conditions over which we have no control. There is substantial uncertainty with respect to achieving the target level at the time that the financial performance measures are set and communicated. In 2015, Adjusted EBITDA was $110.4 million as compared to a target of $50.6 million, resulting in performance at the maximum of 150% of target; the refining group performance measures were at 103.5% of target; the marketing/logistics group performance measures were at 136.1% of target; and the corporate group was at 120.9% of target. Our ability to meet or exceed performance targets in the future will depend upon a variety of factors, including execution of our strategy, competition in our sector, and our safety and environmental performance. As a result, it will be challenging for our named executive officers to receive awards at or near the “target” level.
In addition, the Committee retains the authority and discretion to increase or decrease the size of any performance-based award or payout or to impose a safety, environmental and/or general performance adjustment at its discretion. Except as set forth above, the Committee did not exercise such authority and discretion in 2015 with respect to awards to named executive officers.
Long-Term Incentive Awards
In 2015, the Committee granted two types of long-term incentive awards: restricted stock awards and stock options. For information regarding long-term incentive awards made in 2016 in connection with 2015 performance, please see "2016 Awards" below.
Restricted Stock
Unless otherwise specified, each grant vests pro rata over a period of four years conditioned upon continued employment. The Committee believes that awarding long-term incentive awards in the form of time-vested equity compensation encourages retention and aligns the interests of our named executive officers with the interests of our stockholders in creating incentives for long-term value creation. The Committee granted restricted stock awards to the following named executive officers in 2015:
|
| | | | | | | |
| Named Executive Officer | | Restricted Stock Award ($) | | Shares of Common Stock (#) |
William C. Pate (1) | | $ | — |
| | — |
|
| Christopher Micklas | | $ | 245,988 |
| | 12,257 |
|
Joseph Israel(2) | | $ | 509,984 |
| | 30,818 |
|
| William Monteleone | | $ | 153,736 |
| | 7,660 |
|
James Matthew Vaughn(3) | | $ | 436,692 |
| | 21,996 |
|
Jim Yates(4) | | $ | 199,978 |
| | 8,527 |
|
| Kelly Rosser | | $ | 89,994 |
| | 4,484 |
|
______________________________________________________
| |
| (1) | Does not include 62,500 shares of restricted stock granted to Mr. Pate as a non-employee director prior to his being hired as President and Chief Executive Officer. |
| |
| (2) | Includes a restricted stock award of 27,829 shares granted upon Mr. Israel’s commencement of employment on January 5, 2015 and an additional restricted stock award of 2,989 shares granted on March 13, 2015 vesting pro rata over a period of two years due to Mr. Israel's participation in the SPP. |
| |
| (3) | Includes restricted stock awards granted on March 13, 2015 and March 18, 2015 reflecting Mr. Vaughn’s annual equity incentive award and a restricted stock award granted on July 3, 2015 vesting pro rata over period of five years pursuant to Mr. Vaughn’s employment offer letter. |
| |
| (4) | Includes 6,385 shares of restricted stock granted on May 8, 2015 pursuant to Mr. Yates’ employment offer letter vesting pro rata over a period of two years, and 2,142 shares of restricted stock vesting pro rata over a period of two years due to Mr. Yates' participation in the SPP. |
Stock Options
The Committee believes that the Chief Executive Officer has the most control and responsibility for our overall performance of any officer and, accordingly, it is appropriate that he have the relatively greatest percentage of compensation be at risk and tied to our overall performance in order to best align his interests with those of our stockholders. In 2015, in order to attract Mr. Pate as President and Chief Executive Officer and as part of the arms’ length negotiations with Mr. Pate on his employment and compensation arrangements, upon commencement of his employment and subject to stockholder approval of Proposal 3, we issued to Mr. Pate an award of stock options to purchase 750,000 shares of our common stock, vesting pro-rata over a period of five years based upon his continued employment. Due to his responsibility for our performance as President and Chief Executive Officer, consistent with the intents and purposes of our compensation structure, it is expected that Mr. Pate’s compensation will be materially higher than the other named executive officers.
In addition, certain of our named executive officers receive one-third of their annual equity award in the form of stock options. Unless otherwise specified, in the first quarter of 2015, the following named executive officers were granted options to purchase our common stock at an exercise price of $20.07, the fair market value on the date of grant, vesting ratably over a period of four years based upon continued employment:
|
| | | | | | | |
| Named Executive Officer | | Stock Option Award ($) | | Shares of Common Stock (#) |
William C. Pate(1) | | $ | — |
| | 750,000 |
|
| Christopher Micklas | | $ | 131,996 |
| | 15,295 |
|
Joseph Israel(2) | | $ | 659,990 |
| | 96,606 |
|
| William Monteleone | | $ | 149,998 |
| | 17,381 |
|
James Matthew Vaughn(3) | | $ | 119,988 |
| | 13,672 |
|
______________________________________________________
| |
| (1) | As an inducement to his hiring as President and Chief Executive Officer, Mr. Pate was awarded options to purchase 750,000 shares of common stock subject to the stockholder approval reflected in Proposal 3. Until such stockholder approval is received, no compensation expense is reflected in the company’s financial statements with respect to Mr. Pate’s stock options award. |
| |
| (2) | Pursuant to his employment offer letter, upon commencement of his employment, Mr. Israel was awarded options to purchase 65,217 shares of common stock at an exercise price of $16.17 per share, the fair market value of our common stock on the January 5, 2015 date of grant. On March 13, 2015, as part of his participation in the SPP, Mr. Israel received an award of stock options to purchase 31,389 shares at an exercise price of $20.07, the fair market value on the date of grant, vesting pro rata over a period of two years. |
| |
| (3) | On March 13, 2015 and March 18, 2015, as part of the annual equity award process, Mr. Vaughn received an award of stock options to purchase 5,984 and 7,688 shares, respectively, at exercise prices of $20.07 and $20.91, respectively, the fair market value of the common stock on the dates of such grants. |
| |
| (4) | Pursuant to his employment offer letter, upon commencement of his employment, Mr. Yates was awarded options to purchase 8,625 shares of common stock at an exercise price of $23.49 per share, the fair market value of our common stock on the May 8, 2015 date of grant, vesting pro rata over a period of three years. |
CEO Compensation
In determining the compensation of Mr. Pate and Mr. Israel, each as our Chief Executive Officer during separate periods in 2015, the Committee believes that the Chief Executive Officer has the most control and responsibility for our overall performance of any officer and, accordingly, it is appropriate that he have the relatively greatest percentage of compensation be at risk and tied to our overall performance in order to best align his interests with those of our stockholders. Due to his responsibility for our performance as Chief Executive Officer, consistent with the intents and purposes of the compensation structure, the Chief Executive Officer’s compensation is structured to be materially higher than the other named executive officers. Further, in order to attract Mr. Pate from his position as Co-President and Chief Investment Officer of EGI to become our President and Chief Executive Officer to implement our growth strategy to leverage the potential economic benefits of our substantial tax attributes, the Committee granted Mr. Pate options to purchase 750,000 shares of our common stock vesting pro-rata over a period of five years.
In connection with the hiring of Mr. Pate as Chief Executive Officer and the transitioning of Mr. Israel into his current role as Chief Executive Officer of Par Petroleum, LLC, where he is directly responsible for our petroleum refining operations, we amended Mr. Israel’s employment terms and made a one-time cash payment of $739,534, which will reduce pro rata in value and number any annual grant of restricted common stock or common stock options made to him in 2016. We also modified certain severance benefits included in Mr. Israel’s employment offer letter consistent with this payment. For more detail, please see "Employment Agreements - Joseph Israel" below.
Retirement Benefits
The company maintains a 401(k) plan under which all full-time employees, including the named executive officers, are eligible to participate. Employee contributions are limited to the maximum amount allowed by the Tax Code. The company matches 100% of each employee contribution to the 401(k) plan, up to a maximum match of 4% of each employee’s annual base compensation.
Perquisites
The company does not currently offer perquisites to its named executive officers that are not available to all employees, including, but not limited to relocation expenses granted on a case by case basis at the commencement of employment.
Determining Benefit Levels
The Committee reviews benefit levels periodically to ensure that the plans and programs create the desired incentives for our employees, including named executive officers, which are generally competitive with the applicable marketplace, are cost-effective, and support our human capital needs. Benefit levels are not tied to company, business area or individual performance and due to the relatively short history of our named executive officers with us, we have not reviewed or tied retirement benefits to gains realized upon the exercise of stock options or the sale of restricted stock.
Stock Purchase Plan
In June 2014, the Board, upon the recommendation of the Committee, adopted the Stock Purchase Plan (the "SPP").
The SPP expired pursuant to its terms on December 31, 2015. Participation in the SPP was limited to our executive officers and directors who qualified as accredited investors under Rule 501(a) of the Securities Act of 1933, as amended. The SPP provided each potential participant the ability to, subject to compliance with securities laws and other regulations and only during “window periods” as described in our insider trading policy as in effect from time to time, purchase, in a single transaction, up to $1.0 million of shares (the “SPP Shares”) of our common stock, at a per SPP Share purchase price equal to the closing price of the common stock (as quoted on its principal trading market on the date of purchase). The sale or transfer of the SPP Shares by such participant is limited for the earlier of (i) two years from the date of purchase or (ii) the termination of the participant’s service with us or our affiliates for any reason. Additionally, the SPP provides that each purchasing participant was granted a number of shares of restricted common stock under the 2012 Long-Term Incentive Plan equal to 20% of the SPP Shares purchased with 50% of the restricted common stock vesting on each of the two annual anniversaries of the date of grant. Each purchasing participant was also be granted a nonstatutory stock option with a 5-year term to purchase a number of shares of common stock under the 2012 Long-Term Incentive Plan(with an exercise price equal to the Fair Market Value (as defined in the 2012 Long-Term Incentive Plan) on the date of grant) equal to certain specified percentages of the SPP Shares purchased based on a Black Scholes model (35% volatility) with 50% of the option vesting on each of the first two annual anniversaries of the date of grant. Such percentages are as follows: 50% for a non-employee chairman of the Board, 35% for non-employee members of the Board and 50-70% for executive officers.
During 2015, our Named Executive Officers participated in the SPP as follows:
|
| | | | | | | | |
| | Date of
Transaction | | SPP Shares
Purchased | | Restricted
Common
Stock | | Nonstatutory
stock options (1) |
| Joseph Israel | 03/13/2015 | | 14,947 | | 2,989 |
| | 31,389 |
| Jim Yates | 12/03/2015 | | 10,711 | | 2,142 |
| | 22,635 |
| |
| (1) | The exercise prices for the stock options issued to Mr. Israel and Mr. Yates are $20.07 and $23.34, respectively. |
2016 Awards
In 2016, the committee granted cash bonuses, restricted common stock and nonstatutory stock options to the Named Executive Officers related to performance in 2015 as follows:
|
| | | | | | | | | | |
| Name | | Cash Bonus | | Restricted
Common
Stock | | Non-
Statutory
Stock
Options |
| William Monteleone (1) | | $ | 210,000 |
| | 12,614 |
| | 18,921 |
|
| Christopher Micklas (1) | | $ | 220,000 |
| | 10,874 |
| | 16,312 |
|
| James Matthew Vaughn (1) | | $ | 185,000 |
| | 10,439 |
| | 16,312 |
|
| Jim Yates (2) | | $ | 220,000 |
| | 6,525 |
| | 9,787 |
|
| Kelly Rosser (2) | | $ | 94,500 |
| | 4,948 |
| | — |
|
| |
| (1) | The restricted stock and nonstatutory stock option awards issued to Messrs. Monteleone, Micklas and Vaughn were granted by the Compensation Committee of the Board of Directors on February 16, 2016 and are subject to shareholder approval. |
| |
| (2) | Per ASC 718, the grant date for the restricted stock and nonstatutory stock option awards issued to Mr. Yates and Ms. Rosser was March 10, 2016. |
Compensation Policies
Insider Derivative and Short-Sale Trading Restrictions
In order to avoid any appearance of a conflict of interest and to prevent opportunities for trading in violation of applicable securities laws, the company’s insider trading policy prohibits our officers, directors and all other employees from engaging in transactions in which they may profit from short-term speculative swings in the value of the company's securities. This includes “short sales” (selling borrowed securities which the seller hopes can be purchased at a lower price in the future), “put” and “call” options, straddles, equity swaps or other derivative securities that are linked directly to our common stock. These prohibitions are intended to prevent our employees, officers and directors from hedging the economic risk inherent with their ownership of our common stock. In addition, this policy is intended to ensure compliance with all insider trading rules relating to the company's securities.
Return and/or Forfeiture of Performance-Based Payments or Awards
As required by the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or any applicable laws, rules or regulations promulgated by the Securities and Exchange Commission from time to time, our Board of Directors will, to the extent permitted by applicable law, in all appropriate cases, require reimbursement of any bonus or incentive compensation paid to an employee, cause the cancellation of restricted stock awards and outstanding stock options, and seek reimbursement of any gains realized on the exercise of stock options attributable to such awards, if and to the extent that: (a) the amount of incentive compensation was calculated based upon the achievement of certain financial results that were subsequently reduced due to a restatement; (b) our Board of Directors or an appropriate committee determines that the employee engaged in any fraud or misconduct which caused or contributed to the need for the restatement; and (c) the amount of the bonus or incentive compensation that would have been awarded to the employee had the financial results been properly reported would have been lower than the amount actually awarded.
Timing of Equity Awards
Generally, the Committee makes incentive pay decisions at regularly scheduled Committee and Board of Director meetings. The Committee may also make compensation determinations at other times during the year for newly-hired executives or in connection with the promotion of existing employees. The Committee does not time any form of compensation award, including equity-based awards, to coincide with the release of material non-public information.
Income Tax Consequences
Section 162(m) of the Tax Code generally disallows a tax deduction for annual compensation in excess of $1 million paid to certain executive officers; however, compensation above $1 million is deductible if such compensation is “performance-based” and meets other criteria as specified under Section 162(m) of the Tax Code.
The Committee agrees with the premise of pay-for-performance and it has considered the impact of Section 162(m) of the Tax Code on the design of our compensation program. However, the nature of our business limits the ability to pre-determine meaningful goals without substantial subsequent discretionary adjustments. The Committee believes that such discretion is necessary and would not be available as a compensation management tool if incentive payments were to be “performance-based” as defined and required under Section 162(m) of the Tax Code. Accordingly, it is not the Committee's goal for all compensation to be deductible by us under Section 162(m) of the Tax Code.
The Committee will continue to consider and weigh the potential loss of expense deductions against its need for discretion in designing programs for the named executive officers. The Committee does not expect the loss of any such deductions to have a significant impact on the company.
Severance and Change in Control Benefits
We are in the process of developing a standard severance and change in control policy for our named executive officers based on competitive practice in the industry. As reflected in the employment terms for Messrs. Pate, Israel and Yates, we believe that providing our executive officers with specified benefits in the event of termination of employment under certain circumstances, such as by the company without cause or in connection with a change in control of the company helps us to retain executives and maintain leadership stability. These arrangements have been intended to attract and retain qualified executives that could have other job alternatives that may appear to them to be less risky absent these arrangements. Furthermore, we believe the change in control protections serve to maximize stockholder value by creating incentives for named executive officers to explore strategic transactions and work to bring such transactions to fruition if appropriate.
Beginning in 2016, we no longer grant equity awards without a “double trigger” vesting upon a change in control, meaning that payment of the benefit is not awarded unless the executive's employment is terminated by the company without cause or by the executive upon certain enumerated changes in his or her employment terms (as specified in the applicable agreement or plan) within an agreed period following the change of control transaction. We believe the double trigger vesting structure will strike an appropriate balance between the incentives and the executive hiring and retention effects described above, without providing these benefits to executives who continue to enjoy employment with an acquiring company in the event of a change in control transaction. We also believe this structure is more attractive to potential acquiring companies, who may place significant value on retaining members of our executive management and who may perceive this goal to be undermined if executives receive significant acceleration payments in connection with such a transaction and are no longer required to continue employment to earn these payments.
Provisions of these arrangements for our named executive officers that relate to severance pay and termination benefits (including upon a change in control) are described below in further detail below in the sections entitled “Potential Payments upon Termination or Change in Control”.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth in this proxy statement with the company's management and based on such review and discussions and such other matters deemed relevant and appropriate by the Committee, the Compensation Committee recommended to the company’s Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
COMPENSATION COMMITTEE
Robert S. Silberman (Chair)
Timothy Clossey
Walter A. Dods, Jr.
Narrative Disclosure of Compensation Policies and Practices as Related to Risk Management
In accordance with the requirements of Regulation S-K, Item 402(s), to the extent that risks may arise from our compensation policies and practices that are reasonably likely to have a material adverse effect on us, we are required to discuss those policies and practices for compensating our employees (including employees that are not named executive officers) as they relate to our risk management practices and the possibility of incentivizing risk-taking. We have determined that the compensation policies and practices established with respect to our employees are not reasonably likely to have a material adverse effect on us and, therefore, no such disclosure is necessary.
