UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No.    )
 
Filed by the Registrant       
Filed by a Party other than the Registrant
Check the appropriate box:
 
Preliminary Proxy Statement
 
Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
 
Definitive Proxy Statement
 
Definitive Additional Materials
 
Soliciting Material Pursuant to §240.14a-12
 
TRECORA RESOURCES


(Name of Registrant as specified in its Charter)
 
 
 


 
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
 
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(1)
 
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(2)
 
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(3)
 
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¨
 
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing:
 
     
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 1650 Hwy 6 South, Suite 190
Sugar Land, TX  77478
(409) 385-8300


_________, 2017

To Our Stockholders:

On behalf of the Board of Directors, I cordially invite you to attend the 2017 Annual Stockholders' Meeting on ___________, 2017, at 10:00 a.m., Central Daylight Time.  The meeting will be held at our corporate office, 1650 Hwy 6 South, Suite 190the Sugar Land, Texas 77478.  If you plan to attend the meeting, please RSVP to 281-980-5522.

Matters to be acted upon at the meeting are described in the attached Notice of 2017 Annual Meeting of Stockholders and Proxy Statement.  We have also included a copy of our Annual Report on Form 10-K for the year ended December 31, 2016, for your review.

Your vote on the business to be considered at the meeting is important regardless of the number of shares you own.  Whether or not you plan to attend, please vote your proxy promptly in accordance with the instructions on the enclosed proxy card.  If you do attend the meeting, you may, of course, withdraw your proxy should you wish to vote in person.

Sincerely,

/s/ Nicholas Carter
Nicholas Carter
Chairman of the Board


TABLE OF CONTENTS
     
NOTICE OF 2017 ANNUAL MEETING OF STOCKHOLDERS
1
   
PROXY STATEMENT
 
GENERAL EXPLANATION OF MATERIALS INCLUDED
3
   
QUESTIONS AND REQUESTS FOR ADDITIONAL INFORMATION
4
   
VOTING
5
   
STOCKHOLDER PROPOSALS
8
   
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
9
     
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
  AND MANAGEMENT
22
     
BENEFICIAL OWNERSHIP TABLE
22
     
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
23
     
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
23
   
PROPOSAL NO. 1 – ELECTION/RE-ELECTION OF DIRECTORS
24
   
NON-EMPLOYEE DIRECTOR COMPENSATION
26
   
PROPOSAL NO. 2 – RATIFICATION OF SELECTION OF INDEPENDENT
  REGISTERED PUBLIC ACCOUNTING FIRM
29
   
PRINCIPAL ACCOUNTING FEES AND SERVICES
31
   
PROPOSAL NO. 3 – ADVISORY VOTE ON EXECUTIVE COMPENSATION
32
   
PROPOSAL NO. 4 – ADVISORY VOTE ON THE FREQUENCY OF THE SAY ON PAY VOTE
33
   
EXECUTIVE COMPENSATION
34
   
PROPOSAL NO. 5 – TO APPROVE AND RATIFY THE FIRST AMENDMENT TO THE COMPANY'S STOCK AND INCENTIVE PLAN EQUITY COMPENSATION PLAN INFORMATION
57
   
PROPOSAL NO. 6 – TO APPROVE AND RATIFY CERTAIN AWARDS GRANTED PURSUANT TO THE COMPANY'S STOCK AND INCENTIVE PLAN
69
   
PROPOSAL NO. 7 – ADOPTION OF RESOLUTIONS THAT HAVE BEEN ADOPTED BY THE BOARD OF DIRECTORS TO RATIFY EACH POSSIBLE "DEFECTIVE CORPORATE ACT" (AS DEFINED IN SECTION 204 OF THE DELAWARE GENERAL CORPORATION LAW)
71
   
OTHER BUSINESS
74

TRECORA RESOURCES
("TREC")
1650 Hwy 6 South, Suite 190
Sugar Land, TX  77478
(409) 385-8300

NOTICE OF 2017 ANNUAL MEETING OF STOCKHOLDERS

Time and Date:
 
10:00 a.m. – 11:00 a.m. CDT, ____________, 2017
     
Place:
 
Trecora Resources' Corporate Office
   
1650 Hwy 6 South, Suite 190
   
Sugar Land, TX  77478
Items of Business:    
(1)
Election/re-election of three nominees to the Board of Directors
 
(2)
Ratification of the selection of BKM Sowan Horan, LLP as the Company's independent registered public accounting firm for 2017
 
(3)
To approve, by non-binding vote, the compensation of the Company's named executive officers
 
(4)
To approve, by non-binding vote, the frequency of a non-binding vote on the compensation of the Company's named executive officers
 
(5)
To approve and ratify the First Amendment to the Company's Stock and Incentive Plan
 
(6)
To approve and ratify certain awards granted pursuant to the Company's Stock and Incentive Plan
 
(7)
To adopt resolutions that have been adopted by the Board of Directors to ratify each "defective corporate act" (as defined in Section 204 of the General Corporation Law of the State of Delaware)
 
(8)
Consider and act upon such other business as may properly come before the meeting.
     
Adjournments and Postponements:
 
Any action on the items of business described above may be considered at the annual meeting at the time and on the date specified above or at any time and date to which the annual meeting may be properly adjourned or postponed.
     
Record Date:
 
You are entitled to vote only if you were a Trecora Resources stockholder of record as of the close of business on _____________, 2017.  Your vote is important. We encourage you to vote by proxy, even if you plan to attend the meeting.  You may vote your proxy by telephone, Internet or mail.  A toll-free telephone number and website address are included on your proxy card.
     
Meeting Admission:
 
You are entitled to attend the annual meeting only if you were a Trecora Resources stockholder of record as of the close of business on ____________, 2017, or hold a valid proxy for the annual meeting.  You should be prepared to present photo identification for admittance.  If you are not a stockholder of record but hold shares through a broker, trustee or nominee, you should provide proof of beneficial ownership as of the record date, such as your most recent account statement prior to ___________, 2017, a copy of the voting instruction card provided by your broker, trustee or nominee, or similar evidence of ownership.  If you do not provide photo identification and comply with the other procedures outlined above, you will not be admitted to the annual meeting.
 
 
1

 
     
Webcast:
 
www.ir.trecora.com

This notice of annual meeting and proxy statement and form of proxy are being distributed on or about ________________, 2017.

/s/ Connie Cook
Connie Cook, Secretary
2


PROXY STATEMENT

GENERAL EXPLANATION OF MATERIALS INCLUDED

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (the "Board") of Trecora Resources, a Delaware corporation (the "Company"), for the Company's Annual Meeting of Stockholders which is scheduled to take place on _______________, 2017.  This proxy statement provides a description of the business matters to be covered at the annual meeting.  As a stockholder, you are entitled and encouraged to attend the annual meeting and to vote on the matters described in this proxy statement.  Detailed information on voting is provided below.

In addition to notifying you of the upcoming annual meeting of stockholders, we request your vote on the matters to be covered at the annual meeting.  In making this solicitation, the Company will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials and soliciting votes. Proxies may be solicited in person by our employees, or by mail, courier, telephone, email, or facsimile.

This proxy statement includes the following abbreviations:
(1)
TREC – Trecora Resources
(2)
TOCCO – Texas Oil & Chemical Co. II, Inc. – wholly owned subsidiary and parent of SHR and TC
(3)
SHR – South Hampton Resources, Inc. – Petrochemical segment
(4)
TC – Trecora Chemical – Specialty wax segment
(5)
AMAK – Al Masane Al Kobra Mining Company – Mining investment – 33% ownership
(6)
PEVM – Pioche Ely Valley Mines, Inc. – Inactive mine - 55% ownership

Specific Items of Business

The following seven proposals will be presented at the meeting for your vote.  Space is provided in the accompanying proxy card to vote for, against, or abstain from voting on each of the proposals other than the election of directors and the approval of the frequency of the non-binding vote on the compensation of the Company's named executive officers. Space is provided in the accompanying proxy card to vote for or withhold your vote for each director candidate. Space is provided in the accompanying proxy card to vote for every one, two or three years or to abstain with regard to the frequency of a non-binding vote on the compensation of the Company's named executive officers. If you vote using the telephone or Internet, you will be instructed how to vote on these issues when you call or access the relevant website.

