UNITED STATES
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WASHINGTON, D.C. 20549 Proxy Statement Pursuant to Section 14(a) of the
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Hi-Crush Partners LP
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HI-CRUSH INC.
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Houston, Texas
April 9, 2020
Hi-Crush
Partners LPOctober 25, 2016
Inc.
1330 Post Oak Blvd., Suite 600
Houston, Texas 77056
NOTICE OF 2020 ANNUAL MEETING OF STOCKHOLDERS
To our common unitholders:You are cordially invited to attend a special meeting ofBe Held on May 22, 2020
To the common unitholdersStockholders of Hi-Crush Partners LPInc.:
The 2020 Annual Meeting of Stockholders of Hi-Crush Inc. (the “Partnership”"Annual Meeting") towill be held on December 8, 2016, at 10:9:00 a.m. Central Standard Time, on May 22, 2020, via live webcast at Three Riverway, Houston, Texas 77056. the following address: www.proxyvote.com, for the following purposes:
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| 1. | To elect to our Board of Directors (the "Board") the two Class I directors named in the accompanying Proxy Statement to serve until the 2023 Annual Meeting of Stockholders or until their respective successors are elected and qualified or until their earlier death, resignation or removal; |
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| 2. | To ratify the appointment of Deloitte & Touche LLP ("Deloitte") as our independent auditor for the fiscal year ending December 31, 2020; |
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| 3. | To approve, on a non-binding advisory basis, the compensation of our Named Executive Officers ("NEOs") for the fiscal year ended December 31, 2019; |
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| 4. | To vote on the approval, on a non-binding advisory basis, of the frequency of future advisory votes on the compensation of our NEOs; and |
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| 5. | To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof. |
The boardAnnual Meeting will be completely virtual. There will be no physical meeting location and the Annual Meeting will only be conducted via live webcast at the following address: www.proxyvote.com.
The Board unanimously recommends you vote: (i) "FOR" the election of
directorseach of
Hi-Crush GP LLC (the “general partner”the nominees to the Board named in the accompanying Proxy Statement ("Proposal 1")
, our general partner, which we refer to; (ii) "FOR" the ratification of the appointment of Deloitte as our
board of directors, has calledindependent auditor for the
special meeting. At this important meeting, you will be asked to consider and vote uponfiscal year ending December 31, 2020 ("Proposal 2"); (iii) "FOR" the
following proposals:approval, on a proposal (the “LTIP Proposal”) to approve the first amendment and restatementnon-binding advisory basis, of the Partnership’s Long-Term Incentive Plan (the “LTIP”executive compensation of our NEOs for the fiscal year ended December 31, 2019 ("Proposal 3"), which, among other things, provides for an increaseas described in the maximum numberaccompanying Proxy Statement; and (iv) "FOR" the frequency, on a non-binding advisory basis, of common units reserved and available"every three years" for delivery with respect to awards underfuture advisory votes on the LTIP so that, as of the effective date of the amendment and restatement of the LTIP, the total number of common units available for delivery with respect to awards under the LTIP will be increased by 2,700,000 common units to an aggregate of 4,064,035 common units; and
a proposal (the “Adjournment Proposal”) to approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the special meeting to approve the LTIP Proposal.
Our board of directors has unanimously approved the amendment and restatement of the LTIP (the “Restated LTIP”). Our board of directors believes that the Restated LTIP is in the best interestscompensation of our unitholders and the Partnership and unanimously recommends that the common unitholders approve the Restated LTIP. We are seeking approval to provide for, among other things, additional common units for future delivery with respect to awards granted to employees, consultants and/or directors of the general partner or its affiliates under the LTIP. A copy of the Restated LTIP is attached to this proxy statement as Exhibit A.
Your vote is very importantNEOs ("Proposal 4"). Even if you plan to attend the special meeting, we urge you to promptly vote your common units electronically, via the Internet or by telephone, or by submitting your marked, signed and dated proxy card. You will retain the right to revoke your proxy at any time before the vote, or to vote your common units personally if you attend the special meeting.
The
proxy provides common unitholders the opportunity to vote on the LTIP Proposal and the Adjournment Proposal. Voting your common units electronically, via the Internet or by telephone, or by submitting a proxy card will not prevent you from attending the special meeting and voting in person. Please note, however, that if you hold your common units through a broker or other nominee, and you wish to vote in person at the special meeting, you must obtain from your broker or other nominee a proxy issued in your name.The Restated LTIP will not be effective unless approved by the common unitholders. A quorum of more than 50% of our outstanding common units present in person or by proxy will permit us to conduct the proposed business at the special meeting. Our partnership agreement does not require that we present the Restated LTIP to our common unitholders for approval. However, under the NYSE Listed Company Manual, the Restated LTIP requires the approval of a majority of the votes cast by our common unitholders. Approval of the Adjournment Proposal requires the approval of a majority of the votes cast of the outstanding common units represented either in person or by proxy at the special meeting.
Our board of directors unanimously recommends that the common unitholders vote “FOR” the LTIP Proposal and “FOR” the Adjournment Proposal.
I urge you to review carefully the attached proxy statement, which contains detailed descriptions of the LTIP Proposal and the Adjournment Proposal to be voted upon at the special meeting.
Sincerely,
Robert E. Rasmus
Chief Executive Officer
Hi-Crush GP- LLC
If you need assistance in voting your units, please call Alliance Advisors, LLC toll free at (855) 976-3329.
Hi-Crush Partners LP
NOTICE OF SPECIAL MEETING OF COMMON UNITHOLDERS
To Be Held On December 8, 2016
October 25, 2016
To our common unitholders:
A special meeting of our common unitholders will be held on December 8, 2016, at 10:00 a.m. Central Standard Time, at Three Riverway, Houston, Texas 77056. At the meeting, our common unitholders will act on a proposal (the “LTIP Proposal”) to approve the first amendment and restatement of our Long-Term Incentive Plan (the “LTIP”), which, among other things, provides for an increase in the maximum number of common units reserved and available for delivery with respect to awards under the LTIP so that, as of the effective date of the amendment and restatement of the LTIP, the total number of common units available for delivery with respect to awards under the LTIP will be increased by 2,700,000 common units to an aggregate of 4,064,035 common units. A copy of the amendment and restatement of the LTIP (the “Restated LTIP”) is attached to this proxy statement as Exhibit A. Our common unitholders will also act on a proposal to approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the special meeting to approve the Restated LTIP (the “Adjournment Proposal”).
The form of proxy provides common unitholders the opportunity to vote on the LTIP Proposal. The Restated LTIP will not become effective unless approved by the common unitholders. A quorum of more than 50% of our outstanding common units present in person or by proxy will permit us to conduct the proposed business at the special meeting. Our partnership agreement does not require that we submit the Restated LTIP to common unitholders for a vote. However, under the NYSE Listed Company Manual, the Restated LTIP requires the approval of a majority of the votes cast by our common unitholders. Approval of the Adjournment Proposal requires the approval of a majority of the votes cast of the outstanding common units represented either in person or by proxy at the special meeting.
We have set the close of business on October 10, 2016Board has fixed March 31, 2020 as the record date for determining which common unitholders arestockholders entitled to receive notice of, and to votecast votes for, the virtual Annual Meeting or any adjournment or postponement thereof. Each outstanding share of our common stock (NYSE: HCR) entitles the holder of record at the special meetingclose of business on March 31, 2020, to receive notice of and to cast votes for the virtual Annual Meeting or any postponementsadjournments or adjournments thereof. A list of common unitholders entitled to vote is on file at our principal offices, Three Riverway, Suite 1350, Houston, Texas 77056, and will be available for inspection by any unitholder during the meeting.
Our board of directors unanimously recommends that the common unitholders vote “FOR” the LTIP Proposal and “FOR” the Adjournment Proposal.
Your Vote is Very Important. If you cannot attend the special meeting, you may vote your common units electronically, via the Internet or by telephone, or by mailing the proxy card in the enclosed postage-prepaid envelope. Any common unitholder attending the meeting may vote in person, even though he or she already has returned a proxy.
By Orderpostponements of the Board of Directors,
Robert E. Rasmus
Chief Executive Officer
Hi-Crush GP-LLC
If you need assistance in voting your units, please call Alliance Advisors, LLC toll free at (855) 976-3329.
virtual Annual Meeting.
WHETHER OR NOT YOU
SHOULD RELY ONLY ONEXPECT TO ATTEND THE
INFORMATION CONTAINEDANNUAL MEETING ONLINE, WE URGE YOU TO VOTE YOUR SHARES BY INTERNET, BY TELEPHONE, OR
INCORPORATED BY
REFERENCESIGNING, DATING AND RETURNING THE PROXY CARD YOU WILL RECEIVE. IF YOU CHOOSE TO ATTEND THE ANNUAL MEETING ONLINE, YOU MAY STILL VOTE YOUR SHARES VIRTUALLY, EVEN THOUGH YOU HAVE PREVIOUSLY VOTED OR RETURNED YOUR PROXY BY ANY OF THE METHODS DESCRIBED IN
THISTHE ACCOMPANYING PROXY STATEMENT.
WE HAVE NOT AUTHORIZED ANYONEIF YOUR SHARES ARE HELD IN A BANK OR BROKERAGE ACCOUNT, PLEASE REFER TO
PROVIDE YOU WITH DIFFERENT INFORMATION. THIS PROXY STATEMENT IS DATED OCTOBER 21, 2016. YOU SHOULD ASSUME THAT THE
INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF THAT DATE ONLY. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.MATERIALS PROVIDED BY YOUR BANK OR BROKER FOR VOTING INSTRUCTIONS. IMPORTANT NOTICE REGARDING THE AVAILABILITY OF
PROXY MATERIALS FOR THE UNITHOLDERSANNUAL MEETING
TO BE HELD ON DECEMBER 8, 2016
MAY 22, 2020
The Notice of SpecialAnnual Meeting, of Common Unitholders, the Proxy Statement for the Special Meeting of Common Unitholders and theour combined Annual Report to Stockholders and Annual Report on Form 10-K for the year ended December 31, 2015 2019are available at Three Riverway, Suite 1350, www.hicrushinc.com.
By Order of the Board,
Robert E. Rasmus
Chief Executive Officer and Chairman of the Board
Houston, Texas 77056.
April 9, 2020
HI-CRUSH INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 22, 2020
GENERAL
The enclosed proxy is solicited by the Board of Directors (the "Board") of Hi-Crush Inc. ("Hi-Crush," the "Company," "we," "us," or "our") for use at the 2020 Annual Meeting of Stockholders (the "Annual Meeting") to be held at 9:00 a.m., Central Time, on May 22, 2020, via live webcast at the following address: www.proxyvote.com and at any adjournment or postponement thereof. This Proxy Statement is first being made available to our stockholders on or about April 9, 2020.
All stockholders as of the record date, or their duly appointed proxies, may attend the Annual Meeting, which will be a completely virtual meeting. There will be no physical meeting location and the Annual Meeting will only be conducted via live webcast. Stockholders may attend the Annual Meeting online, including to vote and/or submit questions, at the following address: www.proxyvote.com. To be admitted to and participate in the Annual Meeting, stockholders will be required to enter the company number and control number included in the Notice of Internet Availability of Proxy Materials, on the proxy card or in the instructions accompanying the proxy materials. Online check-in will begin at 8:45 a.m., Central Time. Please allow time for online check-in procedures.
We are utilizing a virtual stockholder meeting format for the Annual Meeting in light of the health risks associated with the outbreak of the coronavirus disease 2019 (or COVID-19). It is currently our intent to resume in-person meetings with our 2021 Annual Meeting of Stockholders (the "2021 Annual Meeting") and thereafter, assuming normal circumstances. Our virtual stockholder meeting format uses technology designed to increase stockholder access, save the Company and our stockholders time and money, provide our stockholders rights and opportunities to participate in the Annual Meeting similar to those they would have at an in-person annual meeting, at no cost, and reduce our environmental impact. In addition to online attendance, we provide stockholders with an opportunity to hear all portions of the official Annual Meeting as conducted by the Board, submit written questions and comments during the Annual Meeting and vote online during the open poll portion of the Annual Meeting. We welcome your suggestions on how we can make our virtual Annual Meeting more effective and efficient.
Stockholders have multiple opportunities to submit questions to the Company for the Annual Meeting. Stockholders who wish to submit a question in advance may do so at www.proxyvote.com. Stockholders also may submit questions live during the meeting. Questions pertinent to Annual Meeting matters will be recognized and answered during the Annual Meeting, subject to time constraints. We reserve the right to edit or reject questions that are inappropriate for Annual Meeting matters. Although the live webcast is available only to stockholders or their duly appointed proxies at the time of the Annual Meeting, following completion of the Annual Meeting, a webcast replay and the final report of the inspector of election will be posted to our website, www.hicrushinc.com, for at least one year. In addition, we offer live technical support for all stockholders attending the Annual Meeting.
To attend online and participate in the Annual Meeting, stockholders of record will need to use their control number on their Notice of Internet Availability of Proxy Materials or proxy card to log into www.proxyvote.com; beneficial stockholders who do not have a control number may gain access to the meeting by logging into their brokerage firm’s website and selecting the stockholder communications mailbox to link through to the Annual Meeting; instructions should also be provided on the voting instruction card provided by their broker, bank or other nominee.
Outstanding Securities and Quorum
Only holders of record of our common stock, par value $0.01 per share, at the close of business on March 31, 2020, the record date, will be entitled to notice of, and to vote at, the Annual Meeting, which will be a completely virtual meeting. On that date, we had 100,908,234 shares of common stock outstanding and entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each other proposal to be voted on at the Annual Meeting. Cumulative voting is not permitted in the election of directors. A majority of the outstanding shares of common stock entitled to vote, present in person (including virtually) or represented by proxy, constitutes a quorum for the transaction of business at the Annual Meeting, meaning that 50,454,118 shares of common stock must be present virtually or represented at the Annual Meeting for us to conduct business other than to adjourn the meeting. Abstentions (including signed proxy cards on which stockholders mark that they abstain and those who attend the Annual Meeting but do not vote) and broker nonvotes will be included in determining the presence of a quorum at the Annual Meeting.
Internet Availability of Proxy Materials
We are furnishing proxy materials to some of our stockholders via the Internet by mailing a Notice of Internet Availability of Proxy Materials, instead of mailing or emailing copies of those materials. The Notice of Internet Availability of Proxy Materials directs stockholders to a website where they can access our proxy materials, including this Proxy Statement and ourcombined Annual Report to Stockholders and Annual Report on Form 10-K for the year ended December 31, 2019 (our "2019 Annual Report"), and view instructions on how to vote via the Internet, mobile device or by telephone. If you received a Notice of Internet Availability of Proxy Materials and would prefer to receive a paper copy of our proxy materials, please follow the instructions included in the Notice of Internet Availability of Proxy Materials. If you have previously elected to receive our proxy materials via email, you will continue to receive access to those materials electronically unless you elect otherwise. We encourage you to register to receive all future stockholder communications electronically, instead of in print. This means that access to our 2019 Annual Report, this Proxy Statement and other correspondence will be delivered to you via email.
Proxy Voting
Shares that are properly voted in advance of the Annual Meeting via the Internet, mobile device or telephone, or for which proxy cards are properly executed and returned, will be voted at the Annual Meeting in accordance with the directions given or, in the absence of directions, will be voted in accordance with the Board’s recommendations as follows: "FOR" the election of each of the nominees to the Board named herein; "FOR" the ratification of the appointment of our independent auditor; "FOR" the approval, on an advisory basis, of the executive compensation of our Named Executive Officers ("NEOs") as described in this Proxy Statement and "FOR" the frequency, on a non-binding advisory basis, of "every three years" for future advisory votes on our NEOs compensation. It is not expected that any additional matters will be brought before the Annual Meeting, but if other matters are properly presented, the persons named as proxies in the proxy card or their substitutes will vote in their discretion on such matters. The Board knows of no other matters to be brought before the Annual Meeting, and the deadlines for stockholders to submit matters to be voted upon at this Annual Meeting have passed.
Voting via the Internet, mobile device or telephone helps save money by reducing postage and proxy tabulation costs. To vote by any of these methods, read this Proxy Statement, have your Notice of Internet Availability of Proxy Materials, proxy card or voting instruction form in hand and follow the instructions below for your preferred method of voting. Each of these voting methods is available 24 hours per day, seven days per week until 11:59 p.m. Eastern Time on May 21, 2020.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE SUBMIT YOUR PROXY IN ONE OF THE FOLLOWING WAYS:
If you hold your shares in the name of a bank, broker or other nominee, you should follow the instructions provided by your bank, broker or other nominee when voting your shares.
If you hold your shares in your own name, you may submit your proxy by:
i
Hi-Crush Partners LP
PROXY STATEMENT
SPECIAL MEETING OF COMMON UNITHOLDERS
October 25, 2016
This proxy statement contains information related
Voting Standard
Stockholders may either vote "FOR" or "WITHHOLD" authority to vote for each nominee for election to the specialBoard. If a quorum is present at the Annual Meeting, a nominee for director shall be elected to the Board by a plurality of the votes cast, meaning that the two nominees receiving the most votes will be elected. Broker nonvotes, if any, will have no effect on the outcome of the election. Broker nonvotes occur when a person holding shares in street name, such as through a brokerage firm, does not provide instructions as to how to vote those shares and the broker does not then vote those shares on the stockholder’s behalf.
For Proposals 2 and 3, stockholders may vote "FOR," "AGAINST" or "ABSTAIN." For each of these matters, the affirmative vote of at least a majority of the votes cast affirmatively or negatively, present in person (including virtually) or represented by proxy and entitled to vote on the subject matter and voting together as a single class is required to approve the matter. For Proposal 4, stockholders may vote for a frequency of "EVERY YEAR," "EVERY TWO YEARS," "EVERY THREE YEARS" or "ABSTAIN." For this matter, the option receiving the greatest number of affirmative votes will be considered approved, on an advisory basis, by the stockholders. For Proposals 2, 3 and 4, abstentions are not counted as votes cast on a matter but are counted as present at the Annual Meeting and entitled to vote for purposes of determining a quorum.
Broker nonvotes, if any, are not counted as votes cast and will have no effect on the outcome of Proposals 1, 3 or 4. The Company does not expect there to be any broker nonvotes on Proposal 2 because, as mentioned above, brokers have the discretionary authority to vote on this matter if they do not receive instructions from the stockholder on whose behalf the broker holds the shares.
Revocation
If you own common stock of record, you may revoke your proxy or change your voting instructions at any time before your shares are voted at the Annual Meeting by delivering to the Secretary of Hi-Crush a revocation of the proxy or a duly executed new proxy (via the Internet, mobile device or telephone or by returning a proxy card) bearing a later date or by attending the Annual Meeting and voting virtually. A stockholder owning common stock in street name may revoke or change voting instructions by contacting the bank, brokerage firm or other nominee holding the shares or by obtaining a legal proxy from such institution and voting virtually at the Annual Meeting.
Attending the Annual Meeting
All holders of our common stock as of the record date and individuals holding valid proxies from such stockholders are invited to attend the Annual Meeting, which will be a completely virtual meeting.
There will be no physical meeting location and the Annual Meeting will only be conducted via live webcast. Stockholders may attend the Annual Meeting online, including to vote and/or submit questions, at the following address: www.proxyvote.com. To be admitted to and participate in the Annual Meeting, stockholders will be required to enter the company number and control number included in the Notice of Internet Availability of Proxy Materials, on the proxy card received or in the instructions that accompanied the proxy materials. Online check-in will begin at 8:45 a.m., Central Time. Please allow time for online check-in procedures.
If you plan to attend the Annual Meeting online, please be aware of what you will need to gain admission, as described below. If you do not comply with the procedures described herein for attending the Annual Meeting online, you will not be able to participate in the Annual Meeting but may view a webcast replay following completion of the Annual Meeting.
To attend and vote online and participate in the Annual Meeting, stockholders of record will need to use their control number on their Notice of Internet Availability of Proxy Materials or proxy card to log in to www.proxyvote.com; beneficial stockholders who do not have a control number may gain access to the meeting by logging in to their brokerage firm’s website and selecting the stockholder communications mailbox to link through to the Annual Meeting; instructions should also be provided on the voting instruction card provided by their broker, bank or other nominee. Although the live webcast is available only to stockholders or their duly appointed proxies at the time of the Annual Meeting, following completion of the Annual Meeting, a webcast replay and the final report of the inspector of election will be posted to our website, www.hicrushinc.com, for at least one year.
Stockholders of record. If your shares are registered directly in your name with American Stock Transfer & Trust Company, LLC, our transfer agent, you are considered the stockholder of record of those shares. As the stockholder of record, you have the right to grant your voting proxy directly or to vote online during the virtual Annual Meeting.
"Beneficial" or "street name" stockholders. If your shares are held in a stock brokerage account or through a bank, broker or other nominee, you are considered a "street name stockholder," meaning that you are the beneficial owner of shares held in "street name," your shares are held in the name of your broker, bank or other nominee and such person (or, Cede & Co., as the case may be) is considered the stockholder of record. As the beneficial owner, you have the right to direct your bank, broker or other nominee how to vote and you are also invited to attend the Annual Meeting. If you hold shares of common unitholdersstock through a broker, bank, trustee or nominee and want to participate in the virtual Annual Meeting, you must follow the instructions you receive from your broker, bank or other nominee.
Communicating with the Board
Stockholders or other interested parties wishing to communicate directly with the Board, a committee of the Board or with an individual director may do so by sending the communication, as appropriate, to:
Hi-Crush Partners LP (the “Partnership”Inc.
1330 Post Oak Blvd., Suite 600
Houston, Texas 77056
Each communication will be forwarded to the addressee(s) as expeditiously as reasonably practicable if the communication complies with the requirements of any applicable policy adopted by the Board relating to the subject matter of the communication and the communication falls within the scope of matters generally considered by the Board. Comments or complaints relating to the Company’s accounting, internal accounting controls or auditing matters will also be referred to members of the Audit Committee. All such communications will be forwarded to the appropriate member(s) of the Board.
PROPOSAL 1: ELECTION OF DIRECTORS
In accordance with our Certificate of Incorporation, dated May 31, 2019 ("Charter") and any postponements or adjournments thereof. This proxy statement andBylaws, dated May 31, 2019 ("Bylaws"), the accompanying formBoard shall consist of proxy are first being mailed to our common unitholders on or about October 25, 2016.QUESTIONS AND ANSWERS
The following is qualified in its entirety by the more detailed information contained in or incorporated by reference in this proxy statement. Common unitholders are urged to read carefully this proxy statement in its entirety. FOR ADDITIONAL COPIES OF THIS PROXY STATEMENT OR PROXY CARDS, OR IF YOU HAVE ANY QUESTIONS ABOUT THE SPECIAL MEETING, CONTACT ALLIANCE ADVISORS, LLC TOLL FREE AT (855) 976-3329.
Q: | What is the purpose of the special meeting? |
A: | At the special meeting, our common unitholders will act upon a proposal (the “LTIP Proposal”) to approve the first amendment and restatement of the Partnership’s Long-Term Incentive Plan (the “LTIP”), which, among other things, provides for an increase in the maximum number of common units reserved and available for delivery with respect to awards under the LTIP so that, as of the effective date of the amendment and restatement of the LTIP, the total number of common units available for delivery with respect to awards under the LTIP will be increased by 2,700,000 common units to an aggregate of 4,064,035 common units. A copy of the amended and restated LTIP (the “Restated LTIP”) is attached to this proxy statement as Exhibit A. Our common unitholders will also act on a proposal to approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the special meeting to approve the Restated LTIP (the “Adjournment Proposal”). |
Q: | When and where is the special meeting? |
A: | The special meeting will be held on December 8, 2016, 10:00 a.m. Central Standard Time, at Three Riverway, Houston, Texas 77056. |
The special meeting maysuch number of directors as shall be adjourned to another date and/or place for any proper purposes (including, without limitation, for the purpose of soliciting additional proxies). However, our partnership agreement also provides that, in the absence of a quorum, the special meeting may be adjourneddetermined from time to time solely by resolution adopted by the affirmative vote of a majority of the outstanding common units represented eithertotal number of directors then authorized. Until the 2023 Annual Meeting of Stockholders (the "2023 Annual Meeting"), the Board is divided into three classes, designated Class I, Class II and Class III. The Board, based on the recommendation of the Nominating and Governance Committee, proposed that the following two Class I nominees be elected at the Annual Meeting, each of whom will hold office for three-year terms beginning at the Annual Meeting and expiring at the 2023 Annual Meeting or until his successor shall have been elected and qualified
or until his earlier death, resignation or removal: |
|
| John F. Affleck-Graves |
| John Kevin Poorman |
Each of the nominees is currently a director of Hi-Crush and has been elected to hold office until the Annual Meeting or until his successor has been elected and qualified. Mr. Affleck-Graves joined the Board in
person or by proxy.November 2012 and Mr. Poorman joined the Board in August 2013. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH NOMINEE.
Directors and Executive Officers
After the Annual Meeting, assuming the stockholders elect to the Board the director nominees set forth in "Proposal 1: Election of Directors" above, the Board will be, and the executive officers of the Company are:
Q: |
| Who is soliciting my proxy? | | | |
A:Name | Hi-Crush GP LLC (the “general partner”), our general partner, is sending you this proxy statement in connection with its solicitation of proxies for use at our special meeting of common unitholders. | Age | | Title |
Q:Robert E. Rasmus | Who is entitled to vote at the special meeting? |
A: | All common unitholders who owned our common units at the close of business on the record date, October 10, 2016, are entitled to receive notice62
| | Chief Executive Officer and Chairman of the special meetingBoard |
| John F. Affleck-Graves (a)(b)(c) | | 69 | | Director |
| John Kevin Poorman (a)(b)(c) | | 68 | | Director |
| Joseph C. Winkler III (a)(b)(c) | | 68 | | Director |
| J. Philip McCormick, Jr. | | 52 | | Chief Financial Officer |
| Michael Alan Oehlert | | 57 | | Chief Operating Officer |
| Mark C. Skolos | | 59 | | General Counsel, Chief Compliance Officer and to vote the common units that they held on the record date at the special meeting, or any postponements or adjournmentsSecretary |
| |
| (a) | Member of the specialAudit Committee. |
| meeting. Each common unitholder that attends the special meeting in person may be asked to present valid picture identification, such as a driver’s license or passport. Cameras, recording devices and other electronic devices will not be permitted at the special meeting. |
Q:(b) | What is the recommendationMember of the board of directors?Compensation Committee. |
A: | The board of directors recommends that you vote “FOR” the LTIP Proposal and “FOR” the Adjournment Proposal. |
A: | If you are a unitholder of record, you may vote your common units by proxy in advanceMember of the special meeting. You may also attend the special meetingNominating and vote your common units in person. Even if you plan to attend the special meeting, please vote your proxy in advance of the special meeting (by Internet, telephone or mail, as described below) as soon as possible so that your common units may be represented at the special meeting.Governance Committee. |
| • | | Internet. You may visit the Internet web site address listed on your proxy card. Internet voting procedures have been established to verify your identity and to confirm your voting instructions. Please have your proxy card available when you visit the Internet web site address. |
| • | | Telephone. You may call the toll-free telephone number listed on your proxy card. Telephone voting procedures have been established to verify your identity, to allow you to provide proxy voting instructions and to confirm that your instructions were accurately recorded. Please have your proxy card available when you call. |
| • | | Mail. You may mail your completed, signed and dated proxy card in the enclosed postage-paid return envelope. |
Internet and telephone voting
The Board consists of four members, divided into three classes serving staggered three-year terms until the 2023 Annual Meeting. Commencing with the election of directors at the 2023 Annual Meeting, the directors will be availabledivided into two classes, with each class subsequently serving staggered two-year terms, and commencing with the 2024 Annual Meeting of Stockholders the directors will consist of a single class, with all directors subsequently serving one-year terms. Mr. Affleck-Graves and Mr. Poorman are designated as Class I directors and, assuming the stockholders elect them to unitholdersthe board as set forth in "Proposal 1: Election of record 24 hoursDirectors" above, their terms of office will expire in 2023. Mr. Winkler is designated as a dayClass II director and his term of office expires in 2021. Mr. Rasmus is designated as a Class III director and his term of office expires in 2022.
Set forth below is biographical information about each of the Company’s director nominees, Class II and III directors and executive officers.
Director Nominees
John F. Affleck-Graves—Director. Dr. Affleck-Graves joined the board of directors of the general partner of Hi-Crush Partners LP in November 2012 and has continued to serve as a member of the Board of Hi-Crush Inc. He currently holds a chaired professorship in the Department of Finance at the University of Notre Dame. He served in roles of increasing responsibility and seniority at The University of Notre Dame from 1986 to the present, including as an Executive Vice President from 2004 to 2019. As Executive Vice President, he served as one of three executive officers of the University. Additionally, Dr. Affleck-Graves is a board member of 1st Source Corporation, a financial services company, and he is a prior board member of St. Joseph’s Capital Bank, Student Loan Corporation and Express-1 Inc., a trucking company. He received his BSc in Mathematical Statistics and Computer Science in 1971 from the University of Cape Town. Dr. Affleck-Graves also holds a PhD in Mathematical Statistics and a BCom in Accounting and Financial Management from the University of Cape Town. Dr. Affleck-Graves previously served as a director of Express-1 Expedited Solutions, Inc. from October 2006 to October 2011 and served on its audit committee. We believe that Dr. Affleck-Graves’ expertise and the unique perspective gained from his service at the University of Notre Dame enable him to effectively serve on the Board.
John Kevin Poorman—Director. Mr. Poorman joined the board of directors of the general partner of Hi-Crush Partners LP in August 2013 and has continued to serve as a member of the Board of Hi-Crush Inc. Since June 2013, Mr. Poorman has been Chief Executive Officer of PSP Capital Partners, LLC and Pritzker Realty Group, LLC, investment managers for affiliated entities in real estate and other non-real estate business. Pritzker Realty Group, LLC is also an operator of real estate. He is also Executive Chairman of Vi Senior Living (formerly Classic Residence by Hyatt). Mr. Poorman previously served as an officer and director of several businesses owned by interests of the extended Pritzker family. Mr. Poorman is the past Chairman of the Board of Trustees of the Loyola University of New Orleans and a past director of The New Orleans Jazz Orchestra, Inc. Mr. Poorman also serves as member and President of the board of The Barack Obama Foundation. Prior to joining Hyatt Hotels Corporation in 1988, Mr. Poorman was a partner in the Dallas-based law firm of Johnson & Swanson. Mr. Poorman received his Bachelor of Science (Botany) degree and Juris Doctor degree from the University of Oklahoma, graduating law school with highest honors. We believe that Mr. Poorman’s business leadership skills make him well-suited to serve on the Board.
Class II and III Directors
Robert E. Rasmus—Chief Executive Officer and Chairman of the Board. Mr. Rasmusserves as a director and Chairman of the Board of Hi-Crush Inc. Mr. Rasmus joined the board of directors of the general partner of Hi-Crush Partners LP in May 2012 and was appointed Chairman in 2019. Mr. Rasmus was a founding member of Red Oak Capital Management LLC ("ROCM") in June 2002 and has served as Managing Director since inception. ROCM’s business model centered on partnering with the largest oil services companies in unconventional basins in the United States. Prior to the founding of ROCM, Mr. Rasmus was the President of Thunderbolt Capital Corp., a venture firm focused on start-up and early stage private equity investments. Previously, Mr. Rasmus started, built and expanded a variety of domestic and international capital markets and corporate finance businesses. Mr. Rasmus was the Senior Managing Director of Banc One Capital Markets, Inc. (formerly First Chicago Capital Markets, Inc.) where he was responsible for the high yield and private placement businesses while functioning as a member of the management committee. Prior thereto, Mr. Rasmus was the Managing Director and Head of Investment Banking in London for First Chicago Ltd. Mr. Rasmus holds a BA in Government and International Relations from the University of Notre Dame. Mr. Rasmus is a member of the board of directors for the Lab for Economic Opportunities. We believe that Mr. Rasmus’ industry experience and deep knowledge of our business makes him well suited to serve on the Board.
Joseph C. Winkler III—Director. Mr. Winkler joined the board of directors of the general partner of Hi-Crush Partners LP in August 2012 and serves as the Chairman of the Audit Committee of Hi-Crush Inc. Mr. Winkler served as Chairman and Chief Executive Officer of NYSE-listed Complete Production Services, Inc. ("Complete"), a provider of specialized oil and gas services and equipment in North America, from March 2007 until 11:59 p.m. Eastern Standard TimeFebruary 2012, at which time Complete was acquired by Superior Energy Services, Inc. From June 2005 to March 2007, Mr. Winkler served as Complete’s President and Chief Executive Officer. From March 2005 until June 2005, Mr. Winkler served as the Executive Vice President and Chief Operating Officer of National Oilwell Varco, Inc., an oilfield capital equipment and services company, and from May 2003 until March 2005 as the President and Chief Operating Officer of the company’s predecessor, Varco International, Inc. ("Varco"). From April 1996 until May 2003, Mr. Winkler served in various other capacities with Varco and its predecessor, including Executive Vice President and Chief Financial Officer. Mr. Winkler served as a member of the board of directors of Dresser-Rand Group, Inc., a NYSE-listed provider of rating equipment solutions, until its acquisition by Siemens in July 2015. Mr. Winkler serves as lead director of the board of directors of Commercial Metals Company, a vertically integrated Fortune 500 steel company, and serves on December its Finance Committee and Compensation Committee, and served as a member of the board of directors of Eclipse Resources Corporation, an independent exploration and production company until its merger to form Montage Resources Corporation. Mr. Winkler joined the board of directors of Tetra Technologies Inc. in August 2015 and is a member of its audit and compensation committees. Mr. Winkler received a BS degree in Accounting from Louisiana State University. We believe that Mr. Winkler’s many years of operational, financial, international and capital markets experience, a significant portion of which was with publicly traded companies in the oil and gas services, manufacturing and exploration and production industries, make him particularly well-suited to serve on the Board.