Named Executive Officer Compensation
Summary Compensation Table. The following table sets forth information regarding compensation earned during the last three fiscal years by our Chief Executive Officer, our two former Chief Executive Officers, our Chief Financial Officer, our Senior Vice President and General Counsel, our Senior Vice President - Marketing and Logistics, and our Vice President and Chief Accounting Officer (the “Named Executive Officers”) for the fiscal years ended December 31, 2015, 2014 and 2013.
SUMMARY COMPENSATION TABLE FOR FISCAL YEARS ENDED DECEMBER 31, 2015, 2014 and 2013
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name and Principal Position | | Year | | Salary ($) | | Bonus ($) | | Stock
Awards ($)
(1) | | Option
Awards
($)(1) | | Nonequity incentive plan compensation ($) (3) | | All Other
Compensation
($) (2) | | Total ($) |
| William C. Pate - President and Chief Executive Officer (4) | | 2015 | | $ | 100,568 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 98,630 |
| | $ | 8,699 |
| | $ | 207,897 |
|
| Joseph Israel - Senior Vice President and former Chief Executive Officer (5) | | 2015 | | $ | 446,589 |
| | $ | — |
| | $ | 509,984 |
| | $ | 659,990 |
| | $ | 405,000 |
| | $ | 904,947 |
| | $ | 2,926,510 |
|
| William Monteleone – Senior Vice President of Mergers & Acquisitions and former Chief Executive Officer (6) | | 2015 | | $ | 350,000 |
| | $ | — |
| | $ | 153,736 |
| | $ | 149,998 |
| | $ | 210,000 |
| | $ | 13,375 |
| | $ | 877,109 |
|
| | | 2014 | | $ | 220,833 |
| | $ | 168,750 |
| | $ | 150,006 |
| | $ | 525,000 |
| | $ | — |
| | $ | 37,328 |
| | $ | 1,101,917 |
|
| | | 2013 | | $ | 61,364 |
| | $ | — |
| | $ | 529,542 |
| | $ | — |
| | $ | — |
| | $ | 15,000 |
| | $ | 605,906 |
|
| Christopher Micklas – Chief Financial Officer (7) | | 2015 | | $ | 338,250 |
| | $ | — |
| | $ | 245,998 |
| | $ | 131,996 |
| | $ | 220,000 |
| | $ | 13,375 |
| | $ | 949,619 |
|
| | | 2014 | | $ | 330,000 |
| | $ | 178,200 |
| | $ | 163,535 |
| | $ | 105,000 |
| | $ | — |
| | $ | 791 |
| | $ | 777,526 |
|
| | | 2013 | | $ | 20,627 |
| | $ | — |
| | $ | 275,377 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 296,004 |
|
| James Matthew Vaughn – Senior Vice President, General Counsel and Secretary (8) | | 2015 | | $ | 303,225 |
| | $ | — |
| | $ | 436,692 |
| | $ | 119,988 |
| | $ | 185,000 |
| | $ | 13,375 |
| | $ | 1,058,280 |
|
| | | 2014 | | $ | 129,125 |
| | $ | 162,000 |
| | $ | 331,305 |
| | $ | 70,000 |
| | $ | — |
| | $ | 52 |
| | $ | 692,482 |
|
| Jim Yates - Senior Vice President, Marketing and Logistics (9) | | 2015 | | $ | 219,231 |
| | $ | — |
| | $ | 199,978 |
| | $ | 290,749 |
| | $ | 220,000 |
| | $ | 493 |
| | $ | 930,451 |
|
| Kelly Rosser - Vice President and Chief Accounting Officer | | 2015 | | $ | 224,500 |
| | $ | — |
| | $ | 89,994 |
| | $ | — |
| | $ | 94,500 |
| | $ | 13,375 |
| | $ | 422,369 |
|
| |
| (1) | The amounts shown represent the aggregate grant date fair value for stock and option awards granted to the Named Executive Officers computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in “Note 15 – Stockholders’ Equity” to our audited financial statements for the fiscal year ended December 31, 2015 included in our 2015 Annual Report on Form 10-K filed with the SEC on March 3, 2016. |
| |
| (2) | Amounts represent matching contributions made by the company under its 401(k) plan and life insurance premiums paid by the company on behalf of the Named Executive Officer. Also includes (i) $7,139 and $154,594 in living expenses and the related income tax gross-up for Mr. Pate and Mr. Israel, respectively, for 2015 and (ii) a $739,534 cash payment made to Mr. Israel in January 2016 in connection with his change in position from Chief Executive Officer pursuant to the October 2015 amendment of his employment arrangement. See “Employment Agreements - Joseph Israel” for further information. |
| |
| (3) | Represents amounts awarded under our 2015 Annual Incentive Plan and paid to the named executive officers in the first quarter of 2016. |
| |
| (4) | Mr. Pate was appointed our Chief Executive Officer on October 12, 2015. The information regarding compensation earned by Mr. Pate as our Chief Executive Officer in 2015 does not include $62,501 in stock awards granted to him as compensation for services as a non-employee director before such appointment. Additionally, the amounts do not include the value of 750,000 stock options granted to Mr. Pate in connection with his appointment as Chief Executive Officer because those options are subject to shareholder approval. |
| |
| (5) | Mr. Israel served as our President and Chief Executive Officer from January 5, 2015 to October 12, 2015. |
| |
| (6) | Mr. Monteleone served as our Chief Executive Officer from June 17, 2013 to January 5, 2015. The information regarding compensation earned by Mr. Monteleone as our Chief Executive Officer in 2013 does not include $49,621 in stock awards granted to him as compensation for services as a non-employee director before such appointment. |
| |
| (7) | Messrs. Micklas and Vaughn were appointed our Chief Financial Officer and Senior Vice President and General Counsel, respectively, on December 9, 2013 and July 28, 2014. |
| |
| (8) | Mr. Yates joined the company on April 1, 2015 and was named Senior Vice President, Marketing and Logistics in May 2015. |
Grants of Plan-Based Awards in 2015 Table. The following table sets forth certain information with respect to each grant of an award made to the Named Executive Officers under the 2012 Long-Term Incentive Plan:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Estimated Possible Payments Under Non-Equity Incentive Plan Awards (1) | | Estimated Future Payouts Under Equity Incentive Plan Awards | | All Other Stock Awards Number of Shares of Stock or Units | | All Other Option Awards Number of Securities Underlying Options | | Exercise or Base Price of Option Awards ($/share) | | Grant Date Fair Value of Stock and Option Awards |
| Name | | Grant Date | | Threshold | | Target | | Maximum | | Threshold | | Target | | Maximum | |
| William C. Pate (2) | | n/a | | $ | — |
| | $ | 450,000 |
| | $ | 675,000 |
| | $ | — |
| | $ | — |
| | $ | — |
| | — |
| | — |
| | $ | — |
| | $ | — |
|
| Joseph Israel | | n/a | | $ | — |
| | $ | 337,500 |
| | $ | 675,000 |
| | $ | — |
| | $ | — |
| | $ | — |
| | — |
| | — |
| | $ | — |
| | $ | — |
|
| | | 3/13/2015 | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | 2,989 |
| | 31,389 |
| | $ | 20.07 |
| | $ | 269,982 |
|
| | | 1/5/2015 | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | 27,829 |
| | 65,217 |
| | $ | 16.17 |
| | $ | 899,992 |
|
| William Monteleone | | n/a | | $ | — |
| | $ | 175,000 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | — |
| | — |
| | $ | — |
| | $ | — |
|
| | | 3/13/2015 | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | 7,660 |
| | 17,381 |
| | $ | 20.07 |
| | $ | 303,734 |
|
| Christopher Micklas | | n/a | | $ | — |
| | $ | 135,960 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | — |
| | — |
| | $ | — |
| | $ | — |
|
| | | 3/13/2015 | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | 12,257 |
| | 15,295 |
| | $ | 20.07 |
| | $ | 377,994 |
|
| James Matthew Vaughn | | n/a | | $ | — |
| | $ | 121,548 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | — |
| | — |
| | $ | — |
| | $ | — |
|
| | | 7/3/2015 | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | 7,026 |
| | — |
| | $ | — |
| | $ | 129,208 |
|
| | | 3/18/2015 | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | 8,376 |
| | 7,688 |
| | $ | 20.91 |
| | $ | 243,488 |
|
| | | 3/13/2015 | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | 6,594 |
| | 5,984 |
| | $ | 20.07 |
| | $ | 183,984 |
|
| Jim Yates | | n/a | | $ | — |
| | $ | 225,000 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | — |
| | — |
| | $ | — |
| | $ | — |
|
| | | 12/3/2015 | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | 2,142 |
| | 22,635 |
| | $ | 23.34 |
| | $ | 265,706 |
|
| | | 5/8/2015 | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | 8,625 |
| | 6,385 |
| | $ | 23.49 |
| | $ | 225,021 |
|
| Kelly Rosser | | n/a | | $ | — |
| | $ | 68,250 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | — |
| | — |
| | $ | — |
| | $ | — |
|
| | | 3/13/2015 | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | 4,484 |
| | — |
| | — |
| | $ | 89,994 |
|
| |
| (1) | Amounts shown represent possible payouts under our 2015 Annual Incentive Plan. |
| |
| (2) | Amounts do not include 750,000 of stock options granted to Mr. Pate that are subject to shareholder approval. |
Narrative Disclosure to Summary Compensation Table. See “– Employment Agreements” for the material terms of our employment agreements and arrangements with our Named Executive Officers. See “Compensation Discussion and Analysis” for an explanation of the amount of salary and bonus in proportion to total compensation. See the footnotes to the Summary Compensation Table and the Grant of Plan-Based Awards Table for narrative disclosure with respect to those tables.
Outstanding Equity Awards at Fiscal Year-End Table. The following table sets forth certain information with respect to the market value of all unvested option and stock awards held by each Named Executive Officer as of December 31, 2015. The table does not include information regarding any equity-based awards related to 2015 performance that were granted to the Named Executive Officers in 2016.
Outstanding Equity Awards at Fiscal Year-End December 31, 2015
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | |
| Name | | Grant date | | 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 ($) | | Option
expiration
date | | Number
of shares
or units of
stock that
have not
vested (#) | | Market
value of
shares of
units of
stock that
have not
vested
($)(1) | | Equity
incentive
plan
awards:
Number of
unearned
shares that
have not
vested (#) | | Equity
incentive
plan
awards:
Market or
payout
value of
unearned
shares
that have
not vested
($) |
| William C. Pate | | 11/14/2014 | (2) | 18,227 |
| | 18,227 |
| | — |
| | $ | 15.24 |
| | 11/13/2019 | | 3,281 | | $ | 77,235 |
| | — |
| | $ | — |
|
| | | 10/5/2015 | (3) | — |
| | — |
| | — |
| | $ | — |
| | — | | 966 | | $ | 22,740 |
| | — |
| | $ | — |
|
| | | 7/6/2015 | (3) | — |
| | — |
| | — |
| | $ | — |
| | — | | 734 | | $ | 17,278 |
| | — |
| | $ | — |
|
| | | 4/5/2015 | (3) | — |
| | — |
| | — |
| | $ | — |
| | — | | 850 | | $ | 20,009 |
| | — |
| | $ | — |
|
| | | 1/9/2015 | (3) | — |
| | — |
| | — |
| | $ | — |
| | — | | 654 | | $ | 15,395 |
| | — |
| |
|
|
| Joseph Israel | | 3/13/2015 | (2) | — |
| | 31,389 |
| | — |
| | $ | 20.07 |
| | 3/12/2020 | | 2,989 | | $ | 70,361 |
| | — |
| | $ | — |
|
| | | 1/5/2015 | (4) | — |
| | 65,217 |
| | — |
| | $ | 16.17 |
| | 1/5/2020 | | 27,829 | | $ | 655,095 |
| | — |
| | $ | — |
|
| William Monteleone | | 3/13/2015 | (4) | — |
| | 17,381 |
| | — |
| | $ | 20.07 |
| | 3/13/2023 | | 7,660 | | $ | 180,316 |
| | — |
| | $ | — |
|
| | | 11/20/2014 | (2) | 51,270 |
| | 51,269 |
| | — |
| | $ | 15.12 |
| | 11/19/2019 | | 4,960 | | $ | 116,758 |
| | — |
| | $ | — |
|
| | | 12/31/2013 | (3) | — |
| | — |
| | — |
| | $ | — |
| | — | | 7,067 | | $ | 166,357 |
| | — |
| | $ | — |
|
| | | 9/25/2013 | (3) | — |
| | — |
| | — |
| | $ | — |
| | — | | 8,473 | | $ | 199,454 |
| | — |
| | $ | — |
|
| Christopher Micklas | | 3/13/2015 | (4) | — |
| | 15,295 |
| | — |
| | $ | 20.07 |
| | 3/13/2023 | | 12,257 | | $ | 288,530 |
| | — |
| | $ | — |
|
| | | 12/9/2014 | (5) | — |
| | — |
| | — |
| | $ | — |
| | — | | 7,972 | | $ | 187,661 |
| | — |
| | $ | — |
|
| | | 11/26/2014 | (2) | 10,355 |
| | 10,355 |
| | — |
| | $ | 15.07 |
| | 11/25/2019 | | 995 | | $ | 23,422 |
| | — |
| | $ | — |
|
| | | 12/9/2013 | (5) | — |
| | — |
| | — |
| | $ | — |
| | — | | 8,060 | | $ | 189,732 |
| | — |
| | $ | — |
|
| James Matthew Vaughn | | 7/3/2015 | (5) | — |
| | — |
| | — |
| | $ | — |
| | — | | 7,026 | | $ | 165,392 |
| | — |
| | $ | — |
|
| | | 3/18/2015 | (4) | — |
| | 7,688 |
| | — |
| | $ | 20.91 |
| | 3/18/2023 | | 8,376 | | $ | 197,171 |
| | — |
| | $ | — |
|
| | | 3/13/2015 | (4) | — |
| | 5,984 |
| | — |
| | $ | 20.07 |
| | 3/13/2023 | | 6,594 | | $ | 155,223 |
| | — |
| | $ | — |
|
| | | 11/24/2014 | (2) | 6,836 |
| | 6,836 |
| | — |
| | $ | 15.08 |
| | 11/23/2019 | | 663 | | $ | 15,607 |
| | — |
| | $ | — |
|
| | | 11/18/2014 | (5) | — |
| | — |
| | — |
| | $ | — |
| | — | | 12,334 | | $ | 290,342 |
| | ��� |
| | $ | — |
|
| Jim Yates | | 12/3/2015 | (2) | — |
| | 22,635 |
| | — |
| | $ | 23.34 |
| | 12/2/2020 | | 2,142 | | $ | 50,423 |
| | — |
| | $ | — |
|
| | | 5/8/2015 | (6) | — |
| | 8,625 |
| | — |
| | $ | 23.49 |
| | 5/8/2023 | | 6,385 | | $ | 150,303 |
| | — |
| | $ | — |
|
| Kelly Rosser | | 3/13/2015 | (4) | — |
| | — |
| | — |
| | $ | — |
| | — | | 4,484 | | $ | 105,553 |
| | — |
| | $ | — |
|
| | | 11/21/2014 | (2) | 3,425 |
| | 3,424 |
| | — |
| | $ | 15.15 |
| | 11/20/2019 | | 330 | | $ | 7,768 |
| | — |
| | $ | — |
|
| | | 2/17/2014 | (5) | — |
| | — |
| | — |
| | $ | — |
| | — | | 1,883 | | $ | 44,326 |
| | — |
| | $ | — |
|
| |
| (1) | Market value based on closing price of $23.54 on December 31, 2015. |
| |
| (2) | Award has a two-year ratable vesting schedule with one-half of each award vesting each year on the anniversary of the grant. |
| |
| (3) | Award vests on the one-year anniversary of the grant date. |
| |
| (4) | Award has a four-year ratable vesting schedule with one-fourth of each award vesting each year on the anniversary of the grant. |
| |
| (5) | Award has a five-year ratable vesting schedule with one-fifth of each award vesting each year on the anniversary of the grant. |
| |
| (6) | Stock award has a four-year ratable vesting schedule with one-fourth of each award vesting each year on the anniversary of the grant. Option award has a three-year ratable vesting schedule with one-third of each award vesting each year on the anniversary of the grant. |
Option Exercises and Stock Vested Table. The following table sets forth certain information regarding the exercise of options and the vesting of stock awards by each Named Executive Officer during 2015:
|
| | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) (1) |
| William C. Pate (2) | | — |
| | $ | — |
| | 3,281 |
| | $ | 81,533 |
|
| Joseph Israel | | — |
| | $ | — |
| | — |
| | $ | — |
|
| William Monteleone (3) | | — |
| | $ | — |
| | 10,141 |
| | $ | 251,553 |
|
| Christopher Micklas (4) | | — |
| | $ | — |
| | 5,675 |
| | $ | 134,245 |
|
| James Matthew Vaughn (5) | | — |
| | $ | — |
| | 3,746 |
| | $ | 98,283 |
|
| Jim Yates | | — |
| | $ | — |
| | — |
| | $ | — |
|
| Kelly Rosser (6) | | — |
| | $ | — |
| | 800 |
| | $ | 16,610 |
|
| |
| (1) | Value Realized on vesting is determined based upon the company's common stock price as of the close of business on the applicable vesting date. |
| |
| (2) | Mr. Pate was granted 6,562 shares of restricted stock on November 14, 2014 in connection with his participation in the SPP. These awards vest ratably over a two-year period on each anniversary of the date of grant. |
| |
| (3) | Mr. Monteleone was granted 9,921 shares of restricted stock on November 20, 2014 in connection with his participation in the SPP. These awards vested ratably over a two-year period on each anniversary of the date of grant. Additionally, Mr. Monteleone was granted 14,122 shares of restricted stock on September 25, 2013 and 11,777 shares of restricted stock on December 31, 2013 in connection with his employment offer. These awards vest ratably over a five-year period on each anniversary of the date of grant. |
| |
| (4) | Mr. Micklas was granted 1,991 shares of restricted stock on November 26, 2014 in connection with his participation in the SPP. These awards vest ratably over a two-year period on each anniversary of the date of grant. Additionally, Mr. Micklas was granted 13,433 shares of restricted stock on December 9, 2013 and 9,965 shares of restricted stock on December 9, 2014 in connection with his employment offer. These awards vest ratably over a five-year period on each anniversary of the date of grant. |
| |
| (5) | Mr. Vaughn was granted 1,326 shares of restricted stock on November 24, 2014 in connection with his participation in the SPP. These awards vest ratably over a two-year period on each anniversary of the date of grant. Additionally, Mr. Vaughn was granted 15,417 shares of restricted stock on November 5, 2014 in connection with his employment offer. These awards vest ratably over a five-year period beginning on July 28, 2015. |
| |
| (6) | Ms. Rosser was granted 660 shares of restricted stock on November 21, 2014 in connection with her participation in the SPP. These awards vest ratably over a two-year period on each anniversary of the date of grant. Additionally, Ms. Rosser was granted 2,354 shares of restricted stock on February 17, 2014 in connection with her employment offer. These awards vest ratably over a five-year period on each anniversary of the date of grant. |
Employment Agreements. We have an employment agreement with our current Chief Executive Officer, our former Chief Executive Officer and our Senior Vice President, Marketing and Logistics. We have “at will” employment arrangements with the other Named Executive Officers. The material terms and conditions of each of the employment agreements and the employment arrangements are summarized below.