(1)
The election/re-election of three directors,

(2)
The ratification of selection of our independent registered public accounting firm,

(3)
The approval, by non-binding vote, of  the compensation of the Company's named executive officers,
 

 
3

(4)
The approval, by non-binding vote, of the frequency of a non-binding vote on the compensation of the Company's named executive officers,

(5)
The approval and ratification of the First Amendment to the Company's Stock and Incentive Plan,

(6)
The approval and ratification of certain awards granted pursuant to the Company's Stock and Incentive Plan, and

(7)
The adoption of resolutions that have been adopted by the Board of Directors to ratify each "defective corporate act" (as defined in Section 204 of the General Corporation Law of the State of Delaware).

QUESTIONS AND REQUESTS FOR ADDITIONAL INFORMATION

Questions regarding the annual meeting, this proxy statement, voting or otherwise should be directed to the individual listed below at the provided contact information.  The following proxy materials should be included with this mailing: (1) Notice of Annual Meeting of Stockholders; (2) proxy statement; (3) proxy card (or voting instruction card for beneficial owners) with pre-addressed envelope; and (4) the Company's 2016 Report on Form 10-K.  If any portion of the proxy materials appears to be missing, or if you would like an additional copy of the proxy materials, please contact the individual below at the listed contact information for a free copy.

Corporate Secretary
Trecora Resources
P. O. Box 1636
Silsbee, TX  77656
(409) 385-8300

Our proxy statement and 2016 Report on Form 10-K may also be accessed on our website at www.trecora.com.

Request for Multiple Copies of Proxy Materials

Please note that if multiple stockholders reside at the same address, only one set of proxy materials has been provided, unless the Company received contrary instructions from one or more of the stockholders.  To request a separate copy of the proxy materials, or to request to receive separate copies of the proxy materials in the future, contact the Corporate Secretary at the above address, and a free copy will be promptly delivered to you.

Request for Single Copy of Proxy Materials

If you share an address with one or more shareholders and are currently receiving multiple sets of proxy materials, you may request delivery of a single set of proxy materials by contacting the Corporate Secretary at the above address.


4


VOTING

Company stockholders of record are entitled to vote on the items of business described in this proxy statement.  Stockholders of record may (1) attend the annual meeting and vote their shares in person; (2) vote by submitting a proxy; or (3) vote electronically via the Internet or by telephone.  Beneficial owners may (1) attend the annual meeting and vote their share in person only if they obtain a legal proxy from their broker, trustee or nominee; (2) vote by submitting voting instructions; or (3) vote electronically via the Internet or by telephone.

Voting Securities, Record Date

Shareholders of record at the close of business on ______________, 2017, (the "record date") are entitled to vote at the meeting and any adjournment or postponement of the meeting.  On the record date, there were ______________ shares of common stock of the Company, par value $0.10, issued and outstanding.

Stockholder of Record

If your shares are registered directly in your name, you are the stockholder of record of those shares, and these proxy materials are being sent directly to you by the Company.  As a
stockholder of record, you have the right to grant your voting proxy directly to the Company or a third party, or vote in person at the meeting.  The Company has enclosed a proxy card for you to use.

Beneficial Owner

If your shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you together with a voting instruction card on behalf of your broker, trustee or nominee.  Your broker is not permitted to vote on your behalf on the election of directors and the other matters at the shareholder meeting (except for the ratification of the selection of BKM Sowan Horan, LLP as auditors for 2017), unless you provide specific instructions by completing and returning the Voting Instruction Form or following the instructions provided to you to vote your shares via telephone or the Internet.  For your vote to be counted, you need to communicate your voting decisions to your broker, bank or other financial institution before the date of the shareholder meeting.

Voting in Person at the Annual Meeting

Stockholders of record are invited to attend the Annual Meeting of Stockholders on _________________, 2017, at the Trecora Resources' Corporate Office, Sugar Land, TX and vote their shares in person.  Beneficial owners may vote in person at the annual meeting only if they obtain a legal proxy from their broker, trustee or nominee that holds their shares giving them the right to vote the shares.


5



Voting by Submitting a Proxy or Voting Instructions

Regardless of whether you plan to attend the annual meeting, stockholders of record and beneficial owners have the option of voting their shares by submitting a proxy or voting instructions, as applicable.

Stockholders of record may vote by proxy.  To vote by proxy, stockholders of record must complete, sign and date their proxy cards and mail them in the accompanying pre-addressed envelopes.  Your proxy card and pre-addressed envelope is included with this proxy statement.

Beneficial owners may vote by submitting voting instructions to their broker, trustee or nominee.  Your voting instruction card should be provided by your broker, trustee or nominee.  Please refer to your voting instruction card for voting procedures and additional information.

Proxies and Voting Instructions Are Revocable

A stockholder of record may change his or her vote by either: (1) submitting a new proxy bearing a later date (which automatically revokes the earlier proxy); (2) providing written notice of revocation to the Corporate Secretary at the address listed above on page 4; or (3) attending the annual meeting and voting in person.  Please note that your attendance at the annual meeting will not revoke a previously submitted proxy unless you specifically make such a request.  A beneficial owner may change his or her vote by either: (1) submitting new voting instructions to the appropriate broker, trustee or nominee; or (2) if they have obtained a legal proxy from their broker, trustee or nominee giving them the legal right to vote their shares, by attending the annual meeting and voting in person.

Voting Electronically

Stockholders of record and beneficial owners may vote electronically by following the instructions provided on their proxy cards prior to 1:00 a.m. CDT on _______________, 2017.

Voting Procedures

The Company's corporate by-laws provide that each stockholder shall have one vote for each share of stock having voting power, registered in his name on the books of the Company.

Election of Directors

In the election of directors, you may vote "FOR" or "WITHHOLD" with respect to each of the nominees.  If you elect to "WITHHOLD" in the election of directors, it will not impact the election of directors.  As provided in the Company's corporate by-laws, directors are elected upon a plurality vote of the stockholders.  Therefore, the director nominees who receive the highest number of "FOR" votes are elected.  Cumulative voting is not permitted in the election of directors.

Pursuant to the Corporate Governance Guidelines of the Company, in any non-contested election of directors, any director nominee who receives a greater number of votes "WITHHELD" from his or her election than votes "FOR" such election shall tender his or her resignation. Within 90
 
 
6

days after certification of the election results the Board of Directors will decide, through a process managed by the Nominations and Governance Committee and excluding the nominee in question, whether to accept the resignation. Absent a compelling reason for the director to remain on the Board, the Board shall accept the resignation.

Advisory Vote on the Frequency of a Non-Binding Vote on the Compensation of the Company's Named Executive Officers

When voting on the frequency of a non-binding vote on the compensation of the Company's named executive officers, you may vote "EVERY YEAR," "EVERY TWO YEARS," "EVERY THREE YEARS" or "ABSTAIN." If you elect to "ABSTAIN," the abstention has the same effect as a vote against the other three options. The Company's corporate by-laws require the affirmative vote of a majority of those shares present in person or represented by proxy and entitled to vote on this proposal at the annual meeting.

Voting on Other Business Items

When voting on other business matters, you may vote "FOR," "AGAINST" or "ABSTAIN."  If you elect to "ABSTAIN," the abstention has the same effect as a vote "AGAINST."  As provided in the Company's corporate by-laws, business proposals, other than the election of the directors, require the affirmative vote of a majority of those shares present in person or represented by proxy and entitled to vote on those proposals at the annual meeting.