Executive Officers
J. Philip McCormick, Jr.—Chief Financial Officer. Mr. McCormick was appointed to Chief Financial Officer of Hi-Crush Services LLC effective January 1, 2020. Mr. McCormick has nearly 30 years of experience in finance, accounting, treasury, risk management and capital markets. Mr. McCormick joined Hi-Crush in August 2018 as Vice President of Finance. Prior to joining Hi-Crush, Mr. McCormick served in various senior level positions at KBR, Inc., a global engineering, construction, and services company, from 2009 to 2018, including Vice President of Finance and Treasurer. Prior to that, Mr. McCormick held various senior level roles at LyondellBasell, a plastics, chemicals and refining company, from 1998 to 2009, including Director, Internal Controls. Mr. McCormick began his career as an Audit Manager at Coopers & Lybrand, a predecessor of PricewaterhouseCoopers, in 1990. He earned a Bachelor of Business Administration in Accounting from The University of Texas at Austin and is a Certified Public Accountant in the State of Texas.
Michael Alan Oehlert—Chief Operating Officer. Mr. Oehlert was appointed to Chief Operating Officer of Hi-Crush Services LLC in May 2019. Mr. Oehlert joined Hi-Crush in July 2017 as Vice President, PropStream, and was promoted to Senior Vice President, PropStream in January 2019. Mr. Oehlert provided consulting services to various private equity firms prior to joining Hi-Crush and following his service as President and Chief Executive Officer of Patriot Artificial Lift LLC ("Patriot"), an artificial lift manufacturer and service company, from August 2013 to November 2015. At Patriot, he managed field operations, product development, and marketing. From October 2012 to August 2013, Mr. Oehlert served as President and Chief Executive Officer of Downhole Technology LLC (then known as National Boss Hog Energy Services LLC), a frac plug manufacturer, where he led product development, well-site operations, sales and marketing. Prior to Downhole Technology LLC, he was the south region General Manager at Integrated Production Services (now a division of SPN Well Services) from 2006 to 2012, where he managed coil tubing, slickline, swabbing, flowback, snubbing, artificial lift, and remedial pumping service lines. From 2000 to 2006, Mr. Oehlert held various manager-level operations positions, including for US Plungers and Scientific Microsystems Inc.
Mark C. Skolos—General Counsel, Chief Compliance Officer and Secretary. Mr. Skolos was appointed General Counsel of Hi-Crush Proppants LLC in April 2012 and named General Counsel and Secretary of the general partner of Hi-Crush Partners LP in May 2012. Mr. Skolos was named Chief Compliance Officer of the general partner of Hi-Crush Partners LP in September 2018. He was named General Counsel, Chief Compliance Officer and Secretary of Hi-Crush Inc. on June 1, 2019. Mr. Skolos is the head of the safety and environmental teams at the Company. Prior to joining the Company, Mr. Skolos was a shareholder at the law firm of Weld, Riley, Prenn and Ricci S.C. ("Weld Riley") from September 2011 to April 2012. Mr. Skolos worked as an attorney for Skolos, Millis and Matousek, S.C., or its predecessor firms ("Skolos Millis"), for 26 years prior to its merger with Weld Riley in April 2012. Mr. Skolos was made a shareholder at Skolos Millis in 1990. In his private practice, Mr. Skolos represented developers, businesses and local units of government on issues of government regulation, land use and real estate. Mr. Skolos has extensive experience representing companies in the Internetnon-metallic mining and processing industry on a wide spectrum of issues, including permitting, land acquisition and government relations. In his role at the Company, he oversees the legal department and is responsible for oversight of all legal compliance matters and initiatives of the Company including, securities, mergers and acquisitions, intellectual property, litigation, environmental law and land use matters among other things. He graduated from the University of Wisconsin Law School in 1985 with a JD. Mr. Skolos has served as President of the Tri-County Bar Association of Wisconsin and acted as both Circuit Court and Family Court Commissioner in the State of Wisconsin. He is Chair of the board of directors for the Industrial Sand Division ("ISD") of the National Sand Stone and Gravel Association ("NSSGA") and is a member of the State Bar of Wisconsin and the Texas General Counsel Forum.
CORPORATE GOVERNANCE
General
Board Leadership. The Board has no policy with respect to the separation of the offices of Chairman and Chief Executive Officer. The Board believes that this issue is part of the succession planning process and that a determination regarding this issue should be made each time the Board appoints a new Chief Executive Officer or at such other times as when consideration of the toll-free telephone numbermatter is warranted under the circumstances. At present, the Board has chosen to provide your proxy voting instructions, you docombine the positions of Chairman and Chief Executive Officer. The Board believes the current Chief Executive Officer possesses the necessary experience, commitment and support of the other members of the Board to effectively carry out the role of Chairman. The Nominating and Governance Committee periodically reviews and reassess the adequacy of the separation of the positions of Chairman and Chief Executive Officer.
Executive Sessions; Election of Lead Director. The non-management directors have regularly scheduled meetings in executive session. The purpose of these executive sessions is to promote candid discussion among the independent directors. Pursuant to the Company’s Corporate Governance Guidelines, the Board, based on the recommendation of the Nominating and Governance Committee, is permitted to choose a Lead Director to preside at these executive sessions. The Board elected Mr. Winkler to serve in this role. In his role as Lead Director, Mr. Winkler provides leadership and guidance to the Board. He also chairs executive sessions and establishes the agenda for these meetings.
Director Independence. Each year, the Nominating and Governance Committee (i) reviews the relationships between the Company and each director and (ii) determines whether or not needeach director serving on a Board committee is independent, disinterested, a non-employee director or an outside director under the standards applicable to mail in your proxy card. If you mail in your proxy card, it must be receivedthe committees on which such director serves or may serve and reports the results of its review to the Board, which then determines which directors qualify under the applicable standards. The Board has determined that the following directors are independent as defined by the Partnership beforeNew York Stock Exchange (the "NYSE") rules: John F. Affleck-Graves, John Kevin Poorman and Joseph C. Winkler III. The Board has determined that all members of the voting polls close atAudit Committee meet the special meeting.If youheightened independence standards applicable to audit committee members, and that all members of the Compensation Committee meet the heightened independence requirements applicable to compensation committee members.
Risk Oversight. The Board is actively involved in overseeing the Company’s risk management processes. The Board focuses on the Company’s general risk management strategy and ensures that appropriate risk mitigation strategies are a beneficial ownerimplemented by management. In addition, each of common units held in street name, you must either direct your broker or other nominee asthe Board’s committees considers risk within its area of responsibility. For example, the Audit Committee reviews and discusses the Company’s major financial risk exposures and the steps management has taken to how to vote your common units, or obtain a “legal” proxy from your broker or other nominee to vote atmonitor and control such exposures, the special meeting. Please referCompensation Committee oversees the assessment of risks related to the voter instruction cards used by your broker or other nomineeCompany’s compensation policies and programs.
Corporate Governance Documents. Please visit our investor relations website at ir.hicrush.com, "Corporate Governance," for specific instructionsadditional information on methods of voting.Q: | What do I do if I want to change my vote? |
A: | If you are a unitholder of record, you may change your vote at any time before the voting polls close at the special meeting by: |
our corporate governance, including: submitting a proxyour Corporate Governance Guidelines, which include policies on stockholder communications with new voting instructions using the Internet or telephone voting system at any time prior to 11:59 p.m. Eastern Standard Time on December 7, 2016;
delivering a later-dated, executed proxy card to American Stock Transfer & Trust Company, LLC, 6201 15th Avenue, Brooklyn, New York 11219;
delivering a written notice of revocation of your proxy to American Stock Transfer & Trust Company, LLC, 6201 15th Avenue, Brooklyn, New York 11219; or
attending the special meeting and voting in person. Please note thatBoard, director attendance at our annual meetings, director qualification standards, director responsibilities and succession planning;
the special meeting will not by itself revoke a previously granted proxy.
If you are a beneficial owner of common units held in street name and you have instructed your broker or other nominee to vote your common units, you must follow the procedure your broker or other nominee provides to change those instructions. You may also vote in person at the special meeting if you obtain a “legal” proxy from your broker or other nominee.
Q: | What constitutes a quorum? |
A: | If more than 50% of our outstanding common units on the record date are present in person or by proxy at the special meeting, such units will constitute a quorum and will permit us to conduct the proposed business at the special meeting. Your common units will be counted as present at the special meeting if you: |
are present and vote in person at the meeting; or
have submitted a properly executed proxy.
Proxies received but marked as abstentions will be counted as common units that are present and entitled to vote for purposes of determining the presence of a quorum. If an executed proxy is returned by a broker or other nominee holding common units in “street name” indicating that the broker or other nominee does not have discretionary authority as to certain common units to vote on the proposals (a “broker non-vote”), such common units will be considered present at the meeting for purposes of determining the presence of a quorum but will not be considered entitled to vote.
Q: | What vote is required to approve the proposals? |
A: | The LTIP Proposal requires the approval of a majority of the votes cast by our common unitholders represented in person or by proxy. Votes “for” and “against” and abstentions count as votes cast, while broker non-votes do not count as votes cast. The number of votes cast “for” the LTIP Proposal must represent a majority of the votes cast in respect of the LTIP Proposal in order to be approved. Thus, broker non-votes can make it difficult to satisfy the votes cast requirement, and abstentions have the effect of a vote against the LTIP Proposal. |
The proxy provides common unitholders the opportunity to vote on the LTIP Proposal. However, the Restated LTIP will not become effective unlesscharters approved by the common unitholders.
ApprovalBoard for the Audit Committee, the Compensation Committee and the Nominating and Governance Committee;
| |
| • | our Insider Trading Policy, which includes a prohibition on the following hedging transactions by our directors, officers and certain of our employees (without the advance approval of the General Counsel or Chief Financial Officer, as applicable): (i) encumbering any portion of Company securities or using Company securities as collateral for any purpose (including margin accounts); (ii) selling the Company’s securities short and (iii) buying or selling puts or calls or other derivative securities on the Company’s securities. |
our Social Media Policy;
our Communications Policy;
the Audit Committee Policy on Complaint Procedures for Accounting and Auditing Matters; and
the Code of Business Conduct and Ethics.
Board Meetings and Committees
The Board meets regularly during the year, and holds special meetings and acts by unanimous written consent whenever circumstances require. During 2019, there were 15 meetings of the
Adjournment Proposal requires the approval of a majorityBoard. All incumbent directors attended at least 75% of the
votes castaggregate of the
outstanding common units represented either in person or by proxy atmeetings of the
special meeting.A properly executed proxy submitted without voting instructionsBoard and committees on which they served occurring during 2019.
The Board encourages all directors to attend each annual meeting of stockholders. We anticipate that all of our directors will
be voted (except toattend the
extent thatAnnual Meeting virtually. The Annual Meeting is the
authority to vote has been withheld) “FOR”first stockholder meeting since the
LTIP Proposal and “FOR” the Adjournment Proposal.Q: | If my common units are held in “street name” by my broker or other nominee, will my broker or other nominee vote my common units for me? |
A: | If you own your common units in “street name” through a broker or other nominee, your broker or other nominee will not be permitted to exercise voting discretion with respect to the matters to be acted upon at the special meeting. Thus, if you do not give your broker or other nominee specific instructions, your common units will (i) not be voted and have no effect on the LTIP Proposal and (ii) not be voted and have no effect on the Adjournment Proposal. This is generally referred to as a “broker non-vote.” Broker non-votes will be considered present at the meeting for purposes of determining the presence of a quorum. |
Q: | Who can I contact for further information? |
A: | If you have questions about the proposals, please contact our proxy solicitor: |
Alliance Advisors, LLC
200 Broadacres Drive, 3rd Floor
Bloomfield, NJ 07003E-mail: HCLP@allianceadvisorsllc.com
Phone (unitholders, brokers and banks): (855) 976-3329
HI-CRUSH PARTNERS LP
References in this proxy statement to “Hi-Crush Partners LP,” “we,” “our,” “us” or like terms when used inCompany completed its conversion (the "Conversion") from a historical context to reference operations or matters prior to August 16, 2012 refer to the business ofHi-Crush Proppants LLC, which is our accounting predecessor that contributed certain of its subsidiaries toHi-Crush Partners LP on August 16, 2012 in connection with our initial public offering. Otherwise, those terms refer toDelaware limited partnership named Hi-Crush Partners LP to a Delaware corporation named Hi-Crush Inc.
The Board has established an Audit Committee, Compensation Committee and Nominating and Governance Committee, each of which is comprised entirely of directors who meet the applicable independence requirements of the NYSE rules. The Committees keep the Board informed of their actions and provide assistance to the Board in fulfilling its oversight responsibility to stockholders. The table below provides current membership information as well as meeting information for the last fiscal year.
|
| | | | | | |
| Name | | Audit Committee | | Compensation Committee | | Nominating and Governance Committee Charter |
| Robert E. Rasmus | | | | | | |
| John F. Affleck-Graves | | X | | X* | | X |
| John Kevin Poorman | | X | | X | | X* |
| Joseph C. Winkler III | | X* | | X | | X |
| Total Meetings in 2019 | | 4 | | 3 | | 2 |
The functions performed by these Committees, which are set forth in more detail in their charters, are summarized below.
Audit Committee. The Audit Committee’s purposes are to regularly report to the Board and assist it in the oversight of (1) the integrity of the Company’s financial statements; (2) the Company’s compliance with legal and regulatory requirements; (3) the independent auditor’s qualifications and independence; (4) the performance of the Company’s internal audit function and independent auditor; and (5) to perform such other functions as the Board may assign to the Audit Committee from time to time. The Board determined that Mr. Winkler, the Chairman of the Audit Committee, is an "audit committee financial expert" as defined in the U.S. Securities and Exchange Commission (the "SEC") rules. Mr. Winkler is an independent director as defined by the NYSE.
Compensation Committee. The Compensation Committee’s purposes are to (1) oversee the Company’s overall compensation philosophy that applies to all Company employees; (2) review, evaluate and approve the agreements, plans, policies and programs of the Company to compensate the Company’s executive officers and directors; (3) oversee the Company’s plans, policies and programs to compensate the Company’s employees; (4) otherwise discharge the Board’s responsibilities relating to compensation of the Company’s executive officers and directors; and (5) perform such other functions as the Board may assign to the Compensation Committee from time to time. The Committee’s goal is to oversee the development and implementation of compensation plans, policies and programs that are designed to provide a competitive level of compensation to attract and retain talented executive officers and directors, reward and encourage maximum corporate and individual performance, promote accountability and align executive officer and director interests with the interests of the Company’s stockholders.
Nominating and Governance Committee. The Nominating and Governance Committee’s purposes are to (1) advise the Board and make recommendations regarding appropriate governance practices and assist the Board in implementing those practices; (2) assist the Board by identifying individuals qualified to become members of the Board, consistent with the criteria approved of by the Board, and recommend director nominees to the Board for election at the annual meetings of stockholders or for appointment to fill vacancies on the Board; (3) advise the Board about the appropriate composition of the Board and its subsidiaries. Referencescommittees; (4) lead the Board in this proxy statementthe annual performance evaluation of the Board and its committees, and of management; (5) direct all matters relating to “Hi-Crush Proppants LLC,” “our predecessor”the succession of the Company’s Chief Executive Officer and “our sponsor” refer(6) perform such other functions as the Board may assign to Hi-Crush Proppants LLC.Overview
Hi-Crush Partners LP (togetherthe Committee from time to time.
Director Nominations. The Nominating and Governance Committee identifies individuals qualified to become members of the Board, consistent with its subsidiaries, the “Partnership”) iscriteria approved of by the Board, and recommends to the Board the persons to be nominated by the Board for election as directors at the annual meeting of stockholders, and the persons to be elected by the Board to fill any vacancies on the Board. In the event a pure play, low-cost, domestic producer and supplier of premium monocrystalline sand, a specialized mineral that is usedvacancy on the Board arises, either as a proppant to enhanceresult of an increase in the recovery rates of hydrocarbons from oil and natural gas wells. Our reserves consist of “Northern White” sand, a resource existing predominately in Wisconsin and limited portionssize of the upper Midwest regionBoard or as a result of the United States, which is highly valued asdeparture of a preferred proppant because it exceeds all American Petroleum Institute specifications. We own, operatedirector, the Nominating and develop sand reserves and related excavation and processing facilities andGovernance Committee will seek and identify a qualified director nominee to acquire or develop additional reserves and facilities. We operate through an extensive logistics network of rail-served destination terminals strategically located throughout Pennsylvania, Ohio, New York, Colorado and Texas.Over the past decade, exploration and production companies have increasingly focused on exploiting the vast hydrocarbon reserves contained in North America’s unconventional oil and natural gas reservoirs through advanced techniques, such as horizontal drilling and hydraulic fracturing. In recent years, this focus has resulted in exploration and production companies drilling longer horizontal wells, completing more hydraulic fracturing stages per well and utilizing more proppant per stage in an attempt to efficiently maximize the volume of hydrocarbon recovery per wellbore. As a result, North American demand for proppant increased rapidly, growing at an average annual rate of 43.0% from 2009 to 2014, with total annual sales of $5.4 billion in 2014, according to The Freedonia Group, Inc.
We utilize the significant oil and natural gas industry experience of our management team to take advantage of what we believe are favorable, long-term market dynamics as we execute our growth strategy, which includes the acquisition of additional frac sand reserves, the development of new excavation and processing facilities and the development of new terminal facilities and logistics assets. We expect to have the opportunity to acquire significant additional acreage, reserves and facilities currently owned or under construction by our sponsor, including our sponsor’s 1,447-acre facility with integrated rail infrastructure, located near Independence, Wisconsin and Whitehall, Wisconsin, in addition to potential acquisitions from unrelated third parties. Our sponsor will not, however, be required to accept any offer we make, and may, following good faith negotiations with us, sell the assets to third parties that may compete with us. Our sponsor may also elect to develop, retain and operate properties in competition with us.
Our principal executive office is located at Three Riverway, Suite 1350, Houston, Texas 77056. Our telephone number is (713) 980-6200.
PROPOSAL ONE: APPROVAL OF THE FIRST AMENDED AND RESTATED LONG-TERM
INCENTIVE PLAN (THE LTIP PROPOSAL)
Our board of directors has approved the first amendment and restatement of our Long-Term Incentive Plan (the “LTIP”), which we refer to as the “Restated LTIP,” subjectrecommended to the approvalBoard for either appointment by the Board to serve the remainder of our unitholders. The LTIP is integral to our compensation strategy and our board of directors believes that increasing the aggregate number of common units that may be delivered with respect to awards under the LTIP will provide the flexibility that we need to keep pace with our competitors and for the Partnership to effectively recruit, motivate and retain the caliber of employees directors, and consultants essential for achievement of our success. Accordingly, the Restated LTIP (i) increases the number of common units available for delivery with respect to awards under the LTIP so that, as of the effective date of the Restated LTIP, the total number of common units available for delivery with respect to awards under the Restated LTIP will be increased by 2,700,000 common units to an aggregate of 4,064,035 common units, (ii) adds a prohibition on repricing of unit options without approval of our unitholders, except in the case of adjustments implemented to reflect certain Partnership transactions, (iii) adds calendar year limitations on the dollar value of awards that may be granted to non-employee directors, (iv) subjects awards and amounts paid or payable pursuant to or with respect to awards to any applicable clawback policies or procedures adopted by our general partner, (v) adds a minimum vesting or restricted period applicable to unit options and unit appreciation rights granted under the Restated LTIP, (vi) extends the term of the LTIP to a maximum of ten years following the Restated LTIP’s effective date, and (vii) incorporates certain other non-material, ministerial changes. While we are cognizant of the potential dilutive effect of compensatory unit awards, we also recognize the significant motivational, retention and performance benefitsdirector position that are achieved from making awards under the LTIP. If the Restated LTIP is approved by our unitholders, the effective date shall be September 21, 2016.
The 2,700,000 common units that are proposed to be added to the units reserved for issuance under the Restated LTIP have a total aggregate equity value of $39,879,000 based on our closing unit price of $14.77 on September 14, 2016 and represents approximately 4.2% of our total outstanding common units on a fully diluted basis. If the Restated LTIP is approved, we estimate that the units reserved for issuance under the Restated LTIP will give us the flexibility to continue granting unit-based awards overvacant or election at the next four to five years in amounts determined toannual meeting of stockholders. To identify such a nominee, the Nominating and Governance Committee will solicit recommendations from existing directors and senior management. These recommendations will be appropriateconsidered by the Committee (defined below), assuming we grant awards consistent with our current projections; however, this is simply an estimate and future circumstances may require a change to expected equity grant practices. These circumstances include, but are not limited to, the future price of our common units, award levels and our hiring activity over the next few years, which we cannot predictalong with any level of certainty at this time.
Consequences of Failing to Approve the Proposal
The Restated LTIP will not be implemented unless it is approved by unitholders. If the proposed Restated LTIP is not approved by our unitholders, the LTIP will continue in effect in its present form and we will continue to grant equity awards under the terms of the LTIP until the common units remaining available for issuance are exhausted. Failure of our unitholders to approve the Restated LTIP also will not affect the rights of existing award holders under the LTIP or under any previously granted awards under the LTIP. If the Restated LTIP is not approved by our unitholders, we may still implement the non-material changes to the LTIP proposed in the Restated LTIP without unitholder approval; however, the number of available common units under the LTIP may not be increased without unitholder approval.
Description of the Restated LTIP
The description of the Restated LTIP set forth below is a summary of the material features of the Restated LTIP. This summary, however, does not purport to be a complete description of all the provisions of the Restated LTIP. The summary is qualified in its entirety by reference to the full text of the Restated LTIP, a copy of which is attached hereto as Exhibit A and incorporated herein by reference.
Key Terms of the Restated LTIP
| | |
Eligible Participants
| | Employees, consultants and directors of our general partner and its affiliates |
| |
Total Common Units Remaining Available for Future Issuance | | 2,991,783 (after giving effect to the 2,700,000 common unit increase described below) |
| |
Award Types
| | Unit options, unit appreciation rights, restricted units, phantom units, substitute awards, unit awards, other unit based awards, cash awards and performance awards |
| |
Prohibitions
| | Repricings of unit options or unit appreciation rights and other material amendments (for example, an amendmentrecommendations that increases the number of common units authorized for issuance) without unitholder approval |
| |
Director Award Limits
| | Annual limit on the grant date fair value of all awards granted to a non-employee director is $700,000 (or $1,400,000 in the first year the individual becomes a non-employee director) |
| |
Minimum Vesting Period
| | Unit options and unit appreciation rights will have a minimum one year restricted period, except with respect to substitute awards |
| |
Restrictions on Unit Options
| | The exercise price of unit options may be no less than the fair market value of the underlying common units as of the date of grant, except with respect to substitute awards |
| |
Other Provisions
| | Awards are non-transferrable, except by will or by the laws of descent and distribution; no automatic award grants are made to any eligible individuals; no excise tax gross-ups |
Purpose of the Restated LTIP
The purpose of the Restated LTIP is to promote our interests and the interests of our general partner and its affiliates by providing incentive compensation awards that encourage superior performance. The Restated LTIP is also intended to enhance the ability of us and our general partner to attract and retain the services of individuals who are essential for our growth and profitability and to encourage those individuals to devote their best efforts to advancing our business.
Common Units Subject to the Restated LTIP
If the Restated LTIP is approved by our unitholders, the maximum number of common units that may be delivered with respect to awards under the Restated LTIP will be increased by 2,700,000 common units to an aggregate of 4,064,035 common units, which would be subject to the same adjustments as currently provided in the LTIP. If the Restated LTIP is approved by our unitholders, we intend to file a Form S-8 to register the additional common units reserved for issuance under the Restated LTIP.
As is the case under the current LTIP, the common units to be delivered under the Restated LTIP may be common units acquired in the open market, common units acquired from the Partnership or any of its affiliates (including newly issued common units) or any other person, or any combination of the foregoing. To the extent that an award is forfeited, cancelled, exercised, settled in cash, or otherwise terminates or expires without the
actual delivery of common units pursuant to such awards, the common units subject to the award will again be available for new awards granted under the Restated LTIP; provided, however, that any common units withheld to cover a tax withholding obligations will not again be available for new awards under the Restated LTIP. There is no limit on the number of awards that may be paid in cash rather than common units under the Restated LTIP, and such awards paid in cash shall have no impact upon the number of common units reserved for awards under the Restated LTIP.
Administration of the Restated LTIP
Similar to the current LTIP, the Restated LTIP will generally be administered by our general partner’s board of directors or a committee appointed by such board (as applicable, the “Committee”). The Committee has the full authority, subject to the terms of the Restated LTIP and applicable law, to establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Restated LTIP, to designate participants under the Restated LTIP, to determine the number of common units to be covered by awards, to determine the type or types of awards to be granted to a participant, to determine the terms and conditions of any award, to interpret and administer the Restated LTIP and any instrument or agreement relating to an award made under the Restated LTIP, and to make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Restated LTIP.
Persons Who May Participate in the Restated LTIP
All employees, consultants and directors of our general partner and its affiliates that perform services for us are eligible to be selected to participate in the Restated LTIP. The selection of which eligible individuals will receive awards is within the sole discretion of the Committee. As of October 11, 2016, approximately 253 individuals, including 249 employees and 4 other service providers, were eligible to receive awards under the LTIP.
Individual Limitations on Awards
A non-employee director may not receive, in any calendar year, awards having an aggregate grant date fair value that exceeds $700,000; provided that such limitation is $1,400,000 in the first year an individual becomes a non-employee director and does not apply to any awards made to a non-employee director during a period in which such individual was an employee or a consultant.
Term of the Restated LTIP
The term of the Restated LTIP will expire on the earliest of (1) the date it is terminated by our board of directors, (2) the date all common units available under the Restated LTIP have been delivered pursuant to awards or (3) the tenth anniversary of the effective date of the Restated LTIP (September 21, 2026).
Awards under the Restated LTIP
Unit Options and Unit Appreciation Rights
Unit options represent the right to purchase a number of common units at a specified exercise price. Unit appreciation rights represent the right to receive the appreciation in the value of a number of common unitsreceived from stockholders as of the exercise date over a specified exercise price. The Committee shall determine the method or methods by which payment of the exercise price with respect thereto may be made or deemed to have been made which may include, without limitation, cash, check acceptable to the Committee, a “cashless-broker” exercise, withholding common units or any combination thereof. Unit options and unit appreciation rights may be granted to such eligible individuals and with such terms as the Committee may determine, consistent with the terms of the Restated LTIP; however, unit options and unit appreciation rights generally must generally have exercise prices
that are no less than the fair market value of their underlying common units as of the date of grant. Vesting provisions applicable to unit options and unit appreciation rights will be determined at the Committee’s discretion and set forth in an applicable award agreement. The restricted period for unit options and unit appreciation rights shall be no less than one year, except with respect to unit options and unit appreciation rights granted as substitute awards.
Unit options and unit appreciation rights may be granted with tandem distribution equivalent right (a “DER”) grants. At the Committee’s discretion, a tandem DER grant may be paid directly to the participant, be reinvested into additional awards, credited to a bookkeeping account subject to the same vesting restrictions as the underlying unit option or unit appreciation right, or be subject to such other provisions as the Committee deems appropriate.
Restricted Units and Phantom Units
A restricted unit is a common unit that is subject to forfeiture while it remains unvested. Upon vesting, the forfeiture restrictions lapse and the participant holds a common unit that is not subject to forfeiture. A phantom unit is a notional unit that entitles the participant to receive a common unit (or the cash equivalent of the fair market value of a common unit) upon the vesting of the phantom unit or on a deferred basis upon specified future dates or events. The Committee may make grants of restricted units and phantom units under the Restated LTIP that contain such terms, consistent with the Restated LTIP, as the Committee may determine are appropriate, including terms regarding the period over which restricted or phantom units will vest.discussed below. The Committee may, in its discretion, base vestingretain a search firm to provide additional candidates.
The tenure range of our directors and director nominees is as follows:
|
| | |
| Tenure on Board | | Number of Directors and Director Nominees |
| More than 10 years | | 0 |
| 6-10 years | | 4 |
| 1-5 years | | 0 |
Prior to recommending to the Board that an existing director be nominated for election as a director at the Annual Meeting, the Committee will consider and review such director’s:
past Board and committee meeting attendance and performance;
length of Board service;
personal and professional integrity, including commitment to the Company’s core values;
relevant experience, skills, qualifications and contributions that the existing director brings to the Board; and
independence under applicable standards.
Among the qualifications and skills of a candidate considered important by the Nominating and Governance Committee are:
relevant skills, qualifications and experience;
independence under applicable standards;
business judgment;
service on boards of directors of other companies;
personal and professional integrity, including commitment to the Company’s core values;
openness and ability to work as part of a team;
willingness to commit the required time to serve as a Board member; and
familiarity with the Company and its industry.
The Nominating and Governance Committee also will consider the diversity of, and the optimal enhancement of the current mix of talent and experience on, the participant’s completionBoard.
The Nominating and Governance Committee will treat recommendations for directors that are received from the Company’s stockholders equally with recommendations received from any other source; provided, however, that the recommendations must comply with the procedures outlined herein. To be considered by the Nominating and Governance Committee for the 2021 Annual Meeting, notice of a
perioddirector candidate recommendation must be received by the Secretary of
service or uponHi-Crush by not later than the
achievementclose of
specified performance criteria or as otherwisebusiness on February 19, 2021 and not earlier than the close of business on January 20, 2021 and must comply with the requirements set forth in
an award agreement. Unless otherwise provided in the applicable award agreement, outstanding restricted units and phantom units will be forfeited in the event that a participant ceases providing employment, consulting or director services, as applicable.The Committee, in its discretion, may grant tandem unit distribution rights with respect to restricted units that provide that the distributions made by us with respect to the restricted units are subject to the same forfeiture and other restrictions as the restricted unit. If so restricted, such distributions may be paid directly to the participant, held, without interest, until the associated restricted unit vests, be used to acquire additional restricted units, or be subject to such other provisions as the Committee deems appropriate.
A phantom unit award may be granted with a tandem DER grant. At the Committee’s discretion, a tandem DER grant may be paid directly to the participant, be reinvested into additional awards, credited to a bookkeeping account subject to the same vesting restrictions as the underlying phantom unit, or be subject to such other provisions as the Committee deems appropriate.
Substitute Awards
Substitute awards may be granted under the Restated LTIP in substitution for similar awards held by individuals who become employees, consultants and directors of our general partner or one of its affiliates as a result of a merger, consolidation or acquisition by us or any of our affiliates of another entity or the assets of another entity.
Unit Awards
A unit award is an award of common units that are fully vested upon grant and are not subject to a restricted period or any other forfeiture provisions. Unit awards may be paid in addition to, or in lieu of, cash or other compensation that would otherwise be payable to a participant. A unit award may be wholly discretionary in amount or it may be paid with respect to a bonus or other incentive compensation award, the amount of which is determined based on the achievement of performance criteria or other factors.
Other Unit Based Awards and Cash Awards
The Restated LTIP also permits the grant of other unit-based awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based, or related to, common units. An other unit-based award may be subject to vesting conditions based on the participant’s continued service, the achievement of performance criteria or other measures, and an other unit-based award may be paid in cash, in common units, or some combination thereof, as determined by the Committee. Additionally, the Restated LTIP permits cash awards, as an element of or supplement to, or independent of any other award under the plan.
Performance Awards
As discussed above, the right a participant to exercise, vest in or receive settlement of any award may be subject to such performance conditions as specified by the Committee (a “performance award”). Performance awards may be subject to one or more following performance conditions, as determined by the Committee in its discretion and as applied to our general partner, us, on a consolidated basis, and/or for specified affiliates or our business or geographical units: (A) earnings per unit, (B) increase in revenues, (C) increase in cash flow, (D) increase in cash flow from operations, (E) increase in cash flow return, (F) increase in tons sold, (G) increase in production capacity, (H) market share or increase in market share, (I) return on net assets, (J) return on assets, (K) return on investment, (L) return on capital, (M) return on equity, (N) economic value added, (O) operating margin, (P) contribution margin, (Q) net income, (R) net income per unit, (S) pretax earnings, (T) EBITDA (defined as pretax earnings (losses) before interest, depreciation, depletion and amortization, net of interest income), (U) Adjusted EBITDA (defined as EBITDA, adjusted for any non-cash impairments of long-lived assets and goodwill), (V) distributable cash flow (defined as Adjusted EBITDA less cash paid for interest expense, income attributable to non-controlling interests and maintenance and replacement capital expenditures, including accrual for reserve replacement, plus accretion of asset retirement obligations and non-cash unit-based compensation), (W) pretax operating earnings after interest expense and before incentives, service fees, and unusual, infrequent or special items, (X) total unitholder return, (Y) debt reduction, (Z) change in the Fair Market Value of the units, (AA) operating income, and (BB) any of the above goals determined on an absolute or relative basis or as compared to the performance of a published or special index deemed applicable by the CommitteeBylaws, including, but not limited to, submission of the Standard & Poor’s 500 Stock Index, following information:
the Alerian MLP Index,name, age and biography of the candidate, and such candidate’s written consent to serving as a director;
such other information that the Company may reasonably request and that is necessary to permit the Company to determine the eligibility of such candidate to serve as a director, including information relevant to a determination whether such person can be considered an independent director;
as to the stockholder giving the notice of nomination and the beneficial owner, if any, on whose behalf the nomination is made of the other business is proposed:
| |
| ◦ | the name and address of such stockholder making the recommendation, as that information appears on the Company’s books, and the name and address of such beneficial owner; |
| |
| ◦ | the class or series and number of shares of stock of the Company which are owned of record by such stockholder and such beneficial owner making the recommendation as of the date of the notice, and a representation that the stockholder will notify the Company in writing within five business days after the record date for such meeting of the class or series and number of shares of stock of the Company owned of record by the stockholder and the beneficial owner as of the record date of the meeting; and |
| |
| ◦ | a representation that such stockholder (or qualified representative of the stockholder) intends to appear at the meeting to make such nomination or propose such business. |
Compensation of Directors
Prior to the Conversion, the executive officers of the general partner of Hi-Crush Partners LP who also served as directors of the general partner of Hi-Crush Partners LP did not receive additional compensation for their services as directors of the general partner of Hi-Crush Partners LP. Following the Conversion, our executive officers who are also members of our Board do not receive compensation for their services as members of our Board.