William C. Pate, Chief Executive Officer
On October 12, 2015, the company entered into an employment offer letter with Mr. Pate (the “Employment Offer Letter”), pursuant to which he was hired as our President and Chief Executive Officer effective October 20, 2015. Under the terms of the letter, Mr. Pate is entitled to receive an annual base salary of $450,000 paid in accordance with company payroll practices. Mr. Pate is eligible for an annual performance bonus, depending upon the achievement of specific individual and corporate performance criteria. Mr. Pate’s target cash bonus is 100% of his annual base salary with a maximum of 150%. In addition, Mr. Pate is eligible to participate in equity programs approved by the Committee commencing on or about February 2017. Currently, these programs include annual grants of awards under the 2012 Long-Term Incentive Plan in the form of restricted stock units (“RSUs”) and stock options. Mr. Pate’s annual RSU grant target is equal to 100%, and up to 150%, of his annual base salary, and his annual stock option award target is 100%, and up to 150%, of his annual base salary. The number of shares awarded will be determined on the basis of a Black-Scholes
valuation as of the date of grant, and stock options will have an exercise price equal to the closing price of the company’s common stock on the date of grant. Upon the commencement of his employment, Mr. Pate was granted an initial award of 750,000 stock options with an exercise price equal to the closing price of the company’s common stock on the date of the grant. One fifth of these options will vest on each anniversary of the date of the grant.
In the event of the termination of Mr. Pate’s employment by the company without cause or by Mr. Pate for certain specified reasons, and provided that Mr. Pate delivers an effective release in favor of the company and complies with restrictive covenants and obligations to the company, Mr. Pate will be entitled to the following benefits: (i) salary continuation payments equal to one year’s annual base salary in effect at the time of the termination, payable pro rata over 12 months, (ii) a bonus equal to the average of the bonuses paid to him over the prior three years (if termination occurs prior to three years, the target bonus will be used for the unserved periods), payable pro rata over 12 months and (iii) accelerated vesting of all outstanding unvested equity awards.
Mr. Pate is also eligible to participate in any benefit plans that may be offered from time to time by the company to its employees generally and in the company’s 401(k) plan, in each case subject to his satisfaction of the applicable eligibility provisions.
Joseph Israel, Senior Vice President and Former Chief Executive Officer
The company entered into an employment offer letter with Mr. Israel effective January 5, 2015, pursuant to which he was hired as our President and Chief Executive Officer. Mr. Israel is entitled to receive an annual base salary of $450,000 paid in accordance with the company's payroll practices. Mr. Israel is also eligible for an annual performance bonus, depending upon the achievement of specific individual and corporate performance criteria. Mr. Israel’s target bonus is 75% of his annual base salary with a maximum of 150%. In addition, Mr. Israel is eligible to participate in equity programs approved by the Committee, and his annual grants of restricted common stock and common stock options are each equal to 75% to 150% of his annual base salary. Mr. Israel received 27,829 shares of restricted company common stock and stock options to purchase 65,217 shares of company common stock in connection with his employment offer letter.
Effective October 20, 2015, Mr. Israel became our Senior Vice President and was named President and Chief Executive Officer of Par Petroleum, LLC. In connection with Mr. Israel’s change in position, his employment offer letter with the company dated December 12, 2014 was amended (the “Amendment”) to grant Mr. Israel a one-time cash payment of $739,534, which shall reduce pro rata in value and number any annual grant of restricted common stock or common stock options made to him in 2016. Certain severance benefits included in Mr. Israel’s employment offer letter were modified such that if Mr. Israel is terminated for Cause (as defined in his employment offer letter) prior to the one-year anniversary of the date of the Amendment (the “Anniversary Date”), Mr. Israel will waive his right to receive (i) salary continuation payments equal to one year’s annual base salary in effect at the time of the termination, payable pro rata over 12 months, and (ii) a bonus equal to the average of the bonuses paid to him over the prior three years (if termination occurs prior to three years, the target bonus will be used for the unserved periods). Additionally, if Mr. Israel resigns or his employment with the company is terminated for Cause, in each case prior to the Anniversary Date, Mr. Israel will not be entitled to receive accelerated vesting of all his outstanding unvested equity awards.
Mr. Israel is also eligible to participate in any benefit plans that may be offered from time to time by us to our employees generally and in our 401(k) plan, in each case subject to his satisfaction of the applicable eligibility provisions.
William Monteleone, Senior Vice President of Mergers and Acquisitions and Former Chief Executive Officer
On September 25, 2013, we entered into an “at will” employment arrangement with William Monteleone, who served as our Chief Executive Officer from September 25, 2013 until January 5, 2015. Since January 5, 2015, Mr. Monteleone has served as our Senior Vice President of Mergers & Acquisitions. Mr. Monteleone is entitled to receive an annual base salary of $350,000 paid in accordance with the company's payroll practices. Mr. Monteleone's compensation is reviewed annually. Mr. Monteleone is also eligible for an annual performance bonus as may be awarded in the sole discretion of the Board.
Mr. Monteleone is also eligible to participate in any benefit plans that may be offered from time to time by us to our employees generally and in our 401(k) plan, in each case subject to his satisfaction of the applicable eligibility provisions.
Christopher Micklas, Chief Financial Officer
On December 9, 2013, we entered into an “at will” employment arrangement with Christopher Micklas, our Chief Financial Officer. Mr. Micklas is entitled to receive an annual base salary of $330,000 paid in accordance with the company's payroll practices. Mr. Micklas’ compensation is reviewed annually. Mr. Micklas is also eligible for an annual performance bonus as may be awarded in the sole discretion of the Board.
Mr. Micklas is also eligible to participate in any benefit plans that may be offered from time to time by us to our employees generally and in our 401(k) plan, in each case subject to his satisfaction of the applicable eligibility provisions.
James Matthew Vaughn, Senior Vice President and General Counsel
On July 28, 2014, we entered into an “at will” employment arrangement with James Matthew Vaughn, our Senior Vice President and General Counsel. Mr. Vaughn is entitled to receive an annual base salary of $300,000 paid in accordance with the company's payroll practices. Mr. Vaughn’s compensation will be reviewed annually. Mr. Vaughn is also eligible for an annual performance bonus as may be awarded in the sole discretion of the Board.
Mr. Vaughn was granted $150,000 in restricted common stock upon completing one year of employment. This restricted stock grant will vest ratably over a 5-year period on each anniversary of the date of grant with 100% accelerated vesting for certain events such as a change in control of the company.
Mr. Vaughn is also eligible to participate in any benefit plans that may be offered from time to time by us to our employees generally and in our 401(k) plan, in each case subject to his satisfaction of the applicable eligibility provisions.
Jim Yates, Senior Vice President - Marketing and Logistics
On March 10, 2015, we entered into an “at will” employment arrangement with Jim Yates, our Senior Vice President, Marketing and Logistics. Mr. Yates received 6,835 shares of restricted stock and 8,625 stock options in connection with the commencement of his employment. Mr. Yates is entitled to an annual base salary of $300,000 paid in accordance with the company's payroll practices. Mr. Yates' compensation will be reviewed annually. Mr. Yates is also eligible for an annual performance bonus as may be awarded in the sole discretion of the Board.
In the event of the termination of Mr. Yates' employment by the company without cause or by Mr. Yates for certain specified reasons, and provided that Mr. Yates delivers an effective release in favor of the company and complies with restrictive covenants and obligations to the company, Mr. Yates will be entitled to the following benefits: (i) salary continuation payments equal to one year’s annual base salary in effect at the time of the termination, payable pro rata over 12 months, (ii) a bonus equal to the average of the bonuses paid to him over the prior three years (if termination occurs prior to three years, the target bonus will be used for the unserved periods), payable pro rata over 12 months and (iii) accelerated vesting of all outstanding unvested equity awards.
Mr. Yates is also eligible to participate in any benefit plans that may be offered from time to time by us to our employees generally and in our 401(k) plan, in each case subject to his satisfaction of the applicable eligibility provisions.
Kelly Rosser, Vice President and Chief Accounting Officer
On February 17, 2014, we entered into an “at will” employment arrangement with Kelly Rosser, our Vice President and Chief Accounting Officer. Ms. Rosser is entitled to receive an annual base salary of $220,000 paid in accordance with the company's payroll practices. Ms. Rosser’s compensation is reviewed annually. Ms. Rosser is also eligible for an annual performance bonus as may be awarded in the sole discretion of the Board.
Ms. Rosser is also eligible to participate in any benefit plans that may be offered from time to time by us to our employees generally and in our 401(k) plan, in each case subject to his satisfaction of the applicable eligibility provisions.
Potential Payments upon Termination or Change in Control
Messrs. Pate, Israel and Yates are entitled to severance pay and certain termination benefits pursuant to their employment arrangements with us. In addition, certain shares of restricted stock and options granted to our named executive officers under the 2012 Long-Term Incentive Plan will automatically vest in their entirety upon certain events such as a change of control or a termination of their employment due to death, disability or without cause.
The following tables further describe the benefits and potential payments upon termination or a change in control for our Named Executive Officers. There are no other potential payments upon termination or change in control for the Named Executive Officers.
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| Name (1) (2) | | Voluntary
Termination
($) | | For Cause
Termination
($) | | Involuntary
Not for Cause
Termination
($) | | Death or
Disability
($) | | Retirement
($) | | After a
Change in
Control
($) |
| William C. Pate - President and Chief Executive Officer | | | | | | | | | | | | |
| Salary continuation for one year | | $ | — |
| | $ | — |
| | $ | 450,000 |
| | $ | 450,000 |
| | $ | — |
| | $ | 450,000 |
|
| Average 3-year bonus | | $ | — |
| | $ | — |
| | $ | 450,000 |
| | $ | 450,000 |
| | $ | — |
| | $ | 450,000 |
|
| Restricted Stock (Unvested and Accelerated) | | $ | — |
| | $ | — |
| | $ | 129,917 |
| | $ | 129,917 |
| | $ | — |
| | $ | 129,917 |
|
| Stock Options (Unvested and Accelerated) (3) | | $ | — |
| | $ | — |
| | $ | 151,284 |
| | $ | 151,284 |
| | $ | — |
| | $ | 151,284 |
|
| Jospeh Israel – Senior Vice President and former Chief Executive Officer | | | | | | | | | | | | |
| Salary continuation for one year | | $ | — |
| | $ | — |
| | $ | 450,000 |
| | $ | 450,000 |
| | $ | — |
| | $ | 450,000 |
|
| Average 3-year bonus | | $ | — |
| | $ | — |
| | $ | 360,000 |
| | $ | 360,000 |
| | $ | — |
| | $ | 360,000 |
|
| Cash payment pursuant to amended employment agreement (4) | | $ | — |
| | $ | — |
| | $ | 739,534 |
| | $ | 739,534 |
| | | | $ | 739,534 |
|
| Restricted Stock (Unvested and Accelerated) | | $ | — |
| | $ | — |
| | $ | 725,456 |
| | $ | 725,456 |
| | $ | — |
| | $ | 725,456 |
|
| Stock Options (Unvested and Accelerated) | | $ | — |
| | $ | — |
| | $ | 480,649 |
| | $ | 480,649 |
| | $ | — |
| | $ | 480,649 |
|
| William Monteleone – Senior Vice President, Mergers & Acquisitions and former Chief Executive Officer | | | | | | | | | | | | |
| Restricted Stock (Unvested and Accelerated) | | $ | — |
| | $ | — |
| | $ | 662,885 |
| | $ | 662,885 |
| | $ | — |
| | $ | 662,885 |
|
| Stock Options (Unvested and Accelerated) | | $ | — |
| | $ | — |
| | $ | 491,997 |
| | $ | 491,997 |
| | $ | — |
| | $ | 491,997 |
|
| Christopher Micklas – Chief Financial Officer | | | | | | | | | | | | |
| Restricted Stock (Unvested and Accelerated) | | $ | — |
| | $ | — |
| | $ | 799,489 |
| | $ | 799,489 |
| | $ | — |
| | $ | 799,489 |
|
| Stock Options (Unvested and Accelerated) | | $ | — |
| | $ | — |
| | $ | 140,781 |
| | $ | 140,781 |
| | $ | — |
| | $ | 140,781 |
|
| James Matthew Vaughn – Senior Vice President, General Counsel and Secretary | | | | | | | | | | | | |
| Restricted Stock (Unvested and Accelerated) | | $ | — |
| | $ | — |
| | $ | 823,735 |
| | $ | 823,735 |
| | $ | — |
| | $ | 823,735 |
|
| Stock Options (Unvested and Accelerated) | | $ | — |
| | $ | — |
| | $ | 198,696 |
| | $ | 198,696 |
| | $ | — |
| | $ | 198,696 |
|
| Jim Yates – Senior Vice President, Marketing and Logistics | | | | | | | | | | | | |
| Salary continuation for one year | | $ | — |
| | $ | — |
| | $ | 300,000 |
| | $ | 300,000 |
| | $ | — |
| | $ | 300,000 |
|
| Average 3-year bonus | | $ | — |
| | $ | — |
| | $ | 225,000 |
| | $ | 225,000 |
| | $ | — |
| | $ | 225,000 |
|
| Restricted Stock (Unvested and Accelerated) | | $ | — |
| | $ | — |
| | $ | 200,726 |
| | $ | 200,726 |
| | $ | — |
| | $ | 200,726 |
|
| Stock Options (Unvested and Accelerated) | | $ | — |
| | $ | — |
| | $ | 4,958 |
| | $ | 4,958 |
| | $ | — |
| | $ | 4,958 |
|
| Kelly Rosser - Vice President and Chief Accounting Officer | | | | | | | | | | | | |
| Restricted Stock (Unvested and Accelerated) | | $ | — |
| | $ | — |
| | $ | 157,647 |
| | $ | 157,647 |
| | $ | — |
| | $ | 157,647 |
|
| Stock Options (Unvested and Accelerated) | | $ | — |
| | $ | — |
| | $ | 28,727 |
| | $ | 28,727 |
| | $ | — |
| | $ | 28,727 |
|
| |
| (1) | For purposes of this analysis, the company assumed the effective date of termination is December 31, 2015 and that the price per share of our common stock on the date of termination is $23.54 per share, the closing price on December 31, 2015. For purposes of valuing the stock options, we assumed the stock options were exercised on December 31, 2015. |
| |
| (2) | Pursuant to the terms of the 2012 Long-Term Incentive Plan and incentive agreements thereunder, under “Involuntary Not for Cause Termination,” “Death or Disability” or “After a Change in Control,” all restrictions and conditions on shares of restricted stock and unvested stock options will be deemed satisfied and will be fully vested on the date of termination of employment or the date immediately preceding a “change in control.” |
| |
| (3) | Excludes 750,000 stock options granted to Mr. Pate that are subject to shareholder approval. |
| |
| (4) | This payment was made to Mr. Israel in January 2016. |
Securities Authorized For Issuance Under Equity Compensation Plans
The following table sets forth information regarding our equity compensation plans as of December 31, 2015:
|
| | | | | | | | | | |
| Plan category | | Number of securities to
be issued upon exercise of
outstanding options,
warrants and rights(1) | | Weighted-average
exercise price of
outstanding options,
warrants and rights | | Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column (a)) |
| | | (a) | | (b) | | (c) |
| Equity compensation plans approved by security holders | | 641,242 |
| | $ | 17.77 |
| | 119,876 |
|
| Equity compensation plans not approved by security holders (2) | | 1,050,000 |
| | $ | 21.44 |
| | 1,350,000 |
|
| Total | | 1,691,242 |
| | $ | — |
| | 1,469,876 |
|
| |
| (1) | Includes options outstanding under the 2012 Long Term Incentive Plan. The total number of common stock initially available for issuance under the 2012 Long Term Incentive Plan is 1,600,000. As of December 31, 2015, 838,882 shares of restricted stock and 641,242 stock options were issued under the 2012 Long Term Incentive Plan net of forfeitures and shares repurchased by the company to settle employee tax withholding obligations triggered upon vesting of restricted stock. |
| |
| (2) | In the fourth quarter of 2015, our board of directors authorized an increase in the number of shares issuable under the LTIP to 4,000,000 shares, subject to shareholder approval. Additionally, we issued an aggregate 1,050,000 options to our new President and Chief Executive Officer, our Chairman and our Vice Chairman of our board of directors, each with an exercise price of $21.44. These option grants are also subject to shareholder approval. |
Certain Relationships and Related Transactions
Policies and Procedures with Respect to Related Party Transactions
The Board has recognized that transactions between us and certain related persons present a heightened risk of Directors knowsconflicts of interest. In order to ensure that we act in the best interests of our stockholders, the Board has delegated the review and approval of related party transactions to the Audit Committee in accordance with our written Audit Committee Charter. After its review, the Audit Committee will only approve or ratify transactions that are fair to us and not inconsistent with the best interests of us and our stockholders. Any director who has an interest in a related party transaction will recuse himself from any consideration of such related party transaction.