How Shares will be Voted by Proxy or Voting Instructions

If you provide specific instructions with regard to certain proposals, your shares will be voted as you instruct on such proposals.  If you sign your proxy card or voting instruction card without giving specific instructions, your shares will be voted in accordance with the recommendations of the Board ("FOR" the Company's nominees to the Board, "FOR" ratification of BKM Sowan Horan, LLP as the Company's independent registered public accounting firm for 2017, "FOR" the approval of the compensation for the Company's named executives, "EVERY YEAR" for the approval of the frequency of a non-binding vote on the compensation of the Company's named executive officers, and "FOR" the approval and ratification of the First Amendment to the Company's Stock and Incentive Plan and of certain awards under the Stock and Incentive Plan).

Broker Non-Votes

If you hold shares beneficially in street name and do not provide your broker with voting instructions, your shares may constitute "broker non-votes."  Generally, broker non-votes occur on a matter when a broker is not permitted to vote on that matter without instructions from the beneficial owner, and instructions are not given.  In tabulating the voting result for any particular proposal, shares that constitute broker non-votes are not considered entitled to vote on that proposal.  Thus, broker non-votes will not affect the outcome of any matter being voted on at the meeting, assuming that a quorum is obtained.



7


Additional Business Proposals Presented at Meeting

Other than the proposals listed in the Notice of Meeting attached hereto, the Board is not aware of any other business to be acted upon at the annual meeting.  However, if you grant a proxy, the persons named as proxy holders will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting.  If for any reason any nominee is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the Board.

Quorum Requirement

The quorum requirement for holding the annual meeting and transacting business is that holders of a majority of the Company stock issued and outstanding and entitled to vote at the meeting, must be present in person or represented by proxy.  Both abstentions and broker non-votes are counted for the purpose of determining the presence of a quorum.

STOCKHOLDER PROPOSALS

Stockholder Proposals Intended to be Included in Proxy Statement

You may submit proposals for consideration at future stockholder meetings.  For a stockholder proposal to be considered for inclusion in the Company's proxy statement for the annual meeting next year, the Corporate Secretary must receive the written proposal at the address above no later than _____________, 2018.  Such proposals also must comply with Securities and Exchange Commission ("SEC") regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials.  Proposals should be addressed to the Corporate Secretary at the address on page 4.

Stockholder Proposals Not Intended to be Included in Proxy Statement

For a stockholder proposal that is not intended to be included in the Company's proxy statement under SEC Rule 14a-8, the stockholder must submit the proposal so that it is received by the Corporate Secretary not later than the close of business 45 days before the date on which the Company first sent its proxy materials for last year's annual meeting of stockholders, or ____________, 2018.  Proposals should be addressed to the Corporate Secretary at the address on page 4.
Stockholder Proposals for Director Candidates

You may propose director candidates for consideration by the Board's Nominations and Governance Committee.  Such recommendations shall include the nominee's name and qualifications for Board membership and shall be received by the Company not later than the close of business 45 days before the meeting date on which the Company first sent its proxy materials for last year's annual meeting of stockholders, or ________________, 2018.  Proposals for director candidates should be directed to the Corporate Secretary at the address on page 4.

8


CORPORATE GOVERNANCE


The Company is committed to maintaining the highest standards of business conduct and corporate governance which we believe are essential to running our business efficiently, serving our stockholders well and maintaining the Company's integrity in the marketplace.  The Company has adopted Corporate Governance Guidelines and Standards of Business Conduct that apply to the Company's principal executive officer, principal financial officer, controller, and all other employees and directors.  The Company's Corporate Governance Guidelines and Standards of Business Conduct, in conjunction with the Certificate of Incorporation, By-laws and Board committee charters, form the framework for governance of the Company.

The Company's Corporate Governance Guidelines, Standards of Business Conduct, Certificate of Incorporation, By-laws and Board committee charters are available on the Company's website at www.trecora.com.  Stockholders may also request free printed copies of these from the Corporate Secretary at the address on page 4.


Directors and Executive Officers

The following sets forth the name and age of each current director of the Company, the date of election of each director, all other positions and offices with the Company held by him or her, and each director's participation on other public company boards.


Name; Current Positions Held & Other Public Company Boards(1)
Age
Director since
Term expires at Annual meeting in
 
Nicholas N. Carter ………………………………….
Chairman of the Board, Member of AMAK Board
 
70
 
 
2004
 
2017
 
Simon Upfill-Brown…………………………………
    President/CEO since July 2015, President of SHR since 2013, Member of  AMAK Board
 
64
 
2014
 
2019
 
John R. Townsend ………………………………….
Chairman of the Compensation
Committee and Member of Audit
Committee
 
63
 
2011
 
2018
 
 
9

Joseph P. Palm 
Chairman of Nominations and Governance
Committee and Member of Compensation
Committee
 
73
 
2011
 
2017
Gary K. Adams. 
Member of Compensation Committee and
Nominations and Governance Committee
Boards: Phillips 66
 
66
 
2012
 
2019
Karen A. Twitchell. 
Chairman of Audit Committee and Member of
Compensation Committee
Boards: Kraton Corporation,
KMG Chemicals, Inc.
 
61
 
2015
 
 
2019
Pamela R. Butcher. 
Member of Audit, Compensation, and
Nominations and Governance Committees
Boards: Pilot Chemical Corp.,
Gruden Topco Holdings
 
59
 
2016
 
 
2017
(1)
Effective February 10, 2017, Allen P. McKee retired from his position on the Board and as a member of the Audit and Compensation Committees.

Mr. Nicholas N. Carter, Chairman of the Board was previously the President and Chief Executive Officer of the Company from July 2009 until his retirement in July 2015, and is a 1975 graduate of Lamar University with a Bachelor of Business Administration in Accounting.  He worked at the Sabine River Authority of Texas as a Project Accountant from 1973 to 1975. From 1975 to 1977 he was a Staff Accountant with Wathen, DeShong and Company, CPA's. From 1977 until 2015 Mr. Carter had been employed by the Company in a succession of positions with increasing and broader operating responsibilities, as follows; 1977 to 1979, Controller of SHR; 1979 to 1982, Facility Manager at a ship dock and terminal facility owned by TOCCO; 1982 to 1987, Treasurer of TOCCO; 1987 to 2013, President of SHR; and 2007 to 2009, Executive Vice President of the Company. This succession of positions with the Company gave Mr. Carter broad experience and knowledge in operations, finances and strategy of the Company. Mr. Carter serves as a Director and President of PEVM of which the Company owns 55% of the outstanding stock. Mr. Carter was appointed to the Board of AMAK in February 2009.  We believe that his experience with the Company provides a wealth of knowledge to our Board.

Mr. Simon Upfill-Brown received undergraduate degrees in chemistry and mathematical statistics from Stellenbosch University, South Africa and a Master of Business Administration from Stanford Graduate School of Business.  He is a National Association of Corporate Directors (NACD) Governance Fellow.  He has over 20 years of senior level experience in international management of coatings, chemicals and renewable resources.  Beginning in 1993 he was President and CEO of Haltermann Inc. Haltermann was a subsidiary of Ascot plc until its acquisition by The Dow Chemical Company in June 2001. He was General Manager of Dow
 
 
10

Haltermann from 2001 until 2008.  Mr. Upfill-Brown was also CEO of his own consulting firm, as well as CEO of a venture-backed algae-to-fuels company spun out of MIT in 2001, and a technology start-up focused on converting organic waste to hydrocarbon fuels. He began his career in the paint and protective coatings industry. Mr. Upfill-Brown joined the Company in 2012 as Executive Vice President and in 2013 was appointed President of SHR.  He was appointed to the AMAK Board in December 2012. In July 2015 he was promoted to the positions of President and CEO of the Company.   We believe that his knowledge and broad experience within the chemical industry, along with strong personal integrity and extensive management experience, provide valuable resources to our Board.