During 2019, each member of our Board, or
a group of comparable companies.Miscellaneous
Amendment. Ourthe board of directors orof the Committee may amend, alter, suspend, discontinue, or terminate the Restated LTIP at any time; provided, however, that unitholder approval will be obtained for any amendmentgeneral partner of Hi-Crush Partners LP (the "GP Board") prior to the Restated LTIPConversion, was eligible to receive the extent necessaryfollowing compensation:
Annual base retainer with a value equal to complyapproximately $100,000;
Supplemental retainer with a value equal to approximately $25,000 for each chair of each committee of our Board; and
Supplemental retainer with a value equal to approximately $10,000 for service on each committee of our Board (excluding any applicable law, regulation or securities exchange rule. Our general partner’s board of directors orservice as the Committee may also amend any outstanding award made underchair).
For 2019, the
Restated 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.Anti-Dilution Adjustments. Upon the occurrence of any “equity restructuring” event that could result in an additional compensation expense under Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”) if adjustments to awards with respect to such eventannual and supplemental retainers described above were discretionary, the Committee will (a) equitably adjust the number and type of units covered by each outstanding award and the terms and conditions of such award to equitably reflect the restructuring event and (b) adjust the number and type of units with respect to which future awards may be granted under the Restated LTIP. Upon the occurrence of a similar event that would not result in a FASB ASC Topic 718 accounting charge if adjustments to awards were discretionary, (i) the Committee will have complete discretion to adjust awardspaid two-thirds in the manner it deems appropriate and (ii) in the event the Committee makes any such adjustments, a corresponding and proportionate adjustment will be made with respect to the maximum numberform of fully-vested common units available under the Restated LTIPof Hi-Crush Partners LP, which were granted in January 2019, and the kind of units or other securities available for grant under the Restated LTIP.
Change of Control. Upon a change of control (as definedone-third in the Restated LTIP) of our general partner or the Partnership, The Committee may,cash, which was paid quarterly in its sole discretion, effect one or more of the following alternatives: (i) remove any applicable forfeiture restrictions or cause the lapse of any restricted period, (ii) require the mandatory surrender of outstanding awards in exchange for cash payment to the holder, (iii) take any other action the Committee deems appropriate in order to prevent dilution or enlargement of the benefits intended to be made available under the Restated LTIP or an outstanding award, or (iv) make such adjustment to the awards to reflect the change of control, which could include substitution of awards for new awards.
Repricing. Repricing of unit options, directly or indirectly, is prohibited under the Restated LTIP without approval of our unitholders, except in the case of adjustments implemented to reflect certain Partnership transactions or if such a repricing would increase the exercise price of an outstanding unit option.
Clawback. The Restated LTIP provides that awards under the Restated LTIP will be subject to any applicable clawback policy adopted by us or our general partner, which may require the forfeiture, repurchase or recoupment of awards and amounts paid or payable in connection with awards.
Tax Withholding.Our general partner or one of its affiliates will be authorized to withhold from any award, from any payment due or transfer made under any award or from any compensation or other amount owing to a Participant, the amount (in cash, common units, other securities or other property) of any applicable taxes payable with respect to the grant of an award, its exercise, the lapse of restrictions applicable to an award or in connection with any payment relating to an award or the transfer of an award and to take such other actions as may be necessary to satisfy the withholding obligations with respect to an award.
U.S. Federal Income Tax Consequences of the Restated LTIP
The following discussion is for general information purposes only and is intended to summarize briefly the U.S. federal income tax consequences to participants arising from participation in the Restated LTIP. This description is based on current law, which is subject to change (possibly retroactively). The tax treatment of participants in the Restated LTIP may vary depending on the particular circumstances and may, therefore, be subject to special rules not discussed below. No attempt has been made to discuss any potential foreign, state or local tax consequences. In addition, unit options or unit appreciation rights that provide for a “deferral of compensation” within the meaning of Section 409A of the Internal Revenue Code (“Section 409A”), phantom units, and certain other awards that may be granted pursuant to the Restated LTIP could be subject to additional taxes unless they are designed to comply with certain restrictions set forth in Section 409A and the guidance promulgated thereunder.
Options; Unit Appreciation Rights
Participants will not realize taxable income upon the grant of a unit option or a unit appreciation right. Upon the exercise or, if later, the settlement of a unit option or a unit appreciation right, a participant will recognize ordinary compensation income (subject to applicable withholding) in an amount equal to the excess of (i) the amount of cash or the fair market value of the common units received, over (ii) the exercise price (if any) paid therefor. A participant will generally have a tax basis in any common units received pursuant to the exercise of a unit appreciation right, or pursuant to the cash exercise of a unit option, that equals the fair market value of the common units on the date of exercise. Subject to the discussion under “— Tax Code Limitations on Deductibility” below, we or one of our affiliates will be entitled to a deduction for federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by a participant under the foregoing rules.
When a participant sells the common units acquired as a result of the exercise of a unit option or unit appreciation right, any appreciation (or depreciation) in the value of the common units after the exercise date is treated as long- or short-term capital gain (or loss) for federal income tax purposes, depending on the holding period. The common units must be held for more than 12 months in order to qualify for long-term capital gain treatment.
The Restated LTIP allows the Committee to permit the transfer of awards in limited circumstances. The Internal Revenue Service (the “IRS”) has not provided formal guidance on, nor specifically addressed, the income tax consequences of a transfer of options (other than in the context of divorce pursuant to a domestic relations order). However, the IRS has informally indicated that after a transfer of stock options (other than to a former spouse pursuant to a domestic relations order), the transferor will recognize income, which will be subject to withholding, and FICA/FUTA taxes will be collectible at the time the transferee exercises the stock option. If stock options are transferred to a former spouse pursuant to a domestic relations order, the transferee will recognize ordinary income upon exercise by the transferee, which will be subject to withholding, and FICA/FUTA taxes (attributable to and reported with respect to the transferor) will be collectible from the transferee at such time. Unit options granted under the Restated LTIP that are transferred will likely be subject to the same tax treatment. The transfer of a unit option may result in gift tax consequences to a participant.
Phantom Units, Restricted Units and Other Awards
A participant will not have taxable income at the time of the grant of a phantom unit award, but rather, will generally recognize ordinary compensation income at the time such participant receives common units or a cash payment in settlement of the phantom unit award in an amount equal to the fair market value of the common units received or the amount of the cash payment, whichever is applicable. In addition, the participant will be subject to ordinary income tax upon the payment of a DER. In general, a participant will recognize ordinary compensation income as a result of the receipt of common units pursuant to a restricted unit award or a unit award in an amount equal to the fair market value of the common units when the common units are received over the amount, if any, paid for such units; provided, that if the common units are not transferable or are subject to a substantial risk of forfeiture when received, the participant will recognize ordinary compensation income in an amount equal to such excess based on the fair market value of the common units (i) when the common units first become transferable or are no longer subject to a substantial risk of forfeiture, in cases where a participant does not make a valid election under Section 83(b) of the Internal Revenue Code (“Section 83(b)”) or (ii) when the common units are received, in cases where a participant makes a valid election under Section 83(b). If a Section 83(b) election is made and the common units are subsequently forfeited, the recipient will not be allowed to take a deduction for the value of the forfeited units.
A participant who is an employee will be subject to withholding for federal, and generally for state and local, income taxes at the time such participant recognizes income under the rules described above with respect to common units or cash received. Directors and consultants must make their own arrangements for satisfying any tax obligations they may incuradvance.
On May 31, 2019, in connection with the
receipt of an award underConversion, we adopted the
Restated LTIP. Distributions that are received by a participant priorHi-Crush Inc. Stock Ownership and Retention Guidelines (the "Ownership Guidelines"). Pursuant to the
time that theOwnership Guidelines, each of our non-employee directors is required to own shares of our common
units underlying an award that are taxedstock with a value equal to
the participant under the rules described in the preceding paragraph are taxed as additional compensation, not as distributions on common units. The tax basis in the common units received by a participant will equalthree times the amount
recognized by him as compensation income under the rules described in the preceding paragraph plus the amount, if any, paid for the common units, and the participant’s capital gains holding period in those common units will commence onof such non-employee director’s annual base retainer. The non-employee directors have until the later of
(i) May 31, 2024, or (ii) five years following such director’s appointment to the
dateBoard to achieve compliance with the
common units are received or the restrictions lapse (provided that, if a valid Section 83(b) electionrequisite ownership level. Until compliance is
made with respect to restricted units, then the holding period of such units will begin on the date of receiptachieved, each non-employee director must retain at least half of the
units).Subject to the discussion immediately below, we or oneshares of our affiliates will be entitledcommon stock granted to a deduction for federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by a participantsuch director under the foregoing rules.
Tax Code Limitations on Deductibility
In order forHi-Crush Inc. Long Term Incentive Plan (as amended from time to time, the amounts described above to be deductible by the Partnership or one of its affiliates, the amounts must constitute reasonable compensation for services rendered or to be rendered and must be ordinary and necessary business expenses.
Limited Partnership Interest
We are not a taxable entity, and as such, we do not incur any federal income tax liability. Instead, holders our common units are required to report on their income tax return their share of our income, gains, losses and deductions in computing their federal income tax liability, regardless of whether cash distributions are made to them by us. Distributions by us to a holder of common units are generally not taxable unless the amount of cash distributed is in excess of the holder’s adjusted basis in his interest. Usually at the beginning of each year, we will mail to each partner a Schedule K-1 showing the amounts of income, gains, losses and deductions that the partner is required to reflect on his federal income tax return as a limited partner for the preceding year. A limited partner will not qualify for using Form 1040EZ or 1040A, and may not file his or her federal income tax return until he has received his Schedule K-1 and reflected the relevant information contained therein in his or her tax return.
Plan Benefits Under the Restated LTIP
The awards, if any, that will be made to eligible persons under the Restated LTIP are subject to the discretion of the Committee; therefore, we cannot currently determine the benefits or the number of common units subject to awards that may be granted in the future to our executive officers, employees and consultants or to members of our board of directors under the Restated LTIP. Furthermore, because all awards under the Restated LTIP are discretionary, it is not possible to determine which awards would have been granted during the prior fiscal year had the Restated LTIP been in effect at that time. Therefore, the New Plan Benefits Table is not provided.
We made annual equity grants under the LTIP to our executive officers in 2015, which are reported in the “Grants of Plan-Based Awards” table on page 23 of this proxy statement. In addition, on September 14, 2016, annual equity awards were granted to key executives and employees as outlined on page 12 of this proxy statement, along with additional grants in 2016. If the Restated LTIP is approved, we anticipate making awards to our executive officers and certain employees under the LTIP in 2017, but the amount of any such grants is not determinable at this time. Such awards will be subject to a vesting schedule that will be specified in the applicable award agreement, and the number of common units subject to any such awards will be determined at the time such awards are granted.
Equity Compensation Plan Information
The following table sets forth information as"LTIP"). As of December 31, 2015 with respect to compensation plans under which our equity securities are authorized for issuance:
| | | | | | | | | | | | |
| | | (1) Number of
Units to be
Issued Upon
Exercise of
Outstanding
Unit Options
and Rights | | | (2) Weighted
Average
Exercise Price of
Outstanding
Unit Options
and Rights | | | (3) Number of
Units Remaining
Available for
Future Issuance
Under Equity
Compensation
(Excluding
Securities Reflect
in Column (1)) (e) | |
Plan Category | | | | | | | | | | | | |
Equity compensation plans approved by unitholders: | | | | | | | | | | | | |
N/A | | | — | | | | — | | | | — | |
Equity compensation plans not approved by unitholders: | | | | | | | | | | | | |
Long-Term Incentive Plan (excluding Unit Purchase Program) (a) | | | 191,890 | (b) | | | — | | | | 1,146,824 | |
Unit Purchase Program (c) | | | 314,774 | (d) | | $ | 5.14 | | | | (314,774 | ) |
Total | | | 506,664 | | | $ | 5.14 | | | | 832,050 | |
(a) | The Partnership’s LTIP was adopted by our general partner in August 2012 in connection with our IPO. The LTIP contemplates the issuance or delivery of up to 1,364,035 common units to satisfy awards under the plan. |
(b) | Represents phantom units subject to equity-settled time-based unit awards and performance unit awards granted under the LTIP, assuming the target distribution at the time of vesting. Payment with respect to the outstanding equity-settled performance unit awards range from 0% to 200% of the target distribution depending on performance actually attained, with a maximum number of 273,140 units shown in column (1) being potentially issuable under the LTIP. There is no exercise price applicable to these awards |
(c) | The Unit Purchase Program (the “UPP”) was adopted under the LTIP on December 14, 2015 as a purchase right for units. |
(d) | Represents purchase rights for units granted under the UPP, based on all participants’ currently elected percentage of compensation or aggregate dollar contribution, as applicable, and are subject to change based on changes in such elections, changes in any UPP participant’s amount of compensation, and/or withdrawals from participation in the UPP. These purchase rights can be exercised on February 28, 2017 at $5.14 per common unit. |
(e) | Includes units that may be issued in payment of the outstanding equity-settled performance phantom unit awards reported in column (1) if and to the extent such payment exceeds the target distribution amount reported in column (1) with respect to such awards. |
On January 25, 2016, the Partnership issued 103,377 common units to certain directors. And on March 23, August 1 and September 14, 2016, the Partnership issued 20,000, 8,644 and 409,171 common units, respectively, to employees. Any units awarded after December 31, 2015 are not included in the Equity Compensation Plan Information table above, which provides information as of December 31, 2015.1
Vote Required
The affirmative vote of a majority of the votes cast by our common unitholders represented in person or by proxy is required to approve the LTIP Proposal. Votes “for” or “against” and abstentions count as votes cast. Executed proxies returned by a broker or other nominee holding common units in “street name” indicating that the broker or other nominee does not have discretionary authority as to certain common units to vote on the proposals (a “broker non-vote”) do not count as votes cast. The number of votes cast “for” the LTIP Proposal must represent a majority of the votes cast in respect of the LTIP Proposal in order to be approved. Thus, broker non-votes can make it difficult to satisfy the votes cast requirement, and abstentions have the effect of a vote against the LTIP Proposal. A properly executed proxy submitted without voting instructions will be voted (except to the extent that the authority to vote has been withheld) “FOR” approval of the LTIP Proposal.
Board of Directors Recommendation
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE LTIP PROPOSAL.
1 | NTD: Include any other dates that awards were issued on. |
INTEREST OF DIRECTORS AND EXECUTIVE OFFICERS IN THE RESTATED LTIP
The officers and employees2019, each of our general partner, its affiliates and our subsidiaries and the members of our board ofnon-employee directors will be eligible to receive awards under the Restated LTIP if it is approved. In addition, the Restated LTIP provides for indemnification of the Committee to the fullest extent permitted by law, with respect to determinations madewas in connectioncompliance with the Restated LTIP. Accordingly, the membersOwnership Guidelines.
2019 Director Compensation Table
The following table sets forth the beneficial ownershipcompensation earned by or paid to the non-employee directors during 2019.
|
| | | | | | | | | | | | |
| Name | | Fees Earned or Paid in Cash ($) | | Stock Awards ($)(a) | | Total ($) |
| John F. Affleck-Graves | | $ | 40,000 |
| | $ | 80,408 |
| | $ | 120,408 |
|
| John Kevin Poorman | | 40,000 |
| | 80,408 |
| | 120,408 |
|
| Joseph C. Winkler III | | 65,000 |
| | 85,433 |
| | 150,433 |
|
| |
| (a) | Amounts in this column represent the aggregate grant date fair value of common units of Hi-Crush Partners LP granted to the directors during 2019, calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 ("FASB ASC Topic 718"). The FASB ASC Topic 718 value for the common units was calculated using the closing price per common unit on the date of grant applied to the total number of common units granted. |
PROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITOR
Under the rules and regulations of the SEC and the NYSE, the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of our
common units issued and outstanding as of October 10, 2016 for:our general partner;
beneficial owners of 5% or moreindependent auditor. In addition, the Audit Committee considers the independence of our common units;
each directorindependent auditor and named executive officeris responsible for the review and evaluation of the independent auditor’s lead partner. The Audit Committee has appointed, and, as a matter of good corporate governance, is requesting ratification by the stockholders of the appointment of, the registered public accounting firm of Deloitte to serve as independent auditor for the fiscal year ending December 31, 2020. Deloitte has served as our independent auditor since 2017. The Audit Committee considered a number of factors in determining whether to re-engage Deloitte as the Company’s independent registered public accounting firm, including the length of time the firm has served in this role, the firm’s professional qualifications and resources, the firm’s past performance and the firm’s capabilities in handling the breadth and complexity of our general partner;business, as well as the potential impact of changing independent auditor.
The Board and
all the Audit Committee believe that the continued retention of our general partner’s directorsDeloitte as the Company’s independent auditor is in the best interests of the Company and executive officersits stockholders. If stockholders do not ratify the selection of Deloitte, the Audit Committee may, but is not required to, evaluate the stockholder vote when considering the selection of a registered public accounting firm for the audit engagement for the 2021 fiscal year. In addition, if stockholders ratify the selection of Deloitte as independent auditor, the Audit Committee may nevertheless periodically request proposals from the major registered public accounting firms and as a group.result of such process may select Deloitte or another registered public accounting firm as our independent auditor.
| | | | | | | | |
| | | Common Units
Beneficially
Owned | | | Percentage of
Common Units
Beneficially
Owned | |
Hi-Crush Proppants LLC (a)(b) | | | 20,693,643 | | | | 32.50 | % |
Hi-Crush GP LLC (b) | | | — | | | | — | |
Robert E. Rasmus (b)(d) | | | 58,689 | | | | * | |
Jefferies V. Alston, III (b) | | | — | | | | — | |
Laura C. Fulton (b) | | | 11,000 | | | | * | |
Mark C. Skolos (b) | | | — | | | | — | |
Chad M. McEver (b) | | | — | | | | — | |
William E. Barker (b) | | | 1,540 | | | | * | |
James M. Whipkey (b) | | | 100 | | | | * | |
John F. Affleck-Graves (b) | | | 31,047 | | | | * | |
Gregory F. Evans (c) | | | — | | | | — | |
John R. Huff (b) | | | 174,066 | | | | * | |
John Kevin Poorman (b) | | | 28,286 | | | | * | |
Trevor M. Turbidy (c) | | | — | | | | — | |
R. Graham Whaling (c) | | | — | | | | — | |
Joseph C. Winkler III (b) | | | 37,376 | | | | * | |
| | | | | | | | |
All executive officers and directors as a group (14 persons) | | | 22,157,542 | | | | 34.80 | % |
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION OF THEAPPOINTMENT OF DELOITTE AS OUR INDEPENDENT AUDITOR FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020.
AUDITORS
Representatives of Deloitte are expected to attend the Annual Meeting and will have an opportunity to make a statement and to respond to appropriate questions from stockholders.
The following table presents fees billed or expected to be billed for professional audit services and other services rendered to the Company by Deloitte for the years ended December 31, 2019 and 2018.
|
| | | | | | | |
| | Year Ended December 31, |
| (in thousands) | 2019 | | 2018 |
| Audit Fees | $ | 1,031 |
| | $ | 539 |
|
| Audit-Related Fees (a) | 50 |
| | 100 |
|
| Tax Fees (b) | — |
| | — |
|
| All Other Fees (c) | — |
| | — |
|
| Total Fees paid | $ | 1,081 |
| | $ | 639 |
|
* | Less than one percent |
| (a) | Represents fees related to offering documents. |
(a) | Avista Capital Partners II, LP, Avista Capital Partners (Offshore) II-A, LP and Avista Capital Partners (Offshore) II, LP indirectly own 58% of the membership interests of Hi-Crush Proppants LLC, through two investment vehicles, ACP HIP Splitter, LP and ACP HIP Splitter (Offshore), LP. Each of Avista Capital Partners II, LP, Avista Capital Partners (Offshore) II-A, LP and Avista Capital Partners (Offshore) II, LP is controlled by its general partner, Avista Capital Partners II GP, LLC (“Avista GP”). Voting and investment determinations are made by an investment committee of Avista GP, comprised of the following members: Thompson Dean, Steven Webster, David Burgstahler, David Durkin, Brendan Scollans and Sriram Venkataraman. As a result, and by virtue of the relationships described above, each of Thompson Dean, Steven Webster, David Burgstahler, David Durkin, Brendan Scollans and Sriram Venkataraman may be deemed |
| (b) | Represents fees related to exercise voting and dispositive power with respect to securities held by ACP HIP Splitter, LP and ACP HIP Splitter (Offshore), LP. The address for Avista Capital Partners is 65 East 55th Street, 18th Floor, New York, NY 10022.tax return preparation. |
(b) | The address for each of Hi-Crush Proppants LLC, Hi-Crush GP LLC, Robert E. Rasmus, Jefferies V. Alston, III, Laura C. Fulton, Mark C. Skolos, Chad M. McEver, William E. Barker, James M. Whipkey, John R. Huff, John F. Affleck-Graves, Joseph C. Winkler III and John Kevin Poorman is Three Riverway, Suite 1350, Houston, Texas 77056. |
| (c) | The address for each of Gregory F. Evans, Trevor M. TurbidyRepresents fees related to tax compliance and R. Graham Whaling is 1000 Louisiana St., Suite 3700, Houston, Texas 77002.consulting. |
(d) | Includes 500 common units owned by the reporting person’s son. Mr. Rasmus disclaims beneficial ownership of the 500 common units held by his son. |
EXECUTIVE AND DIRECTOR COMPENSATION2
(
Pre-Approval Policies and Procedures
All
amounts presented in dollars)Compensation Discussion and Analysis
General
As a publicly traded limited partnership, we do not have directors, officers or employees. Instead, we are managedof the fees described above were approved by the boardAudit Committee. The Audit Committee is responsible for overseeing the audit fee negotiations associated with the retention of directors of our general partner, Hi-Crush GP LLC, andDeloitte to perform the executive officers of our general partner perform all of our management functions. Other than Messrs. Chad McEver and William Barker who are employed by Hi-Crush Services, a subsidiary of our sponsor, Hi-Crush Proppants LLC, all of our general partner’s named executive officers are employed by our sponsor. Under the Services Agreement, we reimburse Hi-Crush Services, on a monthly basis, for the allocable expenses that it and our sponsor incurs in compensating our general partner’s named executive officers. Please see “Item 13. Certain Relationships and Related Transactions, and Director Independence-Other Transactions with Related Persons”audit of our annual consolidated financial statements and internal controls. The Audit Committee has adopted a pre-approval policy under which the Audit Committee pre-approves the audit, audit-related, tax, and other services performed by our independent registered public accounting firm to assure that providing such services does not impair the firm’s independence. In accordance with the pre-approval policy, the Audit Committee has pre-approved certain specified audit, audit-related, tax and other services to be provided by Deloitte if they are initiated within 12 months from the date of pre-approval (unless the Audit Committee specifically approves a different period). The Audit Committee will specifically pre-approve all other services. Finally, in accordance with the pre-approval policy, the Audit Committee has delegated pre-approval authority to its chairperson (or any Audit Committee member if the chairperson is unavailable). Any member who exercises this authority must disclose all such pre-approved services to the Audit Committee at its next scheduled meeting and must meet the applicable independence requirements of the NYSE and the Securities Exchange Act of 1934, as amended ("Exchange Act").
Audit Committee Report
The Audit Committee is composed solely of independent directors meeting the applicable requirements of the NYSE rules. The Audit Committee reviews the Company’s financial reporting process on behalf of the Board. Management has the primary responsibility for establishing and maintaining adequate internal control over financial reporting, for preparing the financial statements and for the reporting process. The Audit Committee members do not serve as professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management and the independent registered public accounting firm. The Company’s independent auditor is engaged to audit and report on the conformity of the Company’s financial statements to accounting principles generally accepted in the United States and the effectiveness of the Company’s internal control over financial reporting.
In this context, the Audit Committee reviewed and discussed with management and the independent auditor the audited financial statements for the year ended December 31, 2019 (the "Audited Financial Statements"), management’s assessment of the effectiveness of the Company’s internal control over financial reporting and the independent auditor’s evaluation of the Company’s system of internal control over financial reporting. The Audit Committee has discussed with Deloitte, the Company’s independent auditor, the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board ("PCAOB"). In addition, the Audit Committee has received the written disclosures and the letter from the independent auditor required by applicable requirements of the PCAOB regarding the independent auditor’s communications with the Audit Committee concerning independence, and has discussed with the independent auditor the independent auditor’s independence.
Based upon the reviews and discussions referred to above, the Audit Committee recommended to the Board that the Audited Financial Statements be included in the Company’s Annual Report on Form 10-K for
more information about the
Services Agreement.Other than equity-based incentive grants underyear ended December 31, 2019, for filing with the SEC.
Members of the Audit Committee:
John F. Affleck-Graves
John Kevin Poorman
Joseph C. Winkler III
PROPOSAL 3: ADVISORY VOTE TO APPROVE COMPENSATION OF NEOs
Our executive compensation program is designed to attract and retain highly qualified individuals capable of contributing to the creation of value for our long-term incentive plan, our sponsor as the ultimate employerstockholders. The compensation of our namedNEOs is designed to be competitive with market practices and align the interests of our NEOs with those of our stockholders by tying compensation to the performance of the Company.
Stockholders are urged to read the Compensation Discussion and Analysis section of this Proxy Statement, which discusses how our compensation design and practices reflect our compensation philosophy. The Compensation Committee and the Board believe that our compensation practices are effective in implementing our compensation strategy and philosophy.
Pursuant to Section 14A of the Exchange Act, we are submitting this annual proposal to our stockholders for an advisory vote to approve the compensation of our NEOs. This proposal, commonly known as a "Say-on-Pay" proposal, gives stockholders the opportunity to express their views on the compensation of our NEOs for 2019. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs for 2019 and the principles, policies and practices described in this Proxy Statement. Accordingly, the following resolution is submitted for stockholder vote at the Annual Meeting:
"RESOLVED, that the stockholders of Hi-Crush Inc. approve, on an advisory basis, the compensation of its NEOs as disclosed in the Proxy Statement for the 2020 Annual Meeting pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table and other related tables and disclosures."
As this is an advisory vote, the result is not likely to affect previously granted compensation. The Compensation Committee will consider the outcome of the vote when evaluating our compensation practices going forward.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NEOs FOR 2019, AS DESCRIBED IN THIS PROXY STATEMENT.
PROPOSAL 4: ADVISORY VOTE ON FREQUENCY OF FUTURE ADVISORY VOTES TO APPROVE EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act enables our stockholders to indicate how frequently we should seek a non-binding advisory vote on the compensation of our NEOs, as disclosed pursuant to the SEC’s compensation disclosure rules (commonly referred to as a "Say-on-Frequency" vote). By voting on this proposal, stockholders may indicate, on a non-binding advisory basis, whether the say-on-pay advisory vote should occur every year, every two years or every three years, or abstain on this matter.
We value the feedback of our stockholders regarding the design and administration of our executive officerscompensation program. As discussed in greater detail in the Compensation Discussion and Analysis, our executive compensation program is structured to emphasize performance-based and variable compensation, particularly over the long-term. Given the emphasis on long-term performance results in the design of our executive compensation program, the Board has determined that holding non-binding advisory votes on the compensation of our NEOs every three years will allow for a more thoughtful assessment of our programs by focusing on multi-year pay and performance outcomes and de-emphasizing the impact of short-term industry cyclicality.
Stockholders may cast their vote on their preferred voting frequency by choosing among the following frequency options (not solely for or against the recommendation of the Board):
Choice 1—every year;
Choice 2—every two years;
Choice 3—every three years; or
Choice 4—abstain from voting.
As this is an advisory vote, the result of the vote is not binding on the Board. However, the Board will take into account the result of the vote when determining the frequency of future Say-on-Pay votes.
THE BOARD RECOMMENDS A VOTE FOR THE FREQUENCY OF "EVERY THREE YEARS" FOR FUTURE ADVISORY VOTES ON THE COMPENSATION OF OUR NEOs.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
General
This Compensation Discussion and Analysis identifies the elements of compensation and explains the compensation objectives and practices for the individuals identified in the following table, our NEOs, for the year ended December 31, 2019.
|
| | |
| Name | | Principal Position |
| Robert E. Rasmus | | Chief Executive Officer ("CEO") and Chairman of the Board (Principal Executive Officer) |
| Laura C. Fulton | | Former Chief Financial Officer (Principal Financial Officer) (a) |
| Michael Alan Oehlert | | Chief Operating Officer (b) |
| Mark C. Skolos | | General Counsel, Chief Compliance Officer and Secretary |
| William E. Barker | | Former Principal Strategy Officer (c) |
| |
| (a) | Ms. Fulton resigned as Chief Financial Officer, effective December 31, 2019. She was succeeded on January 1, 2020 by J. Philip McCormick, Jr. |
| |
| (b) | Mr. Oehlert was appointed as Chief Operating Officer, effective May 21, 2019. |
| |
| (c) | Mr. Barker resigned as Principal Strategy Officer, effective March 15, 2019. |
Prior to the Conversion, the GP Board had responsibility and authority for all compensation-related decisions for our CEO and, following consultation with and recommendation by our CEO, for our other NEOs. In connection with the Conversion, we established the Compensation Committee. Following the Conversion, the Compensation Committee, rather than the Board, generally has responsibility and authority for
non-equity based compensation relatedall compensation-related decisions for our
Chief Executive OfficerCEO and,
our Chief Operating Officer and, uponfollowing consultation with and
recommendationsrecommendation by our
Chief Executive Officer,CEO, for our
Chief Financial Officer and General Counsel. Although our sponsor has the ultimate responsibility and authority for non-equity based compensation related decisions for our named executive officers, it regularly consults with, receives recommendations from, and obtains the approval of, the board of directors of our general partner with respect to non-equity based compensation related decisions. All compensation decisions for employees of Hi-Crush Services, including those for the individuals who are executive officers of our general partner, are made at the discretion of our Co-Chief Executive Officers, subject to approval by our sponsor and consultation with the board of directors of our general partner. All determinations with respect to equity awards made under the Partnership’s Long-Term Incentive Plan (“LTIP”), are made by the board of directors of our general partner, following the recommendation of our sponsor and the approval of the board of directors of our general partner and, where appropriate, the conflicts committee of the board of directors of our general partner.For the year ended December 31, 2015, the named executive officers (“NEOs”), of our general partner were the following:
other NEOs. Robert E. Rasmus, Co-Chief Executive Officer (Principal Executive Officer)(a)
James M. Whipkey, Co-Chief Executive Officer (Principal Executive Officer)(b)
Laura C. Fulton, Chief Financial Officer (Principal Financial Officer)
Jefferies V. Alston, III, Chief Operating Officer
Mark C. Skolos, General Counsel and Secretary
Chad M. McEver, Vice President, Commercial and Distribution
William E. Barker, Vice President, Logistics and Site Development
| (a) | Mr. Rasmus became the sole Chief Executive Officer and Principal Executive Officer upon Mr. Whipkey’s resignation as Co-Chief Executive Officer of our general partner effective November 5, 2015. |
| (b) | Mr. Whipkey resigned as Co-Chief Executive Officer of our general partner effective November 5, 2015. |
2 | NTD: Confirm no material changes, such as changes to the director compensation policies. |
Distributions to Our General Partner
Our general partner is directly owned by our sponsor, which is partially-owned by certain of our named executive officers. We pay quarterly distributions to our sponsor in accordance with our partnership agreement with respect to its ownership of its limited partner interests and the incentive distribution rights as specified in our partnership agreement. The amount of each quarterly distribution that we pay to our sponsor is based solely on the provisions of our partnership agreement, which agreement specifies the amount of cash we distribute to our sponsor based on the amount of cash that we distribute to our limited partners each quarter. Accordingly, the cash distributions we make to our sponsor bear no relationship to the level or components of compensation of our named executive officers.
Our Compensation Philosophy
Our executive compensation program is intended to align the interests of our management team with those of our
unitholdersstockholders by motivating our executive officers to achieve strong financial and operating results for us, which we believe closely
correlatecorrelates to
generating long-term
unitholderstockholder value. In addition, our program is designed to
generally achieve the following objectives:
Provide a competitive level of compensation to attract retain and rewardretain talented executive officersofficers;
Reward and key management employees by providing total compensation competitive with thatencourage maximum corporate and individual performance; and
Promote accountability and align the interests of other executive officers;
motivate executive officers and key management employees to achieve strong financial and operational performance;
emphasize performance-based compensation, balancing short-term and long-term results; and
reward individual performance.
Methodology — Advisors and Peer Companies
We employ a compensation philosophy that emphasizes pay-for-performance based on a combination of the Partnership’s performance and the individual’s impact on the Partnership’s performance, advancement of our business strategies, levels of responsibility, skills and experience. We believe this pay-for-performance approach generally alignswith the interests of our named executive officers with thatstockholders.
The chart below highlights several features of our
unitholders, and at the same time enables us to maintain a lower level of base salary overhead in the event our operating and financial performance fails to meet expectations. Our executive compensation
program is designed to attract and retain individuals with the background and skills necessary to successfully execute our business model in a demanding environment, to motivate those individuals to reach near-term and long-term goals in a way that aligns their interest with that of our unitholders, and to reward success in reaching such goals.In early 2014, we engaged the services of BDO USA, LLP, or BDO, a compensation consultant, to conduct a study to assist us in establishing overall compensation targets for our named executive officers. We consider BDO to be independent of the Partnership and therefore the work performed by BDO does not create a conflict of interest. The BDO study was based on compensation as reported in the proxy statements, Form 8-K filings and the annual reports on Form 10-K for a peer company group comprising energy focused partnerships and certain competitors.