Services Agreements
On September 17, 2013 (but effective January 1, 2013), we entered into letter agreements (the “Services Agreements”) with EGI, an affiliate of ZCOF, and with Whitebox. Pursuant to the Services Agreements, EGI and Whitebox agreed to provide us with ongoing strategic, advisory and consulting services that may include, (i) advice on financing structures and our relationship with lenders and bankers, (ii) advice regarding public and private offerings of debt and equity securities, (iii) advice regarding asset dispositions, acquisitions or other asset management strategies, (iv) advice regarding potential business acquisitions, dispositions or combinations involving us or our affiliates, or (v) such other advice directly related or ancillary to the above strategic, advisory and consulting services as may be reasonably requested by us.
EGI and Whitebox will not receive a fee for the provision of the strategic, advisory or consulting services set forth in the Services Agreements, but may be periodically reimbursed by us, upon request, for (i) travel and out of pocket expenses, provided that in the event that such expenses exceed $50 thousand in the aggregate with respect to any single proposed matter, EGI or Whitebox, as applicable, will obtain our consent prior to incurring additional costs, and (ii) provided that we provide prior consent to their engagement with respect to any particular proposed matter, all reasonable fees and disbursements of counsel, accountants and other professionals incurred in connection with EGI’s or Whitebox’s, as applicable, services under the Services Agreements. In consideration of the services provided by EGI and Whitebox under the Services Agreements, we agreed to indemnify each of them for certain losses incurred by them relating to or arising out of the Services Agreements or the services provided thereunder.
The Services Agreements have a term of one year and will be automatically extended for successive one-year periods unless terminated by either party at least 60 days prior to any extension date.
We incurred costs of approximately $180,000 related to these agreements during 2015. In October 2015, the company terminated its Services Agreement with Whitebox.
Delayed Draw Term Loan Credit Agreement
Certain of our stockholders are lenders under our delayed draw term loan credit agreement and the Tranche B Loan made thereunder. As of December 31, 2015, we owed approximately $60.1 million under the delayed draw term loan credit agreement.
Warrant Issuance Agreement
Certain of our stockholders who were lenders under the delayed draw term loan credit agreement received warrants exercisable for shares of common stock in connection with such loan. The warrants were issued on August 31, 2012. Subject to the warrant issuance agreement, the holders are entitled to purchase shares of common stock upon exercise of the warrants at an exercise price of $0.10 per share of common stock, subject to certain adjustments from time to time as provided in the warrant issuance agreement. The warrants expire on the earlier of (i) August 31, 2022 or (ii) the occurrence of certain merger or consolidation transactions specified in the warrant issuance agreement. A holder may exercise the warrants by paying the applicable exercise price in cash or on a cashless basis. The number of shares of our common stock issuable upon exercise of the warrants and the exercise prices of the warrants will be adjusted in connection with certain issuances or sales of shares of our common stock and convertible securities, or any subdivision, reclassification or combinations of common stock. Additionally, in the case of any reclassification or capital reorganization of the capital stock of the company, the holder of each warrant outstanding immediately prior to the occurrence of such reclassification or reorganization will have the right to receive upon exercise of the applicable warrant, the kind and amount of stock, other securities, cash or other property that such holder would have received if such warrant had been exercised.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 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 matter,other reports were required, during the fiscal year ended December 31, 2015, our officers, directors and greater than 10% beneficial owners timely filed all required Section 16(a) reports, except that the following individuals failed to file timely reports for such fiscal year: William Monteleone was late in filing four
Form 4s disclosing four transactions; Robert S. Silberman was late in filing two Form 4s disclosing three transactions; Timothy Clossey was late in filing four Form 4s disclosing nine transactions; L. Melvin Cooper was late in filing one Form 4 disclosing two transactions; Melvyn N. Klein was late in filing three Form 4s disclosing five transactions; Walter A. Dods, Jr. was late in filing one Form 4 disclosing two transactions; Curtis V. Anastasio was late in filing two Form 4s disclosing four transactions; William C. Pate was late in filing three Form 4s disclosing four transactions; Christopher Micklas was late in filing four Form 4s disclosing four transactions; James Matthew Vaughn was late in filing four Form 4s disclosing four transactions; Kelly Rosser was late in filing two Form 4s disclosing two transactions; Jacob Mercer was late in filing one Form 4 disclosing four transactions; Brice Tarzwell was late in filing one Form 4 disclosing one transaction; and Randy Ludden was late in filing one Form 4 disclosing one transaction.
Other Matters
Our Annual Report to Stockholders on Form 10-K covering the fiscal year ended December 31, 2015, our Quarterly Reports on Form 10-Q and other information are available on our website (www.parpacific.com) and may also be obtained by calling (832) 916-3396 or writing to the address below:
PAR PACIFIC HOLDINGS, INC.
Investor Relations
800 Gessner Road, Suite 875
Houston, Texas 77024
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, whichproxy statement will be representedpresented for action at the Annual Meeting; however, if any other matters are properly brought before the Meeting or anymeeting.
Deadline for Receipt of its adjournments, the person or persons voting the proxies will vote them in accordance with their judgment on such matters.
“Householding” of Proxy Materials. The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy materials with respect to two or more stockholders sharing the same address by delivering a single annual report, proxy statement, or Notice of Internet Availability of Proxy Materials, as applicable, addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for us. Under this procedure, multiple stockholders who share the same last name and address will receive only one copy of the annual proxy materials, unless they notify us that they wish to continue receiving multiple copies. We have undertaken householding to reduce our printing costs and postage fees.Stockholder Proposals
If you wishwant us to opt-outconsider including a proposal in our proxy statement for our 2017 annual meeting of householding and continuestockholders you must deliver a copy of your proposal to Par’s Secretary at our principal executive offices at 800 Gessner Road, Suite 875, Houston, Texas, 77024 no later than December 22, 2016. If the date of Par’s 2017 annual meeting of stockholders is more than 30 calendar days before or after the one-year anniversary date of our 2016 annual meeting, your notice of a proposal will be timely if we receive multiple copiesit by the close of business on the tenth day following the earlier of the proxy materialsdate 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 you intend to present a proposal at the same address,our 2017 annual meeting of stockholders, including director nominations, but you may do sonot intend to have it included in our 2017 Proxy Statement, you must deliver a copy of your proposal, which must contain certain information specified in our Bylaws, to Par’s Secretary at any timeour principal executive offices listed above not less than 90 days nor more than 120 days prior to thirty days before the mailingdate of proxy materials, which will typically be mailed2017 annual meeting of stockholders, provided that in April or May of each year, by notifying our Secretary, Stanley F. Freedman, in writing at: 370 Seventeenth Street, Suite 4300, Denver, Colorado 80202 or by telephone(303) 293-9133. You also may request additional copiesthe event that public disclosure of the proxy materials by notifying us in writing at the same address or contacting us at(303) 293-9133, and we will undertake to deliver such additional copies promptly. If you share an address with another stockholder and currently are receiving multiple copiesdate of the proxy materials, youmeeting is first made less than one hundred days prior to the date of the meeting, your notice must be received not later than the close of business on the tenth day following the day on which such public disclosure of the date of the 2017 annual meeting was made. 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 our Board of Directors may request householding by notifying us at the above referenced address or telephone number.recommend.
Sincerely,
James Matthew Vaughn
Senior Vice President, General Counsel and Secretary
April 21, 2016
AVAILABLE INFORMATION
Appendix A
Upon request of any stockholder, our Annual Report onForm 10-K for the year ended December 31, 2010, as filed with the SEC, will be sent to the stockholder without charge. All requests should be addressed to our Secretary at 370 Seventeenth Street, Suite 4300, Denver, Colorado 80202 or by telephone(303) 293-9133.
You are urged to submit your proxy promptly. You may revoke your proxy at any time before it is voted. If you attend the Annual Meeting, as we hope you will, you may vote your shares in person.
By Order of the Board of Directors
Carl E. Lakey
President
PAR PACIFIC HOLDINGS, INC.
2012 LONG TERM INCENTIVE PLAN
(As Amended and Chief Executive Officer
May 17, 2011
36
APPENDIX A
AMENDMENT TO CERTIFICATE OF INCORPORATION
Article Four, Section 4.1is hereby deleted in its entirety and replaced with the following:
4.1 Common Stock.
(a) The total number of shares of common stock, par value $0.01 per share, that the Company is authorized to issue is two hundred million (200,000,000).
Restated Effective as of 5:00 pm, Eastern time,February 16, 2016)
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| | | | |
| SECTION 1 |
| | ESTABLISHMENT; PURPOSE AND TERM OF PLAN | 1 |
| 1.1 |
| | Establishment | 1 |
| 1.2 |
| | Purpose | 1 |
| 1.3 |
| | Term of Plan | 1 |
| SECTION 2 |
| | DEFINITIONS AND CONSTRUCTION | 1 |
| 2.1 |
| | Definitions | 1 |
| 2.2 |
| | Construction | 6 |
| SECTION 3 |
| | ADMINISTRATION | 6 |
| 3.1 |
| | Administration by the Committee | 6 |
| 3.2 |
| | Authority of Officers | 6 |
| 3.3 |
| | Powers of the Committee | 6 |
| 3.4 |
| | Administration with Respect to Insiders | 7 |
| 3.5 |
| | Indemnification | 7 |
| SECTION 4 |
| | SHARES SUBJECT TO PLAN | 8 |
| 4.1 |
| | Maximum Number of Shares Issuable | 8 |
| 4.2 |
| | Adjustments for Changes in Capital Structure | 8 |
| SECTION 5 |
| | ELIGIBILITY AND AWARD LIMITATIONS | 9 |
| 5.1 |
| | Persons Eligible for Awards | 9 |
| 5.2 |
| | Award Agreements | 9 |
| 5.3 |
| | Award Grant Restrictions | 9 |
| 5.4 |
| | Fair Market Value Limitations for Incentive Stock Options | 10 |
| 5.5 |
| | Repurchase Rights, Right of First Refusal and Other Restrictions on Stock | 10 |
| SECTION 6 |
| | TERMS AND CONDITIONS OF OPTIONS | 10 |
| 6.1 |
| | Exercise Price | 10 |
| 6.2 |
| | Exercisability, Vesting and Term of Options | 10 |
| 6.3 |
| | Payment of Exercise Price | 11 |
| SECTION 7 |
| | RESTRICTED STOCK | 12 |
| 7.1 |
| | Award of Restricted Stock | 12 |
| 7.2 |
| | Restrictions | 12 |
| 7.3 |
| | Delivery of Shares of Common Stock | 13 |
| SECTION 8 |
| | OTHER AWARDS | 13 |
| 8.1 |
| | Grant of Other Awards | 13 |
| 8.2 |
| | Terms of Other Awards | 14 |
| 8.3 |
| | Dividends and Dividend Equivalents | 16 |
|
| | | | |
| SECTION 9 |
| | EFFECT OF TERMINATION OF SERVICE | 17 |
| 9.1 |
| | Exercisability and Award Vesting | 17 |
| 9.2 |
| | Extension if Exercise Prevented by Law | 18 |
| 9.3 |
| | Extension if Participant Subject to Section 16(b) | 18 |
| SECTION 10 |
| | WITHHOLDING TAXES | 18 |
| 10.1 |
| | Tax Withholding | 18 |
| 10.2 |
| | Share Withholding | 18 |
| SECTION 11 |
| | PROVISION OF INFORMATION | 18 |
| SECTION 12 |
| | COMPLIANCE WITH SECURITIES LAW AND OTHER APPLICABLE LAWS | 18 |
| SECTION 13 |
| | RETURN AND/OR FORFEITURE OF PERFORMANCE-BASED PAYMENTS OR AWARDS | 19 |
| SECTION 14 |
| | NONTRANSFERABILITY OF AWARDS AND STOCK | 19 |
| SECTION 15 |
| | NONCOMPETITIVE ACTIONS | 20 |
| SECTION 16 |
| | TERMINATION OR AMENDMENT OF PLAN | 20 |
| SECTION 17 |
| | STOCKHOLDER APPROVAL | 20 |
| SECTION 18 |
| | NO GUARANTEE OF TAX CONSEQUENCES | 20 |
| SECTION 19 |
| | SEVERABILITY | 20 |
| SECTION 20 |
| | GOVERNING LAW | 21 |
| SECTION 21 |
| | SUCCESSORS | 21 |
| SECTION 22 |
| | RIGHTS AS A STOCKHOLDER | 21 |
| SECTION 23 |
| | NO SPECIAL EMPLOYMENT OR SERVICE RIGHTS | 21 |
| SECTION 24 |
| | REORGANIZATION OF COMPANY | 21 |
| SECTION 25 |
| | CODE SECTION 409A | 21 |
| SECTION 26 |
| | ADJUSTMENTS UPON A CHANGE IN CONTROL | 22 |
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PAR PACIFIC HOLDINGS, INC.
2012 LONG TERM INCENTIVE PLAN
SECTION 1
ESTABLISHMENT; PURPOSE AND TERM OF PLAN
1.1Establishment
The Par Pacific Holdings, Inc. 2012 Long Term Incentive Plan (formerly, the Par Petroleum Corporation 2012 Long Term Incentive Plan) (the “Plan”) was established and adopted by the Board effective as of December 20, 2012 (the “Effective Date”) and amended effective as of November 4, 2015, subject to stockholder approval on the date this Certificate is filed with the Secretary of Stateearlier of the Statenext stockholder’s meeting following the effective date of Delaware, eachsuch amendment or within twelve (12) months following the effective date of the amendment. The Plan, as amended and restated as set forth herein, is hereby adopted by the Board effective as of February 16, 2016 (the “Restatement Date”), subject to stockholder approval on the earlier of the next stockholder’s meeting following the effective date of this restatement or within twelve (12) months following the effective date of the restatement. Upon approval by the Board, awards may be made as provided herein, subject to such subsequent stockholder approval. In the event that such stockholder approval is not obtained, any such awards shall be null and void and of no effect.