Mr. John R. Townsend has a Bachelor of Science in Chemical Engineering from Louisiana Tech University with over 30 years of experience in the petrochemical industry garnered through his employment with Mobil Chemical Company which subsequently became ExxonMobil Chemical Company.  During his tenure he held the positions of Technical Service Engineer, Technical Department Section Supervisor, Planning Associate, Operations Manager, Plant Manager and Site Manager.  Mr. Townsend retired from ExxonMobil Chemical Company in 2010 and is currently an investor.  We believe that with his vast experience and knowledge of the industry, Mr. Townsend provides a critical resource and skill set to our Board.

Mr. Joseph P. Palm is a graduate of LaSalle University with a Bachelor of Arts and has a Master of Business Administration from Xavier University.  Mr. Palm has over 40 years of experience in the petrochemical industry.  From 1967-1995 Mr. Palm served Rohm and Haas Company in varying positions including Market Manager, Business Development Manager, Product Safety Manager, and Market Development Analyst.  He was awarded the "Golden C Award" by the Commercial Development Association in 1992.  From 1997-2010 he served INEOS Oligomers as Business Development Manager and Marketing Manager.  He was awarded the BP Breakthrough Award in 2000 for his work to bring new products to the marketplace.  Mr. Palm retired from INEOS Oligomers in 2010.  We believe that his knowledge and experience provide valuable resources to our Board.

Mr. Gary K. Adams holds a Bachelor of Science in Industrial Management from the University of Arkansas and has over 40 years of experience in the petrochemical and plastics industries.  He started his chemical industry career with Union Carbide and after 15 years serving in a number of positions at Union Carbide, Mr. Adams joined Chemical Market Associates Inc. ("CMAI).  He began at CMAI as the director of the Monomers Market Advisory Service and progressed to President, CEO and Chairman of the Board from 1997 until its acquisition by IHS in March 2017.  Mr. Adams is the former Chief Advisor – Chemicals for IHS as of April 1, 2017.  Mr. Adams is a director of Phillips 66 and previously served on the boards of Westlake Chemical Partners LP and Phillips 66 Partners LP from 2013 to 2016.  We believe that his knowledge of the global chemical market provides a critical resource to our Board.

Ms. Karen A. Twitchell holds a Bachelor of Arts in Economics from Wellesley College and a Master of Business Administration from Harvard University.  She has over 35 years of experience in financial management, including financings and capital structures, mergers and acquisitions, investor relations, accounting matters and enterprise risk management. Ms. Twitchell serves on the public company boards of KMG Chemicals, Inc. and Kraton Corporation. From 2010 until her retirement in 2013, Ms. Twitchell served as the Executive Vice President and Chief Financial Officer of Landmark Aviation, where she was responsible for all
 
 
11

financial and strategic planning functions.  Previously she was Vice President and Treasurer of LyondellBasell Industries and Lyondell Chemical Company from 2001 to 2009. Prior to that she was Vice President and Treasurer of Kaiser Aluminum Corporation and Southdown, Inc., and she began her career as an investment banker with Credit Suisse First Boston.  Ms. Twitchell brings important experience to the Board in accounting matters, financings and capital structure, merger and acquisition transactions, investor relations and enterprise risk management.

Ms. Pamela R. Butcher holds a Bachelor Degree in Agronomy and a Master of Science Degree from Purdue University.  In addition, she is a graduate of the Northwestern University Marketing Executive Program and has participated in the Prince of Wales Sustainability Conference and the Asian Master Class on Asian Business.  Ms. Butcher was the CEO, President and Chief Operating Officer of Pilot Chemical Corp. from January 2010 through July 2016, when she retired.  Previously, she worked 29 years for The Dow Chemical Company where she held a variety of executive leadership positions including Business Vice President of Specialty Chemicals, Vice President of Corporate Marketing & Sales and Vice President and General Manager of Adhesives and Sealants.  She was a distinguished recipient of Dow's Genesis Award for people excellence, which is Dow's highest recognition for people leadership.  She currently serves as a director on the boards of Pilot Chemical Corp., and Gruden Topco Holdings.  Previously, she also served on the board of trustees for the Chemical Educational Foundation, as a member of the US Bank Regional Advisory Board, on the Board of the American Cleaning Institute and the Ohio Manufacturers' Association.  Her broad knowledge of the chemical industry provides a valuable resource to our Board.

None of our directors is party to any legal proceedings required to be disclosed under Item 103 of Regulation S-K.

The table below shows each director's skillset.
 
Experience, expertise or attribute
 
Adams
Butcher
Carter
Palm
Townsend
Twitchell
Upfill-Brown
Strategic Executive Leadership: identify and critically assess strategic opportunities and threats to company and organization. Provide strategic guidance that clearly aligns policies and business objectives and the best path forward.
*
*
*
 
*
*
*
Global Business Acumen: applies a global comprehension of our business to decisions as success depends upon growing sales outside the United States. Balance the demand impact on our U.S. customers into our plans and decisions as they become more dependent on exports of their products.
*
*
*
*
   
*
Chemical Industry - Operations: Application of direct operating experience; imparting a practical and experience-based understanding of developing, implementing and assessing operating plans and business strategy.
*
*
*
 
*
 
*
Chemical Industry - Commercial: Applies a broad and direct understanding of commercial transacting experience in the sector and industries in which we participate.
*
*
*
*
   
*
 
 
12

 
Corporate Finance/ Capital Allocation: Provide deep understanding of various methods to raise capital and manage cash flow through experience. Defining the best option for capital deployment and most efficient means to finance growth are key components of our future success.
 
*
   
*
*
 
Financial Expertise / Literacy: is important because it assists our directors in understanding and overseeing our financial reporting and internal controls.
*
*
*
*
*
*
*
Mergers and Acquisitions: Application of direct experience in sourcing, examining, developing effective negotiating tactics, and executing strategic combinations is critical to our success relative to achieving long term growth plans.
 
*
 
*
*
*
*
Investments/Fund Management/Investor Relations: Experience is important in evaluating our financial statements, relations with the investment community and guiding our shareholder interactions.
 
*
*
   
*
*
Risk & Compliance Management: Identify primary risks to the organization related to each significant aspect of business. Ability to monitor risk and compliance and knowledge of legal and regulatory requirements is crucial to providing effective guidance in this regard.
*
*
*
*
*
*
*
Public Company Board Service & Governance: Experience on other corporate boards provides directors with unique insights as they have a practical understanding of organizations, processes, strategy, and risk management and know how to drive change.
*
       
*
 

The following sets forth the name and age of each executive officer of the Company as of December 31, 2016, the date of his or her appointment and all other positions and offices with the Company held by him or her.

Name
Positions
Age
Appointed
Simon Upfill-Brown
President, Chief Executive Officer/Director, President SHR/ AMAK Board Member
63
2015/2014/2013/2014
Mark Williamson
Vice President of Marketing SHR
61
1996
Sami Ahmad
Chief Financial Officer
55
2016
Connie Cook
Vice President of Accounting and Compliance, Secretary, Treasurer and Secretary, Treasurer - TOCCO
53
2016/2008/2004
Ronald Franklin
Vice President of Manufacturing SHR/TC
58
2010/2015
Peter Loggenberg
President TC
54
2014
 

 
13

Each executive officer of the Company serves for a term extending until his or her successor is elected and qualified.

Please refer to the director discussion above for Mr. Upfill-Brown's business experience.