The study was comprised of the following peer companies:
program. |
| | |
Access Midstream Partners, L.P.What We Do | | American Midstream Partners, LPWhat We Don’t Do |
Atlas Pipeline Partners, L.P.ü Pay for performance | | Boardwalk Pipeline Partners, LPû No excessive perquisites |
Carbo Ceramics Inc.ü Retain an independent compensation consultant | | Crestwood Equity Partners LPû No tax gross-ups |
DCP Midstream Partners, LPü Use an appropriate peer group in determining compensation elements and levels of pay | | Eagle Rock Energy Partners, L.P.û No current dividend payments on unvested equity awards |
EnLink Midstream Partners, LPü Maintain stock ownership guidelines | | Genesis Energy, L.P.û No hedging or pledging of Company securities |
Markwest Energy Partners, L.P.ü Maintain a clawback policy that applies to cash and equity incentive compensation | | Niska Gas Storage Partners LLC |
| | |
NuStar Energy L.P. | | PVR Partners, L.P. |
Regency Energy Partners LP | | Summit Midstream Partners, LP |
Targa Resources Partners LP | | U.S. Silica Holdings, Inc. |
Process for Determining Compensation
Compensation Committee
Following the Conversion, determinations with respect to the compensation of our NEOs are ultimately made by the Compensation Committee. Each member of the Compensation Committee meets the independence standards established by the NYSE. The Compensation Committee Charter generally provides the Compensation Committee with authority to review, evaluate and approve our agreements, plans, policies and programs for compensation analysisof our executive officers and directors. In exercising its authority under the Compensation Committee Charter, the Compensation Committee’s goal is to develop and implement compensatory arrangements that further our compensation philosophy. For more detailed information regarding the Compensation Committee, the current Compensation Committee Charter is posted under "Corporate Documents" within the "Corporate Governance" subsection of the "Investors" section of our website at www.hicrushinc.com.
Role of Management
Mr. Rasmus, our CEO, reviews performance against Company performance metrics, evaluates NEO performance against his or her individual goals, and makes recommendations to the Compensation Committee regarding the compensation of all of our NEOs, other than himself; however, the Compensation Committee makes the final determinations with respect to each NEO’s compensation. The Compensation Committee meetings also include members of the human resources and legal teams to answer questions and provide input as requested and to record the minutes of the meetings.
Compensation Consultants
Prior to the Conversion, the GP Board engaged BDO USA LLP ("BDO") as its independent compensation consultant. During the year ended December 31, 2019, BDO provided advice to and worked alongside the GP Board in reviewing and adjusting our executive compensation program, including the implementation of compensation-related policies in connection with the Conversion. BDO provided the GP Board with relevant market and peer group compensation data and information on current trends and developments regarding executive officer and director compensation. The information provided by BDO coveredwas utilized by the GP Board in making decisions regarding executive officer and director compensation.
BDO reported directly and exclusively to the GP Board and did not provide any other services to us, management or our affiliates. BDO did not make compensation-related decisions for the GP Board, the Compensation Committee, the Board or otherwise with respect to us, and while the GP Board generally reviewed and considered information and recommendations provided by BDO, the GP Board always retained the authority to make all compensation-related decisions. During 2019, and after taking into consideration the factors listed in Section 303A.05(c)(iv) of the NYSE Listed Company Manual, the GP Board concluded that neither it nor the Company has any conflicts of interest with BDO and that BDO is independent from management.
Following the Conversion, the Compensation Committee engaged Pearl Meyer & Partners, LLC ("Pearl Meyer") as its new independent compensation consultant. Pearl Meyer provided the Compensation Committee with relevant market and peer group compensation data and information on current trends and developments regarding executive officer and director compensation, which was utilized by the Compensation Committee in making determinations regarding executive officer compensation following the Conversion.
Pearl Meyer reported directly and exclusively to the Compensation Committee and did not provide any other services to us, management or our affiliates. Pearl Meyer did not make compensation-related decisions for the Compensation Committee, the Board or otherwise with respect to us, and while the Compensation Committee generally reviewed and considered information and recommendations provided by Pearl Meyer, the Compensation Committee retains the authority to make all compensation-related decisions. During 2019, and after taking into consideration the factors listed in Section 303A.05(c)(iv) of the NYSE Listed Company Manual, the Compensation Committee concluded that neither it nor the Company has any conflicts of interest with Pearl Meyer and that Pearl Meyer is independent from management.
Peer Group Review and Selection
Each year in which the GP Board retained BDO as its independent compensation consultant, BDO prepared an analysis covering all major components of total compensation, including annual base salary, annual short-term cash incentive and long-term incentive awards for the senior executives of these companies. The board of directors of our general partner utilizedNEOs. Prior to the Conversion, the GP Board used the information provided by BDO to compare the levels of annual base salary, annual short-term cash incentive and long-term equity incentive awards at the peer companies with those of its named executive officersour NEOs to ensure that the compensation of our named executive officersNEOs is both consistent with our compensation philosophy and competitive withrelative to the compensation for executive officers of the peer companies. The board
2018 Peer Group
In 2018, BDO was asked to develop and recommend an updated compensation benchmarking peer group to determine 2019 annual short-term cash incentive award targets as well as to develop a performance peer group of directors ofcompanies against which to measure our general partner also considered and reviewed the resultstotal stockholder return ("TSR") performance in lieu of the study performedAlerian MLP index of companies. In developing a new benchmarking peer group, BDO consulted with members of the GP Board as well as management. Potential peer companies were considered whose size, as measured by market capitalization, total assets, and EBITDA, may be substantially greater than that of the Company but for which helpful data is available through public filings. To account for company size, BDO used multiple regression analysis of peer data to predict what a reasonable total compensation amount might be for a unique executive position. BDO believed that larger sample sizes result in stronger correlations of data.
Upon completion of the due diligence, we removed five companies from the peer group due to M&A activity or financial size considerations and added 13 new peer companies for a total of 26 peer companies (the "2018 Peer Group").
The 2018 Peer Group was used by BDO to ensurecomplete the results indicated thatbenchmarking study to review and establish overall competitive compensation targets for 2019 for our NEOs:
|
| | |
| American Midstream Partners, LP | Dominion Midstream Partners, LP | NuStar Energy L.P. |
| Antero Midstream Partners LP | Energen Corporation* | Range Resources Corporation* |
| Boardwalk Pipeline Partners, LP | FTS International, Inc.* | SemGroup Corporation* |
| Callon Petroleum Company* | Genesis Energy, L.P. | Summit Midstream Partners, LP |
| Centennial Resource Development, Inc.* | Holly Energy Partners LP | Tallgrass Energy Partners LP |
| Cimarex Energy Company* | Liberty Oilfield Services Inc. | U.S. Silica Holdings, Inc. |
| Concho Resources Inc.* | Martin Midstream Partners L.P. | Unit Corporation* |
| Covia Holdings Corporation | Matador Resources Company* | Western Gas Partners, LP* |
| Diamondback Energy, Inc.* | Newfield Exploration Company* | |
| |
| * | These companies were added to the 2018 Peer Group. |
2019 Peer Group
In 2019, Pearl Meyer developed and recommended an updated compensation
programs were yielding a competitive total compensation model prioritizing incentive-based compensation and rewarding achievementbenchmarking peer group to compare the levels of
short and long-term performance objectives.Components of Executive Compensation
There are principally three components of compensation that are used in our executive compensation program —annual base salary, annual short-term cash incentive and long-term equity incentive awards. Cash incentivesawards at the peer companies with those of our NEOs to ensure that the compensation of our NEOs is both consistent with our compensation philosophy and competitive relative to the compensation for executive officers of the peer companies. Based on Pearl Meyer’s observations and due diligence, we removed 13 companies and added 12 companies in 2019 for a total of 21 peer companies (the "2019 Peer Group").
The 2019 Peer Group, as set forth below, was used by Pearl Meyer to complete the 2019 compensation study to review and establish appropriate incentive plan design and program governance and to determine competitive pay levels for our NEOs.
|
| | |
| Archrock, Inc.* | FTS International, Inc. | QEP Resources, Inc.* |
| Basic Energy Services, Inc.* | HighPoint Resources Corporation* | Smart Sand, Inc.* |
| Callon Petroleum Company | Jagged Peak Energy Inc.* | SRC Energy Inc.* |
| Centennial Resource Development, Inc. | Key Energy Services, Inc.* | Summit Midstream Partners, LP |
| Covia Holdings Corporation | Matador Resources Company | Third Coast Midstream, LLC |
| Dril-Quip, Inc.* | Newpark Resources, Inc.* | U.S. Silica Holdings, Inc. |
| Eagle Materials Inc.* | Nine Energy Service, Inc.* | Unit Corporation |
| |
| * | These companies were added to the 2019 Peer Group |
Components of Executive Compensation
Our executive compensation program is primarily comprised of the following components:
Base salary;
Annual short-term cash incentive awards;
Long-term equity incentives (as opposed to base salaryincentive awards; and benefits)
Benefits.
Annual short-term cash incentive awards and long-term equity incentive awards represent the performance driven elements of the compensation
program.program, while the base salary and benefits provide for fixed levels of compensation for each of the NEOs. The
determination of each individual’s short-term cash incentives will reflect their relative contribution to achieving or exceeding annual goals, and the determination of each individual’s long-term incentive awards will be based on their expected contribution in respect of longer term performance objectives.following section describes how we utilized these compensation components during 2019 for our NEOs.
Base salary is paid in cash and is
paid in order to recognizea component which recognizes each
executive officer’sNEO’s unique value and contributions to our success in light of salary norms in the
industry, toindustry. Base salaries provide our
named executive officersNEOs with
sufficient, regularly paid income and
to reflect
each NEO’s position and level of responsibility.
Our sponsor andPrior to the
board of directors of our general partner reviewConversion, the GP Board reviewed base salaries on an annual basis and
may makemade adjustments as necessary to maintain a competitive executive compensation structure.
Similar Following the Conversion, the Compensation Committee has continued the practice of annually reviewing base salaries.
On November 11, 2019, the Compensation Committee determined that it was generally appropriate to
2014, our Co-Chief Executive Officers andmaintain the base salaries of each of the NEOs at the same level, other than for Mr. Oehlert’s base salary, which was increased by $85,000 to recognize his promotion to Chief Operating Officer
each received an annualand align his base salary
with similarly-situated executives of
one dollarour peer companies. The actual base salaries paid to our NEOs during the year ended December 31, 2019 are set forth in
2015.the "Summary Compensation Table." The table below sets forth the base salary for each NEO as of December 31, 2019 and 2018:
|
| | | | | | | | | | | | |
| | | Annual Base Salary | | Approximate Percent Change |
| | | December 31, | |
| Name | | 2018 | | 2019 | |
| Robert E. Rasmus | | $ | 600,000 |
| | $ | 600,000 |
| | | — | % |
| Laura C. Fulton | | 365,000 |
| | 365,000 |
| | | — | % |
| Michael Alan Oehlert | | 290,000 |
| | 375,000 |
| | | 30 | % |
| Mark C. Skolos | | 335,000 |
| | 335,000 |
| | | — | % |
| William E. Barker | | 260,000 |
| | — |
| (a) | | — | % |
| |
| (a) | Prior to his resignation on March 15, 2019, Mr. Barker’s annual base salary was $260,000. |
Annual Short-Term Cash Incentive
Under
the annualour short-term
cash incentive plan
or STI,(the "STI"), annual cash incentives are provided to executives to promote the achievement of our
near-term performance
objectives. For our Co-Chief Executive Officersgoals and
Chief Operating Officer, target incentive opportunities are established as a dollar amount.objectives. Target incentive opportunities
for our other named executive officers under the STI are established as a percentage of
each NEO’s base
salary. Incentive amounts are intended to provide total cash compensation consistent with opportunities available to executive officers in comparable positions in companiessalary as of
comparable size when target performance is achieved, below such levels when performance is less than target and above the market median when performance exceeds target, with appropriate adjustments to reflect our organizational structure containingCo-Chief Executive Officers. The BDO study was used to determine the competitiveness of the incentive opportunity for comparable positions. For Ms. Fulton, Mr. Skolos, Mr. McEver and Mr. Barker, STI payments are generally paid in cash in February of each year for the prior fiscal year’s performance.In order to provide a further focus on long-term value creation and enhance executive retention, our sponsor and the board of directors of our general partner determined that for our Co-Chief Executive Officers and Chief Operating Officer in 2015, 50% of each of such named executive officer’s STI payment will be paid in cash in
February for the prior fiscal year’s performance and the remaining 50% of such STI payment will be awarded as performance based vesting phantom limited partner units (“PPUs”), under the Partnership’s Long-Term Incentive Plan, with the PPUs vesting at the end of a three-yearthe applicable fiscal year. Earned incentive amounts are based on the attainment of pre-established financial goals, operational performance period. Please see “Compensation Discussion and Analysis-Componentsindividual performance objectives related to strategic activities for the function or business unit as applicable.
Our goal is to set incentive target awards at levels that make total direct compensation competitive with comparable companies, including our peer group companies, for the skills, experience and requirements of
Executive Compensation-Long-Term Incentive Compensation” below for a discussion regardingsimilar positions in order to attract and retain top talent. Prior to the
PPUs.In 2015,Conversion, the STI objectives were initially designed and proposed by our Co-Chief Executive Officers, working with certain members ofGP Board determined the board of directors of our general partner, including the Chairman of the conflicts committee of the board of directors of our general partner. The objectives of the STI were both oriented towards the Partnership and the Hi-Crush enterprise, which includes both Hi-Crush Proppants LLC, the owner of our general partner, and the Partnership combined. The STI objectives approved by our sponsor and the board of directors of our general partner were divided as follows for each of our named executive officers other than Mr. McEver and Mr. Barker: (1) Partnership objectives accounted for 80% of the STI and (2) applicable strategic individual objectives accounted for 20% of the STI. Mr. McEver’s and Mr. Barker’s Partnership objectives and their strategic individual objectives each accounted for 50% of the STI. Individual objectives focus on specific strategic objectives to be targeted by each named executive officer for that particular calendar year. Thefollowing target STI opportunities for 2015 as a percentage2019 for our NEOs (the "2019 STI program"), other than Mr. Barker who announced his resignation prior to the establishment of base salary, or as an established dollar amount, as applicable, were as follows:
| | | | |
Name and Principal Position | | 2015 Targeted STI
Opportunity | |
Robert E. Rasmus, Co-Chief Executive Officer | | $ | 1,666,667 | |
James M. Whipkey, Co-Chief Executive Officer | | $ | 1,666,667 | |
Laura C. Fulton, Chief Financial Officer | | | 83% of base salary | |
Jefferies V. Alston, III, Chief Operating Officer | | $ | 1,666,667 | |
Mark C. Skolos, General Counsel and Secretary | | | 83% of base salary | |
Chad M. McEver, Vice President, Commercial and Distribution | | | 40% of base salary | |
William E. Barker, Vice President, Logistics and Site Development | | | 40% of base salary | |
For 2015, there were three stated Partnership objectivesthe 2019 STI program:
|
| | |
| Name | | 2019 Targeted STI Opportunity |
| Robert E. Rasmus | | 100% of base salary |
| Laura C. Fulton (a) | | 100% of base salary |
| Michael Alan Oehlert | | 65% of base salary |
| Mark C. Skolos | | 85% of base salary |
| |
| (a) | As a result of her resignation, Ms. Fulton did not receive a payment related to the 2019 STI program. |
Payouts under the
2019 STI
which accounted for 80% (or 50% in the case of Mr. McEver and Mr. Barker) of the total STI (the “contingent amount”). These Partnership objectives were the following: (1) achievement of our budget for Adjusted EBITDA, which accounted for 50% of the contingent amount, (2) achievement of a targeted annual growth in distributions to unitholders, which accounted for 25% of the contingent amount, and (3) achievement of a targeted year-over-year growth in total unitholder return, which accounted for 25% of the contingent amount. The payout on these Partnership objectives rangedprogram may range from 0%
if(if the
minimumthreshold level of performance
wasis not
achieved, 50% if the minimum level of performance was achieved, 100% if the target level of performance was achieved and with respectachieved) to
(x) our Co-Chief Executive Officers and Chief Operating Officer, 150% if200% (if the maximum level of performance
was achievedis achieved). Payouts for the 2019 STI program were determined based on a combination of (i) financial growth objectives and
(y) our other named executive officers, 200% if(ii) strategic operating and individual performance indicators. In determining the
maximum levelappropriate mix of performance
was achieved. Ifobjectives, the GP Board generally sought to identify those performance goals and objectives that align with our strategies to optimize the performance
level falls between these percentages, payout is determined by straight-line interpolation.of the Company. The levelmix of performance achieved in 2015 formeasures applicable to each of the PartnershipNEO’s STI payout for the year ended December 31, 2019 is as follows:
|
| | | | |
| Name | | Financial Growth Objectives | | Applicable Strategic Operating and Individual Objectives |
| Robert E. Rasmus | | 60% | | 40% |
| Laura C. Fulton (a) | | 60% | | 40% |
| Michael Alan Oehlert | | 60% | | 40% |
| Mark C. Skolos | | 60% | | 40% |
| |
| (a) | As a result of her resignation, Ms. Fulton did not receive a payment related to the 2019 STI program. |
Financial Growth Objectives. We awarded payments under the 2019 STI Program based in part on the financial growth objectives was as follows:set forth below: |
| | |
STI Partnership Objectives
Financial Growth Objective: | | Level of
Performance
AchievedRationale for Selecting Financial Growth Objective: |
(1)
Adjusted EBITDA:* The Company’s earnings before interest, tax, depreciation, depletion and amortization, adjusted for any non-cash impairments of goodwill and other assets, change in estimated fair value of contingent consideration, earnings (loss) from equity method investments, gain on remeasurement of equity method investments, loss on extinguishment of debt and non-recurring business development costs and other items, as compared to the budgeted Adjusted EBITDA for 2019. | | Below MinimumBecause the annual budget is developed each year by executive management and the Board based upon extensive input and reviews by the sales, production, logistics, distribution operations, human resources, inventory, and financial teams, Adjusted EBITDA serves as a key indicator of the short-term financial performance of our assets without regard to financing methods, capital structure or historical cost basis. |
(2) Annual Distribution Growth
Year-Over-Year Total Stockholder Return ("TSR") Growth:
A measure of the growth of our TSR over 2019 based on the closing price of a common unit of Hi-Crush Partners LP on December 31, 2018 of $3.58 and the closing price of a share of our common stock on December 31, 2019 of $0.88 (no quarterly distributions or dividends during 2019). | | Below MinimumAllows us to compare annual return performance to similarly situated companies and reinforces our object to drive near-term and long-term value creation. |
| |
(3) Year-over-Year Total Unitholder Return
* | | Below MinimumFor more information regarding our calculation of Adjusted EBITDA for the year ended December 31, 2019, please see page 40 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. |
For 2015,
The weighting of these financial growth performance measures, the named executive officers’ individualthreshold, target and maximum levels of performance, the actual results and pay percentage for the year ended December 31, 2019 are set forth in the table below:
|
| | | | | | | | | | | | |
| Financial Growth Objective | | Weighting | | Threshold (50% Payout) | | Target (100% Payout) | | Maximum (200% Payout) | | Actual Result | | Payout Percentage |
| Adjusted EBITDA | | 50% | | $126.5 million | | $158.1 million | | $189.7 million | | $67.4 million | | 0% |
| Year-Over-Year TSR Growth | | 50% | | 10% | | 15% | | 20% | | (75)% | | 0% |
| | | | | Total Payout Percentage for Financial Growth Objectives | | 0% |
Applicable Strategic and Operating Objectives. In addition to financial growth objectives, the awards under the 2019 STI accountedprogram are contingent upon the achievement of goals tied to applicable strategic operating and individual performance indicators, which are unique and specific to each NEO. The GP Board selected the strategic operating and individual performance indicators for 20%each NEO to emphasize the unique components of that NEO’s responsibilities. Under the strategic, operating and individual performance indicators, achievement of threshold performance results in a 50% payout percentage for such indicator, achievement of target performance results in a 100% payout percentage for such indicator and achievement of maximum performance results in a 150% payout percentage for such indicator. The following tables for each of the total STINEOs, other than Mr. Barker for Mr. McEver’swhom STI performance measures were not set for 2019 due to his resignation, describes the threshold, target and Mr. Barker’s individual objectivesmaximum levels of performance, the actual results and the pay percentage for the year ended December 31, 2019 for such NEO’s performance metrics under the 2019 STI program:
Robert E. Rasmus
|
| | | | | | |
| Performance Objective | | Weighting | | Actual Performance Achievement Result | | Payout Percentage |
| Financial Growth Objectives | | 60% | | Below Threshold | | 0% |
| Strategic Goal 1: expanding market share and customer base | | 10% | | Maximum | | 15% |
| Strategic Goal 2: development of alternative forms of in-basin transportation | | 15% | | Threshold | | 7.5% |
| Strategic Goal 3: improvements in cost structure | | 15% | | Maximum | | 22.5% |
| Total Payout Percentage for Mr. Rasmus | | 45% |
Laura C. Fulton
|
| | | | | | |
| Performance Objective | | Weighting | | Actual Performance Achievement Result | | Payout Percentage |
| Financial Growth Objectives | | 60% | | Below Threshold | | 0% |
| Strategic Goal 1: timing of the Conversion | | 10% | | Maximum | | 15% |
| Strategic Goal 2: improvements in corporate taxes | | 5% | | Target | | 5% |
| Strategic Goal 3: limiting ABL borrowings | | 2% | | Maximum | | 3% |
| Strategic Goal 4: improvements in cost structure | | 13% | | Maximum | | 19.5% |
| Strategic Goal 5: internal controls over financial reporting | | 5% | | Threshold | | 2.5% |
| Strategic Goal 6: compliance with the SEC, NYSE, the IRS and other financial regulators | | 5% | | Target | | 5% |
| Total Payout Percentage for Ms. Fulton (a) | | 50% |
| |
| (a) | As a result of her resignation, Ms. Fulton did not receive a payout under the 2019 STI program. |
Michael Alan Oehlert
|
| | | | | | |
| Performance Objective | | Weighting | | Actual Performance Achievement Result | | Payout Percentage |
| Financial Growth Objectives | | 60% | | Below Threshold | | 0% |
| Strategic Goal 1: expanding market share and customer base | | 10% | | Maximum | | 15% |
| Strategic Goal 2: development and implementation of inventory management and trucking operations technology | | 5% | | Target | | 5% |
| Strategic Goal 3: implementation of strategic, profitable sales and business development initiatives | | 5% | | Below Threshold | | 0% |
| Strategic Goal 4: improvements in cost structure | | 10% | | Maximum | | 15% |
| Operational Goal 1: expansion of equipment utilization by customers | | 5% | | Below Threshold | | 0% |
| Operational Goal 2: safety and environmental priority and performance | | 5% | | Between Target and Maximum | | 5.5% |
| Individual Performance Adjustment | | 1.33x |
| Total Payout Percentage for Mr. Oehlert (a) | | 53.33% |
| |
| (a) | The total payout percentage takes into account discretionary adjustments for recognition of individual contributions to strategic goals and performance not captured in the above scorecard items along with internal equity considerations. |
Mark C. Skolos
|
| | | | | | |
| Performance Objective | | Weighting | | Actual Performance Achievement Result | | Payout Percentage |
| Financial Growth Objectives | | 60% | | Below Threshold | | 0% |
| Strategic Goal: timing of the Conversion | | 20% | | Maximum | | 30% |
| Operational Goal 1: safety and environmental priority and performance | | 20% | | Between Target and Maximum | | 22.5% |
| Individual Performance Adjustment | | 0.73x |
| Total Payout Percentage for Mr. Skolos (a) | | 38.5% |
| |
| (a) | The total payout percentage takes into account discretionary adjustment in consideration of internal equity. |
When determining the payment of individual STI awards for the year, the Compensation Committee considered recommendations made by the CEO, which
accountedare based on his evaluation of whether, and to what extent, the financial, strategic and operational goals for
50%the year ended December 31, 2019 were achieved. Mr. Rasmus also made recommendations to the Compensation Committee based on his assessment of the
total STI. The individual
objectives were based on applicable strategicperformance of each of the other NEOs in executing their goals and objectives,
of thePartnership. Similarwhich align to strategic scorecard opportunities. Any STI award paid to the payout onCEO is determined by the Partnership objectives,Compensation Committee based upon a similar review performed as described above without input from the payout on the individual objectives range from 0% if the minimum level of performance was not achieved, 50% if the minimum level of performance was achieved, 100% if the target level of performance was achieved and with respect to (x) our Co-Chief Executive Officers and Chief Operating Officer, 150% if the maximum level of performance was achieved and (y) our other named executive officers, 200% if the maximum level of performance was achieved, with straight-line interpolation used to determine the payout if the performance level falls between these percentages. Our sponsor and the board of directors of our general partner may apply discretion in determining actual payouts below stated maximums based on its assessment of the Partnership’s overall performance for the year.
Early in 2016, management prepared a report on the achievement of the Partnership objectives and the individual objectives. These results were reviewed by our sponsor and the board of directors of our general partner in January 2016, including a calculation of the percentage achievement of each objective for purposes of the STI program. Based on their review, the sponsor and the board of directors determined that no funding for any incentive payouts for the NEO’s would be approved based on the 2015 financial performance as compared to goals.
CEO.
Long-Term Incentive Compensation
In connection with
our initial public offering, the
boardConversion, following approval by the unitholders of
directors of our general partnerHi-Crush Partners LP, we adopted the LTIP for employees, officers, consultants and directors of
our general partnerthe Company. The LTIP replaced the Hi-Crush Partners LP First Amended and
its affiliates, including Hi-Crush Services LLC, who perform services for us. All Hi-Crush Services LLC employees and eachRestated Long-Term Incentive Plan (the "Partnership LTIP"), which was cancelled in connection with the Conversion. Each of our
named executive officers,NEOs are eligible to participate in the
LTIP. The LTIP,
which, at the discretion of the Compensation Committee or the Board, provides for the grant of
restricted units, phantom units, unitstock options,
unitstock appreciation rights,
distribution equivalent rights,restricted stock, restricted stock units, stock awards, dividend equivalents, other
unit-basedstock-based awards, cash awards and
unitsubstitute awards.
The LTIP’s objective is to provide a focus on long-term value creation and enhance executive retention. The board of directors of our general partner approved the issuance under our LTIP in February 2015 of PPUs to each of our named executive officers and awards of both PPUs and time based vesting phantom limited partner units (“TPUs”) to Messrs. McEver and Barker.
The number of PPUs that will vest will range from 0% to 200% of the number of initially granted PPUs and is dependent on the Partnership’s total unitholder return (“TUR”), over a three-year performance period compared to the TUR of each entity in the Alerian MLP Index based on the Partnership’s average position among the Peer Group for each calendar quarter in the Performance Period based on Quarterly TUR. Each PPU represents the right to receive, upon vesting, one common unit representing limited partner interests in the Partnership. The PPUs are also entitled to forfeitable distribution equivalent rights (“DERs”), which accumulate during the performance period and are paid in cash on the date of settlement. The amount paid on the DERs will equal the quarterly distributions actually paid on the underlying securities during the performance period. Termination of employment for any reason will result in the forfeiture of any unvested units and unpaid DERs.
Benefits
We
believe that utilizing total unitholder return as the long-term performance measure for these awards provides incentive for the continued growth of our operating footprint and distributions to unitholders. The PPUs will vest if the named executive officer continuously provides services to the Partnership from the date of grant until the end of the performance period.If our Average TUR ranking among the companies in the group over the performance period is below the 25th percentile, 0% of the performance units will vest. If our Average TUR ranking over the performance period is greater than the 25th percentile but less than or equal to the 50th percentile, 50% to 100% of the performance units will vest. If our Average TUR ranking over the performance period is greater than the 50th percentile but less than or equal to the 75th percentile, 100% to 200% of the performance units will vest. If our Average TUR ranking over the performance period is greater than the 75th percentile, 200% of the performance units will vest. The number of phantom units that vest between applicable percentiles will be determined by straight-line interpolation. In addition, the board of directors of our general partner has discretion to increase or decrease the number of phantom units earned by up to 20%.
The TPUs vest 100% on the third anniversary of the date of grant.
To determine the number of PPUs or TPUs to be granted to each named executive officer in February 2015, we determined the dollar amount of long-term incentive compensation that we wanted to provide, and then granted the number of PPUs or TPUs that had a fair market value equal to that amount on the date of grant. For our Co-Chief Executive Officers and Chief Operating Officer, long-term incentive awards were determined using the BDO study for individuals in comparable positions and an analysis of the scope and responsibility of their roles and duties and also reflected the significant contribution of each individual to the Partnership’s profitability and success since the Partnership’s initial public offering in 2012. For our other named executive officers, long-term incentive awards for executives under the plan were established as a percentage of base salary (which reflects position and level of responsibility), with reference to the BDO study data for individuals in comparable positions.
The target 2015 long-term incentive opportunities, expressed as a dollar amount or percentage of base salary, as applicable, and the number of PPUs and TPUs awarded in February 2015, were as follows:
| | | | | | | | | | |
Name and Principal Position | | 2015 Long-Term
Incentive Award
Value | | 2015 PPUs
Awarded
(a) | | | 2015 TPUs
Awarded
(a) | |
Robert E. Rasmus, Co-Chief Executive Officer | | $1,081,785 | | | 30,750 | | | | — | |
James M. Whipkey, Co-Chief Executive Officer (b) | | $1,081,785 | | | 30,750 | | | | — | |
Laura C. Fulton, Chief Financial Officer | | 130% of base salary | | | 11,000 | | | | — | |
Jefferies V. Alston, III, Chief Operating Officer | | $1,081,785 | | | 30,750 | | | | — | |
Mark C. Skolos, General Counsel and Secretary | | 113% of base salary | | | 8,000 | | | | — | |
Chad M. McEver, Vice President, Commercial and Distribution | | 50% of base salary | | | 1,550 | | | | 1,550 | |
William E. Barker, Vice President, Logistics and Site Development | | 95% of base salary | | | 2,700 | | | | 2,700 | |
(a) | Represents 100% of the PPUs awarded to the named executive officer. As discussed above, depending on the Partnership’s performance over a three-year period, between 0% and 200% of the performance units will vest. |
(b) | In connection with Mr. Whipkey’s resignation as Co-Chief Executive Officer of our general partner effective November 5, 2015, his previously granted PPUs, including the 2015 PPUs, terminated for no value. |
Other Compensation
Unit purchase program
During 2015, the board of directors approved the adoption of the Hi-Crush Partners LP Unit Purchase Program (the “UPP”) offered under the LTIP as a purchase right for units. The UPP provides participating directors and employees, including the named executive officers, the opportunity to purchase common units representing limited partner interests of the Partnership at a discount. Employees earning more than $1 annual salary contribute to the UPP through payroll deductions not to exceed 35% of such employee’s eligible compensation during the applicable offering period. Directors and employees earning $1 annual salary contribute to the UPP through cash contributions not to exceed $150,000 in the aggregate.
On December 14, 2015, each named executive officer participating in the UPP was granted the right to purchase, on February 28, 2017 at $5.14 per common unit, up to the number of common units set forth in the table below, which shall be equal to (a)(i) such named executive officer’s aggregate dollar amount of contributions elected to be made to the UPP during the period of the UPP’s applicability divided by (ii) $5.14 (for named executive officers earnings $1 annual salary), or (b)(i) such named executive officer’s elected percentage of compensation multiplied by (ii) his or her actual eligible compensation during the period of the UPP’s applicability divided by (iii) $5.14 (for named executive officers earning more than $1 annual salary), in each case capped at 20,000 common units:
| | | | |
Name and Principal Position
| | Purchase Rights for
Common Units Granted
Under the UPP | |
Robert E. Rasmus, Co-Chief Executive Officer
| | | 20,000 | (a) |
James M. Whipkey, Co-Chief Executive Officer
| | | 20,000 | (a) |
Laura C. Fulton, Chief Financial Officer
| | | 20,000 | (b) |
Jefferies V. Alston, III, Chief Operating Officer
| | | — | (a) |
Mark C. Skolos, General Counsel and Secretary
| | | 5,799 | (b) |
Chad M. McEver, Vice President, Commercial and Distribution
| | | 17,455 | (b) |
William E. Barker, Vice President, Logistics and Site Development
| | | 16,643 | (b) |
(a) | Calculated based on application of the formula set forth above, using the dollar amount of contributions currently elected by the named executive officer. This number may be reduced based on reductions in the named executive officer’s elected dollar amount of contributions. |
(b) | Calculated based on the application of the formula set forth above, using the named executive officer’s current elected percentage of compensation and amount of eligible compensation. This number may increase due to increases in the named executive officer’s actual eligible compensation or be reduced based on reductions in the named executive officer’s elected percentage of compensation or amount of actual eligible compensation. |
Incentive Profits Interests
Pursuant to their employment agreements, each of Ms. Fulton, Mr. Skolos and Mr. McEver have been granted a 0.75% profits interest, 0.25% profits interest and 0.50% profits interest, respectively, in our sponsor entitling them to receive 0.75%, 0.25% and 0.50%, respectively, of any net distributions by our sponsor after the capital members of the sponsor have received aggregate distributions from our sponsor above applicable threshold amounts for each executive officer. Upon the receipt by the capital members of aggregate distributions from the sponsor above certain incremental thresholds, Mr. McEver’s profits interest increases from 0.50% up to a maximum 0.80% of any net distributions by our sponsor. No profits interest was paid to Ms. Fulton, Mr. Skolos or Mr. McEver in 2015.