1.2Purpose
The purpose of the Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company.
1.3Term of Plan
The Plan shall continue in effect until the earlier of its termination by the Board or the date on which all of the shares of Stock available for issuance under the Plan have been issued and all restrictions on such shares of Stock under the terms of the Plan and the agreements evidencing Awards granted under the Plan have lapsed. However, all Awards shall be granted, if at all, on or before the date which is ten (10) years from Effective Date; provided, however, that with respect to any Awards tied to the Two Million Four Hundred Thousand (2,400,000) shares of the Company’s common stock, par value $0.01 per share, issued and outstanding shall, automatically and without any action on the partStock that were added as of the respective holders thereof, be combined and converted into one (1) share of common stock, par value $0.01 per share, of the Company. No fractional shares shall be issued and, in lieu thereof, any holder of less than one share of common stock shall be entitledNovember 4, 2015 to receive a cash payment representing that holder’s proportionate interest in the net proceeds from the sale by the Company’s transfer agent of the aggregate of fractional shares of common stock that would otherwise have been issued. Whether or not the stock combination provided above would result in fractional shares for a holder of record shall be determined on the basis of the total number of shares of Stock available for issuance under the Plan, those Awards shall be granted, if at all, on or before the date which is ten (10) years from November 4, 2015.
SECTION 2
DEFINITIONS AND CONSTRUCTION
2.1Definitions
Whenever used herein, the following terms shall have their respective meanings set forth below:
(a) “Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, another Person. The term “control” includes, without limitation, the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. With respect to any Award that is deferred compensation subject to Code Section 409A, for the purposes of applying Code Section 409A to such Award the term Affiliate shall mean all Persons with whom the Participant’s employer would be considered a single employer under Code Section 414(b) or 414(c) as defined and modified in Code Section 409A as determined by the Committee. Notwithstanding the foregoing, with respect to Nonstatutory Stock Options and Stock Appreciation Rights, if necessary for such Awards to be exempt from Code Section 409A, as determined by the Committee, for purposes of grants of such Awards, Affiliate shall only include an entity if the Company’s Stock would constitute “service recipient stock” within the meaning of Code Section 409A.
(b) “Award” means a grant of an Option, Restricted Stock, Restricted Stock Unit, Stock Appreciation Right, Performance Award, Other Stock-Based Award or Cash Award to a Participant under this Plan.
(c) “Authorized Shares” shall have the meaning set forth in Section 15.
(d) “Award Agreement” means a written agreement between the Company and a Participant setting forth the terms, conditions and restrictions of the Award granted to the Participant and any shares of Stock acquired or cash paid upon the exercise or settlement thereof, in such form as the Committee may approve from time to time.
(e) “Board” means the Board of Directors of the Company.
(f) “Broker-Assisted Cashless Exercise” shall have the meaning set forth in Section 6.3(a)(ii).
(g) “Cash Award” shall have the meaning set forth in Section 8.1(f).
(h) “Cause” shall mean, unless otherwise specifically defined in a Participant’s Award Agreement or an employment agreement between the Participant and the Company or an Affiliate as in effect on the effective date of the grant of an Award, any of the following: (1) the Participant’s theft or falsification of any Company or Affiliate documents or records or property; (2) the Participant’s improper use or disclosure of the Company’s or an Affiliate’s confidential or proprietary information; (3) any action by the Participant which has a material detrimental effect on the Company’s or an Affiliate’s reputation or business as determined by the Committee; (4) the Participant’s material failure or inability to perform any reasonable assigned and lawful duties after written notice from the Company or Affiliate of, and Participant’s failure or inability to cure within ten (10) business days, such failure or inability; (5) any material breach by the Participant of any employment or service agreement between the Participant and the Company or Affiliate, if applicable, which breach is not cured pursuant to the terms of such agreement, if applicable; or (6) the Participant’s conviction (including any plea of guilty or nolo contendere) of any felony or any criminal violation involving fraud, embezzlement, misappropriation, dishonesty, the misuse or misappropriation of money or other property or any other crime which has or would reasonably be expected to have an adverse effect on the business or reputation of the Company or an Affiliate or (7) a material breach by the Participant of the policies and procedures of the Company or an Affiliate.
(i) A “Change in Control” means any of the following events occurring with respect to the Company:
(i) any Person (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company immediately prior to the occurrence with respect to which the evaluation is being made in substantially the same proportions as their ownership of the common stock of the Company) acquires securities of the Company and immediately thereafter is the beneficial owner (except that a Person shall be deemed to be the beneficial owner of all shares of Stock that any such Person has the right to acquire pursuant to any agreement or arrangement or upon exercise of conversion rights, warrants or options or otherwise, without regard to the sixty (60)-day period referred to in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities;
(ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii), or (iv) of this paragraph) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved but excluding for this purpose any such new director whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of
an individual, corporation, partnership, group, associate or other entity or Person other than the Board, cease for any reason to constitute at least a majority of the Board;
(iii) the consummation of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or resulting entity) more than 50% of the combined voting power of the surviving or resulting entity outstanding immediately after such merger or consolidation; or
(iv) the stockholders of the Company approve a plan or agreement for the sale or disposition of all or substantially all of the consolidated assets of the Company (other than such a sale or disposition immediately after which such assets will be owned directly or indirectly by the stockholders of the Company, in substantially the same proportions as their ownership of the common stock of the Company immediately prior to such sale or disposition) in which case the Board shall determine the effective date of the Change in Control resulting therefrom; provided, however, that a transaction described in this clause (iv) shall not be deemed a Change in Control unless and until such transaction is consummated.
(j) “Code” means the Internal Revenue Code of 1986, as amended, and any applicable notices, rulings and regulations promulgated thereunder.
(k) “Committee” means the Board or, if so appointed by the Board, the Compensation Committee of the Board or any other committee duly appointed by theBoard to administer the Plan, which such committee may be one or more persons; provided however, that during any period the Company is a “publicly held corporation” within the meaning of Code Section 162(m) the Committee shall consist of not less than two directors of the Board who fulfill the “outside director” requirements of Code Section 162(m) and who are non-employee directors under the Securities and Exchange Commission Rule 16b-3.
(l) “Company”means Par Pacific Holdings, Inc., a Delaware corporation, or any successor corporation thereto.
(m) “Consultant” means an individual who is a natural person engaged to provide consulting or advisory services (other than as an Employee or a Director) to the Company or its Affiliates, provided that the identity of such person, the nature of such services or the entity to which such services are provided are not in connection with the offer or sale of securities in a capital raising transaction, and do not directly or indirectly promote or maintain a market for the Company’s securities or would not preclude the Company from offering or selling securities to such person pursuant to the Plan in reliance on either the exemption from registration provided by Rule 701 under the Securities Act or, if the Company is required to file reports pursuant to Section 13 or 15(d) of the Exchange Act, registration on a Form S-8 Registration Statement under the Securities Act.
(n) “Director” means a member of the Board or of the board of directors of any of the Company’s Affiliates.
(o) “Disability” means, unless otherwise specifically defined in the Participant’s Award Agreement, (i) in the case where the Participant has a written employment agreement with the Company or any Subsidiary, the definition of “Disability,” the definition for such holderterm set forth in such employment agreement as in effect on the date of recordthe applicable Award grant and (ii) in all other cases, a Participant’s inability, due to physical or mental incapacity, to substantially perform his duties and responsibilities for a period of ninety (90) days during any twelve-month period as determined by the Company. The Participant agrees to submit to any examination that is necessary for a determination of Disability and agrees to provide any information necessary for a determination of Disability, including any information that is protected by the Health Insurance Portability and Accountability Act.
(p) “Effective Date”shall have the meaning set forth in Section 1.1.
(q) “Employee”means any person treated as an employee (including a Director who is also treated as an employee) of the Company on the records of the Company or of any of the Company’s Affiliates on the records of such Affiliate and, with respect to any Incentive Stock Option granted to such
person, who is an employee of the Company or a parent or a Subsidiary of the Company for purposes of Code Sections 422, 424 and 3401(c); provided, however, that neither service as a Director nor payment of a director’s fee shall be sufficient to constitute employment for purposes of the Plan. The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such individual’s employment or termination of employment, as the case may be. For purposes of an individual’s rights, if any, under the Plan as of the time of the Company’s determination, all such determinations by the Company shall be final, binding and conclusive, notwithstanding that the Company, the Board, the Committee or any court of law or governmental agency subsequently makes a contrary determination.
(r) “Exchange Act”means the Securities Exchange Act of 1934, as amended.
(s) “Expiration Date” shall have the meaning set forth in Section 9.1(a).
(t) “Fair Market Value” means, as of any date, the value of a share of Stock or other property as determined by the Committee, in its discretion, or by the Company, in its discretion, if such determination is expressly allocated to the Company herein, subject to the following:
(i) If, on such date, the Stock is listed or traded on a national or regional securities exchange or market system, constituting the primary market for the Stock, the Fair Market Value of a share of Stock shall be the closing sale price of a share of Stock (or the mean of the closing bid and asked prices of a share of Stock if the Stock is so quoted instead) on the determination date (or, if no sales occur on such date, on the last preceding date on which such sales of Stock are so reported) as quoted on such exchange and as reported in The Wall Street Journal, pink sheets or such other source as the Committee deems reliable.
(ii) If, on such date, the Stock is not listed or traded on a national or regional securities exchange or market system, the Fair Market Value of a share of Stock shall be as determined by the Committee in its discretion using a reasonable method exercised in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse, and if it is determined by the Committee to be applicable, in any other manner permitted in accordance with Code Section 409A and the notices, rulings and regulations thereunder, or Code Section 422(b) and the notices, rulings and regulations thereunder, if applicable.
(u) “Incentive Stock Option” means an Option intended to be (as set forth in the Award Agreement) and which qualifies as an incentive stock option within the meaning of Code Section 422(b).
(v) “Insider” means an Officer, a Director or other person whose transactions in Stock are subject to Section 16 of the Exchange Act.
(w) “Net Exercise” shall have the meaning set forth in Section 6.3(a)(iii).
(x) “New Shares” shall have the meaning set forth in Section 4.2.
(y) “Nonstatutory Stock Option” means an Option not intended to be (as set forth in the Award Agreement) or which does not qualify as an Incentive Stock Option.
(z) “Officer” means any person designated by the Board as an officer of the Company.
(aa) “Option” means a right to purchase Stock pursuant to the terms and conditions of the Plan and the applicable Award Agreement. An Option may be either an Incentive Stock Option or a Nonstatutory Stock Option.
(bb) “Other Stock-Based Award”means an Award described in Section 8.1(d).
(cc) “Participant” means a person who has been granted one or more Awards hereunder.
(dd) “Performance Award”means an Award described in Section 8.1(c).
(ee) “Permitted Transferee” has the meaning provided such term in Section 13.
(ff) “Person”means any partnership, corporation, limited liability company, group, trust or other legal entity.
(gg) “Plan” shall have the meaning set forth in Section 1.1.
(hh) “Reprice” means the reduction of the exercise price of an Option or Stock Appreciation Right previously awarded, and, at any time when the exercise price of an Option or Stock Appreciation Right is above the Fair Market Value of a share of Stock, the cancellation and re-grant or the exchange of such outstanding Option or Stock Appreciation Right for either cash or a new Award with a lower (or no) exercise price.
(ii) “Restatement Date”shall have the meaning set forth in Section 1.1.
(jj) “Restricted Stock” means an Award granted to a Participant pursuant to Section 7.
(kk) “Restricted Stock Unit” means a notional account established pursuant to an Award granted pursuant to Section 8.1(a) that is (i) valued solely by reference to shares of Stock, (ii) subject to restrictions specified in the Award Agreement, and (iii) payable in Stock, cash or a combination thereof. The Restricted Stock Unit awarded to the Participant will vest according to time-based or performance-based criteria specified in the Award Agreement.
(ll) “Restriction Period” means the period of time determined by the Committee and set forth in the Award Agreement during which an Award of Restricted Stock is subject to a restriction that constitutes a “substantial risk of forfeiture” (as defined in Code Section83) and/or a restriction on the ability of the Participant to transfer the Restricted Stock.
(mm) “Rule 16b-3” means Rule 16b-3 under the Exchange Act, as amended from time to time, or any successor rule or regulation.
(nn) “Securities Act” means the Securities Act of 1933, as amended.
(oo) “Section 409A Plan” shall have the meaning described in Section25.
(pp) “Service”means a Participant’s employment or service with the Company or any of its Affiliates, whether in the capacity of an Employee, a Director or a Consultant. A Participant’s Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders Service to the Company or Affiliate (or in the case of an Incentive Stock Option the parent or Subsidiary of the Company) or a change in the Company or Affiliate (or in the case of an Incentive Stock Option the parent or Subsidiary of the Company) for which the Participant renders such Service, provided that there is no interruption or termination of the Participant’s Service. Furthermore, a Participant’s Service with the Company or an Affiliate (or in the case of an Incentive Stock Option the parent or Subsidiary of the Company) shall not be deemed to have terminated if the Participant takes any military leave, temporary illness leave, authorized vacation or other bona fide leave of absence; provided, however, that if any such leave exceeds three (3) months, the Participant’s Service shall be deemed to have terminated unless the Participant’s right to return to Service with the Company is provided by either statute or contract. Notwithstanding the foregoing, unless otherwise designated by the Company or provided by statute or contract, a leave of absence shall not be treated as Service. The Participant’s Service shall be deemed to have terminated either upon an actual termination of Service or upon the company for which the Participant performs Service ceasing to be the Company or an Affiliate (or in the case of an Incentive Stock Option the parent or Subsidiary of the Company). Subject to the foregoing, the Company, in its discretion, shall determine whether the Participant’s Service has terminated and the effective date of such termination. Notwithstanding the foregoing, with respect to any Award that is subject to Code Section409A, “separation from service” shall be determined by the Committee under the applicable rules of Code Section409A.
(qq) “Spread” shall have the meaning set forth in Section 8.1(c).
(rr) “Stock” means the common stock of the Company, par value $0.01 per share, as adjusted from time to time in accordance with Section 4.2.
(ss) “Stock Appreciation Right” means an Award described in Section 8.1(b).
(tt) “Subsidiary” means any corporation (whether now or hereafter existing) which constitutes a “subsidiary” of the Company, as defined in Code Section 424(f).
(uu) “Ten Percent Owner Participant”means a Participant who, at the time an Option is granted to the Participant, owns stock split occurs.possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or its parent or Subsidiary within the meaning of Code Section 422(b)(6).
(vv) “Term”shall have the meaning described in Section 15. DELTA PETROLEUM CORPORATION
ATTN: ANDREA BROWN
370 SEVENTEENTH STREET, STE 4300
DENVER, CO 80202
2.2ConstructionVOTE BY INTERNET - www.proxyvote.com
Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Words of the masculine gender shall include the feminine and neuter, and vice versa. Use of the Internetterm “or” is not intended to transmit your voting instructionsbe exclusive, unless the context clearly requires otherwise. Section headings as used herein are inserted solely for convenience and reference and do not constitute any part of the interpretation or construction of the Plan.
SECTION 3
ADMINISTRATION
3.1Administration by the Committee
The Plan shall be administered by the Committee. All questions of interpretation of the Plan, construction of its terms, or of any Award shall be determined by the Committee, and such determinations shall be final and binding upon all persons having an interest in the Plan or such Award.
3.2Authority of Officers
Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, determination or election.