Mr. Mark Williamson received his Bachelor of Business Administration in Marketing from Sam Houston University.  He has been Vice President of Marketing for SHR since 1996.  He has over 30 years within the petrochemical industry.  He joined SHR in 1987 as sales manager.  Before SHR, Mr. Williamson spent 5 years with Ashland Chemicals as Sales and Marketing Representative and Branch Manager.

Mr. Sami Ahmad received his Bachelor of Science in Chemical Engineering from the University of Pennsylvania and a Master of Business Administration from the University of Chicago. Mr. Ahmad has over 25 years of experience in corporate finance, accounting, and engineering. Prior to joining the Company in October 2016, Mr. Ahmad was Chief Financial Officer of Armada Water Assets, Inc., an oil field service company, which he helped build from its formation in 2013.  Previously, he served as Chief Financial Officer for Southwest Water Company, and as Vice President and Treasurer for Exterran, a publicly-owned oil and gas services company.  Earlier Mr. Ahmad worked for LyondellBasell Industries and Lyondell Chemical Company from 1998 to 2009, where his positions included Director, Corporate Development; Assistant Treasurer, Corporate Finance; and Director, Investor Relations.  From 1991 through 1998 he held various positions with ARCO Chemical Company where his responsibilities included managing acquisitions and business development, production, and investor relations.

Ms. Connie Cook received her Bachelor of Business Administration in Accounting from Lamar University in 1991 and is a CPA.  She became Vice President of Accounting and Compliance of the Company in October 2016.  She was Chief Financial Officer of the Company from January 2011 through October 2016.  In 2008 Ms. Cook became the Secretary/Treasurer of the Company and continues to hold those titles.   In 2004 Ms. Cook became the Secretary/Treasurer of TOCCO and continues to hold those titles.  She was the Assistant Secretary of the Company from 2007-08.  She was the Accounting Manager of TOCCO from 1991-96.  She was the Controller of TOCCO from 1996 to 2011 and was the Assistant Secretary of TOCCO from 1992-2004.

Mr. Ronald Franklin received his Bachelor of Science in Electrical Engineering from Lamar University in 1982 and his Master of Engineering Management from Lamar University in 1994.  He has been Vice President of Manufacturing for SHR and TC since August 2015.  He became Vice President of Manufacturing for SHR in August 2010.  Mr. Franklin joined SHR in November 2009 as Manager of Business Development.  Prior to joining SHR, he worked as a process industry consultant specializing in merger and acquisition due diligence.  Mr. Franklin has over 30 years of petrochemical process experience at Texaco Chemical Company, Huntsman Corporation and Flint Hills Resources.  The highest positions reached were Director of Operations for Surfactants and Director of Operations for PO/MTBE.

Dr. Peter Loggenberg received his Bachelor of Science in Chemistry and Mathematics, Honors Degree in Chemistry, Master of Science in Physical Chemistry and a PhD in Chemistry (Catalysis).  He has been President of Trecora Chemical since the Company's acquisition of SSI
 
 
14

Chusei, Inc. in October 2014.  He served as President of SSI Chusei, Inc. from 2009 through 2014.  He has over 25 years of experience in the chemical industry with over 15 years at the corporate level. He continued as President of Trecora Chemical upon the Company's acquisition, a position which he has held since 2010.

There are no family relationships among our directors and executive officers.

We have adopted a Standards of Business Conduct that apply to the Company's principal executive officer, principal financial officer, principal accounting officer and controller, and to persons performing similar functions.

Board Leadership Structure

The Board will annually elect one director to serve as Chairman of the Board. The Chairman of the Board may also be the CEO or any other officer of the Corporation. The Board does not have a policy on whether the roles of Chairman of the Board and CEO should be separate or combined. This allows the Board flexibility to determine whether the two roles should be separated or combined based upon the Company's needs and the Board's assessment of the Company's leadership from time to time.  Mr. Carter retired on July 15, 2015, from his position as President and CEO of the Company.  He remains a director of the Company and AMAK, as well as Chairman of the Board.  He possesses an in-depth knowledge of the Company and the array of opportunities and challenges to be faced. This knowledge was gained through more than 35 years of successful experience in progressively senior positions.  The Board believes that these experiences and other insights put Mr. Carter in the best position to provide broad leadership for the Board as it considers strategy and exercises its fiduciary responsibilities to shareholders.  Further, the Board has demonstrated its commitment and ability to provide independent oversight of management.  Each independent director has access to the CEO and other Company executives on request; may call meetings of the independent directors; and, may request agenda topics to be added or dealt with in more detail at meetings of the full Board or an appropriate Board committee.

Board Policy Regarding Voting for Directors

The Company has implemented a plurality vote standard in the election of directors.  In addition, the Company's Corporate Governance Guidelines state that any director nominee standing for re-election who receives a greater number of votes "WITHHELD" than votes "FOR" such election will tender his or her resignation for consideration by the Nominations and Governance Committee.  Within 90 days after certification of the election results the Board of Directors will decide, through a process managed by the Nominations and Governance Committee and excluding the nominee in question, whether to accept the resignation.  Absent a compelling reason for the director to remain on the Board, the Board shall accept the resignation.

Board Independence

The Company's Corporate Governance Guidelines and the NYSE listing standards require that a majority of the Board consist of independent directors.  The Board has determined that each of Pamela R. Butcher, John R. Townsend, Joseph P. Palm, Gary K. Adams, and Karen A. Twitchell is independent within the meaning of the NYSE listing standards.  The Board previously
 
 
15

determined that Allen P. McKee was independent within the meaning of the NYSE listing standards during his service on the Board.

Meetings of the Board and Its Committees

Quarterly Board meetings are typically held in person.  Other Board meetings may be held via telephone conference call due to the geographical distance between members of the Board.  In the instance where all members cannot meet or be contacted at once, members may be contacted individually, and upon agreement, Unanimous Consent Resolutions may be signed.  During 2016 the Board held five meetings.

Board Structure and Committee Composition

As of the date of this proxy statement, our Board has seven directors and the following three standing committees: (1) Audit, (2) Compensation, and (3) Nominations and Governance.  Committee membership and meetings during the last fiscal year and the function of each of the standing committees are described below.  Each of the standing committees operates under a written charter adopted by the Board.  Committee charters are available on the Company's website at www.trecora.com.  Free printed copies are also available to any stockholder who makes a request to the address on page 4.

All directors, including Allen P. McKee during his service on the Board, attended at least 75% of all Board and applicable standing committee meetings during 2016.  Directors are also encouraged to attend annual meetings of Company stockholders.  All of our then-current directors attended our 2016 annual meeting of stockholders.

 
Name of Director
Audit
Compensation
Nominations and Governance
Non-Employee Directors:1
     
Pamela R. Butcher2
Member
Member
Member
John R. Townsend
Member
Chair
 
Joseph P. Palm
 
Member
Chair
Gary K. Adams
 
Member
Member
Karen A. Twitchell
Chair
Member
 
Nicholas N. Carter
     
Employee Director:
     
Simon Upfill-Brown
     
Number of Meetings in Fiscal 2016
6
10
6
Notes to Board Committee Table

1
Allen P. McKee served as a member of the Audit and Compensation Committees until his retirement from the Board in February 2017.
2
Ms. Butcher was appointed to the Board on November 17, 2016. She joined the Audit Committee in February 2017.  She joined the Compensation and Nominations and Governance Committees upon appointment.

Audit Committee

The Company has a separately-designated standing Audit Committee established in accordance with the Securities Exchange Act of 1934, as amended (the "Exchange Act").  The Audit
 
 
16

Committee assists the Board in fulfilling its responsibilities for generally overseeing the Company's financial reporting processes and the audit of the Company's financial statements, including:

the integrity of the Company's financial statements, including the Company's compliance with legal and regulatory requirements;
 the qualifications and independence of the independent registered public accounting firm; and
the performance of the Company's internal audit function and the independent registered public accounting firm, risk assessment and risk management, and finance and investment functions.