Benefits
The Partnership doesdo not maintain a defined benefit or pension plan for our named executive officersNEOs because it believeswe believe such plans primarily reward longevity rather than performance. Hi-Crush Services providesWe provide benefits to all of itsour employees, that includesincluding the NEOs, including health, dental, vision, basic term life insurance, personal accident insurance and short and long-term disability coverage. Employees provided to us under
We also maintain a 401(k) plan for our employees, including the
Services Agreement, including our named executive officers, are entitled to the same basic benefits.NEOs. For the year ended December 31,
2015, Hi-Crush Services2019, we provided a
100% dollar-for-dollar matching contribution under the 401(k) plan on the first
3%2% of eligible compensation contributed to the plan and a 50% matching contribution on the next 4% of eligible compensation contributed to the plan, up to
$7,950.$11,200. The 401(k) matching contribution vests in four installments with the first 25% vesting upon completion of one year of
service.service and an additional 25% vesting each year thereafter.
Impact of the Conversion on Outstanding Equity Awards
At the effective time of the Conversion, (i) each outstanding time-based phantom unit ("TPU") award under the Partnership LTIP, including those held by our NEOs, was converted into a restricted stock unit ("RSU") award under the LTIP and (ii) each outstanding performance based phantom unit ("PPU") award under the Partnership LTIP, including those held by our NEOs, was converted into a performance share unit ("PSU") award under the LTIP, in each case, with substantially the same terms and conditions (including with respect to vesting) applicable to such award immediately prior to the Conversion, representing the right to receive a number of shares of our common stock equal to the number of common units of the Partnership subject to such award immediately prior to the Conversion.
All distribution equivalent rights granted in tandem with a corresponding TPU award or PPU award outstanding immediately prior to the Conversion was converted into dividend equivalent rights ("DERs"), with substantially the same terms and conditions (including with respect to vesting) applicable to such distribution equivalent rights immediately prior to the Conversion, representing the right to receive (i) any amounts accrued under the distribution equivalent right as of the effective time of the Conversion and (ii) any dividends paid by us from and after the Conversion with respect to the number of shares of our common stock subject to the RSU award or PSU award to which such DER relates.
Actions Taken Following 2019 Fiscal-Year End
Laura Fulton Separation Agreement
In connection with Ms. Fulton’s resignation as Chief Financial Officer, effective December 31, 2019, and her subsequent separation from employment on January 3, 2020, Ms. Fulton entered into a Separation and Release Agreement with Hi-Crush Services LLC and the Company (the "Fulton Separation Agreement"), pursuant to which certain outstanding equity awards were accelerated in exchange for a comprehensive release of claims. Please see below under "Potential Payments Upon Termination or Change in Control—Fulton Separation Agreement" for more information regarding the terms of the Fulton Separation Agreement.
Other Compensation Related Matters
Stock Ownership and Retention Guidelines
On May 31, 2019, in connection with the Conversion, we adopted the Ownership Guidelines. Pursuant to the Ownership Guidelines, each of our NEOs are required to own shares of our common stock with a value equal to a specified multiple of such NEO’s annual base salary, as set forth below:
|
| | |
| Officer Level | | Ownership Guideline |
| Chief Executive Officer | | 5x annual base salary |
| Chief Financial Officer | | 3x annual base salary |
| Other NEOs | | 3x annual base salary |
The NEOs will have until the later of (i) May 31, 2024, or (ii) five years following such NEO’s appointment as an executive officer to achieve compliance with the requisite ownership level. Until compliance is achieved, each NEO must retain at least half of the after-tax shares of our common stock obtained from the grant or settlement of awards under the LTIP. As of December 31, 2019, each of our NEOs was in compliance with the Ownership Guidelines.
Clawback Policy
On May 31, 2019, in connection with the Conversion, we adopted the Hi-Crush Inc. Compensation Recoupment and Clawback Policy (the "Clawback Policy"). Under the terms of the Clawback Policy, in the event of a (i) restatement of our financial statements due to material non-compliance with any financial reporting requirement under applicable securities laws and (ii) a determination by the administrator of the Clawback Policy that such restatement is due in whole or in substantial part to fraud or intentional misconduct by a covered individual, the administrator may cause the Company to recover the amount of any cash or equity incentive compensation granted, awarded or paid to such covered individual during the fiscal periods covered by such restatement. Each officer, including our NEOs and former officers who have separated within the preceding two years, are considered "covered individuals" for purposes of the Clawback Policy. The Board, or a committee thereof designed by the Board, acts as the administrator of the Clawback Policy.
Risk Assessment Related to our Compensation
StructureProgram
We believe that the compensation plans and programs for our
named executive officers,NEOs, as well as our other employees, are appropriately structured and are not reasonably likely to result in material risk to the
Partnership.Company. We believe these compensation plans and programs are structured in a manner that does not promote excessive risk-taking that could harm the value of
the Partnershipus or reward poor judgment. We also believe that compensation has been allocated among base salary and
short and long-termincentive compensation in such a way
as tothat does not encourage excessive risk-taking. Under our STI
program, annual cash incentives are provided to our
executivesexecutive officers to promote achievement of
the Partnership’sour short-term strategic objectives.
The Partnership awards performance phantom limited partner units, which represent the right to receive upon vesting one common unit representing limited partner interests in the Partnership, rather than unit options for equity awards because the phantom units retain value even in a depressed market so that employees are less likely to take unreasonable risks to get, or keep, unit options “in-the-money.” Finally, the time-based vesting over three years for the Partnership’s long-term incentive awards ensures that the interests of employees align with those of the unitholders of the Partnership for the long-term performance of the Partnership.
Tax and Accounting Implications of Equity-Based Compensation Arrangements
Deductibility
The Compensation Committee and the Company review and consider the tax, accounting and securities law implications of
Executive CompensationWeour executive compensation program.
Following the Conversion, we are
a partnership and not a corporation for U.S. federal income tax purposes. Therefore, we believe that the compensation paid to our named executive officers is notnow subject to the deduction limitations under Section 162(m) of the
Internal Revenue Code
("Section 162(m)"). Section 162(m) prohibits deductions for compensation paid in excess of $1 million during a single fiscal year to certain executive officers. We take the economic effects of Section 162(m) into consideration when determining the structure, implementation and
therefore is generally fully deductible for federal income tax purposes.Accounting for Unit-Based Compensation
For unit-basedvalue of compensation arrangements, including equity-based awards issuedpaid to our named executive officers, including the deductibility of our executive compensation program. In doing so, we recordreserve the right to pay non-deductible compensation to our executive officers if the Compensation Committee determines that such compensation is in the best interests of the Company.
Historically, all equity-based compensation is accounted for under the rules of the FASB ASC Topic 718. This rule requires the Company to estimate the expense of each equity award over the vesting period of the award and record it as such. We did not grant any equity-based compensation to our NEOs during the year ended December 31, 2019. We are also obligated to record cash-based awards as discussed furtheran expense at the time our payment obligation is accrued.
Compensation Committee Report
The information contained in
Note 10this Compensation Committee Report shall not be deemed to
our consolidated financial statements.Board of Directors Report
be "soliciting material" or to be "filed" with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act, or the Exchange Act, except to the extent that the Company specifically incorporates such information by reference in such filing.
The
board of directors of our general partner hasCompensation Committee reviewed and discussed
the Compensation Discussion and Analysis required by Item 402 of Regulation S-K promulgated by the SEC with management
of the
“CompensationCompany and, based on such review and discussions, the Compensation Committee recommended to the Board that such Compensation Discussion and
Analysis” presented above. The member of management with whom the board of directors of our general partner had discussions is the Chief Executive Officer. In addition, the board of directors of our general partner engaged the services of BDO USA, LLP, a compensation consultant, to conduct a study in 2014 to assist us in establishing overall compensation packages for our executives. Based on this review and discussion, we recommended that the “Compensation Discussion and Analysis” referred to aboveAnalysis be included in this
Proxy Statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended December 31,
2015.Board2019.
Members of
Directorsthe Compensation Committee of the Board:
John F. Affleck-Graves,
Jefferies V. Alston, III
Gregory F. Evans
John R. Huff
Chair
John Kevin Poorman
Robert E. Rasmus
Trevor M. Turbidy
R. Graham Whaling
James M. Whipkey
Joseph C. Winkler III
The foregoing report shall not be deemed to be incorporated by reference by any general statement or reference to this Annual Report on Form 10-K into any filing under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under those Acts.
Compensation Tables
Summary Compensation Table
The following table
showssets forth information regarding the compensation
paid or otherwise awarded to,
earned by or paid to our
fiscal year 2015 named executive officers for services rendered to us and our subsidiariesNEOs during
the fiscal years
2015, 2014ended December 31, 2019, 2018 and
2013, as applicable. The cash compensation paid or awarded by us reflects only the portion of our sponsor’s or Hi-Crush Services’ compensation expense allocated to us by Hi-Crush Services under the Services Agreement. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | | Salary
($) | | | Bonus
($)(a) | | | Equity
Awards
($)(b) | | | Non-Equity
Incentive Plan
Compensation
($)(c) | | | All Other
Compensation
($)(d) | | | Total
$ | |
Robert E. Rasmus | | | 2015 | | | | 1 | | | | — | | | | — | | | | — | | | | 39,247 | (e) | | | 39,248 | |
Co-Chief Executive Officer | | | 2014 | | | | 1 | | | | — | | | | 2,310,664 | | | | — | | | | 27,361 | (e) | | | 2,338,026 | |
| | | 2013 | | | | 1 | | | | — | | | | — | | | | — | | | | 16,648 | (e) | | | 16,649 | |
| | | | | | | |
James M. Whipkey (f) | | | 2015 | | | | 1 | | | | — | | | | — | | | | — | | | | 29,805 | (e) | | | 29,806 | |
Co-Chief Executive Officer | | | 2014 | | | | 1 | | | | — | | | | 2,310,664 | | | | — | | | | 20,199 | (e) | | | 2,330,864 | |
| | | 2013 | | | | 1 | | | | — | | | | — | | | | — | | | | 14,260 | (e) | | | 14,261 | |
| | | | | | | |
Laura C. Fulton | | | 2015 | | | | 225,000 | | | | — | | | | 412,720 | | | | — | | | | 16,830 | | | | 654,550 | |
Chief Financial Officer | | | 2014 | | | | 219,231 | | | | — | | | | 363,182 | | | | 323,000 | | | | 5,928 | | | | 911,341 | |
| | | 2013 | | | | 151,250 | | | | 137,500 | | | | — | | | | 266,000 | | | | 11,023 | | | | 565,773 | |
| | | | | | | |
Jefferies V. Alston, III | | | 2015 | | | | 1 | | | | — | | | | — | | | | — | | | | 14,634 | | | | 14,635 | |
Chief Operating Officer | | | 2014 | | | | 1 | | | | — | | | | 2,310,664 | | | | — | | | | — | | | | 2,310,665 | |
| | | | | | | |
Mark C. Skolos | | | 2015 | | | | 187,500 | | | | — | | | | 300,160 | | | | — | | | | 15,443 | | | | 503,103 | |
General Counsel and Secretary | | | 2014 | | | | 183,335 | | | | — | | | | 259,438 | | | | 247,000 | | | | 418 | | | | 690,191 | |
| | | 2013 | | | | 108,654 | | | | — | | | | — | | | | 190,000 | | | | 7,176 | | | | 305,830 | |
| | | | | | | |
Chad M. McEver | | | 2015 | | | | 107,500 | | | | — | | | | 110,996 | | | | — | | | | 10,571 | | | | 229,067 | |
Vice President, Commercial and Distribution | | | 2014 | | | | 163,400 | | | | — | | | | — | | | | 76,000 | | | | 3,790 | | | | 243,190 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
William E. Barker | | | 2015 | | | | 102,500 | | | | — | | | | 193,347 | | | | — | | | | 7,759 | | | | 303,606 | |
Vice President, Logistics Site Development | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name and Principal Position | | Year | | Salary ($) | | Bonus ($) | | Equity Awards ($) | | Non-Equity Incentive Plan Compensation ($)(d) | | All Other Compensation ($)(e) | | Total ($) |
Robert E. Rasmus Chief Executive Officer | | 2019 | | $ | 600,000 |
| | $ | — |
| | $ | — |
| | $ | 270,000 |
| | $ | 205,613 |
| | $ | 1,075,613 |
|
| | 2018 | | 600,000 |
| | — |
| | 1,608,750 |
| | — |
| | 99,619 |
| | 2,308,369 |
|
| | 2017 | | 600,000 |
| | — |
| | 1,607,996 |
| | 725,000 |
| | 49,759 |
| | 2,982,755 |
|
Laura C. Fulton (a) Former Chief Financial Officer | | 2019 | | 365,000 |
| | — |
| | — |
| | — |
| | 108,373 |
| | 473,373 |
|
| | 2018 | | 365,000 |
| | — |
| | 651,931 |
| | — |
| | 56,733 |
| | 1,073,664 |
|
| | 2017 | | 332,692 |
| | — |
| | 668,062 |
| | 350,000 |
| | 27,397 |
| | 1,378,151 |
|
Michael Alan Oehlert (b) Chief Operating Officer | | 2019 | | 188,269 |
| | 31,281 |
| | — |
| | 98,719 |
| | 20,449 |
| | 338,718 |
|
Mark C. Skolos General Counsel, Chief Compliance Officer and Secretary | | 2019 | | 335,000 |
| | — |
| | — |
| | 110,000 |
| | 101,104 |
| | 546,104 |
|
| | 2018 | | 335,000 |
| | — |
| | 523,556 |
| | 100,000 |
| | 49,067 |
| | 1,007,623 |
|
| | 2017 | | 279,616 |
| | — |
| | 594,577 |
| | 335,000 |
| | 29,800 |
| | 1,238,993 |
|
William E. Barker (c) Former Principal Strategy Officer | | 2019 | | 63,844 |
| | — |
| | — |
| | — |
| | 22,979 |
| | 86,823 |
|
| | 2018 | | 260,000 |
| | — |
| | 383,122 |
| | 100,000 |
| | 30,001 |
| | 773,123 |
|
| | 2017 | | 232,308 |
| | — |
| | 382,468 |
| | 175,000 |
| | 15,615 |
| | 805,391 |
|
| |
| (a) | The amountsMs. Fulton resigned as Chief Financial Officer, effective December 31, 2019. She was succeeded on January 1, 2020 by J. Philip McCormick, Jr. |
| |
| (b) | Mr. Oehlert was appointed as Chief Operating Officer, effective May 21, 2019. |
| |
| (c) | Mr. Barker resigned as Principal Strategy Officer, effective March 15, 2019. |
| |
| (d) | Short-term cash incentive awards under our 2019 STI program were paid in February 2020 and are reported in thispart in the "Bonus" column represent (i) discretionary bonuses earned by the named executive officer during the applicable fiscal year, includingfor the portion of any cash bonuses paid by our sponsor to the named executive officer that was reimbursable by us underaward reflecting the Services Agreementdiscretionary upwards adjustment and (ii) any bonuses provided forin part in the named executive officer’s employment agreement. |
(b) | Equity award amounts reflect the aggregate grant date fair value of LTIP awards granted"Non-Equity Incentive Plan Compensation" column for the periods presented, computed in accordance with FASB ASC Topic 718.remainder. For Messrs. Rasmus, Whipkeymore details regarding our 2019 STI program, please see "Compensation Discussion and Alston, a portionAnalysis—Components of the amounts underlying the 2014 equity awards reflects equity grants made in 2015 for amounts earned in 2014 under the STI. See Note 10 to our consolidated financial statements for additional assumptions underlying the value of the equity awards.Executive Compensation—Annual Short-Term Cash Incentive" above. |
(c) | Represents amounts paid according to the provisions of the short-term cash incentive plan then in effect. Amounts were earned in the fiscal year indicated but were paid in the next fiscal year. With respect to Messrs. Rasmus, Whipkey and Alston, no compensation expense associated with the cash component of their 2014 STI award was allocated to us by Hi-Crush Services under the Services Agreement. |
(d)(e) | Amounts in this column reflect the amount paid by our sponsor since 2013 that was reimbursable by us under the Services Agreement for matching 401(k) contributions made by Hi-Crush Services LLC, cash dividends on vested equity awards and premiums paid for healthcell phone and welfare benefits and coverage. |
(e) | Pursuant to a management services agreement entered into between Red Oak Capital Management LLC and our sponsor, our sponsor reimburses Red Oak Capital Management LLCauto allowances, as provided in the table for the health and welfare benefits and coverage paid for Messrs. Rasmus and Whipkey.fiscal year ended December 31, 2019: |
(f) | In connection with Mr. Whipkey’s resignation as Co-Chief Executive Officer of our general partner effective November 5, 2015, his PPUs terminated for no value. |
|
| | | | | | | | | | | | | | | | | | | | |
| Name | | 401(k) Matching Contributions ($) | | Cash Dividends on Vested Equity Awards ($) | | Cell Phone Allowances ($) | | Auto Allowances ($) | | Total ($) |
| Robert E. Rasmus | | $ | — |
| | $ | 205,613 |
| | $ | — |
| | $ | — |
| | $ | 205,613 |
|
| Laura C. Fulton | | 11,200 |
| | 95,979 |
| | 1,194 |
| | — |
| | 108,373 |
|
| Michael Alan Oehlert | | 7,255 |
| | — |
| | 1,194 |
| | 12,000 |
| | 20,449 |
|
| Mark C. Skolos | | 7,296 |
| | 81,808 |
| | — |
| | 12,000 |
| | 101,104 |
|
| William E. Barker | | 5,600 |
| | 17,149 |
| | 230 |
| | — |
| | 22,979 |
|
Grants of Plan-Based Awards
TableThe following
supplemental compensation table
shows compensation details onincludes information regarding the
value of plan-based incentiveSTI awards granted
to the NEOs during
2015the year ended December 31, 2019. No equity or equity-based awards were granted to
our named executive officers. The table includes awards made during or for 2015. The information in the
tableNEOs under the
caption “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” representsPartnership LTIP or the
threshold, target and maximum amounts payable underLTIP during the
short-term cash incentive plan for performance in 2015. Amounts actually paid under that plan for 2015 that were allocated to us byHi-Crush Services under the Services Agreement are set forth in the Summary Compensation Table under the caption “Non-Equity Incentive Plan Compensation.” Information under the “Grant Date Fair Value of LTIP Awards” represents the PPUs granted to Messrs. Rasmus, Whipkey and Alston in February 2015 under our LTIP based on the achievement of the targets set forth in the STI. These amounts are set forth in the Summary Compensation Table under the caption “Equity Awards”. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Grant
Date | | | Estimated Future Payouts
under Non-Equity
Incentive Plan Awards (a) | | | Estimated Future Payouts
under Equity
Incentive Plan Awards (b) | | | Grant Date
Fair Value
of LTIP
Awards
($)(c) | |
| | | Threshold
($) | | | Target
($) | | | Maximum
($) | | | Threshold
(#) | | | Target
(#) | | | Maximum
(#) | | |
Robert E. Rasmus | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Short-term incentive plan | | | N/A | | | | 416,667 | | | | 833,334 | | | | 1,250,000 | | | | — | | | | — | | | | — | | | | — | |
STI PPU | | | 2/13/2015 | | | | — | | | | — | | | | — | | | | 15,375 | | | | 30,750 | | | | 61,500 | | | | 1,153,740 | |
| | | | | | | | |
James M. Whipkey (d) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Short-term incentive plan | | | N/A | | | | 416,667 | | | | 833,334 | | | | 1,250,000 | | | | — | | | | — | | | | — | | | | — | |
STI PPU | | | 2/13/2015 | | | | — | | | | — | | | | — | | | | 15,375 | | | | 30,750 | | | | 61,500 | | | | 1,153,740 | |
| | | | | | | | |
Laura C. Fulton | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Short-term incentive plan | | | N/A | | | | 125,000 | | | | 250,000 | | | | 500,000 | | | | — | | | | — | | | | — | | | | — | |
February 2015 PPU | | | 2/13/2015 | | | | — | | | | — | | | | — | | | | 5,500 | | | | 11,000 | | | | 22,000 | | | | 412,720 | |
| | | | | | | | |
Jefferies V. Alston, III | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Short-term incentive plan | | | N/A | | | | 416,667 | | | | 833,334 | | | | 1,250,000 | | | | — | | | | — | | | | — | | | | — | |
STI PPU | | | 2/13/2015 | | | | — | | | | — | | | | — | | | | 15,375 | | | | 30,750 | | | | 61,500 | | | | 1,153,740 | |
| | | | | | | | |
Mark C. Skolos | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Short-term incentive plan | | | N/A | | | | 103,750 | | | | 207,500 | | | | 415,000 | | | | — | | | | — | | | | — | | | | — | |
February 2015 PPU | | | 2/13/2015 | | | | — | | | | — | | | | — | | | | 4,000 | | | | 8,000 | | | | 16,000 | | | | 300,160 | |
| | | | | | | | |
Chad M. McEver | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Short-term incentive plan | | | N/A | | | | 43,000 | | | | 86,000 | | | | 172,000 | | | | — | | | | — | | | | — | | | | — | |
February 2015 PPU | | | 2/13/2015 | | | | — | | | | — | | | | — | | | | 775 | | | | 1,550 | | | | 3,100 | | | | 58,156 | |
February 2015 TPU | | | 2/13/2015 | | | | — | | | | — | | | | — | | | | — | | | | 1,550 | | | | — | | | | 52,840 | |
| | | | | | | | |
William E. Barker | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Short-term incentive plan | | | N/A | | | | 41,000 | | | | 82,000 | | | | 164,000 | | | | — | | | | — | | | | — | | | | — | |
February 2015 PPU | | | 2/13/2015 | | | | — | | | | — | | | | — | | | | 1,350 | | | | 2,700 | | | | 5,400 | | | | 101,304 | |
February 2015 TPU | | | 2/13/2015 | | | | — | | | | — | | | | — | | | | — | | | | 2,700 | | | | — | | | | 92,043 | |
|
| | | | | | | | | | | | |
| | | Estimated Future Payouts under Non-Equity Incentive Plan Awards (c) |
| Name | | Threshold ($) | | Target ($) | | Maximum ($) |
| Robert E. Rasmus | | $ | 300,000 |
| | $ | 600,000 |
| | $ | 1,200,000 |
|
| Laura C. Fulton (a) | | 182,500 |
| | 365,000 |
| | 730,000 |
|
| Michael Alan Oehlert | | 121,875 |
| | 243,750 |
| | 487,500 |
|
| Mark C. Skolos | | 142,375 |
| | 284,750 |
| | 569,500 |
|
| William E. Barker (b) | | — |
| | — |
| | — |
|
| |
| (a) | As a result of her resignation, Ms. Fulton did not receive a payment related to the 2019 STI program. |
| |
| (b) | Mr. Barker announced his resignation prior to the establishment of the 2019 STI program, and as a result, he was not granted an STI award and hence no threshold, target or maximum payout was established for him. |
| |
| (c) | Amounts shown represent amountsthe threshold, target and maximum payouts under the STI.2019 STI program. If minimumperformance levels of performance are not met,achieved below threshold, then the payout for one or more of the components of the 2019 STI program may be zero. See “CompensationFor more details regarding our 2019 STI program, please see "Compensation Discussion and |
| Analysis-Components Analysis—Components of Executive Compensation-AnnualCompensation—Annual Short-Term Cash Incentive” above for further discussion of these awards.Incentive" above. |
(b) | The number of units shown represent units awarded under the LTIP. The PPUs awarded on February 13, 2015 will vest in their entirety on December 31, 2017 if the specified performance conditions are satisfied. If minimum levels of performance are not met, then none of the PPUs will vest. See “Compensation Discussion and Analysis-Components of Executive Compensation-Long-Term Incentive Compensation” above for further discussion of these awards. The TPUs vest 100% on the third anniversary on the grant date. |
(c) | Equity award amounts reflect the aggregate grant date fair value of LTIP awards granted for the periods presented, computed in accordance with FASB ASC Topic 718. See Note 10 to our consolidated financial statements for additional assumptions underlying the value of the equity awards. |
(d) | In connection with Mr. Whipkey’s resignation as Co-Chief Executive Officer of our general partner effective November 5, 2015, his PPUs terminated for no value. |
Narrative Disclosure to the Summary Compensation Table and Grants of
the Plan-Based Awards
in 2019 Table
A
On September 19, 2019, the Company and Hi-Crush Services LLC entered into an Amended and Restated Employment Agreement with each of Mr. Rasmus, Ms. Fulton and Mr. Skolos (collectively, the "Amended Employment Agreements"). The Amended Employment Agreements have an initial term of one year, with automatic extensions for additional one-year periods unless either party provides at least 30 days’ advance written notice of non-renewal.
Pursuant to the Amended Employment Agreements, Mr. Rasmus is entitled to an annualized base salary of $600,000, Ms. Fulton was entitled to an annualized base salary of $365,000 and Mr. Skolos is entitled to an annualized base salary of $335,000. The Amended Employment Agreements also provide (or, in the case of Ms. Fulton, provided) eligibility to receive discretionary bonus compensation and discretionary equity awards under our LTIP for each calendar year in which the applicable NEO is employed by the Company.
In connection with Mr. Oehlert’s appointment as Chief Operating Officer on May 21, 2019, the Company and Hi-Crush Services LLC entered into an employment agreement with him that has substantially the same terms as the Amended Employment Agreements (the "Oehlert Employment Agreement"). Pursuant to the Oehlert Employment Agreement, Mr. Oehlert is entitled to an annualized base salary of $290,000 and is eligible to receive discretionary bonus compensation for each calendar year that he is employed by the Company with a target bonus for the 2019 calendar year equal to 65% of his base salary. In addition, the Oehlert Employment Agreement provides Mr. Oehlert with eligibility to participate in the LTIP and sets his initial long term incentive award target value as 165% of his base salary. Mr. Oehlert’s base salary was increased to $375,000 on November 11, 2019.
Prior to his resignation, Mr. Barker did not have an employment agreement.
See "Potential Payments Upon Termination of Employment or Change in Control—Employment Agreements" for a description of
material factors necessarythe payments potentially payable to
understand the
information disclosedNEOs upon certain terminations or upon a change in
control pursuant to the
tables above with respect to salaries, bonuses, equity awards, non-equity incentive plan compensation, and 401(k) plan contributions can be found in the compensation discussion and analysis that precedes these tables.employment agreements.
Outstanding Equity Awards at Fiscal Year-End
The following
aretable sets forth the outstanding equity awards
under our LTIP for the
named executive officersNEOs as of December 31,
2015: | | | | | | | | |
| | | Outstanding LTIP Awards | |
Name and Principal Position | | Equity Incentive
Plan Awards:
Unearned Units
That Have Not
Vested (a) | | | Equity Incentive
Plan Awards:
Market Value of
Unearned Units
That Have Not
Vested ($)
(a)(b) | |
Robert E. Rasmus, Co-Chief Executive Officer (c) | | | 47,394 | | | | 280,572 | |
James M. Whipkey, Co-Chief Executive Officer (c) | | | — | | | | — | |
Laura C. Fulton, Chief Financial Officer | | | 17,991 | | | | 106,507 | |
Jefferies V. Alston, III, Chief Operating Officer (c) | | | 47,394 | | | | 280,572 | |
Mark C. Skolos, General Counsel and Secretary | | | 12,994 | | | | 76,924 | |
Chad M. McEver, Vice President, Commercial and Distribution | | | 3,100 | | | | 18,352 | |
William E. Barker, Vice President, Logistics and Site Development | | | 7,448 | | | | 44,092 | |
|
| | | | | | | | | | | | | | |
| | | Outstanding Stock Awards |
| Name | | Number of Shares or Units of Stock That Have Not Vested (#)(a) | | Market Value of Shares or Units of Stock That Have Not Vested ($)(b) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(c) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(b) |
| Robert E. Rasmus | | 322,525 |
| | $ | 283,822 |
| | 112,500 |
| | $ | 99,000 |
|
| Laura C. Fulton (d) | | 145,638 |
| | 128,161 |
| | 50,695 |
| | 44,612 |
|
| Michael Alan Oehlert | | 46,763 |
| | 41,151 |
| | — |
| | — |
|
| Mark C. Skolos | | 120,282 |
| | 105,848 |
| | 40,712 |
| | 35,827 |
|
| William E. Barker (e) | | — |
| | — |
| | — |
| | — |
|
| |
| (a) | Amounts in this column represent RSU awards originally granted as TPUs held by each NEO. The RSU awards vest pro-rata over the applicable remaining vesting dates as follows, subject to the NEO’s continued employment: |
|
| | | | |
| Name | | Number of Unvested RSUs | | Remaining Vesting Dates |
| Robert E. Rasmus | | 45,239 | | December 14, 2020 |
| | 225,000 | | December 21, 2020 and December 21, 2021 |
| Laura C. Fulton | | 23,334 | | December 8, 2020 |
| | 101,389 | | December 21, 2020 and December 31, 2021 |
| Michael Alan Oehlert | | 12,712 | | July 2, 2020 and July 2, 2021 |
| | 21,084 | | August 1, 2020 |
| | 12,967 | | September 27, 2020 and September 27, 2021 |
| Mark C. Skolos | | 21,429 | | December 8, 2020 |
| | 81,424 | | December 21, 2020 and December 21, 2021 |
This column also includes PSU awards originally granted as PPUs in December 2017 (the "2017 PSUs") held by each NEO for which performance was achieved as of December 31, 2019, but which were not vested and settled until the Compensation Committee certified performance results on January 29, 2020. Performance with respect to the 2017 PSUs was achieved and is reported in the above table at 61% of target, and the PSUs vested and settled on January 29, 2020, except with respect to the 2017 PSUs held by Ms. Fulton, which vested and were settled in connection with her separation, as described below under "Potential Payments Upon Termination or a Change in Control—Fulton Separation Agreement." The following number of 2017 PSUs are reflected in this column for the NEOs: For Mr. Rasmus, 52,286 PSUs; for Ms. Fulton, 20,915 PSUs; and for Mr. Skolos, 17,429 PSUs.
| |
| (b) | The values in these columns were calculated by multiplying the number of shares underlying the equity awards reported in the immediately preceding column by $0.88, the closing price of a share of our common stock on December 31, 2019. |
| |
| (c) | The amounts in this column represent PSU awards originally granted as PPUs were awarded in June 2014 and February 2015, andDecember 2018 (the "2018 PSUs") held by each NEO. The 2018 PSUs vest in their entirety over a range of 0% to 200% onwithin 45 days after December 31, 2016 and December 31, 2017, respectively, if the specified performance conditions are satisfied. To determine the number of unearned units and the market value of such units, the calculation2021, subject to satisfaction of the number of PPUs granted that are expected to vest is basedapplicable TSR performance conditions. Based on assumed performance of 100%. Additionally, Mr. McEver and Mr. Barker were granted TPUs in February 2015 which vest 100% on December 31, 2017. |
(b) | Value calculated based on the closing price at December 31, 2015 of our common units at $5.92. |
(c) | On February 13, 2015, Messrs. Rasmus, Whipkey and Alston each received 30,750 PPUs under the LTIP for amounts earned in 2014 under the STI. The PPUs vest in their entirety over a range of 0% to 200% on December 31, 2017 if the specified performance conditions are satisfied. Please see “Compensation Discussion and Analysis-Annual Short-Term Cash Incentive” and “Compensation Discussion and Analysis-Long-Term Incentive Compensation” for more information about the STI award and the PPUs. In connection with Mr. Whipkey’s resignation as Co-Chief Executive Officer of our general partner effective November 5, 2015, his previously granted PPUs terminated for no value. Mr. Whipkey had no outstanding equity awards as of December 31, 2015.2019, the 2018 PSUs would have been earned below the threshold level of payout, and in accordance with the SEC rules, the number of 2018 PSUs reflected in this column is based on the threshold amount, or 50% of the target number of 2018 PSUs. For the 2018 PSUs, the actual number of PSUs earned based on actual performance over the full performance period may be higher or lower than the amount included in this table. |
| |
| (d) | Certain of Ms. Fulton’s outstanding RSU and PSU awards that are reflected in this table were accelerated in connection with her separation, as described below under "Potential Payments Upon Termination or a Change in Control—Fulton Separation Agreement." |
| |
| (e) | Any unvested equity awards previously held by Mr. Barker were forfeited and cancelled in accordance with the terms of the award agreements governing such awards in connection with his resignation on March 15, 2019, as described below under "Potential Payments Upon Termination or a Change in Control—Barker Resignation." |
Option Exercises and
UnitsStock Vested
| | | | | | | | |
| | | Unit Awards | |
Name | | Number of Units
Acquired on
Vesting (#) | | | Value Realized
on Vesting ($) | |
William E. Barker | | | 1,070 | | | $ | 8,014.30 | |
The following table sets forth information regarding equity-based awards under the LTIP (and prior to the Conversion, the Partnership LTIP) that vested during the year ended December 31, 2019:
|
| | | | | | | |
| | | Stock Awards |
| Name | | Number of Shares Acquired on Vesting (#)(a) | | Value Realized on Vesting ($)(b) |
| Robert E. Rasmus | | 137,031 |
| | $ | 333,843 |
|
| Laura C. Fulton | | 64,180 |
| | 144,024 |
|
| Michael Alan Oehlert | | 21,084 |
| | 39,005 |
|
| Mark C. Skolos | | 54,853 |
| | 119,969 |
|
| William E. Barker (c) | | 11,064 |
| | 48,792 |
|
| |
| (a) | This column does not include PSUs for which performance was achieved on December 31, 2019, but which were not vested and settled until January 29, 2020. |
| |
| (b) | Amounts in this column are equal to the number of shares of our common stock (or, if prior to the Conversion, common units of Hi-Crush Partners LP) acquired upon vesting multiplied by the closing price of a share of our common stock (or, if prior to the Conversion, the closing price of a common unit of Hi-Crush Partners LP) on the applicable vesting date (or the preceding trading day if the vesting date was not a trading day). |
| |
| (c) | Any unvested equity awards previously held by Mr. Barker were forfeited and cancelled in accordance with the terms of the award agreements governing such awards in connection with his resignation on March 15, 2019, as described below under "Potential Payments Upon Termination or a Change in Control—Barker Resignation." |
Pension Benefits
Currently, our general partner does not, and does not intend to, provide pension benefits to our named executive officers. Our general partner may change this policy in the future.