3.3Powers of the Committee
In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Committee shall have the full and final power and authority, in its discretion:
(a) to determine the persons to whom, and the time or times at which, Awards shall be granted and the number of shares of Stock to be subject to each Award;
(b) to designate Awards as Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Awards, Other Stock-Based Awards or Cash Awards, and to designate Options as Incentive Stock Options or Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares of Stock or other property;
(d) to determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and any shares of Stock acquired upon the exercise and/or vesting thereof, including, without limitation, (i) the exercise price of an Option or Stock Appreciation Right, (ii) the method of payment for shares purchased upon the exercise and/or vesting of an Award, (iii) the method for satisfaction of any tax withholding obligation arising in connection with the Award or such shares, including by the withholding or delivery of shares of Stock, (iv) the timing, terms and conditions, including but not limited to performance goals, of the exercisability of the Award or the vesting of any Award, (v) the time of the expiration of the Award, (vi) the effect of the Participant’s termination of Service with the Company on any of the foregoing, (vii) the provision for electronic delivery of Awards and/or book entry, and (viii) all other terms, conditions and restrictions applicable to the Award not inconsistent with the terms of the Plan;
(e) to approve forms of Award Agreements;
(f) to amend, modify, extend, cancel, or renew any Award, or to waive any restrictions or conditions applicable to any Award or any shares of Stock acquired upon the exercise thereof; provided, however, that except as provided in Section 25, no such amendment, modification, extension or cancellation shall adversely affect a Participant’s Award without the Participant’s consent;
(g) to accelerate, continue, extend or defer the exercisability and/or vesting of any Award, including with respect to the period following a Participant’s termination of Service with the Company;
(h) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt supplements to, or alternative versions of, the Plan, including, without limitation, as the Committee deems necessary or desirable to comply with the laws of, or to accommodate the tax policy or custom of, foreign jurisdictions whose citizens may be granted Awards;
(i) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement and to make all other determinations and take such other actions with respect to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with the provisions of the Plan or applicable law; and
(j) notwithstanding the foregoing, except as provided in Section 4.2 and Section 26, the terms of an outstanding Award may not be amended by the Committee, without approval of the Company’s stockholders, to: (i) reduce the exercise price of an outstanding Option or to reduce the exercise price of an outstanding Stock Appreciation Right, (ii) cancel an outstanding Option or outstanding Stock Appreciation Right in exchange for other Options or Stock Appreciation Rights with an exercise price that is less than the exercise price of the cancelled Option or the cancelled Stock Appreciation Right, as applicable, or (iii) cancel an outstanding Option with an exercise price that is less than the Fair Market Value of a share of Stock on the date of cancellation or cancel an outstanding Stock Appreciation Right with an exercise price that is less than the Fair Market Value of a share of Stock on the date of cancellation in exchange for cash or another Award.
3.4Administration with Respect to Insiders
With respect to participation by Insiders in the Plan, at any time that any class of equity security of the Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements, if any, of Rule 16b-3 and all other applicable laws, including any required blackout periods. At any time the Company is required to comply with Securities Regulation BTR, all transactions under this Plan respecting the Company’s securities shall comply with Securities Regulation BTR and the Company’s insider trading policies, as revised from time to time, or such other similar Company policies, including but not limited to policies relating to blackout periods. Any ambiguities or inconsistencies in the construction of an Award shall be interpreted to give effect to such limitation. To the extent any provision of the Plan or Award Agreement or action by the Committee or Company fails to so comply, such provision or action shall be deemed null and void to the extent permitted by law and deemed advisable by the Committee in its discretion.
3.5Indemnification
EACH PERSON WHO IS OR WAS A MEMBER OF THE BOARD OR THE COMMITTEE SHALL BE INDEMNIFIED BY THE COMPANY AGAINST AND FROM ANY DAMAGE, LOSS, LIABILITY, COST AND EXPENSE THAT MAY BE IMPOSED UPON OR REASONABLY INCURRED BY HIM OR HER IN CONNECTION WITH OR RESULTING FROM ANY CLAIM, ACTION, SUIT, OR PROCEEDING TO WHICH HE OR SHE MAY BE A PARTY OR IN WHICH HE OR SHE MAY BE INVOLVED BY REASON OF ANY ACTION TAKEN OR FAILURE TO ACT UNDER THE PLAN (INCLUDING SUCH INDEMNIFICATION FOR A PERSON’S OWN, SOLE, CONCURRENT OR JOINT NEGLIGENCE OR STRICT LIABILITY), EXCEPT FOR ANY SUCH ACT OR OMISSION CONSTITUTING WILLFUL OR INTENTIONAL MISCONDUCT, FRAUD OR GROSS NEGLIGENCE. SUCH PERSON SHALL BE INDEMNIFIED BY THE COMPANY FOR ALL AMOUNTS PAID BY HIM OR HER IN SETTLEMENT THEREOF, WITH THE COMPANY’S APPROVAL, OR PAID BY HIM OR HER IN SATISFACTION OF ANY JUDGMENT IN ANY SUCH ACTION, SUIT, OR PROCEEDING AGAINST HIM OR HER, PROVIDED HE OR SHE SHALL GIVE THE COMPANY AN OPPORTUNITY, AT ITS OWN EXPENSE, TO HANDLE AND DEFEND THE SAME BEFORE HE OR SHE UNDERTAKES TO HANDLE AND DEFEND IT ON HIS OR HER OWN BEHALF. THE FOREGOING RIGHT
OF INDEMNIFICATION SHALL NOT BE EXCLUSIVE OF ANY OTHER RIGHTS OF INDEMNIFICATION TO WHICH SUCH PERSONS MAY BE ENTITLED UNDER THE COMPANY’S ARTICLES OF INCORPORATION OR BYLAWS, AS A MATTER OF LAW, OR OTHERWISE, OR ANY POWER THAT THE COMPANY MAY HAVE TO INDEMNIFY THEM OR HOLD THEM HARMLESS.
SECTION 4
SHARES SUBJECT TO PLAN
4.1Maximum Number of Shares Issuable
Subject to adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be issued under the Plan is Four Million (4,000,000) and shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof. The maximum aggregate number of shares of Stock covered by Incentive Stock Options that may be issued under the Plan is Three Million (3,000,000) shares of Stock. Shares of Stock of an outstanding Award that for any reason expire or are terminated, forfeited or canceled or withheld for taxes or settled in a manner that all or some of the shares of Stock covered by an Award are not issued to a Participant (including, without limitation, shares of Stock withheld for the purchase price of an Award) shall again be available for issuance under the Plan.
During any period that the Company is a publicly held corporation within the meaning of Code Section 162(m) the following rules shall apply to grants of Awards:
(a) Subject to adjustment as provided in Section 4.2, no Participant may be granted Options or Stock Appreciation Rights (i) during any calendar year prior to December 31, 2015 with respect to more than Three Million Five Hundred Thousand (3,500,000) shares of Stock, and (ii) during any calendar year beginning after January 1, 2016, with respect to Three Hundred Fifty Thousand (350,000) shares of Stock.
(b) Subject to adjustment as provided in Section 4.2, no Participant may be granted Restricted Stock Awards, Restricted Stock Unit Awards, Performance Awards or Other Stock-Based Awards that are denominated in shares of Stock during any calendar year with respect to more than Two Hundred Fifty Thousand (250,000) shares of Stock.
(c) The maximum aggregate cash payout (including Restricted Stock Units, Stock Appreciation Rights, Performance Awards, Other Stock-Based Awards paid out in cash or Cash Awards) that may be made to any Participant with respect to Awards granted (i) during any calendar year prior to December 31, 2015 shall be Eight Million Dollars ($8,000,000) and (ii) during any calendar year beginning after January 1, 2016, shall be Two Million Five Hundred Thousand Dollars ($2,500,000).
(d) With respect to any Option or Stock Appreciation Right granted to a Participant that is canceled, the number of shares of Stock subject to such Option or Stock Appreciation Right shall continue to count against the maximum number of shares of Stock that may be the subject of Options or Stock Appreciation Right granted to such Participant hereunder to the extent such is required in accordance with Section 162(m) of the Code.
(e) The limitations of subsections (a), (b), (c) and (d) above shall be construed and administered so as to comply with the performance-based exception in Code Section 162(m).
In addition and subject to Section 4.2, no Director, except the Chairman and the Vice Chairman of the Board, may be granted Awards with an aggregate grant date value in excess of Three Hundred Seventy Five Thousand Dollars ($375,000) in any calendar year. Such limitation on Director Awards does not apply to any cash retainer fees, including cash retainer fees converted into equity awards at the election of the Director.
4.2Adjustments for Changes in Capital Structure
In the event of any stock dividend or extraordinary cash dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar change in the capital structure of the Company, appropriate adjustments shall be made in the number and class of shares of Stock subject to the Plan and to any outstanding Awards, and in the exercise price per share of any outstanding Awards and with respect to Options and Stock
Appreciation Rights, if applicable, in accordance with Code Sections 409A and 424. If a majority of the shares, which are of the same class as the shares that are subject to outstanding Awards, are exchanged for, converted into, or otherwise become (whether or not pursuant to a change in control) shares of another company (the “New Shares”), the Committee may, in its sole discretion, unilaterally amend the outstanding Awards to provide that such Awards are exercisable for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise price per share of, the outstanding Awards shall be adjusted in a fair and equitable manner as determined by the Committee, in its discretion, and with respect to Options and Stock Appreciation Rights in accordance with Code Sections 409A and 424 and the regulations thereunder. Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 4.2 shall be rounded down to the nearest whole number, and in no event may the exercise price of any Award be decreased to an amount less than the par value, if any, of the stock subject to the Award. The adjustments determined by the Committee pursuant to this Section 4.2 shall be final, binding and conclusive.
SECTION 5
ELIGIBILITY AND AWARD LIMITATIONS
5.1Persons Eligible for Awards
Awards may be granted only to Employees, Consultants, and Directors. For purposes of the foregoing sentence, “Employees,” “Consultants,” and “Directors” shall include prospective Employees, prospective Consultants and prospective Directors to whom Awards are granted in connection with written offers of employment or other service relationships with the Company. Eligible persons may be granted more than one (1) Award. Eligibility in accordance with this Section 5.1 shall not entitle any person to be granted an Award, or, having been granted an Award, to be granted an additional Award.
5.2Award Agreements
Each Participant to whom an Award is granted shall be required to enter into an Award Agreement with the Company, in such a form as is provided by the Committee. The Award Agreement shall contain specific terms as determined by the Committee, in its discretion, with respect to the Participant’s particular Award. Such terms need not be uniform among all Participants or any similarly situated Participants. The Award Agreement may include, without limitation, vesting, forfeiture and other provisions specific to the particular Participant’s Award, as well as, for example, provisions to the effect that the Participant (i) shall not disclose any confidential information upacquired during employment with the Company or while providing service to the Company, (ii) shall abide by all the terms and conditions of the Plan and such other terms and conditions as may be imposed by the Committee, (iii) shall not interfere with the employment or other Service of any Employee or service provider, (iv) shall not compete with the Company or become involved in a conflict of interest with the interests of the Company, (v) shall forfeit an Award if terminated for Cause, (vi) shall not be permitted to make an election under Section 83(b) of the Code when applicable, (vii) shall be subject to transfer restrictions respecting the Award or Stock, (viii) shall be subject to any other agreement between the Participant and the Company regarding shares of Stock that may be acquired under an Award including, without limitation, an agreement restricting the transferability of the Award or shares of Stock by Participant or any other restrictions or requirements of any stockholders’ agreement that is in effect from time to time, and (ix) any provisions or definitions the Committee deems necessary or desirable to comply with Code Section 409A. An Award Agreement shall include such terms and conditions as are determined by the Committee, in its discretion, to be appropriate with respect to any individual Participant. The Award Agreement shall be signed by the Participant to whom the Award is made and by an authorized Officer of the Company.
5.3Award Grant Restrictions
Any person who is not an Employee on the effective date of the grant of an Award to such person may be granted only a Nonstatutory Stock Option, Restricted Stock, Other Stock-Based Award or Cash Award. An Incentive Stock Option granted to an Employee of the Company, or its parent or Subsidiary as defined in Code Section 424(f), or to a prospective Employee of the Company, or its parent or its Subsidiary as defined in Code Section 424(f) upon the condition that such person become an Employee shall be deemed granted effective on the date such person commences service as an Employee with the Company, with an exercise price determined as of such date in accordance with Section 6.1.
5.4Fair Market Value Limitations for Incentive Stock Options
To the extent that Options designated as Incentive Stock Options (granted under all stock option plans of the Company or parent or Subsidiary as defined in Code Section 422, including the Plan) become exercisable by a Participant for the first time during any calendar year for Stock having an aggregate Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such Option(s) which exceeds such amount shall be treated as Nonstatutory Stock Option(s). For purposes of this Section 5.4, Options designated as Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of Stock shall be determined as of the time the Option with respect to such Stock is granted. If the Code is amended to provide for a different limitation from that set forth in this Section 5.4, such different limitation shall be deemed incorporated herein effective as of the date and with respect to such Options as required or permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section 5.4, the Company at the request of the Participant may designate which portion of such Option the Participant is exercising. In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Separate certificates representing each such portion shall be issued upon the exercise of the Option.
5.5Repurchase Rights, Right of First Refusal and Other Restrictions on Stock
Shares under the Plan may be subject to a right of first refusal, one or more repurchase options, or other conditions and restrictions pursuant to a contract entered into by the Company and its stockholders or otherwise as determined by the Committee or as provided in the Award Agreement, in the Committee’s discretion. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company. Upon request by the Company, each Participant shall execute any agreement, including but not limited to, the Award Agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.
SECTION 6
TERMS AND CONDITIONS OF OPTIONS
Options shall be evidenced by Award Agreements specifying the number of shares of Stock covered thereby, in such form as the Committee shall from time to time establish. No Option or purported Option shall be a valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement. Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
6.1Exercise Price
The exercise price for each Option shall be established in the discretion of the Committee; provided, however, that (a) the exercise price per share for an Option shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the Option and (b) no Incentive Stock Option granted to a Ten Percent Owner Participant shall have an exercise price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise price lower than the minimum exercise price set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner qualifying under the provisions of Code Sections 409A and 424. Except as provided in Section 4.2 of the Plan, the Committee shall not be permitted to Reprice an Option or a Stock Appreciation Right after the date of grant without the approval of the Company’s stockholders.
6.2Exercisability, Vesting and Term of Options
(a) Exercisability. Options shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such Option; provided, however, that (a) no Option shall be exercisable after the expiration of ten (10) years after the effective date of grant of such Option, (b) no Incentive Stock Option granted to a Ten Percent Owner Participant shall be exercisable
after the expiration of five (5) years after the effective date of grant of such Option, and (c) no Option granted to a prospective Employee, prospective Consultant or prospective Director may become exercisable prior to the date on which such person commences Service with the Company. Subject to the foregoing, unless otherwise specified by the Committee in the grant of an Option, any Option granted hereunder shall terminate ten (10) years after the effective date of grant of the Option, unless earlier terminated in accordance with its provisions.
(b) Vesting. The Committee shall specify the vesting schedule of the Option, if any, in the applicable Award Agreement. The Committee, in its discretion may condition vesting on the satisfaction of performance goals.
(c) Incentive Stock Options. Unless otherwise provided in the Option Agreement with respect to the death of the Participant, if the Incentive Stock Option is exercised more than three (3) months after the Participant’s termination of Service, the Option shall be treated as a Nonstatutory Stock Option.
6.3Payment of Exercise Price
(a) Forms of Consideration Authorized.Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option shall be made in cash, by check or cash equivalent or upon approval by the Committee in its sole discretion by any of the following:
(i) subject to Section 6.3(b)(i) below, by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Participant having a Fair Market Value not less than the exercise price;
(ii) subject to the Company’s rights set forth in Section 6.3(b)(ii) below, by delivery of a properly executed exercise notice together with such other documentation as the Committee and a qualified broker, if applicable shall require to effect an exercise of the Option and delivery to the Company of the proceeds required to pay the exercise price (a “Broker-Assisted Cashless Exercise”);
(iii) subject to the Company’s rights set forth in Section 6.3(b)(iii) below, by causing the Company to withhold from the shares of Stock issuable upon the exercise of the Option the number of whole shares of Stock having a Fair Market Value, as determined by the Company, not less than the exercise price (a “Net Exercise”);
(iv) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law; or
(v) by any combination of cash or any of the foregoing or any combination of (i)-(iv) thereof.
The Committee may at any time or from time to time grant Options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of consideration. In the case of an Incentive Stock Option, the Committee shall determine the acceptable forms of consideration to be used in payment of the exercise price at the time of grant.
(b) Limitations on Forms of Consideration.
(i) Tender of Stock.Notwithstanding the foregoing, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or attestation would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock or would cause the Company to incur adverse tax consequences.
(ii) Broker-Assisted Cashless Exercise.The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options by means of a Broker-Assisted Cashless Exercise in order to comply with applicable law.
(iii) Net Exercise.The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options by means of a Net Exercise in order to comply with applicable law.
SECTION 7
RESTRICTED STOCK
7.1Award of Restricted Stock
(a) Grant. In consideration of the performance of employment or Service by any Participant who is an Employee, Consultant or Director, Stock may be awarded under the Plan by the Committee as Restricted Stock with such restrictions during the Restriction Period as the Committee may designate in its discretion, any of which restrictions may differ with respect to each particular Participant. Restricted Stock shall be awarded for no additional consideration or such additional consideration as the Committee may determine, which consideration may be equal to or more than the Fair Market Value of the shares of Restricted Stock on the grant date. The terms and conditions of each grant of Restricted Stock shall be evidenced by an Award Agreement.
(b) Immediate Transfer Without Immediate Delivery of Restricted Stock. Unless otherwise specified in the Participant’s Award Agreement, each Restricted Stock Award shall constitute an immediate transfer of the record and beneficial ownership of the shares of Restricted Stock to the Participant in consideration of the performance of Services as an Employee, Consultant or Director, as applicable, entitling such Participant to all voting and other ownership rights in such shares of Stock.