Among other things, the Audit Committee:

prepares the Audit Committee report for inclusion in the annual proxy statement;
annually reviews its charter and performance;
appoints, evaluates and determines the compensation of the independent registered public accounting firm;
reviews and approves the scope of the annual audit, the audit fee and the financial statements;
reviews and approves all permissible non-audit services to be performed by the independent registered public accounting firm;
reviews the Company's disclosure controls and procedures, internal controls, information security policies, internal audit function, and corporate policies with respect to financial information and earnings guidance;
reviews regulatory and accounting initiatives and off-balance sheet structures, oversees the Company's compliance programs with respect to legal and regulatory requirements;
oversees investigations into complaints concerning financial matters;
reviews other risks that may have a significant impact on the Company's financial statements;
reviews and oversees treasury matters, the Company's loans and debt, loan guarantees and outsourcings; and
reviews the Company's capitalization and operations; and coordinates with the Compensation Committee regarding the cost, funding and financial impact of the Company's equity compensation plans and benefit programs.

The Audit Committee works closely with management as well as the independent registered public accounting firm.  In performance of their oversight function, the Audit Committee has the authority to obtain advice, assistance from, and receive appropriate funding from the Company for, outside legal, accounting or other advisors as the Audit Committee deems necessary to carry out its duties.

The individuals serving on the Audit Committee of the Board of Directors are Karen A. Twitchell (Chair), Pamela R. Butcher and John R. Townsend.  The Board has determined that each of the Committee members, including Allen P. McKee during his service on the Audit Committee, is independent pursuant to SEC rules and NYSE listing standards governing audit committee members.  The Board also determined that Karen A. Twitchell and Pamela R. Butcher are audit committee financial experts as defined by SEC rules and NYSE listing standards.
 

 
17

The charter of the Audit Committee is available on the Company's website at www.trecora.com.  A free printed copy is also available to any stockholder who requests it from the Corporate Secretary at the address on page 4.

Compensation Committee

The Compensation Committee:

discharges the Board's responsibilities relating to the compensation of the Company's executives and directors;
prepares the report required to be included in the annual proxy statement;
provides general oversight of the Company's compensation structure;
reviews and provides guidance on the Company's human resources programs; and
retains and approves the terms of the retention of compensation consultants and other compensation experts.

Other specific duties and responsibilities of the Compensation Committee include:

reviewing and approving objectives relevant to executive officer compensation, evaluating performance and determining the compensation of executive officers in accordance with those objectives;
approving severance arrangements and other applicable agreements for executive officers;
overseeing the Company's equity-based and incentive compensation plans; overseeing non-equity based benefit plans and approving any changes to such plans involving a material financial commitment by the Company;
monitoring workforce management programs; establishing compensation policies and practices for service on the Board and its committees;
developing guidelines for and monitoring director and executive stock ownership; and
annually evaluating its performance and its charter.

The individuals serving on the Compensation Committee of the Board of Directors are John R. Townsend (Chair), Pamela R. Butcher, Karen A. Twitchell, Gary K. Adams, and Joseph P. Palm.  The Board determined that each of the Committee members, including Allen P. McKee during his service on the Committee, is independent pursuant to NYSE listing standards governing compensation committee members.

The charter of the Compensation Committee is available on the Company's website at www.trecora.com.  A free printed copy is also available to any stockholder who requests it from the Corporate Secretary at the address on page 4.

Nominations and Governance Committee

The Nominations and Governance Committee:

recommends candidates to be nominated for election as directors at the Company's annual meeting, consistent with criteria approved by the Board;
 
 
18

develops and regularly reviews corporate governance principles and related policies for approval by the Board;
oversees the organization of the Board to discharge the Board's duties and responsibilities properly and efficiently; and
sees that proper attention is given and effective responses are made to stockholder concerns regarding corporate governance.

Other specific duties and responsibilities of the Nominations and Governance Committee include:

annually assessing the size and composition of the Board, including developing and reviewing director qualifications for approval by the Board;
identifying and recruiting new directors and considering candidates proposed by stockholders; recommending assignments of directors to committees to ensure that committee membership complies with applicable laws and listing standards;
conducting annual evaluations of Board performance and recommending improvements; and
conducting a preliminary review of director independence and financial literacy and expertise of Audit Committee members and making recommendations to the Board relating to such matters; and overseeing director orientation and continuing education.

The Nominations and Governance Committee also reviews and approves any executive officers for purposes of Section 16 of the Exchange Act ("Section 16 Officers") standing for election for outside for-profit boards of directors; and reviews stockholder proposals and recommends Board responses.

The individuals serving on the Nominations and Governance Committee of the Board of Directors are Joseph P. Palm (Chair), Pamela R. Butcher and Gary K. Adams.  The Board has determined that each of the Committee members is independent pursuant to NYSE listing standards governing nominating committee members.

The charter of the Nominations and Governance Committee is available on the Company's website at www.trecora.com.  A free printed copy is also available to any stockholder who requests it from the Corporate Secretary at the address on page 4.

Stockholder Recommendations

The policy of the Nominations and Governance Committee is to consider properly submitted stockholder recommendations of candidates for membership on the Board as described below under "Identifying and Evaluating Candidates for Directors."  In evaluating such recommendations, the Nominations and Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Board and to address the membership criteria set forth below under "Director Qualifications."  Any stockholder recommendations proposed for consideration by the Nominations and Governance Committee should include the candidate's name and qualifications for Board membership and should be addressed to the Corporate Secretary at the address on page 4.

19


Director Qualifications

The Company maintains certain criteria that apply to nominees recommended for a position on the Company's Board.  Under these criteria, members of the Board should have the highest professional and personal ethics and values, consistent with longstanding Company values and standards.  They should have broad experience at the policy-making level in business, government, education, technology or public service.  They should be committed to enhancing stockholder value and should have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience.  Their service on other boards of public companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly all director duties.  Each director must represent the interests of all stockholders of the Company.

Identifying and Evaluating Candidates for Directors

The Nominations and Governance Committee uses a variety of methods for identifying and evaluating nominees for director.  The Nominations and Governance Committee regularly assesses the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise.  In the event that vacancies are anticipated, or otherwise arise, the Nominations and Governance Committee considers various potential candidates for director.  Candidates may come to the attention of the Nominations and Governance Committee through current Board members, professional search firms, stockholders or other persons.  Identified candidates are evaluated at regular or special meetings of the Nominations and Governance Committee and may be considered at any point during the year.  As described above, the Nominations and Governance Committee considers properly submitted stockholder recommendations for candidates for the Board to be included in the Company's proxy statement.  Following verification of the stockholder status of those persons proposing candidates, recommendations are considered together by the Nominations and Governance Committee at a regularly scheduled meeting, which is generally the first or second meeting prior to the issuance of the proxy statement for the Company's annual meeting.  If any materials are provided by a stockholder in connection with the nomination of a director candidate, such materials are forwarded to the Nominations and Governance Committee.  In evaluating such nominations, the Nominations and Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Board.

The Company recognizes the strength and effectiveness of the Board reflects the balance, experience, and diversity of the individual directors; their commitment; and importantly, the ability of directors to work effectively as a group in carrying out their responsibilities. The Company seeks candidates with diverse backgrounds who possess knowledge and skills in areas of importance to the Corporation.  In addition to seeking a diverse set of business or academic experiences, the Nominations and Governance Committee seeks a mix of nominees whose perspectives reflect diverse life experiences and backgrounds. The Nominations and Governance Committee does not use quotas but considers diversity when evaluating potential new directors.