Nonqualified Deferred Compensation
Currently, our general partner does
We have not
maintained, and
doesdo not
intend to, sponsorcurrently maintain, a defined benefit pension plan or
adopt a nonqualified deferred compensation plan.
Our general partner may change this policy in the future.
Potential Payments Upon Termination of Employment or Change in Control
Employment Agreements
As of December 31, 2019, each of our NEOs, other than Mr. Barker, are parties to an employment agreement with Hi-Crush Services LLC and the Company (collectively, the "Employment Agreements"). Pursuant to the terms of the Employment Agreements, upon a termination of employment for any reason, the NEO is entitled to the following amounts: (i) payment of all accrued and unpaid base salary through the date of termination, (ii) payment of all accrued and unused vacation time, if any, in accordance with any applicable vacation policy in effect, and (iii) reimbursement for all incurred but unreimbursed expenses entitled to reimbursement (collectively, the "Accrued Obligations").
Additionally, upon a termination by Hi-Crush Services LLC without "cause" (as defined below) or by the NEO for "good reason" (as defined below), in each case, prior to the expiration of the initial term or renewal term of the employment agreement (each, a "Qualifying Termination"), the NEO is entitled to the following severance benefits: (i) severance payments equal to 12 months’ of the NEO’s annualized base salary, payable in installments over 12 months, (ii) partial reimbursement of the amount the NEO pays for continuation coverage under our health plans pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), for up to 12 months following such termination, (iii) payment of a pro-rata annual bonus for the year of such termination based on actual performance, (iv) accelerated vesting of the NEO’s outstanding RSU awards under the LTIP on the date of termination, (v) accelerated vesting of a pro-rata portion of the NEO’s outstanding PSU awards under the LTIP based on actual performance as of the date of termination, and (vi) payment of the annual bonus for the year prior to the year in which such termination occurs if such bonus has not yet been paid.
If the Qualifying Termination occurs during the 24-month period, or for Mr. Oehlert, the 18-month period, following a "change in control" (as defined below), then the NEO is entitled to the following severance benefits: (i) severance payments equal to (a) 18 months’ (or, for Mr. Rasmus, 24 months’) of the NEO’s annualized base salary plus (b) one and one half (or, for Mr. Rasmus, two) times the NEO’s target annual bonus for the year in which such termination occurs, payable in installments over 24 (or, for Mr. Oehlert, 18) months, (ii) partial reimbursement of the amount the NEO pays for continuation coverage under our health plans pursuant to COBRA for up to 18 months following such termination, (iii) payment of a pro-rata annual bonus for the year of such termination based on actual performance, (iv) accelerated vesting of the NEO’s outstanding RSU awards under the LTIP on the date of termination, (v) accelerated vesting of the NEO’s outstanding PSU awards under the LTIP based on target performance, and (vi) payment of the annual bonus for the year prior to the year in which such termination occurs if such bonus has not yet been paid.
If the NEO is terminated due to his or her death or Disability (as defined below), then all of the NEO’s outstanding RSU awards under the LTIP will become fully vested as of the date of such termination, and a pro-rata portion of the NEO’s PSU awards under the LTIP will become fully vested as of the date of such termination based on actual performance as of the date of termination.
Payment of the severance payments and benefits outlined above is contingent upon the NEO’s execution and non-revocation of a general release of claims in favor of us. No NEO has any right to receive a "gross up" for any excise tax imposed by Section 4999 of the Code, or any federal, state or local income tax.
Under the Employment Agreements, the following terms generally have the meanings set forth below:
"Cause" generally means a NEO’s (i) material breach of the employment agreement or any other written agreement between the NEO and Hi-Crush Services LLC or us, (ii) material breach of any law applicable to the workplace or any of our policies or codes of conduct applicable to the NEO, (iii) gross negligence, willful misconduct, breach of fiduciary duty, fraud, theft or embezzlement, (iv) the commission of or conviction or indictment of, or entry of a plea of nolo contendere with respect to, a felony or state law equivalent or any other crime involving the NEO’s moral turpitude, (v) refusal to follow a lawful directive from Hi-Crush Services LLC or us, or (vi) breach of the NEO’s obligations described under the employment agreement or chronic absenteeism without cure.
"Change in Control"is as defined in the LTIP and generally means (i) the acquisition by any "person" or "group" within the meaning of those terms as used in Sections 13(d) and 14(d)(2) of the Exchange Act, other than the Company, its subsidiaries, or any employee benefit plan maintained by the Company, of beneficial ownership of 50% or more of the then outstanding shares of stock or voting securities of the Company, (ii) the individuals that currently constitute the Board cease to constitute the majority of the Board, provided that any individual whose appointment to the Board was approved by at least two-thirds of the current directors shall be considered a current director for these purposes, (iii) consummation of a reorganization, merger or consolidation or sale of substantially all of the Company’s assets or an acquisition of assets of another entity, provided that such business combination will not be considered a Change in Control if immediately following such business combination, (a) the Company’s stock or voting securities represent 50% of the resulting entity, (b) no individual beneficially owns 50% or more of the outstanding shares of stock or voting securities of the resulting entity, and (c) at least a majority of the members of the Board at the time of the execution of the initial agreement remain members of the Board following the business combination, or (iv) approval by the stockholders of the complete dissolution of the Company.
"Disability"generally means a good faith determination by the Board that the NEO is unable to perform the essential functions of his or her position due to physical or mental impairment that continues, or can reasonably be expected to continue, for more than 120 consecutive days or 180 nonconsecutive days in any 12-month period.
"Good Reason" generally means, without the NEO’s consent: (i) a material breach by Hi-Crush Services LLC of its obligations under the employment agreement or any other written agreement between the NEO and Hi-Crush Services LLC or us, (ii) a material diminution of the NEO’s annualized base salary, or (iii) the relocation of the geographic location of the NEO’s principal place of employment by more than 50 miles.
LTIP Awards
On May 31, 2019, in connection with the Conversion, as described above under "Compensation Discussion and Analysis—Impact of the Conversion on Outstanding Equity Awards," each of the TPU awards held by our NEOs were converted into RSU awards and each of the PPU awards held by our NEOs were converted into PSU awards.
Under the RSU awards and PSU awards, upon a NEO’s termination for any reason, except as otherwise provided above under the Employment Agreements, the RSU awards and PSU awards will be immediately forfeited. If a "Change in Control" (as defined above under "—Employment Agreements") occurs, (i) all outstanding RSU awards held by our NEOs will be accelerated and fully vested and (ii) all outstanding PSU awards held by our NEOs will vest based on actual performance as of the date of such Change in Control.
Barker Resignation
Mr. Barker resigned as Principal Strategy Officer on March 15, 2019. Mr. Barker did not receive any severance payments or benefits in connection with his resignation, and all of his outstanding equity awards were forfeited upon his resignation.
Aggregate Payments.
The table below reflects the aggregate amount of payments and benefits that we believe our
named executive officersNEOs would have received under
their employment agreementthe Employment Agreements and the
Partnership’sCompany’s LTIP upon certain specified
terminationterminations of employment,
and/or a change in control events, in each case, had such
eventterminations occurred on December 31,
2015. Details regarding individual plans and arrangements follow the table.2019. The amounts below constitute estimates of the amounts that would be paid to our
named executive officersNEOs upon each designated event, and
such amounts do not include any amounts accrued through
fiscal 2015 year-endDecember 31, 2019 that would be paid in the normal course of continued employment, such as
accrued but unpaid salary and benefits generally available to all salaried employees.the Accrued Obligations. The actual amounts to be paid are dependent on various factors, which may or may not exist at the time a
named executive officerNEO is actually
terminated and/or a change in control actually occurs.terminated. Therefore, such amounts and disclosures should be considered
“forward-looking"forward-looking statements.
” | | | | | | | | | | | | | | | | |
Name and Principal Position | | Change in
Control
($) | | | Termination
without Cause or
by Executive for
Good Reason
($) | | | Termination with
Cause or for
Death or
Disability
($) | | | Termination Due
to Expiration of
Term
($) | |
Robert E. Rasmus, Co-Chief Executive Officer | | | 280,572 | | | | 750,000 | | | | — | | | | — | |
James M. Whipkey, Co-Chief Executive Officer (a) | | | — | | | | — | | | | — | | | | — | |
Laura C. Fulton, Chief Financial Officer | | | 106,507 | | | | 150,000 | | | | — | | | | 150,000 | |
Jefferies V. Alston, III, Chief Operating Officer | | | 280,572 | | | | 750,000 | | | | — | | | | — | |
Mark C. Skolos, General Counsel and Secretary | | | 76,924 | | | | 125,000 | | | | — | | | | 125,000 | |
Chad M. McEver, Vice President, Commercial and Distribution | | | 18,352 | | | | — | | | | — | | | | — | |
William E. Barker, Vice President, Logistics and Site Development | | | 44,092 | | | | — | | | | — | | | | — | |
|
| | | | | | | | | | | | | | | | |
| Name | | Change in Control ($) | | Termination without Cause or Resignation for Good Reason Following a Change in Control ($) | | Termination without Cause or Resignation for Good Reason ($)(e) | | Death or Disability ($)(e) |
| Robert E. Rasmus | | | | | | | | |
| Cash Severance | | $ | — |
| | $ | 2,400,000 |
| | $ | 600,000 |
| | $ | — |
|
| Pro-Rata Annual Bonus (a) | | — |
| | 270,000 |
| | 270,000 |
| | — |
|
| COBRA Reimbursement (b) | | — |
| | — |
| | — |
| | — |
|
| RSU Acceleration (c) | | 237,810 |
| | 237,810 |
| | 237,810 |
| | 237,810 |
|
| PSU Acceleration (d) | | 145,012 |
| | 273,428 |
| | 79,012 |
| | 79,012 |
|
| Total | | 382,822 |
| | 3,181,238 |
| | 1,186,822 |
| | 316,822 |
|
| Laura C. Fulton | | | | | | | | |
| Cash Severance | | — |
| | 912,500 |
| | 365,000 |
| | — |
|
| Pro-Rata Annual Bonus (a) | | — |
| | — |
| | — |
| | — |
|
| COBRA Reimbursement (b) | | — |
| | 22,795 |
| | 15,197 |
| | — |
|
| RSU Acceleration (c) | | 109,756 |
| | 109,756 |
| | 109,756 |
| | 109,756 |
|
| PSU Acceleration (d) | | 63,017 |
| | 119,394 |
| | 33,275 |
| | 33,275 |
|
| Total | | 172,773 |
| | 1,164,445 |
| | 523,228 |
| | 143,031 |
|
| Michael Alan Oehlert | | | | | | | | |
| Cash Severance | | — |
| | 928,125 |
| | 375,000 |
| | — |
|
| Pro-Rata Annual Bonus (a) | | — |
| | 130,000 |
| | 130,000 |
| | — |
|
| COBRA Reimbursement (b) | | — |
| | 18,519 |
| | 12,346 |
| | — |
|
| RSU Acceleration (c) | | 41,151 |
| | 41,151 |
| | 41,151 |
| | 41,151 |
|
| PSU Acceleration (d) | | — |
| | — |
| | — |
| | — |
|
| Total | | 41,151 |
| | 1,117,795 |
| | 558,497 |
| | 41,151 |
|
| Mark C. Skolos | | | | | | | | |
| Cash Severance | | — |
| | 929,625 |
| | 335,000 |
| | — |
|
| Pro-Rata Annual Bonus (a) | | — |
| | 110,000 |
| | 110,000 |
| | — |
|
| COBRA Reimbursement (b) | | — |
| | 29,152 |
| | 19,435 |
| | — |
|
| RSU Acceleration (c) | | 90,511 |
| | 90,511 |
| | 90,511 |
| | 90,511 |
|
| PSU Acceleration (d) | | 51,164 |
| | 96,796 |
| | 27,279 |
| | 27,279 |
|
| Total | | 141,675 |
| | 1,256,084 |
| | 582,225 |
| | 117,790 |
|
| |
| (a) | These amounts reflect the pro-rata portion of each NEO’s STI award for the year ended December 31, 2019, which would have been the full amount of such STI award had the termination of employment occurred on December 31, 2019. Ms. Fulton and Mr. Whipkey’s employment agreement terminated in connection with his resignation effective November 5, 2015.Barker did not receive a STI award payment for the year ended December 31, 2019. |
Employment Agreements. Other than Mr. McEver
| |
| (b) | The COBRA reimbursement amount is based on the premiums in effect on December 31, 2019 and each NEO’s elections in place on such date, which are assumed for purposes of this table to remain the same throughout the period for which the COBRA reimbursement would be available. |
| |
| (c) | These amounts are calculated by multiplying the number of RSUs that would become vested upon the applicable event by $0.88, the closing price of our common stock on December 31, 2019. |
| |
| (d) | These amounts are calculated by multiplying the number of PSUs that would become vested upon the applicable event by $0.88, the closing price of a share of our common stock on December 31, 2019. The amount set forth under each of "Change in Control," "Termination without Cause or Resignation for Good Reason" and "Death or Disability" assumes actual performance as of December 31, 2019 was equal to 61% of target performance for the PSUs granted in 2017, which is the actual performance determined to have been achieved on December 31, 2019, and threshold performance for the PSUs granted in 2018. Pursuant to the terms of the Employment Agreements, the amount set forth under "Termination without Cause or Resignation for Good Reason Following a Change in Control" is based upon the target number of performance for the PSUs granted in 2017 and 2018. |
| |
| (e) | Pursuant to the terms of the Employment Agreements, amounts shown in these columns for the "PSU Acceleration" have been prorated to reflect services performed by each NEO during the applicable performance period. |
Fulton Separation Agreement
On January 3, 2020, Ms. Fulton, Hi-Crush Services LLC and
Mr. Barker, each of our named executive officers hasthe Company, entered into
ana Separation and Release Agreement (the "Fulton Separation Agreement"), pursuant to which Ms. Fulton’s employment
agreement with
our sponsor. The initial term of the each employment agreement isone year from the effective date of such agreement, with automatic extensions for additional one-year periods unless either party provides at least sixty days’ advance written notice of the intent to terminate the agreement. Mr. Whipkey’s employment agreementHi-Crush Services LLC terminated in connection with his resignation effective November 5, 2015.
The employment agreements contain severance provisions.on January 3, 2020. Under the terms of the employment agreements, the employment of the named executive officer may be terminated by our sponsor with or without Cause (defined below), by the named executive officer for or without Good Reason (defined below), due to the named executive officer’s disability or death, or due to expiration of the term of the employment agreement.
Upon a termination by our sponsor for Cause, by the named executive officer without Good Reason, due to the named executive officer’s disability or death, or with respect to Mr. Rasmus and Mr. Alston due to expiration of the term of the employment agreement, the named executive officer isFulton Separation Agreement, Ms. Fulton became entitled to receive the following severance benefits: (i) payment of all accrued and unpaid base salary through the date of termination, (ii) reimbursement for all incurred but unreimbursed expenses entitled to reimbursement, and (iii) provision of any benefits, to which the named executive officer is entitled pursuant to the terms of any applicable benefit plan or program (collectively, the “Accrued Obligations”). Under Ms. Fulton’s and Mr. Skolos’ employment agreement, upon a termination due to the expiration of the term, Ms. Fulton and Mr. Skolos shall be entitled to the following severance benefits: (i) payment of the Accrued Obligations and (ii) 50% of such named executive officer’s base salary, payable over the remainder of the term of the employment agreement in installments substantially similar to our sponsor’s salary payment practices.
Upon a termination by our sponsor without Cause or by the named executive officer for Good Reason, the named executive officer is entitled to the following severance benefits: (i) payment of the Accrued Obligations and (ii) (a) in the case of Mr. Rasmus and Mr. Alston, payment of an amount equal to $750,000 in a lump sum payment on the date that is 30 days after the date of termination and (b) in the case of Ms. Fulton and Mr. Skolos, the remainder of such employee’s base salary for the remaining term of the employment agreement, which in no event shall be less than 50% of such base salary, payable over the remainder of the term of the employment agreement in installments substantially similar to our sponsor’s salary payment practices. Payment of the additional lump sum payment is contingent upon the named executive officer’sher execution and non-revocation of a general release of claims in favor of us. No named executive officer has any right to receive a “gross up”us:
Lump-sum cash payment for any excise tax imposed by Section 4999her accrued but unused vacation days;
Accelerated vesting of 58,675 RSUs and receipt of the
Code, or any federal, state or local income tax.Under$32,668 of accrued dividends with respect to such RSUs; and
Deemed satisfaction of the
employment agreements,applicable service requirement with respect to 41,325 PSUs, which were accelerated and vested upon the
following terms generally haveseparation date, and receipt of the
meanings set forth below: | • | | Cause means a named executive officer’s (i) conviction of, or entry of a guilty plea or plea of no contest with respect to, a felony or any other crime directly or indirectly involving the named executive officer’s lack of honesty or moral turpitude, (ii) drug or alcohol abuse for which the named executive officer fails to undertake and maintain treatment within five calendar days after requested by our sponsor, (iii) acts of fraud, embezzlement, theft, dishonesty or gross misconduct, (iv) material misappropriation (or attempted misappropriation) of any of our funds or property, or (v) a breach of the named executive officer’s obligations described under the employment agreement, as determined by a majority of our sponsor’s board of directors. |
| • | | Good Reason means, without the named executive officer’s consent: (i) a material breach by our sponsor of its obligations under the employment agreement, (ii) any material diminution of the duties of the named executive officer, (iii) a reduction in the named executive officer’s base salary, other than$29,281 of accrued dividends with respect to such PSUs.The table below quantifies the value of the payments and benefits received by Ms. Fulton pursuant to a proportionate reduction applicable to all senior executives or employees generally and the members of our sponsor’s board of directors, to the extent such board members receive board fees, or (iv) the relocation of the geographic location of the named executive officer’s principal place of employment by more than 50 miles. |
The following table reflects payments that would have been made under the named executive officer’s employment agreement in the event the named executive officer’s employment was terminated as of December 31, 2015.
| | | | | | | | | | | | |
Name and Principal Position | | Termination
without Cause or
by Executive for
Good Reason
($) | | | Termination with
Cause or for
Death or
Disability
($) | | | Termination Due
to Expiration of
Term
($) | |
Robert E. Rasmus, Co-Chief Executive Officer | | | 750,000 | | | | — | | | | — | |
James M. Whipkey, Co-Chief Executive Officer (a) | | | — | | | | — | | | | — | |
Laura C. Fulton, Chief Financial Officer | | | 150,000 | | | | — | | | | 150,000 | |
Jefferies V. Alston, III, Chief Operating Officer | | | 750,000 | | | | — | | | | — | |
Mark C. Skolos, General Counsel and Secretary | | | 125,000 | | | | — | | | | 125,000 | |
Chad M. McEver, Vice President, Commercial and Distribution | | | — | | | | — | | | | — | |
William E. Barker, Vice President, Logistics and Site Development | | | — | | | | — | | | | — | |
(a) | Mr. Whipkey’s employment agreement terminated in connection with his resignation effective November 5, 2015. |
Performance Phantom Unit Grants under the LTIP. Each of our named executive officers, other than Mr. Whipkey, held PPUs, under our form of phantom unit award agreement (performance based vesting) (the “PPU Award Agreement”) and the LTIP as of December 31, 2015. If a Change in Control occurs and the named executive officer has remained continuously employed by us from the date of grant to the date upon which such Change in Control occurs, then the phantom units granted to the named executive officer under the PPU Award Agreement and related distribution equivalent rights will fully vest on the date upon which such Change in Control occurs.
The following terms generally have the following meanings for purposes of the LTIP and PPU Award Agreement:
Fulton Separation Agreement. | • | | Affiliate means, with respect to any person, any other person that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, the person in question. As used herein, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through ownership of voting securities, by contract or otherwise. |
| • | | Change of Control means, and shall be deemed to have occurred upon one or more of the following events: (i) any “person” or “group” within the meaning of those terms as used in Sections 13(d) and 14(d)(2) of the Exchange Act, other than members of our general partner, the Partnership, or an Affiliate of either our general partner or the Partnership, shall become the beneficial owner, by way of merger, consolidation, recapitalization, reorganization or otherwise, of 50% or more of the voting power of the voting securities of our general partner, (ii) the members of our general partner or the limited partners of the Partnership approve, in one transaction or a series of transactions, a plan of complete liquidation of our general partner or the Partnership, (iii) the sale or other disposition by either our general partner or the Partnership of all or substantially all of its assets in one or more transactions to any Person other than an Affiliate, or (iv) our general partner or an Affiliate of our general partner or the Partnership ceases to be the general partner of the Partnership; |
The following table reflects amounts that would have been received by each of the named executive officers under the LTIP and related PPUs in the event there was a Change in Control as of December 31, 2015. The amounts reported below assume that the price per unit of our common units was $5.92, which was the closing price per unit of our common units on December 31, 2015.
| | | | |
Name and Principal Position | | Change in Control
Received at Separation ($) (a) |
| Laura C. Fulton | | |
Cash Severance | | $ | — |
|
| Pro-Rata Annual Bonus | | — |
|
| COBRA Subsidy | | — |
|
| Vacation Payout | | 10,148 |
|
| RSU Acceleration (a) | | 87,235 |
|
| PSU Acceleration (a) | | 67,713 |
|
| Total | | 165,096 |
|
| |
| (a) | These amounts are calculated by (i) multiplying the number of RSUs or PSUs, as applicable, that vested upon Ms. Fulton’s separation by $0.93, the closing price of a share of our common stock on her separation date and (ii) adding such product to the amount of accrued distributions Ms. Fulton received with respect to such awards. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of our common stock as of March 31, 2020 (except as otherwise indicated) by (i) each person or entity known by us to beneficially own more than 5% of our common stock, (ii) each director, (iii) each executive officer for whom compensation information is given in the Summary Compensation Table in this Proxy Statement and (iv) all directors and executive officers as a group. Except as otherwise indicated, and subject to any interests of the reporting person’s spouse, we believe that the beneficial owners of common stock listed below, based on information furnished by such owners, have sole voting and investment power with respect to such shares. As of March 31, 2020 we had 100,908,234 shares of common stock outstanding.
|
| | | | | | |
| Name and Address of Beneficial Owner (a) | | Common Shares Beneficially Owned | | Percentage of Common Shares Beneficially Owned |
| Robert E. Rasmus (b) | | 4,534,706 |
| | 4.5 | % |
| Laura C. Fulton (c) | | 419,078 |
| | * |
|
| J. Philip McCormick, Jr. (d) | | — |
| | * |
|
| Michael Alan Oehlert (e) | | 77,084 |
| | * |
|
| Mark C. Skolos | | 169,385 |
| | * |
|
| William E. Barker (f) | | 19,588 |
| | * |
|
| John F. Affleck-Graves | | 87,320 |
| | * |
|
| John Kevin Poorman | | 64,559 |
| | * |
|
| Joseph C. Winkler III | | 99,072 |
| | * |
|
| All directors and executive officers as a group (9 persons) | | 5,470,792 |
| | 5.4 | % |
| |
| (a) | The address for each of Robert E. Rasmus, Co-Chief Executive OfficerJ. Philip McCormick, Jr., Michael Alan Oehlert, Mark C. Skolos, John F. Affleck-Graves, John Kevin Poorman and Joseph C. Winkler III is 1330 Post Oak Blvd., Suite 600, Houston, Texas 77056. |
| | | 280,572 | |
James M. Whipkey, Co-Chief Executive Officer (b)
| Includes (i) 4,045,171 shares of common stock held by RER Legacy Investments LLC ("RER LLC"), of which Mr. Rasmus is a member and may be deemed the beneficial owner of the common stock held by RER LLC, (ii) 175,486 shares of common stock held by RER Investments LLC, of which Mr. Rasmus of the sole member and which includes shares previously owned directly by Mr. Rasmus which were distributed to RER Investments LLC and are now owned indirectly and (iii) 500 shares of common stock owned by the Mr. Rasmus’s son. Mr. Rasmus disclaims beneficial ownership of the 500 shares of common stock owned by his son. |
| | — | |
Laura C.(c)
| Ms. Fulton resigned from her position as Chief Financial Officer of the Company on December 31, 2019. The number of common shares beneficially owned by Ms. Fulton is based on the Form 4 which was filed with the SEC on December 8, 2019. |
| | | 106,507 | |
Jefferies V. Alston, III,(d)
| Mr. McCormick was appointed Chief Financial Officer of the Company effective January 1, 2020. |
| |
| (e) | Mr. Oehlert was appointed Chief Operating Officer of the Company on May 21, 2019. |
| | | 280,572 | |
Mark C. Skolos, General Counsel and Secretary
(f) | | | 76,924 | |
Chad M. McEver, Vice President, Commercial and Distribution
| | | 18,352 | |
William E.Mr. Barker Vice President, Logistics and Site Development
| | | 44,092 | resigned from his position as Principal Strategy Officer of the Company on March 19, 2019. The number of Common shares beneficially owned by Mr. Barker is based on the Form 4 which was filed with the SEC on February 1, 2019. |
CEO PAY RATIO
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Robert E. Rasmus, our Chief Executive Officer ("CEO"), for the year ended December 31, 2019. Our independent compensation consultants assisted us in the calculation of this ratio.
For 2019, our last completed fiscal year:
The median of the annual total compensation of all employees of our company (other than the CEO) was $81,872; and
The annual total compensation of Mr. Rasmus, as reported in the Summary Compensation Table included within this Proxy Statement, was $1,075,613.
Based on this information, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees ("CEO Pay Ratio") was reasonably estimated to be 13 to 1.
To calculate the CEO Pay Ratio we must identity the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee and our CEO. To these ends, we took the following steps:
We determined that, as of December 31, 2019, our employee population consisted of approximately 725 individuals. This population consisted of our full-time, part-time, and temporary employees.
We used a consistently applied compensation measure to identify our median employee of comparing the amount of gross earnings paid in 2019. We identified our median employee by consistently applying this compensation measure to all of our employees included in our analysis. For individuals hired after January 1, 2019 that were included in the employee population, we calculated these compensation elements on an annualized basis. We did not make any cost of living adjustments in identifying the median employee.
After we identified our median employee, we combined all of the elements of such employee’s compensation for the 2019 year in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $81,872. With respect to the annual total compensation of our CEO, we used the amount reported in the "Total" column of our 2019 Summary Compensation Table included in this Proxy Statement.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth information about shares of our common stock that may be issued under equity compensation plans as of December 31, 2019. In connection with the Conversion, we adopted the LTIP and cancelled the Partnership LTIP, and as a result, our only equity compensation plan outstanding as of December 31, 2019 is the LTIP.
|
| | | | | | | | | |
| | (1) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | | (2) Weighted Average Exercise Price Of Outstanding Options, Warrants and Rights (b) | | (3) Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (1))(c) |
| Equity compensation plans approved by security holders | 1,786,966 |
| | — |
| | 5,425,661 |
|
| Equity compensation plans not approved by security holders | — |
| | — |
| | — |
|
| Total | 1,786,966 |
| | $ | — |
| | 5,425,661 |
|
| |
| (a) | Amounts reported relateThis column reflects the maximum number of shares of our common stock subject to the PPUs awarded in June 2014PSU awards and February 2015, which vest in their entirety over a range of 0% to 200% on December 31, 2016 and December 31, 2017, respectively, if the specified performance conditions are satisfied. To determine the number of unearned units and the market value of such units, the calculation of the number of PPUs granted in June 2014 and February 2015 that are expected to vest is based on assumed performance of 100%. The amounts also include the value of the TPUs which were granted in June 2014 and February 2015. |
(b) | In connection with Mr. Whipkey’s resignation as Co-Chief Executive Officershares of our general partner effective November 5, 2015, his previouslycommon stock subject to RSU awards granted PPUs terminated for no value. Mr. Whipkey had nounder the LTIP outstanding equity awardsand unvested as of December 31, 2015. |
Director Compensation
The executive officers of our general partner who also serve as directors of our general partner do not receive additional compensation for their services as a director of our general partner. The table below sets forth the annual compensation earned during 2015 by the non-executive directors of our general partner.
| | | | | | | | | | | | |
Director | | Fees Earned or
Paid in Cash
($) | | | Unit Awards
($) | | | Total
($) | |
John F. Affleck-Graves | | | 70,000 | | | | 50,000 | | | | 120,000 | |
Gregory F. Evans | | | — | | | | — | | | | — | |
John R. Huff | | | 50,000 | | | | 50,000 | | | | 100,000 | |
John Kevin Poorman | | | 70,000 | | | | 50,000 | | | | 120,000 | |
Trevor M. Turbidy | | | — | | | | — | | | | — | |
Steven A. Webster (a) | | | — | | | | — | | | | — | |
R. Graham Whaling (b) | | | — | | | | — | | | | — | |
James M. Whipkey (c) | | | — | | | | — | | | | — | |
Joseph C. Winkler III | | | 100,000 | | | | 50,000 | | | | 150,000 | |
(a) | Mr. Webster resigned2019. Because the number of shares to be issued upon settlement of outstanding PSU awards is subject to performance conditions, the number of shares actually issued may be substantially less than the number reflected in this column. No options or warrants have been granted under the LTIP as a director of our general partner on February 17, 2015.December 31, 2019. |
(b) | Mr. Whaling was appointed as a director of our general partner on February 17, 2015. |
(c) | Mr. Whipkey became a non-executive director of our general partner on November 5, 2015 in connection with his resignation as Co-Chief Executive Officer of our general partner, and was appointed as Chairman of the board of directors of our general partner on November 5, 2015. |
Following the IPO on August 16, 2012, each independent director of our general partner has received an annual retainer of $50,000. Each January, our independent directors have also received an annual grant of the number of common units having a grant date fair value of approximately $50,000 as of such date. Such units are not subject to a vesting period. Further, each independent director serving as a chairman or a member of a
committee of the board of directors of our general partner has received an annual retainer of $25,000 or $10,000, respectively. Beginning in 2014, Mr. Huff, who is not an independent director, also received the foregoing annual retainers and grants.
As discussed in “Compensation Discussion and Analysis-Components of Executive Compensation-Other Compensation-Unit Purchase Program” above, directors may contribute to the UPP through cash contributions not to exceed $150,000 in the aggregate. On December 14, 2015, each director participating in the UPP was granted the right to purchase, on February 28, 2017 at $5.14 per common unit, up to the number of common units set forth in the table below, which shall be equal to such director’s aggregate dollar amount of contributions elected to be made to the UPP during the period of the UPP’s applicability divided by $5.14, capped at 20,000 common units:
| | | | |
Director (a)
(b) | | Purchase Rights for
Common Units Granted
UnderNo options or warrants have been granted under the UPP (b) | |
John F. Affleck-Graves
| | | 20,000 | |
John R. Huff
| | | 20,000 | |
Joseph C. Winkler III
| | | 20,000 | |
(a) | The UPP participationLTIP as of directors whoDecember 31, 2019, and the RSU and PSU awards reflected in column (1) are named executive officers is providednot reflected in “Compensation Discussion and Analysis-Components of Executive Compensation-Other Compensation-Unit Purchase Program” above.this column, as they do not have an exercise price. |
(b) | Calculated based on application |
| (c) | This column reflects the total number of shares of our common stock remaining available for issuance under the formula set forth above, using the dollar amountLTIP as of contributions currently elected by the director. This number may be reduced based on reductions in the director’s elected dollar amount of contributions.December 31, 2019. |
Compensation Committee Interlocks
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Procedures for Review, Approval and
Insider ParticipationNoneRatification of Transactions with Related Persons
The Board has adopted policies for the review, approval and ratification of transactions with related persons and a written Code of Business Conduct and Ethics. Under our Code of Business Conduct and Ethics, a director is required to bring to the attention of the
directorsBoard or
executive officersthe Audit Committee any conflict or potential conflict of
our general partner served as membersinterest that may arise between the director or any affiliate of the
compensation committeedirector, on the one hand, and us on the other. The resolution of any such conflict or
board of directors of another entity that has or had an executive officer who served as a memberpotential conflict should, at the discretion of the
board of directors of our general partner during 2015. Our general partner’s board of directors is not required to maintain, and does not maintain, a compensation committee. In addition, as previously noted, other than for equity-based awards under our LTIP, we do not directly employBoard or
compensate the
executive officers of our general partner. Rather, under the Services Agreement, we reimburse Hi-Crush Services and its affiliates for, among other things, the allocable expenses incurredAudit Committee in
compensating our general partner’s executive officers. Messrs. Rasmus, Whipkey and Alston, who are memberslight of the
board of directors of our general partner, are, or were during the fiscal year 2015, also executive officers of our general partner.PROPOSAL TWO: APPROVAL OF THE ADJOURNMENT OF THE SPECIAL MEETING, IF
NECESSARY OR APPROPRIATE, TO SOLICIT ADDITIONAL PROXIES
We may ask our common unitholders to vote on a proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the adjournment to adopt the Restated LTIP, which we refer to as the Adjournment Proposal. We currently do not intend to propose adjournment at the special meeting if there are sufficient votes to adopt the Restated LTIP. If our common unitholders approve the Adjournment Proposal, we may adjourn the special meeting and use the additional time to solicit additional proxies, including proxies from our common unitholders who have previously voted against adoption of the Restated LTIP.
Vote Required
The affirmative vote ofcircumstances, be determined by a majority of the votes castdisinterested directors. In determining whether to approve or ratify a transaction with a related party, the Board or Audit Committee will take into account, among other factors it deems appropriate, (1) whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, (2) the extent of the outstanding common units represented eitherrelated person’s interest in person or by proxy at the special meetingtransaction and (3) whether the interested transaction is requiredmaterial to approve the Adjournment Proposal. Accordingly, abstentions will have no impact on the outcomeCompany.