As specified in the Award Agreement, a Restricted Stock Award may limit the Participant’s dividend and voting rights during the Restriction Period in which the shares of Restricted Stock are subject to a “substantial risk of forfeiture” (within the meaning given to such term under Code Section 83) and restrictions on transfer. In the Award Agreement, the Committee may apply any restrictions to the dividends that the Committee deems appropriate.
Shares awarded pursuant to a grant of Restricted Stock may be issued in the name of the Participant and held, together with a stock power endorsed in blank, by the Committee or Company (or their delegates) or in trust or in escrow pursuant to an agreement satisfactory to the Committee, as determined by the Committee, until 11:59 P.M. Eastern Timesuch time as the restrictions on transfer have expired. All such terms and conditions shall be set forth in the particular Participant’s Award Agreement. The Company or Committee (or their delegates) shall issue to the Participant a receipt evidencing the certificates held by it which are registered in the name of the Participant.
7.2Restrictions
(a) Forfeiture of Restricted Stock. Restricted Stock awarded to a Participant may be subject to the following restrictions until the expiration of the Restriction Period: (i) a restriction that constitutes a “substantial risk of forfeiture” (as defined in Code Section 83), or a restriction on transferability; (ii) unless otherwise specified by the Committee in the Award Agreement, the Restricted Stock that is subject to restrictions which are not satisfied shall be forfeited and all rights of the Participant to such shares shall terminate; and (iii) any other restrictions that the Committee determines in advance are appropriate, including, without limitation, rights of repurchase or first refusal in the Company or provisions subjecting the Restricted Stock to a continuing substantial risk of forfeiture in the hands of any transferee. Any such restrictions shall be set forth in the particular Participant’s Award Agreement.
(b) Issuance of Certificates. Reasonably promptly after the date of grant with respect to shares of Restricted Stock, the Company shall take the actions as it determines necessary in its sole discretion to cause the Stock to be issued subject to the forfeiture provisions and other requirements as the Committee determines necessary, including, without limitation, issuing a stock certificate, registered in the name of the Participant to whom such shares of Restricted Stock were granted, evidencing such shares; provided, however, that the Company shall not cause to be issued such a stock certificate unless it has received a stock power duly endorsed in blank with respect to such shares of Restricted Stock. Each such stock certificate shall bear the following legend or any other legend approved by the Company:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE RESTRICTIONS, TERMS AND CONDITIONS (INCLUDING FORFEITURE AND RESTRICTIONS AGAINST TRANSFER) CONTAINED IN THE PAR PACIFIC HOLDINGS, INC. 2012 LONG TERM INCENTIVE PLAN AND AN AWARD AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER OF SUCH SHARES AND PAR PACIFIC HOLDINGS, INC. A COPY OF THE PLAN AND AWARD AGREEMENT ARE ON FILE IN THE CORPORATE OFFICES OF PAR PACIFIC HOLDINGS, INC.
Such legend shall not be removed from the certificate evidencing such shares of Restricted Stock until such shares vest pursuant to the terms of the Award Agreement.
(c) Vesting. The Award Agreement shall specify the vesting schedule for the Award of Restricted Stock. The Committee, in its discretion may condition vesting on the satisfaction of performance goals.
(d) Removal of Restrictions. The Committee, in its discretion, shall have the authority to remove any or all of the restrictions on the Restricted Stock if it determines that, by reason of a change in applicable law or another change in circumstance arising after the grant date of the Restricted Stock, such action is appropriate.
7.3Delivery of Shares of Common Stock
Subject to withholding taxes under Section 10 and to the terms of the Award Agreement, a stock certificate evidencing the shares of Restricted Stock with respect to which the restrictions in the Award Agreement have been satisfied shall be delivered to the Participant or other appropriate recipient free of restrictions. Such delivery shall be effected for all purposes when the Company shall have deposited such certificate in the United States mail, addressed to the Participant or other appropriate recipient.
SECTION 8
OTHER AWARDS
8.1Grant of Other Awards.
The Committee, in its sole discretion, but subject to the terms of the Plan and the applicable Award Agreements, may grant the following types of Awards (in addition to or in combination with the Awards of Options and Restricted Stock described above) under the Plan on a standalone, combination or tandem basis:
(a) Restricted Stock Units.
(i) Award of Restricted Stock Units. The Committee may grant an Award of Restricted Stock Units to a Participant. The Committee may condition the vesting of the Restricted Stock Units to satisfaction of certain performance criteria. The terms of an Award of Restricted Stock Units need not be the same with respect to each Participant.
(ii) Restriction Period. Subject to the provisions of the Plan and the terms of the Award Agreement, during a period set by the Committee, commencing with the date of grant of such Award, the Participant shall not be permitted to sell, assign, transfer, pledge or otherwise encumber Restricted Stock Units. The Committee may provide for the lapse of such restrictions in installments or otherwise and may accelerate or waive such restrictions, in whole or in part, in each case based on period of Service, performance of the Participant or of the Company, Subsidiary or Affiliate, or such other factors or criteria as the Committee may determine.
(b) Rights of Restricted Stock Unit Recipients. The recipient of Restricted Stock Units shall not have any of the rights of a stockholder of the Company and has no right to vote any shares of Stock or to receive any cash dividend. The Committee shall be entitled to specify in a Restricted Stock Unit Award Agreement that in the event that the Company declares a dividend on its Stock, the Company will hold in escrow an amount in cash equal to the dividend that would have been paid on the Restricted Stock Units had
they been converted into the same number of shares of Stock and held by the Participant on the record date of such dividend. Upon adjustment and vesting of the Restricted Stock Unit, any cash payment due with respect to such dividends shall be made to the Participant.
(c) Stock Appreciation Rights. The Committee may grant a right to receive the excess of the Fair Market Value of a share of Stock on the date the Stock Appreciation Right is exercised over the Fair Market Value of a share of Stock on the date the Stock Appreciation Right was granted (the “Spread”). Upon exercise of a Stock Appreciation Right, the Spread with respect to a Stock Appreciation Right will be payable in cash, shares of Stock with a total Fair Market Value equal to the Spread or a combination of these two. The terms of the Award Agreements granting Stock Appreciation Rights need not be the same with respect to each Participant.
(d) Performance Award. The Committee may grant a Performance Award based on the performance of the Participant over a specified performance period. A Performance Award may be awarded to a Participant contingent upon future performance of the Company or any Affiliate, Subsidiary, division or department thereof in which such Participant is employed or providing Service, if applicable, during the performance period. The Committee shall establish the performance measures applicable to such performance prior to the beginning of the performance period, but subject to such later revisions as the Committee may deem appropriate to reflect significant, unforeseen events or changes. The Performance Award may consist of a right to receive shares of Stock (or cash in an amount equal to the Fair Market Value thereof) or the right to receive an amount equal to the appreciation, if any, in the Fair Market Value of shares of Stock over a specified period. Each Performance Award shall have a maximum value established by the Committee at the time such Award is made. In determining the value of Performance Awards, the Committee shall take into account the Participant’s responsibility level, performance, potential, other Awards and such other considerations as it deems appropriate. Payment of a Performance Award may be made following the end of the performance period in cash, shares of Stock (based on the Fair Market Value on the payment date) or a combination thereof, as determined by the Committee, and in a lump sum or installments as determined by the Committee. Except as otherwise provided in an Award Agreement or as determined by the Committee, a Performance Award shall terminate if the Participant does not remain continuously in the Service of the Company at all times during the applicable performance period. The terms of the Award Agreements granting Performance Awards need not be the same with respect to each Participant.
(e) Other Stock-Based Awards. The Committee may, in its discretion, grant Other Stock-Based Awards which are related to or serve a similar function to those Awards set forth in this Section 8.
(f) Cash Award. The Committee may, in its discretion, grant a Cash Award pursuant to an Award Agreement to any Participant. The Award Agreement shall specify the vesting schedule for the Cash Award. The Committee, in its discretion may condition vesting on the satisfaction of performance goals. The terms of a Cash Award need not be the same with respect to each Participant and need not relate to the Fair Market Value of a share of Stock. A “Cash Award” is an Award to be settled only in cash.
8.2Terms of Other Awards.
(a) Written Agreement. The terms and conditions of each grant of an Award described in this Section 8 shall be evidenced by an Award Agreement.
(b) Purchase Price.The exercise price per share of Stock of a Stock Appreciation Right shall not be less than one hundred percent (100%) of Fair Market Value of a share of Stock on the date of the grant of the Stock Appreciation Right.
(c) Performance Goals and Other Terms. In its discretion, the Committee may specify such criteria, periods or performance goals for vesting in the Awards described in this Section 8 and payment thereof to the Participant as it shall determine; and the extent to which such criteria, periods or goals have been met shall be determined by the Committee. All terms and conditions of such Awards shall be determined by the Committee and set forth in the Award Agreement.
If any Award of Restricted Stock or any Award described in this Section 8 is intended by the Committee to meet the performance-based exception in Code Section 162(m), the following shall apply:
(i) Performance Period. The Committee shall establish a performance period which shall be a period of time, as may be determined in the discretion of the Committee and set out in the Award Agreement, over which performance is measured for the purpose of determining a Participant’s right to and the payment value of an Award in accordance with Code Section 162(m). For each performance period, the Committee shall establish the number of shares of Stock subject to an Award and their contingent values which may vary depending on the degree to which performance criteria established by the Committee are met.
(ii) Establishment of Performance Criteria. The Committee may establish performance goals applicable to Awards based upon criteria in one or more of the following categories: (i) performance of the Company as a whole, (ii) performance of a segment of the Company’s business, and (iii) individual performance. Performance criteria for the Company shall relate to the achievement of predetermined financial, operational or strategic objectives for the Company and its Subsidiaries. Performance criteria for a segment of the Company’s business shall relate to the achievement of financial, operational or strategic objectives of the segment for which the Participant is accountable. In order to qualify as performance-based under Code Section 162(m), the performance criteria will be established before 25% of the performance period has elapsed and will not be subject to change (although future awards may be based on different performance criteria). The performance periods may extend over one to five calendar years, and may overlap one another, although no two performance periods may consist solely of the same calendar years.
(iii) Performance Criteria. Performance criteria for an Award intended to “qualified performance-based compensation” for purposes of Code Section 162(m) shall include any of the following:
(A) pre-tax or after tax profit levels, including: earnings per share, earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization, net operating profits after tax, and net income;
(B) total stockholder return;
(C) return on assets, equity, capital or investment;
(D) cash flow and cash flow return on investment;
(E) cash from operating activities;
(F) revenues;
(G) financial return ratios;
(H) profit returns and margins;
(I) stock price;
(J) stock price compared to a peer group of companies;
(K) working capital;
(L) selling, general and administrative expenses;
(M) discounted cash flows;
(N) productivity;
(O) expense targets;
(P) market share;
(Q) cost control measures;
(R) strategic initiatives;
(S) economic value added and economic profit;
(T) growth in earnings per share;
(U) reserves added;
(V) measures of customer satisfaction and customer service
(W) changes between years or periods that are determined with respect to any of the above listed performance criteria;
(X) net present value; and
(Y) economic profit.
Individual performance criteria shall relate to a Participant’s overall performance, taking into account, among other measures of performance, the attainment of individual goals and objectives. The performance goals may differ among Participants and shall be established in accordance with Code Section 162(m).
(iv) Modification. If the Committee determines, in its discretion exercised in good faith, that the established performance measures or objectives are no longer suitable to the Company’s objectives because of a change in the Company’s business, operations, corporate structure, capital structure, or other conditions the Committee deems to be appropriate, the Committee may modify the performance measures and objectives to the extent it considers such modification to be necessary, provided, however, that with respect to Awards intended to qualify for the performance-based exception of Code Section 162(m), the Committee shall not permit any such modification that would cause the Awards to fail to qualify for the performance-based exception.
(v) Compliance with Code Section 162(m). With respect to Awards intended to meet the performance based exception of Code Section 162(m), the Committee shall administer the Awards and take all action that it determines are necessary, including but not limited to certifying in writing that performance goals have been met, so that Awards intended to meet the performance based exception comply with Code Section 162(m). The Committee shall have no discretion to increase the amount payable pursuant to Award that are intended to qualify for the performance-based exception of Code 162(m) beyond the amount that would otherwise be payable upon attainment of the applicable performance goal(s). The Committee shall, however, retain the discretion to decrease the amount payable pursuant to such Awards below the amount that would otherwise be payable upon attainment of the applicable performance goal(s), either on a formula or discretionary basis or any combination, as the Committee determines, in its sole discretion.
(d) Payment. Awards described in this Section 8may be paid in shares of Stock, cash or other consideration or a combination thereof related to such shares, in a single payment or in installments on such dates as determined by the Committee, all as specified in the Award Agreement.
8.3Dividends and Dividend Equivalents.
Except with respect to dividends on Restricted Stock, the Participant shall not be entitled to receive, currently or on a deferred basis, dividends or dividend equivalents with respect to the number of shares of Stock covered by the Award unless (and to the extent) otherwise as determined by the Committee and set forth in a separate Award Agreement. The Committee in the Award Agreement may provide such terms and conditions for the Award of dividends or dividend equivalents as it shall determine in its discretion. The Committee may also provide in such Award Agreement that the amounts of any dividends or dividend equivalent shall be deemed to have been reinvested in additional shares of Stock. Notwithstanding the foregoing and subject to adjustments under
Section 4.2, no grant of a dividend or dividend equivalent may be granted with respect to an Option or Stock Appreciation Right.
SECTION 9
EFFECT OF TERMINATION OF SERVICE
9.1Exercisability and Award Vesting
Subject to earlier termination of the Option or other Award as otherwise provided herein and unless otherwise provided by the Committee in the Award Agreement, an Award and Option shall be vested and an Option shall be exercisable after a Participant’s termination of Service only during the applicable time period determined in accordance with this Section 9.1 and thereafter shall terminate:
(a) Disability or Death. If the Participant’s Service terminates because of the Disability or death of the Participant, the unvested portion of any Award shall be forfeited and terminated and:
(i) the vested portion of any outstanding Nonstatutory Option or Stock Appreciation Right held by such a Participant may be exercised by the Participant or his guardian or legal representative for a period of one (1) year after the date on which the Participant’s Service terminated due to Disability;
(ii) the vested portion of any outstanding Incentive Stock Option held by such a Participant may be exercised by the Participant or his guardian or legal representative for a period of three (3) months after the date on which the Participant’s Service terminated due to Disability; and
(iii) the vested portion of any outstanding Option or Stock Appreciation Right held by such Participant may be exercised by the Participant’s estate for a period of (1) year after the date on which the Participant’s Service terminated due to death;
but in no event shall the Option or Stock Appreciation Right be exercised later than the date of expiration of the Option’s or Stock Appreciation Right’s term, which in no event shall exceed ten (10) years from the date of grant, as set forth in the Award Agreement evidencing such Option or Stock Appreciation Right (the “Expiration Date”).
(b) Change in Control. Upon a Change in Control then (1) the vested portion of the Option or Stock Appreciation Right, to the extent unexercised and exercisable on the date on which the Participant’s Service terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the expiration of three (3) months after the date on which the Participant’s Service terminated without Cause, but in any event no later than the Expiration Date, and (2) the exercisability and vesting of the Option or Stock Appreciation Right and any shares of Stock acquired upon the exercise thereof may otherwise be accelerated effective as of the date on which the Participant’s Service terminated to such extent, if any, as shall have been determined by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Option or Stock Appreciation Right.
(c) Termination for Cause. Notwithstanding any other provision of the Plan to the contrary, if the Participant’s Service with the Company is terminated for Cause, as defined by the Participant’s Award Agreement or contract of employment or service (or, if not defined in any of the foregoing, as defined in the Plan), the Award, whether or not vested, shall terminate and cease to be exercisable immediately upon such termination of Service and any Stock issued pursuant to an Award shall be forfeited.
(d) Other Termination of Service. If the Participant’s Service with the Company terminates for any reason, except Disability, death, termination after a Change in Control, or Cause, any Award, to the extent unvested shall be forfeited by the Participant on the date on which the Participant’s Service is terminated, and any vested Option or Stock Appreciation Right may be exercised by the Participant at any time prior to the expiration of three (3) months after the date on which the Participant’s Service terminated, but in any event no later than the Expiration Date.
9.2Extension if Exercise Prevented by Law
Notwithstanding the foregoing, other than in the case of a termination for Cause, if the exercise of an Option or Stock Appreciation Right within the applicable time periods set forth in Section 9.1 is prevented by the provisions of Section 12 below, the Option or Stock Appreciation Right shall remain exercisable until thirty (30) days (or such longer period of time as determined by the Committee, in its discretion) after the date the Participant is notified by the Company that the Option or Stock Appreciation Right is exercisable, but in any event no later than the Expiration Date.