Board Oversight of Risk Management

The Board oversees management of risk. The Board regularly reviews information regarding the Company's business and operations, including the key operational and/or financial risks. As
 
20

described below, consistent with SEC regulations and NYSE requirements, the Board committees are also engaged in overseeing risk associated with the Company.

The Audit Committee oversees management of exposure to financial risks and monitors and evaluates the effectiveness of the Company's risk management and risk assessment guidelines and policies.

The Compensation Committee oversees the management of risks relating to the Company's executive compensation plans and incentive structure.

The Nominations and Governance Committee oversees the Company's ethics and compliance programs.

While each committee is responsible for evaluating certain risks and overseeing the management of those risks, the full Board is ultimately responsible for overseeing the Company's risk exposures and management thereof, and the Board is regularly informed on these matters through committee and senior management presentations.

Executive Sessions

Executive sessions of independent directors are held at least four times a year.  During 2016 six meetings were held.  Each session is scheduled and chaired by one of the independent directors on a rotational basis.  Any independent director may request that an additional executive session be scheduled.

Communications with the Board

Individuals may communicate with the Board by contacting:

Simon Upfill-Brown
Trecora Resources
1650 Highway 6 South, Suite 190
Sugar Land, TX  77478

All directors have access to this correspondence.  In accordance with instructions from the Board, the Secretary to the Board reviews all correspondence, organizes the communications for review by the Board and relays communications to the full Board or individual directors, as appropriate.  The Company's independent directors have requested that certain items that are unrelated to the Board's duties, such as spam, junk mail, mass mailings, solicitations, resumes and job inquiries, not be forwarded.

Communications that are intended specifically for the independent directors or non-management directors should be sent to the address noted above to the attention of independent directors.


21




COMMON STOCK OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information, as of April 1, 2017, concerning beneficial ownership by:
(1)
Company directors and nominees, each of the named executive officers, and all individuals owning more than 5% of the Company's outstanding Common Stock and
(2)
Current directors and Company executive officers as a group.

The information provided in the table is based on the Company's records, information filed with the SEC and information provided to the Company, except where otherwise noted.

The number of shares beneficially owned by each entity or individual is determined under SEC rules, and the information is not necessarily indicative of beneficial ownership for any other purpose.  Under such rules, beneficial ownership includes any shares as to which the entity or individual has sole or shared voting power or investment power and also any shares that the entity or individual has the right to acquire as of April 1, 2017, through the exercise of any stock option or other right.  Unless otherwise indicated, each person has sole voting and investment power (or shares such powers with his or her spouse) with respect to the shares set forth in the following table.

BENEFICIAL OWNERSHIP TABLE

 
Name of Beneficial Owner
 
Amount and Nature of Beneficial Ownership1
   
 
Note
   
Percent of
Class
 
Current Directors:
                 
Pamela R. Butcher
   
-
           
*
 
John R. Townsend
   
61,167
     
2,3,4
     
*
 
Joseph P. Palm
   
103,733
     
2,4
     
*
 
Gary K. Adams
   
80,000
     
2
     
*
 
Karen A. Twitchell
   
10,500
     
4
     
*
 
Nicholas N. Carter
   
717,500
     
2,3,4
     
2.9
%
Current Director or Named Executive Officer:
                       
Simon Upfill-Brown
   
226,472
     
2,3,4
     
*
 
Sami Ahmad
   
-
             
*
 
Connie J. Cook
   
131,140
     
2,3,4
     
*
 
Mark D. Williamson
   
133,964
     
2,3,4
     
*
 
Ronald R. Franklin
   
134,333
     
2,3,4
     
*
 
Peter M. Loggenberg
   
20,135
     
4
     
*
 
All current directors and executive officers as a group (12 persons)
   
1,618,944
     
2,3,4
     
6.6
%
                         
Individuals with beneficial ownership of more than 5% of outstanding Common Stock
                       
Fahad Mohammed Saleh Al Athel
   
4,167,044
             
17.0
%
Wellington Management Company LLP
   
2,647,121
             
10.8
%

Notes to Beneficial Ownership Table

 * Indicates beneficial ownership of less than 1% of shares outstanding.
 

 
22

(1) Unless otherwise indicated, to the knowledge of the Company, all shares are owned directly and the owner has sole voting and investment power (includes shares of restricted stock).
(2) Includes 781,493 aggregated shares which these directors and executive officers have the right to acquire through the exercise of presently exercisable stock options.  These options are held as follows:  Mr. Carter 204,030 shares; Mr. Palm 91,833 shares; Mr. Upfill-Brown 122,500 shares; Mr. Adams 80,000 shares; Mr. Townsend 20,000 shares; Mr. Franklin 97,650 shares; Mr. Williamson 83,330 shares; and Ms. Cook 82,150 shares.
(3) Includes 130,000 aggregated shares which certain directors and executive officers have the right to acquire through the exercise of stock options or other rights exercisable presently or within 60 days.  These options are held as follows:  Mr.Upfill-Brown 30,000 shares; Mr. Franklin 14,500 shares; Mr. Williamson 16,250 shares; Mr. Carter 37,500 shares; Mr. Townsend 20,000 shares, and Ms. Cook 11,750 shares.
(4) Includes 71296 aggregated shares which these directors and executive officers have the right to acquire presently or upon vesting within 60 days.  These shares are held as follows:  Mr. Upfill-Brown 18,020 shares; Mr. Loggenberg 6,715 shares; Mr. Franklin 5,253 shares; Mr. Williamson 5,662 shares; Mr. Carter 11,566 shares; Ms. Twitchell 6,000 shares, Mr. Townsend 7,022 shares, Mr. Palm 6,276 shares, and Ms. Cook 4,782 shares.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act, requires our directors, executive officers and holders of more than 10% of Company common stock to file reports with the SEC regarding their ownership and changes in ownership of our securities.  The Company believes that during fiscal 2016, its directors and executive officers complied with all Section 16(a) filing requirements.  In making these statements, the Company has relied upon examination of the copies of Forms 3, 4, and 5, and amendments thereto, provided to the Company and the written representations of its directors and executive officers.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company directly owns approximately 55% of the outstanding capital stock of PEVM. Mr. Carter is currently a director and President of PEVM.  The Company is providing funds necessary to cover the PEVM operations. During 2016 and 2015, the Company advanced approximately $20,000 and $19,000, respectively, for such purposes.  As of December 31, 2016, PEVM owed the Company approximately $614,000 as a result of advances made by the Company. During the first quarter of 2017, the Company advanced approximately $5,000 and at March 31, 2017, PEVM owed the Company approximately $620,000.  The indebtedness is secured by real estate but bears no interest.

Consulting fees of approximately $73,000 and $37,000 were incurred during 2016 and 2015, respectively from Chairman of the Board Nicholas Carter.   During the first quarter of 2017, consulting fees of approximately $18,000 were incurred from Mr. Carter.  Due to his history and experience with the Company as President and CEO and to provide continuity after his retirement, a three year consulting agreement was entered into with Mr. Carter on July 16, 2015. At December 31, 2016, and March 31, 2017, we had no outstanding liability payable to Mr. Carter.

Consulting fees of approximately $33,000, $25,000, and $52,000 were incurred during 2016, 2015, and 2014, respectively from IHS Global FZ LLC where Company Director Gary K. Adams held the position of Chief Advisor – Chemicals until April 1, 2017.  During the first quarter of 2017, we incurred consulting fees of approximately $27,000 from IHS.  At December 31, 2016, and March 31, 2017, we had no outstanding liability payable to IHS Global FZ LLC.
 

 
23

Review, Approval or Ratification of Transactions with Management and Others

The Company's Standards of Business Conduct addresses conflicts of interest and is available on our website.  Our chief executive officer, chief financial officer, principal accounting officer and controller, and persons performing similar functions are required to abide by this code by avoiding activities that conflict with, or are reasonably likely to conflict with, the best interests of the Company and its stockholders.  Personal activities, interests, or relationships that would or could negatively influence judgment, decisions, or actions must be disclosed to the Board with prompt and full disclosure for Board review and/or action.