Certain of the Adjournment Proposal. A properly executed proxy submitted without voting instructions will be voted (excepttransactions and agreements disclosed in this section were determined by and among affiliated entities and, consequently, the terms of such transactions and agreements are not the result of arm’s length negotiations. These terms are not necessarily at least as favorable to the extentparties to these transactions and agreements as the terms that could have been obtained from unaffiliated third parties.
Investment in Proppant Express Investments, LLC
On September 8, 2016, the authorityCompany entered into an agreement to vote has been withheld) “FOR” approvalbecome a member of Proppant Express Investments, LLC ("PropX"), which was established to develop last mile logistics equipment for the proppant industry. PropX is responsible for manufacturing containers and conveyor systems that allow for transportation of frac sand from in-basin terminals to the wellsite. During the year ended December 31, 2019, the Company made no capital contribution to PropX and acquired additional ownership interests in PropX through the acquisition of BulkTracer Holdings LLC valued at $289,000.
Investment in Proppant Logistics LLC
On October 31, 2018, the Company invested $6,600,000 for an equity interest in Proppant Logistics, LLC ("Proppant Logistics"), which owns Pronghorn Logistics, LLC, a logistics company which provides frac sand services in North America. During the year ended December 31, 2019, the Company made capital contributions of $495,000 to Proppant Logistics. The Company acquired the remaining 34% ownership interest in Proppant Logistics and therefore began to consolidate the operations of Proppant Logistics prospectively from May 7, 2019.
The following table summarizes our related party transactions from our equity method investments in Prop X and Proppant Logistics for the year ended December 31, 2019:
|
| | | | |
| Revenues - related parties | | $ | 220,000 |
|
| Cost of goods sold - related parties (a) | | 9,183,000 |
|
| Equipment purchases - related parties (b) | | 1,432,000 |
|
| |
| (a) | The Company incurs lease expense for the use of PropX equipment. |
| |
| (b) | The Company purchases equipment from PropX. |
The following table summarizes our related party balance sheet components from our equity method investments in Prop X as of December 31, 2019:
|
| | | | |
| Accounts payable - related parties | | $ | 1,164,000 |
|
| | | |
| Current portion of operating lease liabilities - related parties (a) | | $ | 8,273,000 |
|
| Operating lease liabilities - related parties (a) | | 11,130,000 |
|
| | | $ | 19,403,000 |
|
| |
| (a) | The Company During the first quarter of 2019, the Company made a lease prepayment of $3,739,000 for the use of PropX equipment during the first half of 2019. |
EXPENSES OF SOLICITATION
The accompanying proxy is solicited by and on behalf of the
Adjournment Proposal. Common unitholders who hold their units in “street name”Board and
do not give instructions to their brokerage firm or other nominee will not be considered present at the
special meeting, but the failure to provide instructions will have no effect on the outcome of the Adjournment Proposal.Board of Directors Recommendation
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE ADJOURNMENT PROPOSAL.
THE SPECIAL MEETING
Time and Place
The special meeting will be held on December 8, 2016, beginning at 10:00 a.m. Central Standard Time, at Three Riverway, Houston, Texas 77056.
Purpose
At the special meeting, our common unitholders will act upon the following proposals:
a proposal to approve the first amendment and restatement of the LTIP, which, among other things, provides for an increase in the maximum number of common units reserved and available for delivery with respect to awards under the LTIP so that, as of the effective date of the amendment and restatement of the LTIP, the total number of common units available for delivery with respect to awards under the LTIP will be increased by 2,700,000 common units to an aggregate of 4,064,035 common units; and
a proposal to approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the special meeting to approve the LTIP Proposal.
Record Date
Our general partner has fixed the close of business on October 10, 2016 as the record date for the determination of holders of common units entitled to notice of, and to vote at, the special meeting or any postponements or adjournments thereof. A complete listcost of such common unitholders will be available for inspection in our offices at Three Riverway, Suite 1350, Houston, Texas 77056, during normal business hours upon written demand by any holder of our common units.
Holders Entitled to Vote
All unitholders who owned our common units at the close of business on the record date, October 10, 2016, are entitled to receive notice of the special meeting and to vote the common units that they held on the record date at the special meeting, or any postponements or adjournments of the special meeting.
Each unitholder is entitled to one vote for each common unit owned on all matters to be considered. On October 10, 2016, there were 63,667,519 common units issued and outstanding.
Quorum
If more than 50% of our outstanding common units on the record date are present in person or by proxy at the special meeting, that will constitute a quorum and will permit us to conduct the proposed business at the special meeting. Your common units will be counted as present at the special meeting if you:
are present and vote in person at the meeting; or
have submitted a properly executed proxy.
Proxies received but marked as abstentions will be counted as common units that are present and entitled to vote for purposes of determining the presence of a quorum. If an executed proxy is returned by a broker or other nominee holding common units in “street name” indicating that the broker does not have discretionary authority as to certain common units to vote on the proposals (a “broker non-vote”), such common units will be considered present at the meeting for purposes of determining the presence of a quorum but will not be considered entitled to vote.
Vote Required
The LTIP Proposal requires the approval of a majority of the votes cast by our common unitholders represented in person or by proxy. Votes “for” and “against” and abstentions count as votes cast, while broker non-votes do not count as votes cast. The number of votes cast “for” the LTIP Proposal must represent a majority of the votes cast in respect of the LTIP Proposal in order to be approved. Thus, broker non-votes can make it difficult to satisfy the votes cast requirement, and abstentions have the effect of a vote against the LTIP Proposal.
The proxy provides common unitholders the opportunity to vote on the LTIP Proposal. However, the Restated LTIP will not be effective unless approved by the common unitholders.
Approval of the Adjournment Proposal requires the approval of a majority of the votes cast of the outstanding common units represented either in person or by proxy at the special meeting.
A properly executed proxy submitted without voting instructions will be voted (except to the extent that the authority to vote has been withheld) “FOR” the LTIP Proposal and “FOR” the Adjournment Proposal.
Revocation of Proxies
If you are a unitholder of record, you may change your vote at any time before the voting polls close at the special meeting by:
submitting a proxy with new voting instructions using the Internet or telephone voting system at any time prior to 11:59 p.m. Eastern Standard Time on December 7, 2016;
delivering a later-dated, executed proxy card to American Stock Transfer & Trust Company, LLC, 6201 15th Avenue, Brooklyn, New York 11219;
delivering a written notice of revocation of your proxy to American Stock Transfer & Trust Company, LLC, 6201 15th Avenue, Brooklyn, New York 11219; or
attending the special meeting and voting in person. Please note that attendance at the special meeting will not by itself revoke a previously granted proxy.
If you are a beneficial owner of common units held in street name and you have instructed your broker or other nominee to vote your common units, you must follow the procedure your broker or nominee provides to change those instructions. You may also vote in person at the special meeting if you obtain a “legal” proxy from your broker or other nominee.
Solicitation
The expense of preparing, printing and mailing this proxy statement and the proxies solicited herebysolicitation will be borne by us. In additionHi-Crush. Broadridge Financial Solutions, Inc. ("Broadridge") will distribute proxy materials to the use of thebanks, brokers and other nominees for forwarding to beneficial owners, may solicit proxies by personal interview, mail, proxies may be solicited by employees of our general partner, without additional remuneration, by mail, phone, fax or in person. Wetelephone and electronic communications and will also request brokerage firms, banks,houses and other custodians, nominees custodians and fiduciaries to forward proxysoliciting materials to the beneficial owners of ourthe common units as ofstock held on the record date by such persons, and Broadridge will provide reimbursementalso be tabulating the vote and providing the webcast hosting services for the costvirtual Annual Meeting. We will pay Broadridge $24,000 in addition to our reimbursement of Broadridge for payments made to brokers and other nominees for their expenses in forwarding solicitation materials. We have also engaged Georgeson Inc. to assist in the solicitation for an estimated fee of $15,000 plus any out-of-pocket expenses. Solicitations also may be made by personal interview, mail, telephone and electronic communications by directors, officers and other Hi-Crush employees without additional compensation.
OTHER MATTERS
As of the date of this Proxy Statement there are no other matters that we intend to present, or have reason to believe others will present, at the Annual Meeting. If, however, other matters properly come before the Annual Meeting, the accompanying proxy materialsauthorizes the persons named as proxies or their substitutes to vote on such matters as they determine appropriate.
PROPOSALS OF STOCKHOLDERS
To be considered for inclusion in accordance with customary practice. Your cooperation in promptly voting your common units electronically, via the Internet or by telephone, or by signingProxy Statement and returning the enclosed proxy card will help to avoid additional expense.Adjournment
We may adjourn the special meeting to another date and/or place for any proper purpose, including, without limitation, for the purpose2021 Annual Meeting, proposals of soliciting additional proxies if there arestockholders pursuant to Rule 14a-8 under the Exchange Act must be submitted in writing to the Secretary of Hi-Crush, at the address of our principal offices (see "General" on page 1 of this Proxy Statement) and must be received no later than the close of business on December 10, 2020. The submission of a stockholder proposal does not sufficient votes castguarantee that it will be included in favorour Proxy Statement or proxy card for the 2021 Annual Meeting.
Our Bylaws include separate advance notice provisions applicable to stockholders desiring to bring nominations for directors before an annual stockholders meeting or to bring proposals before an annual stockholders meeting other than pursuant to Rule 14a-8. These advance notice provisions require that, among other things, stockholders give timely written notice to the Secretary of Hi-Crush regarding such nominations or proposals and provide the LTIP Proposal. In addition, our partnership agreement provides that,information and satisfy the other requirements set forth in the absence ofBylaws. To be timely, a quorum, the special meeting may be adjourned from timestockholder who intends to time by the affirmative vote of a majority of the outstanding common units represented either in personpresent nominations or by proxy.No Common Unitholder Proposals
Your common units do not entitle you to make proposals at the special meeting. Under our partnership agreement, only our general partner can make a proposal at this meeting. Our partnership agreement establishes a procedure for calling meetings whereby limited partners owning 20% or more of the outstanding common units of the class for which a meeting is proposed may call a meeting. In any case, limited partners are not allowed to vote on matters that would cause the limited partners to be deemed to be taking part in the management and control of the business and affairs of the partnership. Doing so would jeopardize the limited partners’ limited liability under the Delaware Revised Uniform Limited Partnership Act (the “Delaware Act”) or the law of any2021 Annual Meeting other state in which we are qualified to do business.
Dissenters’ Rights
We were formed as a limited partnership under the laws of the State of Delaware, including the Delaware Act. Under those laws, dissenters’ rights are not available to our common unitholders with respect to the LTIP Proposal.
HOUSEHOLDING MATTERS
Common unitholders who share a single address will receive only one proxy statement at that address unless we have received instructions to the contrary from any common unitholder at that address. This practice, known as “householding,” is designed to reduce our printing and postage costs. However, if a common unitholder of record residing at such an address wishes to receive a separate copy of this proxy statement or of future proxy statements (as applicable), he or she may contact us at (713) 980-6200, attention Investor Relations, or write to Investor Relations, attention Mark C. Skolos, Hi-Crush Partners LP, Three Riverway, Suite 1350, Houston, Texas 77056. We will deliver separate copies of this proxy statement promptly upon written or oral request. If you are a common unitholder of record receiving multiple copies of our proxy statement, you can request householding by contacting us in the same manner. If you own your common units through a bank, broker or other common unitholder of record, you can request additional copies of this proxy statement or request householding by contacting the common unitholder of record.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We are required to file annual, quarterly and current reports and other information with the Securities and Exchange Commission (the “SEC”). You may read and copy any documents filed by us with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at (800) SEC-0330. Our filings with the SEC are also available to the public from commercial document retrieval services and at the SEC’s website atwww.sec.gov. We also make available free of charge on our website atwww.hicrushpartners.com all of the documents that we file with the SEC as soon as reasonably practicable after we electronically file such material with the SEC.
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF
PROXY MATERIALS FOR THE UNITHOLDERS MEETING
TO BE HELD ON DECEMBER 8, 2016
The Notice of Special Meeting of Common Unitholders, the Proxy Statement for the Special Meeting of
Common Unitholders and the Annual Report on Form 10-K for the year ended December 31, 2015 are
available at Three Riverway, Suite 1350, Houston, Texas 77056.
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EXHIBIT A
HI-CRUSH PARTNERS LP
FIRST AMENDED AND RESTATED LONG TERM INCENTIVE PLAN
Section 1.Purpose of the Plan. The Hi-Crush Partners LP Long-Term Incentive Plan was adopted on August 21, 2012 and amended by the First Amendment on June 2, 2014 (the “Prior Plan”) by Hi-Crush GP LLC, a Delaware limited liability company, the general partner (“General Partner”) of Hi-Crush Partners LP, a Delaware limited partnership (the “Partnership”). This Hi-Crush Partners LP First Amended and Restated Long-Term Incentive Plan (the “Plan”) has been adopted on September 21, 2016 (the “Effective Date”) by the General Partner. Except as provided in the following sentence, the Plan as set forth herein shall supersede and replace in its entirety the Prior Plan. Notwithstanding any provisions herein to the contrary, each Award granted under the Prior Plan prior to the Effective Date shall be subject to the terms and provisions applicable to such Award under the Prior Plan as in effect immediately prior to the Effective Date, except that any such Award that is an Option or UAR shall also be subject to the provisions of Section 6(j)(xi) of the Plan as set forth herein. The Plan is intended to promote the interests of the General Partner, the Partnership and their respective Affiliates by providing to Employees, Consultants and Directors incentive compensation awards to encourage superior performance. The Plan is also contemplated to enhance the ability of the General Partner, the Partnership and their respective Affiliates to attract and retain the services of individuals who are essential for the growth and profitability of the Partnership and to encourage them to devote their best efforts to advancing the business of the Partnership.
Section 2.Definitions. As used in the Plan, the following terms shall have the meanings set forth below:
(a) “409A Award” means an Award that constitutes a “deferral of compensation” within the meaning of the 409A Regulations, whether by design, due to a subsequent modification in the terms and conditions of such Award or as a result of a change in applicable law following the date of grant of such Award, and that is not exempt from Section 409A of the Codethan pursuant to an applicable exemption.
(b) “409A Regulations” meansRule 14a-8 must provide the applicable Treasury regulations and other interpretive guidance promulgated pursuant to Section 409A of the Code.
(c) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, the Person in question. As used herein, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
(d) “Award” means an Option, Unit Appreciation Right, Restricted Unit, Phantom Unit, Unit Award, Substitute Award, Other Unit Based Award or Cash Award granted under the Plan or Performance Awards and includes, as appropriate, any tandem DERs granted with respect to an Award (other than a Restricted Unit or Unit Award).
(e) “Award Agreement” means the written or electronic agreement by which an Award shall be evidenced.
(f) “Board” means the Board of Directors of the General Partner.
(g) “Cash Award” means an award denominated in cash.
(h) “Change of Control” means, and shall be deemed to have occurred upon one or more of the following events:
(i) any “person” or “group” within the meaning of those terms as used in Sections 13(d) and 14(d)(2) of the Exchange Act, other than members of the General Partner, the Partnership, or an Affiliate of either the
General Partner or the Partnership, shall become the beneficial owner, by way of merger, consolidation, recapitalization, reorganization or otherwise, of 50% or more of the voting power of the voting securities of the General Partner;
(ii) the members of the General Partner or the limited partners of the Partnership approve, in one transaction or a series of transactions, a plan of complete liquidation of the General Partner or the Partnership;
(iii) the sale or other disposition by either the General Partner or the Partnership of all or substantially all of its assets in one or more transactions to any Person other than an Affiliate of the General Partner or the Partnership;
(iv) the General Partner or an Affiliate of the General Partner or the Partnership ceases to be the general partner of the Partnership;
Notwithstanding the above, with respect to a 409A Award, a “Change of Control” shall not occur unless that Change of Control also constitutes a “change in the ownership of a corporation,” a “change in the effective control of a corporation,” or a “change in the ownership of a substantial portion of a corporation’s assets,” in each case, within the meaning of Section 1.409A-3(i)(5) of the 409A Regulations, as applied to non-corporate entities.
(i) “Chief Executive Officer” means the then-current Chief Executive Officer of the General Partner.
(j) “Code” means the Internal Revenue Code of 1986, as amended from time to time.
(k) “Committee” means the Board or such committee as may be appointed by the Board to administer the Plan, which alternative committee may be the board of directors or managers of any Affiliate of the General Partner or a committee therefore.
(l) “Consultant” means an individual who renders consulting or advisory services to the General Partner, the Partnership or an Affiliate of either.
(m) “Director” means a member of the Board or the board of directors of an Affiliate of the General Partner who is not an Employee or a Consultant (other than in that individual’s capacity as a Director).
(n) “Distribution Equivalent Right” or “DER” means a contingent right, granted alone or in tandem with a specific Award (other than a Restricted Unit or Unit Award), to receive with respect to each Unit subject to the Award an amount in cash, Units and/or Phantom Units, as determined by the Committee in its sole discretion, equal in value to the distributions made by the Partnership with respect to a Unit during the period such Award is outstanding.
(o) “Effective Date” has the meaninginformation set forth in Section 1.
(p) “Employee” means an employeethe Bylaws to the Secretary of Hi-Crush no earlier than close of business on January 22, 2021 and no later than close of business on February 21, 2021. However, if we hold the 2021 Annual Meeting more than 30 days before, or more than 30 days after, the anniversary of the General Partner or an Affiliate ofAnnual Meeting date, then the General Partner.
(q) “Exchange Act” meansinformation must be received no earlier than the Securities Exchange Act of 1934, as amended.
(r) “Fair Market Value” means, on any relevant date, the closing sales price of a Unit on the principal national securities exchange or other market in which trading in Units occurs on the last market trading120th day prior to the applicable2021 Annual Meeting date and not later than (i) the 90th day (or, if there is no trading inprior to the Units on such2021 Annual Meeting date onor (ii) the next precedingtenth day on which there was trading) as reported in The Wall Street Journal (or other reporting service approved by the Committee). If Units are not traded on a national securities exchange or other market at the time a determination of Fair Market Value is required to be made hereunder, the determination of Fair Market Value shall be made by the Committee in good faith using a “reasonable application of a reasonable valuation method” within the meaningafter public disclosure of the 409A Regulations (specifically, Section 1.409A-l(b)(5)(iv)(B) of2021 Annual Meeting date. If a stockholder fails to meet these deadlines and fails to satisfy the 409A Regulations).
(s) “General Partner” has the meaning set forth in Section 1.
(t) “Option” means an option granted under the Plan to purchase Units.
(u) “Other Unit Based Award” means an Award granted to an Employee, Director or Consultant pursuant to Section 6(f).
(v) “Participant” means an Employee, Consultant or Director granted an Award under the Plan.
(w) “Partnership” has the meaning set forth in Section 1.
(x) “Performance Award” means a right granted to an Employee, Director or Consultant pursuant to Section 6(i), to receive an Award based upon performance criteria specified by the Committee.
(y) “Person” means an individual or a corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association, governmental agency or political subdivision thereof or other entity.
(z) “Phantom Unit” means a notional Unit granted under the Plan which upon vesting entitles the Participant to receive, at the time of settlement, a Unit or an amount of cash equal to the Fair Market Value of a Unit, as determined by the Committee in its sole discretion.
(aa) “Plan” has the meaning set forth in Section 1.
(bb) “Prior Plan” has the meaning set forth in Section 1.
(cc) “Qualified Member” means a member of the Committee who is a “nonemployee director” within the meaningrequirements of Rule 16b-3(b)(3).
(dd) “Restricted Period” means, subject to Section 8(p) of the Plan, the period established by the Committee with respect to an Award during which the Award remains subject to forfeiture and is either not exercisable by or payable to the Participant, as the case may be.
(ee) “Restricted Unit” means a Unit granted under the Plan that is subject to a Restricted Period.
(ff) “Rule 16b-3” means Rule 16b-3 promulgated by the SEC14a-4 under the Exchange Act, or any successor rule or regulation thereto as in effect from timewe may exercise discretionary voting authority under proxies we solicit to time.
(gg) “SEC” means the Securities and Exchange Commission, or any successor thereto.
(hh) “Substitute Award” means an award granted pursuant to Section 6(h) of the Plan.
(ii) “Unit Distribution Right” or “UDR” means a distribution made by the Partnership with respect to a Restricted Unit.
(jj) “Unit” means a common unit of the Partnership.
(kk) “Unit Appreciation Right” means a contingent right granted under the Plan that entitles the holder to receive, in cash or Units, as determined by the Committee in its sole discretion, an amount equal to the excess of the Fair Market Value of a Unitvote on the exercise date of the Unit Appreciation Right (or another specified date) over the exercise price of the Unit Appreciation Right.
(ll) “Unit Award” means a grant of a Unit that is not subject to a Restricted Period.
Section 3.Administration.
(a)Authority of the Committee. The Plan shall be administered by the Committee. A majority of the Committee shall constitute a quorum, and the acts of the members of the Committee who are present at any meeting thereof at which a quorum is present, or acts unanimously approved by the members of the Committee in writing, shall be the acts of the Committee. Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant; (iii) determine the number of Units to be covered by Awards; (iv) determine the terms and conditions of any Award, consistent with the terms of the Plan, which terms may include any provision regarding the acceleration of vesting or waiver of forfeiture restrictions or any other condition or limitation regarding an Award, based on such factors as the Committee shall determine, in its sole discretion; (v) determine whether, to what extent, and under what circumstances Awards may be vested, settled, exercised, canceled, or forfeited; (vi) interpret and administer the Plan and any instrument or agreement relating to an Award made under the Plan; (vii) establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (viii) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or an Award Agreement in such manner and to such extent as the Committee deems necessary or appropriate. The determinations of the Committee on the matters referred to in this Section 3(a) shall be final and conclusive.
(b)Manner and Exercise of Committee Authority. At any time that a member of the Committee is not a Qualified Member, any action of the Committee relating to an Award granted or to be granted to a Participant who is then subject to Section 16 of the Exchange Act in respect of the Partnership may be taken either (i) by the Board, (ii) by a subcommittee, designated by the Committee, composed solely of two or more Qualified Members, or (iii) by the Committee but with each such member who is not a Qualified Member abstaining or recusing himself or herself from such action;provided,however, that upon such abstention or recusal the Committee remains composed solely of two or more Qualified Members. Such action, authorized by such a subcommittee or by the Committee upon the abstention or recusal of such non-Qualified Member(s), shall be the action of the Committee for all purposes of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive, and binding upon all Persons, including, without limitation, the General Partner, the Partnership, any Affiliate of the General Partner or the Partnership, any Participant, and any beneficiary of a Participant. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting the power or authority of the Committee. Subject to the Plan and any applicable law, the Committee, in its sole discretion, may delegate any or all of its powers and duties under the Plan, including the power to grant Awards under the Plan, to the Chief Executive Officer, subject to such limitations on such delegated powers and duties as the Committee may impose, if any, and provided that the Committee may not delegate its duties where such delegation would violate state partnership or limited liability company law, or with respect to making Awards to, or otherwise with respect to Awards granted to, Participants who are subject to Section 16(b) of the Exchange Act. Upon any such delegation, all references inproposal as we determine appropriate.
We reserve the
Plan to the “Committee,” other than in Section 7, shall be deemed to include the Chief Executive Officer. Any such delegation shall not limit the Chief Executive Officer’s right to
receive Awards under the Plan;provided,however, the Chief Executive Officer may not grant Awards to himself, a Director or any executive officerreject, rule out of
the General Partner or any of its Affiliates,order or take
anyother appropriate action with respect to any
Award previously granted to himself, an individual who is an executive officernomination or
a Director. Under no circumstances shall any such delegation result in the loss of an exemption under Rule 16b-3(d)(1) for Awards granted to Participants subject to Section 16 of the Exchange Act in respect of the Partnership.(c)Limitation of Liability. The Committee and each member thereof shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or employee of the General
Partner, the Partnership or their respective Affiliates, the General Partner’s or the Partnership’s legal counsel, independent auditors, consultants or any other agents assisting in the administration of the Plan. Members of the Committee and any officer or employee of the General Partner, the Partnership or any of their respective Affiliates acting at the direction or on behalf of the Committee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the fullest extent permitted by law, be indemnified and held harmless by the General Partner with respect to any such action or determination.
(d)Exemptions from Section 16(b) Liability. It is the intent of the General Partnerproposal that the grant of any Awards to, or other transaction by, a Participant who is subject to Section 16 of the Exchange Act shall be exempt from Section 16(b) of the Exchange Act pursuant to Rule 16b-3 or another applicable exemption (except for transactions acknowledged by the Participant in writing to be non-exempt). Accordingly, if any provision of the Plan or any Award Agreement does not comply with the requirements of Rule 16b-3 or such other exemption as then applicable to any such transaction, such provision shall be construed or deemed amended to the extent necessary to conform to the applicable requirements of Rule 16b-3 so that such Participant shall avoid liability under Section 16(b) of the Exchange Act.
Section 4.Units.
(a)Limits on Units Deliverable. Subject to adjustment as provided in Section 4(c) and Section 7, the aggregate number of Units that may be delivered with respect to Awards under the Plan is 4,064,035 (which number includes the number of Units previously issued pursuant to an Award (or made subject to an Award that has not expired or been terminated) granted under the Prior Plan). Units withheld from an Award or surrendered by a Participant to satisfy the payment of any exercise price with respect to the Award shall not be considered to be Units delivered under the Plan for this purpose. If any Award is forfeited, cancelled, exercised, settled in cash, or otherwise terminates or expires without the actual delivery of Units pursuant to such Award (the grant of Restricted Units is not a delivery of Units for this purpose), the Units subject to such Award shall again be available for Awards under the Plan (including Units not delivered in connection with the exercise of an Option or Unit Appreciation Right);provided,however, that, notwithstanding the foregoing, any Units withheld to cover a tax withholding obligation shall not again be available for Awards under the Plan. There shall not be any limitation on the number of Awards that may be granted and paid in cash.
(b)Sources of Units Deliverable Under Awards. Any Units delivered pursuant to an Award shall consist, in whole or in part, of Units acquired in the open market, from the Partnership or any of its Affiliates (including newly issued Units) or any other Person, or any combination of the foregoing, as determined by the Committee in its discretion.
(c)Anti-dilution Adjustments. Notwithstanding anything contained in Section 7, with respect to any “equity restructuring” event that could result in an additional compensation expense to the General Partner or the Partnership pursuant to the provisions of FASB Accounting Standards Codification, Topic 718 if adjustments to Awards with respect to such event were discretionary, the Committee shall equitably adjust the number and type of Units covered by each outstanding Award and the terms and conditions, including the exercise price and performance criteria (if any), of such Award to equitably reflect such restructuring event and shall adjust the number and type of Units (or other securities or property) with respect to which Awards may be granted after such event. With respect to any other similar event that would not result in an accounting charge under FASB Accounting Standards Codification, Topic 718 if the adjustment to Awards with respect to such event were subject to discretionary action, the Committee shall have complete discretion to adjust Awards in such manner as it deems appropriate with respect to such other event. In the event the Committee makes any adjustment pursuant to the foregoing provisions of this Section 4(c), the Committee shall make a corresponding and proportionate adjustment with respect to the maximum number of Units that may be delivered with respect to Awards under the Plan as provided in Section 4(a) and the kind of Units or other securities available for grant under the Plan.
(d)Additional Issuances. Except as hereinbefore expressly provided, the issuance by the General Partner or the Partnership of Units for cash, property, labor or services, upon direct sale, or upon the conversion of Units or
obligations of the General Partner or the Partnership convertible into such Units, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of Units subject to Awards theretofore granted pursuant to the Plan.
(e)Director Awards.Notwithstanding any provision to the contrary in the Plan, the aggregate grant date fair value (computed as of the date of grant in accordance with applicable financial accounting rules) of all Awards granted to any individual Director for any single calendar year shall not exceed $700,000; provided, however, that such limitation shall be (i) $1,400,000 in the first year an individual becomes a Director and (ii) determined without regard to grants of Awards, if any, made to a Director during any period in which such individual was an Employee or a Consultant.
Section 5.Eligibility. Any Employee, Consultant or Director shall be eligible to be designated a Participant and receive an Award under the Plan. If the Units issuable pursuant to an Award are intended to be registered with the SEC on Form S-8, then only Employees, Consultants, and Directors of the Partnership or a parent or subsidiary of the Partnership (within the meaning of General Instruction A.1(a) to Form S-8) will be eligible to receive such an Award.
Section 6.Awards.
(a)General. Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 7(a)), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture of Awards in the event of termination of employment by the Participant, or termination of the Participant’s service relationship with the General Partner, the Partnership, or their respective Affiliates, and terms permitting a Participant to make elections relating to his or her Award. The Committee shall retain full power and discretion to accelerate, waive or modify, at any time, any term or condition of an Award that is not mandatory under the Plan;provided,however, that the Committee shall not have any discretion to accelerate the terms of payment of any 409A Award if such acceleration would subject a Participant to additional taxes under Section 409A of the Code and the 409A Regulations.
(b)Options. The Committee may grant Options that are intended to comply with Section 1.409A-l(b)(5)(i)(A) of the 409A Regulations only to Employees, Consultants or Directors performing services on the date of grant for the Partnership or a corporation or other type of entity in a chain of corporations or other entities in which each corporation or other entity has a “controlling interest” in another corporation or entity in the chain, starting with the Partnership and ending with the corporation or other entity for which the Employee, Consultant or Director performs services. For purposes of this Section 6(b), “controlling interest” means (i) in the case of a corporation, ownership of stock possessing at least 50% of total combined voting power of all classes of stock of such corporation entitled to vote or at least 50% of the total value of shares of all classes of stock of such corporation; (ii) in the case of a partnership, ownership of at least 50% of the profits interest or capital interest of such partnership; (iii) in the case of a sole proprietorship, ownership of the sole proprietorship; or (iv) in the case of a trust or estate, ownership of an actuarial interest (as defined in Section 1.414(c)-2(b)(2)(ii) of the 409A Regulations) of at least 50% of such trust or estate. The Committee may grant Options that are otherwise exempt from or compliant with Section 409A of the Code to any eligible Employee, Consultant or Director. The Committee shall have the authority to determine the number of Units to be covered by each Option, the exercise price therefor and the Restricted Period and other conditions and limitations applicable to the exercise of the Option, including the following terms and conditions and such additional terms and conditions, as the Committee shall determine, that are not inconsistent with the provisions of the Plan.
(i)Exercise Price. The exercise price per Unit purchasable under an Option shall be determined by the Committee at the time the Option is granted but, except with respect to a Substitute Award, may not be less than the Fair Market Value of a Unit as of the date of grant of the Option.
(ii)Time and Method of Exercise. The Committee shall determine the exercise terms and the Restricted Period with respect to an Option grant, which may include, without limitation, a provision for accelerated
vesting upon the achievement of specified performance goals or other events, and the method or methods by which payment of the exercise price with respect thereto may be made or deemed to have been made, which may include, without limitation, cash, check acceptable to the General Partner, withholding Units from an Award, a “cashless-broker” exercise through procedures approved by the General Partner, or any combination of the above methods, having a Fair Market Value on the exercise date equal to the relevant exercise price.
(iii)Forfeitures. Except as otherwise provided in the terms of the Award Agreement, upon termination of a Participant’s employment or service to the General Partner and its Affiliates or membership on the Board or the board of directors of an Affiliate of the General Partner, whichever is applicable, for any reason during the applicable Restricted Period, all unvested Options shall be forfeited by the Participant. The Committee may, in its discretion, waive in whole or in part such forfeiture with respect to a Participant’s Options;provided that the waiver contemplated under this Section 6(b)(iii) shall be effective only to the extent that such waiver will not cause the Participant’s Options that are designed to satisfy Section 409A of the Code to fail to satisfy such Section.
(c)Unit Appreciation Rights. The Committee may grant Unit Appreciation Rights that are intended to comply with Section 1.409A-l(b) (5)(i)(B) of the 409A Regulations only to Employees, Consultants or Directors performing services on the date of grant for the Partnership or a corporation or other type of entity in a chain of corporations or other entities in which each corporation or other entity has a “controlling interest” in another corporation or entity in the chain, starting with the Partnership and ending with the corporation or other entity for which the Employee, Consultant or Director performs services. For purposes of this Section 6(c), “controlling interest” means (i) in the case of a corporation, ownership of stock possessing at least 50% of total combined voting power of all classes of stock of such corporation entitled to vote or at least 50% of the total value of shares of all classes of stock of such corporation; (ii) in the case of a partnership, ownership of at least 50% of the profits interest or capital interest of such partnership; (iii) in the case of a sole proprietorship, ownership of the sole proprietorship; or in the case of a trust or estate, ownership of an actuarial interest (as defined in Section 1.414(c)-2(b)(2)(ii) of the 409A Regulations) of at least 50% of such trust or estate. The Committee may grant Unit Appreciation Rights that are otherwise exempt from or compliant with Section 409A of the Code to any eligible Employee, Consultant or Director. The Committee shall have the authority to determine the Employees, Consultants and Directors to whom Unit Appreciation Rights shall be granted, the number of Units to be covered by each grant, whether Units or cash shall be delivered upon exercise, the exercise price therefor and the conditions and limitations applicable to the exercise of the Unit Appreciation Rights, including the following terms and conditions and such additional terms and conditions as the Committee shall determine, that are not inconsistent with the provisions of the Plan.
(i)Exercise Price. The exercise price per Unit Appreciation Right shall be determined by the Committee at the time the Unit Appreciation Right is granted but, except with respect to a Substitute Award, may not be less than the Fair Market Value of a Unit as of the applicable date of grant of the Unit Appreciation Right.
(ii)Time of Exercise. The Committee shall determine the Restricted Period and the time or times at which a Unit Appreciation Right may be exercised in whole or in part, which may include, without limitation, accelerated vesting upon the achievement of specified performance goals or other events.