9.3Extension if Participant Subject to Section 16(b)
Notwithstanding the foregoing, other than in the case of a termination for Cause, if a sale within the applicable time periods set forth in Section 9.1 of shares of Stock acquired upon the exercise of the Option or Stock Appreciation Right would subject the Participant to suit under Section 16(b) of the Exchange Act, the Option or Stock Appreciation Right (if exercisable) shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following the date on which a sale of such shares by the Participant would no longer be subject to such suit, (ii) three (3) months after the Participant’s termination of Service, or (iii) the Expiration Date.
SECTION 10
WITHHOLDING TAXES
10.1Tax Withholding
All Awards are subject to, and the Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of the Plan or an Award hereunder and all Awards are subject to the Company’s right hereunder.
10.2Share Withholding
With respect to tax withholding required upon the exercise of Options, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising as a result of any Awards, the Committee in its discretion, may elect to satisfy the withholding requirement, in whole or in part, by having the Company withhold shares of Stock having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction (or, in the discretion of the Committee, such higher statutory total tax as may be permitted under applicable accounting standards that would not result in an Award otherwise classified as an equity award under ASC Topic 718 to be classified as a liability award under ASC Topic 718 as a result of withholding shares of Stock having a Fair Market Value in excess of the minimum statutory withholding requirement). All such elections shall be subject to any restrictions or limitations that the Committee, in its discretion, deems appropriate, including requiring the Participant to pay cash to satisfy an obligation that would otherwise be satisfied by withholding a fraction of a share of Stock.
SECTION 11
PROVISION OF INFORMATION
Each Participant shall be given access to information concerning the Company equivalent to that information generally made available to the Company’s common stockholders.
SECTION 12
COMPLIANCE WITH SECURITIES LAW AND OTHER APPLICABLE LAWS
The Plan, Award Agreements, the grant of Awards and the issuance of shares of Stock shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to securities and all other applicable laws, regulations and requirements of any stock exchange or market system upon which the stock is listed or traded. Options may not be exercised and Stock may not be issued if the issuance of shares of Stock would
constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, no Option may be exercised and no shares of Stock may be issued unless (a) a registration statement under the Securities Act shall at the time be in effect with respect to the shares issuable or (b) in the opinion of legal counsel to the Company, the shares issuable may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. If the shares of Stock issuable pursuant to an Award are not registered under the Securities Act, the Company may imprint on the certificate for such shares the following legend or any other legend which legal counsel for the Company considers necessary or advisable to comply with the Securities Act:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT UPON SUCH REGISTRATION OR UPON RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED FOR SUCH SALE OR TRANSFER.
The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares of Stock hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of any Option or the issuance of shares of Stock, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
SECTION 13
RETURN AND/OR FORFEITURE OF PERFORMANCE-BASED PAYMENTS OR AWARDS
Notwithstanding any other provision in this Plan or in any Award Agreement, in the event that pursuant to the terms or requirements of the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or of any applicable laws, rules or regulations promulgated by the Securities and Exchange Commission from time to time, and in the event any Award is based upon the satisfaction of financial performance metrics which are subsequently reversed due to a restatement or reclassification of financial results of the Company, then any payments made or awards granted shall be returned and forfeited to the extent required and as provided by applicable laws, rules, regulations or listing requirements.
SECTION 14
NONTRANSFERABILITY OF AWARDS AND STOCK
During the lifetime of the Participant, an Award shall be exercisable only by the Participant or the Participant’s guardian or legal representative. Subject to the remainder of this paragraph, an Award may be assignable or transferable by the Participant only by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order as defined in Code Section 414(p), and only if it is so specified in the Award Agreement; provided, however, that an Incentive Stock Option may only be assignable or transferable by will or by the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Committee in the Award Agreement, and in accordance with applicable law, in its discretion, and set forth in the Award Agreement evidencing such Option, a Nonstatutory Stock Option shall be assignable or transferable subject to the applicable limitations, if any, described in Rule 701 under the Securities Act, and the General Instructions to Form S-8 Registration Statement under the Securities Act. However, the transferee or transferees must be any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, in each case with respect to the Participant, any person sharing the Participant’s household (other than a tenant or employee of the Company), a trust in which these persons have more than fifty percent (50%) of the beneficial interest, a foundation in which these persons (or the Participant) control the management of assets, or any other entity in which these persons (or the Participant) own more than fifty percent (50%) of the voting interests (collectively, “Permitted Transferees”); provided further that, (a) there may be no consideration for any such transfer and (b) subsequent
transfers of Options transferred as provided above shall be prohibited except subsequent transfers back to the original holder of the Option and transfers to other Permitted Transferees of the original holder.
SECTION 15
NONCOMPETITIVE ACTIONS
The Committee may provide in an Award Agreement a requirement to enter into a noncompetition agreement in connection with the Award or the effect of a violation of a noncompetition agreement on an Award.
SECTION 16
TERMINATION OR AMENDMENT OF PLAN
The Committee may terminate or amend the Plan at any time. However, no grant shall be made after the tenth (10th) anniversary of the Restatement Date (the “Term”). Subject to changes in applicable law, regulations or rules that would permit otherwise, without the approval of the Company’s stockholders within the time required, there shall be (a) no increase in the maximum aggregate number of shares of Stock that may be issued under the Plan (except by operation of the provisions of Section 4.2), (b) no change in the class of persons eligible to receive Incentive Stock Options or purchase Stock under the Plan or to extend the Term of the Plan, and (c) no other amendment of the Plan that would require approval of the Company’s stockholders under any applicable law, regulation or rule or the stock exchange or market system on which the Stock is traded. No termination or amendment of the Plan shall affect any then outstanding Award unless expressly provided by the Committee or otherwise provided in the Plan. In any event, no termination or amendment of the Plan may adversely affect any then outstanding Award without the consent of the Participant, unless such termination or amendment is required to enable an Award designated as an Incentive Stock Option to qualify as an Incentive Stock Option or is necessary to comply with any applicable law, regulation or rule, including Code Section 409A or as otherwise permitted under the Plan, including upon a Change in Control.
SECTION 17
STOCKHOLDER APPROVAL
The Plan is adopted by the Board as of the Restatement Date and shall be approved by the stockholders of the Company on the earlier of the next stockholder’s meeting following the effective date of such restatement or within twelve (12) months following the effective date of the restatementon or within twelve (12) months of the date of adoption thereof by the Board. Options or performance-based compensation under Section 8.2 granted prior to stockholder approval of the Plan or in excess of the Stock previously approved by the stockholders shall become exercisable and otherwise shall not be paid no earlier than the date of stockholder approval of the Plan or stockholder approval of such increase in the Stock, as the case may be.
SECTION 18
NO GUARANTEE OF TAX CONSEQUENCES
Neither the Company, the Board nor the Committee makes any commitment or guarantee that any federal, state or local tax treatment will apply or be available to any person participating or eligible to participate hereunder.
SECTION 19
SEVERABILITY
In the event that any provision of this Plan shall be held illegal, invalid or unenforceable for any reason, such provision shall be fully severable, but shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if the illegal, invalid, or unenforceable provision was not included herein.
SECTION 20
GOVERNING LAW
The Plan shall be interpreted, construed and constructed in accordance with the laws of the State of Delaware without regard to its conflicts of law provisions, except as may be superseded by applicable laws of the United States.
SECTION 21
SUCCESSORS
All obligations of the Company under the Plan with respect to Incentive Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
SECTION 22
RIGHTS AS A STOCKHOLDER
The holder of an Award shall have no rights as a stockholder with respect to any shares of Stock covered by the Award until the date of issue of a stock certificate to him or her for such shares. Except as otherwise expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued.
SECTION 23
NO SPECIAL EMPLOYMENT OR SERVICE RIGHTS
Nothing contained in the Plan or in an Award Agreement shall confer upon any Participant receiving a grant of any Award any right with respect to the continuation of his or her Service with the Company (or any Affiliate) or interfere in any way with the right of the Company (or Affiliate), subject to the terms of any separate employment agreement to the contrary, at any time to terminate such Service or to increase or decrease the compensation of the Participant from the rate in existence at the time of the grant of any Award.
SECTION 24
REORGANIZATION OF COMPANY
The existence of an Award shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in Company’s capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the shares of Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
SECTION 25
CODE SECTION 409A
To the extent that any Award is deferred compensation subject to Code Section 409A, as determined by the Committee, the Award Agreement shall comply with the requirements of Code Section 409A in a manner as determined by the Committee in its sole discretion including, without limitation, using applicable definitions from Code Section 409A, such as a more restrictive definition of Change in Control to comply with Code Section 409A to the extent that it is more restrictive than as defined in the Plan, using the more restrictive definition of Disability as provided in Code Section 409A and specifying a time and form of payment schedule. In addition if any Award constitutes deferred compensation under Code Section 409A (a “Section 409A Plan”), then the Award shall be subject to the following requirements, if and to the extent required to comply with Code Section 409A and as determined by the Committee and specified in the Award Agreement:
(a) Payments under the Section 409A Plan may not be made earlier than (i) the Participant’s separation from service, (ii) the date of the Participant’s Disability, (iii) the Participant’s death, (iv) a specified time (or pursuant to a fixed schedule) specified in the Award Agreement at the date of the deferral of such compensation, (v) a change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets of the corporation, or (vi) the occurrence of an unforeseeable emergency;
(b) The time or schedule for any payment of the deferred compensation may not be accelerated, except to the extent provided in applicable Treasury Regulations or other applicable guidance issued by the Internal Revenue Service;
(c) Elections with respect to the deferral of such compensation or the time and form of distribution of such deferred compensation shall comply with the requirements of Code Section 409A(a)(4); and
(d) The case of any Participant who is specified employee, a distribution on account of a separation from service may not be made before the cut-off date which is six (6) months after the date of the Participant’s separation from service (or, if earlier, the date of the Participant’s death).
For purposes of the foregoing, the terms “separation from service” and “specified employee”, all shall be defined in the same manner as those terms are defined for purposes of Code Section 409A, and the limitations set forth herein shall be applied in such manner (and only to the extent) as shall be necessary to comply with any requirements of Code Section 409A that are applicable to the Award as determined by the Committee.
If an Award is subject to Code Section 409A, as determined by the Committee, the Committee may interpret or meeting date. Have your proxy cardamend any Award to comply with Code Section 409A without a Participant’s consent even if such amendment would have an adverse effect on a Participant’s Award. With respect to an Award that is subject to Code Section 409A, the Board may amend or interpret the Plan as it deems necessary to comply with Code Section 409A, including, without limitation, limiting the Committee’s or Company’s discretion with respect to an Award that constitutes deferred compensation to the extent it would violate Code Section 409A, and no Participant consent shall be required even if such an amendment would have an adverse effect on a Participant’s Award.
SECTION 26
ADJUSTMENTS UPON A CHANGE IN CONTROL
If a Change in hand when you accessControl occurs, except a Change in Control solely on account of Section 2.1(h)(ii), then the web siteCommittee, in its sole discretion, shall have the power and followright to (but subject to any accelerated vesting specified in an Award Agreement):
(a) cancel, effective immediately prior to the instructionsoccurrence of the Change in Control, each outstanding Option and Stock Appreciation Right with an exercise price that is greater than the value of the consideration that would be received if such Option or Stock Appreciation Right were exercised immediately prior to obtain your recordsthe occurrence of the Change in Control;
(b) cancel, effective immediately prior to the occurrence of the Change in Control, an outstanding Award (whether or not then exercisable) in exchange for a cash payment equal to:
(i) with respect to Options and Stock Appreciation Rights that currently have an exercise price less the value of the consideration that would be received immediately prior to createthe Change in Control if such Option or Stock Appreciation right were exercised immediately prior to the occurrence of the Change in Control, the excess of the value of such consideration over the exercise price;
(ii) with respect to Restricted Stock, Restricted Stock Units, Performance Awards (that would otherwise be settled in shares of Stock) and Other Stock-Based Awards, for each share of Stock covered by the Award, the value of consideration received by stockholders for each share of Stock as a result of the Change in Control; and
(iii) with respect to Cash Awards, the cash value of such Cash Awards as a result of the Change in Control;
provided, however, this subsection shall be inapplicable to an electronic voting instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the dayAward granted within six (6) months before the cut-offoccurrence of the Change in Control but only if the Participant is an Insider and such disposition is not exempt under Rule 16b-3 (or other rules preventing liability of the insider under Section 16(b) of the Exchange Act) and, in that event, the provisions hereof shall be applicable to such Award after the expiration of six (6) months from the date of grant; or
(c) provide for the exchange or meeting date. Have your proxy cardsubstitution of each Award outstanding immediately prior to such Change in hand when you callControl (whether or not then exercisable) for another award with respect to the Stock or other property for which such Award is exchangeable and, then followincident thereto, make an equitable adjustment as determined by the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return itCommittee, in its discretion, in the postage-paid envelope weexercise price of the Award, if any, or in the number of shares of Stock or amount of property (including cash) subject to the Award; or
(d) provide for assumption of the Plan and such outstanding Awards by the surviving entity or its parent.
The Committee, in its discretion, shall have providedthe authority to take whatever action it deems to be necessary or return itappropriate to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.effectuate the provisions of this Section 26.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the foregoing sets forth the Par Pacific Holdings, Inc. 2012 Long Term Incentive Plan as duly adopted by the Board on the Restatement Date.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:PAR PACIFIC HOLDINGS, INC. |
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| By: | KEEP THIS PORTION FOR YOUR RECORDS | /s/ James Matthew Vaughn |
| Name: | | James Matthew Vaughn |
| Title: | | Senior Vice President, General Counsel and Secretary |
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| | DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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All | | Withhold
All | | For All
Except | | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | | | | | | | |
The Board of Directors recommends you vote FOR the following:
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1.
| | Election of DirectorsNominees | | | | | | | | | | | | | | | | | | | | |
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01 | | Carl E. Lakey | | 02 Kevin R. Collins | | | | 03 Jerrie F. Eckelberger | | 04 Jean-Michel Fonck | | 05 Anthony Mandekic |
06 | | James J. Murren | | 07 Jordan R. Smith | | | | 08 Daniel J. Taylor | | | | | | | | | | |
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The Board of Directors recommends you vote FOR proposals 2, 3 and 4. | | | | For | | Against | Abstain |
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2 | | To approve a proposal to effect a reverse split of our Common Stock at a ratio of 1-for-10 and a reduction in the number of authorized shares of Common Stock available for issuance from 600,000,000 to 200,000,000. | | | | o | | o | o |
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3 | | To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2011. | | | | o | | o | o |
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4 | | To approve, on an advisory basis, the compensation of the Company’s named executive officers. | | | | o | | o | o |
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The Board of Directors recommends you vote 1 YEAR on the following proposal: | | | | 1 year | | 2 years | | 3 years | Abstain |
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5 | | To approve, on an advisory basis, the frequency of the advisory stockholder vote on the compensation of the Company’s named executive officers. | | o | | o | | o | o |
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NOTE: Such other business as may properly come before the meeting or any adjournment thereof. | | | | | | | | |
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Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. | | |
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Signature [PLEASE SIGN WITHIN BOX] | Date | | | | | | Signature (Joint Owners) | Date | | |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:The Notice & Proxy Statement, Annual Report is/are available at www.proxyvote.com .DELTA PETROLEUM CORPORATION
Annual Meeting of Stockholders
July 12, 2011 10:00 AM MDT
This proxy is solicited by the Board of Directors
The undersigned hereby constitutes and appoints Carl E. Lakey and Stanley F. Freedman, or each of them, lawful attorneys and proxies of the undersigned, with full power of substitution, for and in the name, place and stead of the undersigned, to attend the Annual Meeting of Stockholders of Delta Petroleum Corporation, to be held in the Company’s offices located at 370 17th Street, Suite 4300, Denver Colorado 80202 on Tuesday, July 12, 2011, at 10:00 a.m (MDT), and any adjournment(s) thereof, with all powers the undersigned would possess if personally present to vote thereat, as provided below, the number of shares the undersigned would be entitled to vote if personally present.
In accordance with their discretion, said attorneys and proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment(s) thereof. Every properly signed proxy will be voted in accordance with the specifications made thereon. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES IN PROPOSAL 1, FOR PROPOSALS 2, 3, AND 4 AND FOR “ONE YEAR” IN PROPOSAL 5. All prior proxies are revoked. This proxy will also be voted in accordance with the discretion of the proxy or proxies on any other business. Receipt is herebyacknowledged of the Notice of Annual Meeting of Stockholders and Proxy Statement.
Continued and to be signed on reverse side