(iii)Forfeitures. Except as otherwise provided in the terms of the Award Agreement, upon termination of a Participant’s employment with or service to the General Partner, the Partnership and their respective Affiliates or membership on the Board or the board of directors of an Affiliate of the General Partner or the Partnership, whichever is applicable, for any reason during the applicable Restricted Period, all outstanding Unit Appreciation Rights awarded to the Participant shall be automatically forfeited on such termination. The Committee may, in its discretion, waive in whole or in part such forfeiture with respect to a Participant’s Unit Appreciation Rights;provided that the waiver contemplated under this Section 6(c)(iii) shall be effective only to the extent that such waiver will not cause the Participant’s Options that are designed to satisfy Section 409A of the Code to fail to satisfy such Section.
(d)Restricted Units and Phantom Units. The Committee shall have the authority to determine the Employees, Consultants and Directors to whom Restricted Units or Phantom Units shall be granted, the number of Restricted Units or Phantom Units to be granted to each such Participant, the Restricted Period, the conditions under which the Restricted Units or Phantom Units may become vested or forfeited and such other terms and conditions as the Committee may establish with respect to such Awards.
(i)UDRs. To the extent provided by the Committee, in its discretion, a grant of Restricted Units may provide that the distributions made by the Partnership with respect to the Restricted Units shall be subject to the same forfeiture and other restrictions as the Restricted Unit and, if restricted, such distributions shall be held, without interest, until the Restricted Unit vests or is forfeited with the UDR being paid or forfeited at the same time, as the case may be. In addition, the Committee may provide that such distributions be used to acquire additional Restricted Units for the Participant. Such additional Restricted Units may be subject to such vesting and other terms as the Committee may prescribe. Absent such a restriction on the UDRs in the Award Agreement, UDRs shall be paid to the holder of the Restricted Unit without restriction at the same time as cash distributions are paid by the Partnership to its unitholders. Notwithstanding the foregoing, UDRs shall only be paid in a manner that is either exempt from or in compliance with Section 409A of the Code.
(ii)Forfeitures. Except as otherwise provided in the terms of the applicable Award Agreement, upon termination of a Participant’s employment with or services to the General Partner and its Affiliates or membership on the Board or the board of directors of an Affiliate of the General Partner, whichever is applicable, for any reason during the applicable Restricted Period, all outstanding, unvested Restricted Units and Phantom Units awarded to the Participant shall be automatically forfeited on such termination. The Committee may, in its discretion, waive in whole or in part such forfeiture with respect to a Participant’s Restricted Units and/or Phantom Units;provided that the waiver contemplated under this Section 6(d)(ii) shall be effective only to the extent that such waiver will not cause the Participant’s Restricted Units and/or Phantom Units that are designed to satisfy Section 409A of the Code to fail to satisfy such Section.
(iii)Lapse of Restrictions.
(A)Phantom Units. Except as otherwise set forth in an Award Agreement, no later than the 30th calendar day following the vesting of each Phantom Unit, subject to the provisions of Section 8(b), the Participant shall be entitled to settlement of such Phantom Unit and shall receive one Unit or an amount in cash equal to the Fair Market Value of a Unit (for purposes of this Section 6(f)(iii), as calculated on the last day of the Restricted Period), as determined by the Committee in its discretion.
(B)Restricted Units. Upon the vesting of each Restricted Unit, subject to satisfying the tax withholding provisions of Section 8(b), the Participant shall be entitled to have the restrictions removed from his or her Award so that the Participant then holds an unrestricted Unit.
(e)Unit Awards. The Committee shall have the authority to grant a Unit Award under the Plan to any Employee, Consultant or Director in a number determined by the Committee in its discretion, as a bonus or additional compensation or in lieu of cash compensation the individual is otherwise entitled to receive, in such amounts as the Committee determines to be appropriate.
(f)Cash Awards; Other Unit Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Units, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Units, purchase rights for Units, Awards with value and payment contingent upon performance of the Partnership or any other factors designated by the Committee, and Awards valued by reference to the book value of Units or the value of securities of or the performance of specified Affiliates of the General Partner or the Partnership. The Committee shall determine the terms and conditions of such Awards. Units delivered pursuant to an Award in the nature of a purchase right granted under
this Section 6(f) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, Units, other Awards, or other property, as the Committee shall determine. Cash awards, as an element of or supplement to, or independent of any other Award under the Plan, may also be granted pursuant to this Section 6(f).
(g)DERs. To the extent provided by the Committee, in its discretion, an Award (other than a Restricted Unit or Unit Award) may include a tandem DER grant, which may provide that such DERs shall be paid directly to the Participant, be reinvested into additional Awards, be credited to a bookkeeping account (with or without interest in the discretion of the Committee) subject to the same vesting restrictions as the tandem Award, or be subject to such other provisions or restrictions as determined by the Committee in its discretion. Absent a contrary provision in the Award Agreement, DERs shall be paid to the Participant without restriction at the same time as ordinary cash distributions are paid by the Partnership to its unitholders. Notwithstanding the foregoing, DERs shall only be paid in a manner that is either exempt from or in compliance with Section 409A of the Code.
(h)Substitute Awards. Awards may be granted under the Plan in substitution for similar awards held by individuals who become Employees, Consultants or Directors as a result of a merger, consolidation or acquisition by the Partnership or any of its Affiliates of another entity or the assets of another entity. Such Substitute Awards that are Options or Unit Appreciation Rights may have exercise prices less than the Fair Market Value of a Unit on the date of the substitution if such substitution complies with Section 409A of the Code and the 409A Regulationsthese and other applicable laws and exchange rules.
(i)Performance Awards. The right of a Participant to exercise, vest in or receive settlement of any Award, and the timing thereof, may be subject to such performance conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions, and may exercise its discretion to reduce or increase the amounts payable under any Award subject to performance conditions.
(i)Performance Goals Generally. The performance goals for such Performance Awards shall consist of one or more business criteria or individual performance criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Section 6(i). The Committee may determine that such Performance Awards shall be granted, exercised, and/or settled upon achievement of any one performance goal or that two or more of the performance goals must be achieved as a condition to grant, exercise and/or settlement of such Performance Awards. The Committee shall establish any such performance conditions and goals based on one or more business criteria for the General Partner and/or the Partnership, on a consolidated basis, and/or for specified Affiliates or business or geographical units of the Partnership, as determined by the Committee in its discretion, which may include (but are not limited to) one or more of the following: (A) earnings per Unit, (B) increase in revenues, (C) increase in cash flow, (D) increase in cash flow from operations, (E) increase in cash flow return, (F) increase in tons sold, (G) increase in production capacity, (H) market share or increase in market share, (I) return on net assets, (J) return on assets, (K) return on investment, (L) return on capital, (M) return on equity, (N) economic value added, (O) operating margin, (P) contribution margin, (Q) net income, (R) net income per Unit, (S) pretax earnings, (T) EBITDA (defined as pretax earnings (losses) before interest, depreciation, depletion and amortization, net of interest income), (U) Adjusted EBITDA (defined as EBITDA, adjusted for any non-cash impairments of long-lived assets and goodwill), (V) distributable cash flow (defined as Adjusted EBITDA less cash paid for interest expense, income attributable to non-controlling interests and maintenance and replacement capital expenditures, including accrual for reserve replacement, plus accretion of asset retirement obligations and non-cash unit-based compensation), (W) pretax operating earnings after interest expense and before incentives, service fees, and unusual, infrequent or special items, (X) total unitholder return, (Y) debt reduction, (Z) change in the Fair Market Value of the Units, (AA) operating income, and (BB) any of the above goals determined on an absolute or relative basis or as compared to the performance of a published or special index deemed applicable by the Committee including, but not limited to, the Standard & Poor’s 500 Stock Index, the Alerian MLP Index, or a group of comparable companies. Performance goals may differ for Performance Awards granted to any one Participant or to different Participants.
(ii)Performance Periods. Achievement of performance goals in respect of Performance Awards that are intended to constitute performance-based compensation within the meaning of Section 162(m) of the Code shall be measured over a performance period of up to ten years, as specified by the Committee. Performance goals shall be established by the Committee not later than 90 days after the beginning of any performance period applicable to such Performance Awards.
(iii)Settlement. At the end of each performance period, the Committee shall determine the amount, if any, of the amount of the potential Performance Award otherwise payable to each Participant and such amount shall be paid to the Participant no later than March 15 of the year following the year that included the last day of the performance period. Settlement of such Performance Awards shall be in cash, Units, other Awards or other property, in the discretion of the Committee. The Committee may, in its discretion, reduce or increase the amount of a settlement otherwise to be made in connection with such Performance Awards. The Committee shall specify the circumstances in which such Performance Awards shall be paid or forfeited in the event of termination of employment by the Participant prior to the end of a performance period or settlement of Performance Awards.
(j)Certain Provisions Applicable to Awards.
(i)Stand-Alone, Additional, Tandem and Substitute Awards. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution for any other Award granted under the Plan or any award granted under any other plan of the Partnership or any of its Affiliates. Awards granted in addition to, in substitution for, or in tandem with other Awards or awards granted under any other plan of the Partnership or any of its Affiliates may be granted either at the same time as or at a different time from the grant of such other Awards or awards. If an Award is granted in substitution or exchange for another Award, the Committee shall require the surrender of such other Award in consideration for the grant of the new Award. Awards under the Plan may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other plans of the General Partner, the Partnership, or any of their respective Affiliates, in which the value of Units subject to the Award is equivalent in value to the cash compensation, or in which the exercise price, grant price, or purchase price of the Award in the nature of a right that may be exercised is equal to the Fair Market Value of the underlying Units minus the value of the cash compensation surrendered. Awards granted pursuant to the preceding sentence shall be designed, awarded and settled in a manner that does not result in additional taxes under Section 409A the Code and the 409A Regulations.
(ii)Limits on Transfer of Awards.
(A) Except as provided in Section 6(j)(ii)(C) below, each Option and Unit Appreciation Right shall be exercisable only by the Participant during the Participant’s lifetime, or by the Person to whom the Participant’s rights shall pass by will or the laws of descent and distribution.
(B) Except as provided in Section 6(j)(ii)(C) below, no Award and no right under any such Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant, other than by will or the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the General Partner, the Partnership or any of their respective Affiliates. For the avoidance of doubt, this Section 6(j)(ii)(B) does not apply to any Award that has been settled (e.g., a Unit Award that has been granted or an Option that has been exercised).
(C) requirements.
ELIMINATING DUPLICATIVE PROXY MATERIALS
To
the extent specifically provided by the Committee with respect to an Option or Unit Appreciation Right, an Option or Unit Appreciation Right may be transferred by a Participant without consideration to immediate family members or related family trusts, limited partnerships or similar entities or on such terms and conditions as the Committee may from time to time establish.(iii)Term of Awards. The term of each Award shall be for such period as may be determined by the Committee.
(iv)Form and Timing of Payment under Awards; Deferrals. Subject to the terms of the Plan and any applicable Award agreement, payments to be made by the General Partner, the Partnership, or any of their respective Affiliates upon the exercise of an Option or other Award or settlement of an Award may be made in such forms as the Committee shall determine, including without limitation cash, Units, other Awards or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis;provided,however, that any such deferred payment will be set forth in the agreement evidencing such Award and/or otherwise made in a manner that will not result in additional taxes under Section 409A the Code and the 409A Regulations. Except as otherwise provided herein, the settlement of any Award may be accelerated, and cash paid in lieu of Units in connection with such settlement, in the discretion of the Committee or upon occurrence of one or more specified events (in addition to a Change of Control). Installment or deferred payments may be required by the Committee (subject to Section 7(a) of the Plan, including the consent provisions thereof in the case of any deferral of an outstanding Award not provided for in the original Award Agreement) or permitted at the election of the Participant on terms and conditions established by the Committee and in compliance with Section 409A the Code and the 409A Regulations. Payments may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of DERs or other amounts in respect of installment or deferred payments denominated in Units. The Plan shall not constitute an “employee benefit plan” for purposes of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended.
(v)Issuance of Units. The Units or other securities of the Partnership delivered pursuant to an Award may be evidenced in any manner deemed appropriate by the Committee in its sole discretion, including, but not limited to, in the form of a certificate issued in the name of the Participant or by book entry, electronic or otherwise and shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the SEC, any stock exchange upon which such Units or other securities are then listed, and any applicable federal or state laws, and the Committee may cause a legend or legends to be inscribed on any such certificates or book entries to make appropriate reference to such restrictions.
(vi)Consideration for Grants. Awards may be granted for such consideration, including services, as the Committee shall determine.
(vii)Exemptions from Section 16(b) Liability. It is the intent of the General Partner that the grant of any Awards to or other transaction by a Participant who is subject to Section 16 of the Exchange Act shall be exempt from such Section pursuant to an applicable exemption (except for transactions acknowledged in writing to be non-exempt by such Participant). Accordingly, if any provision of the Plan or any Award Agreement does not comply with the requirements of Rule 16b-3 as then applicable to any such transaction, such provision shall be construed or deemed amended to the extent necessary to conform to the applicable requirements of Rule 16b-3 so that such Participant shall avoid liability under Section 16(b) of the Exchange Act.
(viii)Delivery of Units or other Securities and Payment by Participant of Consideration. Notwithstanding anything in the Plan or any Award Agreement to the contrary, delivery of Units pursuant to the exercise, vesting and/or settlement of an Award may be deferred for any period during which, in the good faith determination of the Committee, the General Partner is not reasonably able to obtain Units to deliver pursuant to such Award without violating applicable law or the applicable rules or regulations of any governmental agency or authority or securities exchange. No Units or other securities shall be delivered pursuant to any Award until payment in full of any amount required to be paid pursuant to the Plan or the applicable Award Agreement (including, without limitation, any exercise price or tax withholding) is received by the General Partner.
(ix)Additional Agreements. Each Employee, Consultant or Director to whom an Award is granted under the Plan may be required to agree in writing, as a condition to the grant of such Award or otherwise, to subject an Award that is exercised or settled following such Person’s termination of services with the General Partner, the Partnership or their respective Affiliates to a general release of claims and/or a
noncompetition agreement in favor of the General Partner, the Partnership, and their respective Affiliates, with the terms and conditions of such agreement(s) to be determined in good faith by the Committee.
(x)Termination of Employment. Except as provided herein, the treatment of an Award upon a termination of employment or any other service relationship by and between a Participant and the General Partner, the Partnership, or any of their respective Affiliates shall be specified in the Award Agreement controlling such Award.
(xi)Prohibition on Repricing of Options and UARs.Subject to the provisions of Section 4(c), Section 7(b), Section 7(c), Section 7(d), Section 7(e) and Section 7(g), the terms of outstanding Award Agreements may not be amended without the approval of the Partnership’s unitholders so as to (A) reduce the Unit exercise priceexpense of any outstanding Options or UARs, (B) grant a new Option, UAR or other Awarddelivering duplicate voting materials to our stockholders who may hold shares of Hi-Crush common stock in substitution for, or upon the cancellation of, any previously granted Option or UAR that has the effect of reducing the exercise price thereof, (C) exchange any Option or UAR for Units, cash or other consideration when the exercise price per Unit under such Option or UAR exceeds the Fair Market Value of the underlying Units, or (D) take any other action that would be considered a “repricing” of an Option or UAR under the listing standards of the New York Stock Exchange or, if the Units are not then-listed on such exchange, to the extent applicable, on any other national securities exchange on which the Units are listed. Subject to Section 4(c), Section 7(b), Section 7(c), Section 7(d), Section 7(e), Section 7(g) and Section 8(m), the Committee shall have the authority, without the approval of the Partnership’s unitholders, to amend any outstanding Award to increase the per Unit exercise price of any outstanding Options or UARs or to cancel and replace any outstanding Options or UARs with the grant of Options or UARs having a per Unit exercise price that is equal to or greater than the per Unit exercise price of the original Options or UARs.
Section 7.Amendment and Termination. Except to the extent prohibited by applicable law:
(a)Amendments to the Plan and Awards. Except as required by applicable law or the rules of the principal securities exchange, if any, on which the Units are traded, the Board or the Committee may amend, alter, suspend, discontinue, or terminate the Plan in any manner, including increasing the number of Units available for Awards under the Plan, without the consent of any partner, Participant, other holder or beneficiary of an Award, or any other Person. Notwithstanding the foregoing, the Committee may waive any conditions or rights under, amend any terms of, or alter any Award theretofore granted,provided that no change, other than pursuant to Section 7(b), 7(c), 7(d), 7(e), or 7(g) below, in any Award shall materially reduce the rights or benefits of a Participant with respect to an Award without the consent of such Participant.
(b)Subdivision or Consolidation of Units. The terms of an Award and the number of Units authorized pursuant to Section 4 for issuance under the Plan shall be subject to adjustment from time to time, in accordance with the following provisions:
(i) If at any time, or from time to time, the Partnership shall subdivide as a whole (by reclassification, by a Unit split, by the issuance of a distribution on Units payable in Units, or otherwise) or in the event the Partnership distributes an extraordinary cash dividend, the number of Units then outstanding into a greater number of Units, then, as appropriate, (A) the maximum number of Units available for the Plan or in connection with Awards as provided in Section 4 shall be increased proportionately, and the kind of other securities available for the Plan shall be appropriately adjusted, (B) the number of Units (or other kind of securities) that may be acquired under any then outstanding Award shall be increased proportionately, and (C) the price (including the exercise price) for each Unit (or other kind of securities) subject to then outstanding Awards shall be reduced proportionately, without changing the aggregate purchase price or value as to which outstanding Awards remain exercisable or subject to restrictions.
(ii) If at any time, or from time to time, the Partnership shall consolidate as a whole (by reclassification, by reverse Unit split, or otherwise) the number of Units then outstanding into a lesser number of Units, (A) the maximum number of Units for the Plan or available in connection with Awards as
provided in Section 4 shall be decreased proportionately, and the kind of other securities available for the Plan shall be appropriately adjusted, (B) the number of Units (or other kind of securities) that may be acquired under any then outstanding Award shall be decreased proportionately, and (C) the price (including the exercise price) for each Unit (or other kind of securities) subject to then outstanding Awards shall be increased proportionately, without changing the aggregate purchase price or value as to which outstanding Awards remain exercisable or subject to restrictions.
(iii) Whenever the number of Units subject to outstanding Awards and the price for each Unit subject to outstanding Awards are required to be adjusted as provided in this Section 7(b), the Committee shall promptly prepare a notice setting forth, in reasonable detail, the event requiring adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the change in price and the number of Units, other securities, cash, or property purchasable subject to each Award after giving effect to the adjustments. The Committee shall promptly provide each affected Participant with such notice.
(iv) Adjustments under Sections 7(b)(i) and (ii) shall be made by the Committee, and its determination as to what adjustments shall be made and the extent thereof shall be final, binding, and conclusive. No fractional interest shall be issued under the Plan on account of any such adjustments.
(c)Recapitalizations. If the Partnership recapitalizes, reclassifies its equity securities, or otherwise changes its capital structure (a “recapitalization”) without a Change of Control, the number and class of Units covered by an Award theretofore granted shall be adjusted so that such Award shall thereafter cover the number and class of Units and securities to which the holder would have been entitled pursuant to the terms of the recapitalization if, immediately prior to the recapitalization, the holder had been the holder of record of the number of Units then covered by such Award and the Unit limitations provided in Section 4 shall be adjusted in a manner consistent with the recapitalization.
(d)Additional Issuances. Except as expressly provided herein, the issuance by the Partnership of units of any class or securities convertible into units of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of units or obligations of the Partnership convertible into such units or other securities, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of Units subject to Awards theretofore granted or the purchase price per Unit, if applicable.
(e)Change of Control. Notwithstanding any other provisions of the Plan or any Award Agreement to the contrary, upon a Change of Control the Committee, acting in its sole discretion without the consent or approval of any holder, may affect one or more of the following alternatives, which may vary among individual holders and which may vary among Awards: (i) remove any applicable forfeiture restrictions on any Award; (ii) accelerate the time of exercisability or the time at which the Restricted Period shall lapse to a specific date, before or after such Change of Control, specified by the Committee; (iii) require the mandatory surrender to the General Partner or the Partnership by selected holders of some or all of the outstanding Awards held by such holders (irrespective of whether such Awards are then subject to a Restricted Period or other restrictions pursuant to the Plan) as of a date, before or after such Change of Control, specified by the Committee, in which event the Committee shall thereupon cancel such Awards and pay to each holder an amount of cash per Unit equal to the amount calculated in Section 7(f) (the “Change of Control Price”) less the exercise price, if any, applicable to such Awards;provided,however, that to the extent the exercise price of an Option or a Unit Appreciation Right exceeds the Change of Control Price, no consideration will be paid with respect to that Award; (iv) take any other action the Committee deems appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or an outstanding Award;provided,however, that the Committee may determine in its sole discretion that no such action is necessary; or (v) make such adjustments to Awards then outstanding as the Committee deems appropriate to reflect such Change of Control (including, but not limited to, the substitution of Awards for new awards);provided,however, that the Committee may determine in its sole discretion that no adjustment is necessary to Awards then outstanding.
(f)Change of Control Price. The “Change of Control Price” shall equal the amount determined in clause (i), (ii), (iii), (iv) or (v), whichever is applicable, as follows: (i) the per Unit price offered to unitholders of the Partnership in any merger or consolidation, (ii) the per Unit value of the Units immediately before the Change of Control without regard to assets sold in the Change of Control and assuming the General Partner or the Partnership, as applicable, has received the consideration paid for the assets in the case of a sale of the assets, (iii) the amount distributed per Unit in a dissolution transaction, (iv) the price per Unit offered to unitholders of the Partnership in any tender offer or exchange offer whereby a Change of Control takes place, or (v) if such Change of Control occurs other than pursuant to a transaction described in clauses (i), (ii), (iii), or (iv) of this Section 7(f), the Fair Market Value per Unit of the Units that may otherwise be obtained with respect to such Awards or to which such Awards track, as determined by the Committee as of the date determined by the Committee to be the date of cancellation and surrender of such Awards. In the event that the consideration offered to unitholders of the Partnership in any transaction described in this Section 7(f) or Section 7(e) consists of anything other than cash, the Committee shall determine the fair cash equivalent of the portion of the consideration offered which is other than cash.
(g)Impact of Corporate Events on Awards Generally. In the event of changes in the outstanding Units by reason of a recapitalization, reorganization, merger, consolidation, combination, exchange or other relevant change in capitalization occurring after the date of the grant of any Award and not otherwise provided for by this Section 7, any outstanding Awards and any Award Agreements evidencing such Awards shall be subject to adjustment by the Committee at its discretion, which adjustment may, in the Committee’s discretion, be described in the Award Agreement and may include, but not be limited to, adjustments as to the number and price of Units or other consideration subject to such Awards, accelerated vesting (in full or in part) of such Awards, conversion of such Awards into awards denominated in the securities or other interests of any successor Person, or the cash settlement of such Awards in exchange for the cancellation thereof. In the event of any such change in the outstanding Units, the aggregate number of Units available under the Plan may be appropriately adjusted by the Committee, whose determination shall be conclusive.
Section 8.General Provisions.
(a)No Rights to Award. No Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Participants. The terms and conditions of Awards need not be the same with respect to each recipient.
(b)Tax Withholding. Unless other arrangements have been made that are acceptable to the General Partner or any of its Affiliates, the Partnership or any of its Affiliates is authorized to deduct, withhold, or cause to be deducted or withheld, from any Award, from any payment due or transfer made under any Award or from any compensation or other amount owing to a Participant the amount (in cash, Units, including Units that would otherwise be issued pursuant to such Award or other property) of any applicable taxes payable in respect of the grant or settlement of an Award, its exercise, the lapse of restrictions thereon, or any other payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the General Partner or its Affiliate to satisfy its withholding obligations for the payment of such taxes. Notwithstanding the foregoing, with respect to any Participant who is subject to Rule 16b-3, such tax withholding automatically shall be effected by the General Partner either by (i) “netting” or withholding Units otherwise deliverable to the Participant on the vesting or payment of such Award, or (ii) requiring the Participant to pay an amount equal to the applicable taxes payable in cash.
(c)No Right to Employment or Services. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of the General Partner or any of its Affiliates, to continue providing consulting services, or to remain on the Board, as applicable. Furthermore, the General Partner or any of its Affiliates may at any time dismiss a Participant from employment or his or her service relationship free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan, any Award Agreement or other agreement.
(d)Governing Law. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Delaware without regard to its conflicts of laws principles.
(e)Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable law or, if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect. If any of the terms or provisions of the Plan or any Award Agreement conflict with the requirements of Rule 16b-3 (as those terms or provisions are applied to Participants who are subject to Section 16(b) of the Exchange Act), then those conflicting terms or provisions shall be deemed inoperative to the extent they so conflict with the requirements of Rule 16b-3 (unless the Board or the Committee, as appropriate, has expressly determined that the Plan or such Award should not comply with Rule 16b-3).
(f)Other Laws. The Committee may refuse to issue or transfer any Units or other consideration under an Award if, in its sole discretion, it determines that the issuance or transfer of such Units or such other consideration might violate any applicable law or regulation, the rules of the principal securities exchange on which the Units are then traded, or entitle the Partnership or any of its Affiliates to recover the same under Section 16(b) of the Exchange Act, and any payment tendered to the General Partner by a Participant, other holder or beneficiary in connection with the exercise of such Award shall be promptly refunded to the relevant Participant, holder or beneficiary.
(g)No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the General Partner or any of its Affiliates and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the General Partner or any of its Affiliates pursuant to an Award, such right shall be no greater than the right of any general unsecured creditor of the General Partner or such Affiliate.
(h)No Fractional Units. No fractional Units shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine in its sole discretion whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional Units or whether such fractional Units or any rights thereto shall be canceled, terminated, or otherwise eliminated with or without consideration.
(i)Headings. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.
(j)Facility of Payment. Any amounts payable hereunder to any individual under legal disability or who, in the judgment of the Committee, is unable to manage properly his financial affairs, may be paid to the legal representative of such individual, or may be applied for the benefit of such individual in any manner that the Committee may select, and the General Partner shall be relieved of any further liability for payment of such amounts.
(k)Allocation of Costs. Nothing herein shall be deemed to override, amend, or modify any cost sharing arrangement, omnibus agreement, or other arrangement between the General Partner, the Partnership, and any of their respective Affiliates regarding the sharing of costs between those entities.
(l)Gender and Number. Words in the masculine gender shall include the feminine gender, the plural shall include the singular and the singular shall include the plural.
(m)Compliance with Section 409A. Nothing in the Plan or any Award Agreement shall operate or be construed to cause the Plan or an Award that is subject to Section 409A of the Code to fail to comply with the requirements of Section 409A of the Code. The applicable provisions of Section 409A the Code and the 409A Regulations are hereby incorporated by reference and shall control over any Plan or Award Agreement provision in conflict therewith or that would cause a failure of compliance thereunder, to the extent necessary to resolve such conflict or obviate such failure. All 409A Awards shall be designed to comply with Section 409A of the Code. Subject to any other restrictions or limitations contained herein, in the event that a “specified employee” (as defined under Section 409A of the Code and the 409A Regulations) becomes entitled to a payment under an Award which is a 409A Award on account of a “separation from service” (as defined under Section 409A of the Code and the 409A Regulations), to the extent required by the Code, such payment shall not occur until the date that is six months plus one day from the date of such separation from service. Any amount that is otherwise payable within the six-month period described herein will be aggregated and paid in a lump sum without interest. Notwithstanding any provision herein to the contrary, none of the Board, the Partnership, the General Partner or any of their respective Affiliates makes any representations that any Awards (or payments with respect to any Awards) are exempt from or compliant with Section 409A of the Code and the 409A Regulations and in no event shall the Board, the Partnership, the General Partner or any of their respective Affiliates by liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by any Participant on account of non-compliance with Section 409A of the Code and the 409A Regulations.
(n)No Guarantee of Tax Consequences. None of the Board, the Committee, the Partnership nor the General Partner makes any commitment or guarantee that any federal, state or local tax treatment will (or will not) apply or be available to any Participant.
(o)Clawback.To the extent required by applicable law or any applicable securities exchange listing standards, or as otherwise determined by the Board, Awards and amounts paid or payable pursuant to or with respect to Awards shall be subject to the provisions of any applicable clawback policies or procedures adopted by the General Partner or the Partnership, which clawback policies or procedures may provide for forfeiture, repurchase and/or recoupment of Awards and amounts paid or payable pursuant to or with respect to Awards. Notwithstanding any provision of the Plan or any Award Agreement to the contrary, the General Partner and the Partnership reserve the right, without the consent of any Participant or beneficiary of any Award, to adopt any such clawback policies and procedures, including such policies and procedures applicable to the Plan or any Award Agreement with retroactive effect.
(p)Minimum Vesting.Notwithstanding anything to the contrary contained herein, the Restricted Period for Options and Unit Appreciation Rights shall be no less than one year, except with respect to Substitute Awards.
Section 9.Term of the Plan. The Plan shall be effective on the Effective Date, subject to the approval by the unitholders of the Partnership, and shall continue until the earliest of (i) the date terminated by the Board, (ii) all Units available under the Plan have been delivered to Participants, or (iii) the 10th anniversary of the Effective Date. However, any Award granted prior to such termination, and the authority of the Board or Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award or to waive any conditions or rights under such Award, shall extend beyond such termination date.
PROXY
HI-CRUSH PARTNERS LP
PROXY FOR SPECIAL MEETING OF UNITHOLDERS TO BE HELD DECEMBER 8, 2016
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
The undersigned hereby constitutes and appoints Robert E. Rasmus and Mark C. Skolos and each of them, as proxies with full power of substitution, to represent and vote all of the units which the undersigned is entitled to vote at the Special Meeting of Unitholders (the “Special Meeting”) of Hi-Crush Partners LP (the “Partnership”) in such manner as they, or any of them, may determine on any matters which may properly come before the Special Meeting or any adjournments thereof and to vote on the matters set forth on the reverse side as directed by the undersigned. The Special Meeting will be held at Three Riverway, Houston, Texas 77056 on December 8, 2016 at 10:00 am Central Time, and at any and all adjournments thereof. The undersigned hereby revokes any proxies previously given.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF THIS CARD IS SIGNED AND NO DIRECTION IS GIVEN, WILL BE VOTED “FOR” UNDER PROPOSALS 1 AND 2. THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION UPON SUCH OTHER BUSINESS NOT KNOWN AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY ADJOURNMENTS THEREOF.
(Continued and to be marked, dated and signed on the reverse side)
pFOLD AND DETACH HERE AND READ THE REVERSE SIDEp
Importantstock account, we are delivering only one Notice Regarding the Availability of Proxy Materials and/or set of the other proxy solicitation materials, as applicable, to certain stockholders who share an address, unless otherwise requested. A separate proxy card is included in the voting materials (either electronically or by mail, as applicable) for the Special Meetingeach of
Unitholders to be held December 8, 2016.
The these stockholders.
We will promptly deliver, upon written or oral request, a separate copy of our 2019 Annual Report or this Proxy Statement
is available at:http://www.viewproxy.com/Hi-Crush/2016SM
Please mark votes as in this example ☒
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSALS 1 AND 2:
Proposal I – A proposal (the “LTIP Proposal”) to approve the first amendment and restatementa stockholder at a shared address to which a single copy of the Partnership’s Long-Term Incentive Plan (the “LTIP”)documents was delivered. To obtain an additional copy, you may write us at 1330 Post Oak Blvd., which, among other things, provides forHouston, Texas 77056, Attn: Investor Relations, or contact our Investor Relations department by telephone at 713-980-6236.
Similarly, if you share an
increaseaddress with another stockholder and have received multiple copies of our proxy materials, you may contact us at the address or telephone number specified above to request that only a single copy of these materials be delivered to your address in the
maximum numberfuture. Stockholders sharing a single address may revoke their consent to receive a single copy of
common units reserved and available for delivery with respect to awards under the LTIP so that, as of the effective date of the amendment and restatement of the LTIP, the total number of common units available for delivery with respect to awards under the LTIP will be increased by 2,700,000 common units to an aggregate of 4,064,035 common units.☐ FOR ☐ AGAINST ☐ ABSTAIN
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DO NOT PRINT IN THIS AREA
(Unitholder Name & Address Data)
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Proposal II – A proposal to approve the adjournment of the Special Meeting to a later date or dates, if necessary or appropriate, to solicit additional proxiesour proxy materials in the event there are not sufficient votesfuture at theany time of the Special Meeting to approve the LTIP Proposal.
☐ FOR ☐ AGAINST ☐ ABSTAIN
To transact other business as may properly come before the meeting or any adjournment or postponement thereof.
WILL ATTEND THE MEETING ☐
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Signature | | |
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Signature | | |
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Note: Please sign exactly as your name or names appear on this card. Joint owners should each sign personally. If signing as a fiduciary or attorney, please give your exact title.
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pFOLD AND DETACH HERE AND READ THE REVERSE SIDEp
As a unitholder of Hi-Crush Partners LP you have the option of voting your units electronically through the Internetby contacting our distribution agent, Broadridge, either by calling toll-free at 1-866-540-7095, or by telephone, eliminatingwriting to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, NY 11717. It is our understanding that Broadridge will remove such stockholder from the need to return thehouseholding program within 30 days of receipt of such written notice, after which each such stockholder will receive an individual copy of our proxy card. Your electronic vote authorizes the named proxies to vote your units in the same manner as if you marked, signed, dated and returned the proxy card. Votes submitted electronically over the Internet or by telephone must be received by 11:59 p.m., Eastern Standard Time, on December 7, 2016.
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PROXY VOTING INSTRUCTIONS
Please have your 11-digit control number ready when voting by Internet or Telephone
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INTERNET | | | | TELEPHONE | | | | MAIL |
Vote Your Proxy on the Internet:
Go towww.cesvote.com
Have your proxy card available when you access the above website. Follow the prompts to vote your units.
| | | | Vote Your Proxy by Phone:
Call 1 (888) 693-8683
Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your units.
| | | | Vote Your Proxy by Mail:
Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided.
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materials.