We also solicit information from our directors and executive officers annually in connection with preparation of disclosures in our proxy statement.  These questionnaires specifically seek information pertaining to any "related-person" transaction.

PROPOSAL NO. 1

ELECTION/RE-ELECTION OF DIRECTORS

There are two directors standing for re-election and one director standing for election to our Board this year.  The directors standing for re-election are Nicholas N. Carter and Joseph P. Palm.  They have served as directors since 2004 and 2011, respectively, and will serve a three year term expiring in 2020.  The director standing for election is Pamela R. Butcher.  She has served as a director since November 17, 2016, and will serve a one year term expiring in 2018.

There are no family relationships among our executive officers and directors.

If you sign your proxy or voting instruction card but do not give instructions with respect to voting for directors, your shares will be voted for the person(s) recommended by the Board.  If you wish to give specific instructions with respect to voting for directors, you may do so by indicating your instructions on your proxy or voting instruction card.

The nominees have indicated to the Company that they will be available to serve as directors.  In the event that the nominee should become unavailable, however, the proxy holders, Charles Goehringer, Jr. and/or Connie Cook, will vote for a nominee or nominees designated by the Board.

The Company's Corporate Governance Guidelines state that any director nominee standing for re-election who receives a greater number of votes "WITHHELD" than votes "FOR" such election, will tender his or her resignation for consideration by the Nominations and Governance Committee.  Within 90 days after certification of the election results the Board of Directors will decide, through a process managed by the Nominations and Governance Committee and excluding the nominee in question, whether to accept the resignation.  Absent a compelling reason for the director to remain on the Board, the Board shall accept the resignation.



24



Vote Required

 As provided in the Company's corporate by-laws, directors are elected upon a plurality vote of the stockholders.  Therefore, the director nominees who receive the highest number of "FOR" votes are elected.

Our Board recommends a vote FOR the election/re-election to the BOARD of the following nominees:

Nicholas N. Carter
Director since 2004
Current Age 70
Nicholas N. Carter, Chairman of the Board, was previously the President and Chief Executive Officer of the Company from July 2009 until his retirement in July 2015, and is a 1975 graduate of Lamar University with a Bachelor of Business Administration in Accounting.  He worked at the Sabine River Authority of Texas as a Project Accountant from 1973 to 1975. From 1975 to 1977 he was a Staff Accountant with Wathen, DeShong and Company, CPA's. From 1977 until 2015 Mr. Carter had been employed by the Company in a succession of positions with increasing and broader operating responsibilities, as follows; 1977 to 1979, Controller of SHR; 1979 to 1982, Facility Manager at a ship dock and terminal facility owned by TOCCO; 1982 to 1987, Treasurer of TOCCO; 1987 to 2013, President of SHR; and 2007 to 2009, Executive Vice President of the Company. This succession of positions with the Company gave Mr. Carter broad experience and knowledge in operations, finances and strategy of the Company. Mr. Carter serves as a Director and President of PEVM of which the Company owns 55% of the outstanding stock. Mr. Carter was appointed to the Board of AMAK in February 2009.  We believe that his experience with the Company provides a wealth of knowledge to the Board.
 
Joseph P. Palm
Director since 2011
Current Age 73
Mr. Joseph P. Palm is a graduate of LaSalle University with a Bachelor of Arts and has a Master of Business Administration from Xavier University.  Mr. Palm has over 40 years of experience in the petrochemical industry.  From 1967-1995 Mr. Palm served Rohm and Haas Company in varying positions including Market Manager, Business Development Manager, Product Safety Manager, and Market Development Analyst.  He was awarded the "Golden C Award" by the Commercial Development Association in 1992.  From 1997-2010 he served INEOS Oligomers as Business Development Manager and Marketing Manager.  He was awarded the BP Breakthrough Award in 2000 for his work to bring new products to the marketplace.  Mr. Palm retired from INEOS Oligomers in 2010.  We believe that his knowledge and experience provide valuable resources to our Board.
 
 
 
25

 
 
Pamela R. Butcher
Director since 2016
Current Age 59
Ms. Pamela R. Butcher holds a Bachelor Degree in Agronomy and a Master of Science Degree from Purdue University.  In addition, she is a graduate of the Northwestern University Marketing Executive Program and has participated in the Prince of Wales Sustainability Conference and the Asian Master Class on Asian Business.  Ms. Butcher was the CEO, President and Chief Operating Officer of Pilot Chemical Corp. from January 2010 through July 2016, when she retired.  Previously, she worked 29 years for The Dow Chemical Company where she held a variety of executive leadership positions including Business Vice President of Specialty Chemicals, Vice President of Corporate Marketing & Sales and Vice President and General Manager of Adhesives and Sealants.  She was a distinguished recipient of Dow's Genesis Award for people excellence, which is Dow's highest recognition for people leadership.  She currently serves as a director on the boards of Pilot Chemical Corp., and Gruden Topco Holdings.  Previously, she also served on the board of trustees for the Chemical Educational Foundation, as a member of the US Bank Regional Advisory Board, on the Board of the American Cleaning Institute and the Ohio Manufacturers' Association.  Her broad knowledge of the chemical industry will provide a valuable resource to our board of directors.
 

NON-EMPLOYEE DIRECTOR COMPENSATION

The following table provides a summary of compensation earned by members of our Board during the year ended December 31, 2016.

2016 Non-Employee Director Compensation

Name
 
Fees Earned or
Paid in Cash
($)(1)
   
Stock Awards
($)(2)
   
Total
($)
 
                   
Allen P. McKee3
   
84,000
     
371,703
     
455,703
 
John R. Townsend
   
91,500
     
300,000
     
391,500
 
Joseph P. Palm
   
75,500
     
300,000
     
375,500
 
Gary K. Adams
   
76,000
     
-
     
76,000
 
Karen A. Twitchell
   
86,500
     
-
     
86,500
 
Nicholas N. Carter
   
76,750
     
-
     
76,750
 
Pamela R. Butcher
   
10,880
     
262,500
     
273,380
 

(1)
In the aggregate, this column includes committee fees for 2016 in the amount of $106,849, Company board fees in the amount of $336,781, subsidiary board fees in the amount of $10,000, AMAK board representation in the amount of $10,000, and per diem amounts of $37,500.
(2)
Represents the aggregate grant date fair value of restricted stock awards granted to the non-employee directors in 2016, pursuant to Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718 ("ASC 718"), disregarding any estimates for forfeitures.  These amounts reflect the Company's total estimated accounting expense and may not correspond to the actual value that will be realized by the non-employee directors.  For information on the valuation assumptions, see "Note 2 – Summary of Significant Accounting Policies – Share-Based Compensation" and "Note 16 – Share-Based Compensation" in the notes to our consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
 
 
26

 
(3)
Mr. McKee retired effective February 10, 2017.

The following table presents information concerning outstanding equity awards held by the directors as of December 31, 2016.

Outstanding Non-Employee Director Equity Awards at 2016 Fiscal Year-End

   
Option awards
   
Stock awards
 
Name
 
Number of Securities Underlying Unexercised Options
(#) Exercisable
   
Number of Securities Underlying Unexercised Options
(#) Unexercisable
   
Equity incentive plan awards: number of securities underlying unexercised unearned options
(#)
   
Option exercise price
($)
   
Option Expiration date
   
Number of Shares or units of stock that have not vested
(#)
   
Market value of shares or units of stock that have not vested
(#)
   
Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#)
   
Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested
($)
 
Karen A. Twitchell
   
--
     
--
     
--
     
--
     
--
     
24,000
   
$
297,360
     
--
     
--
 
John R. Townsend
   
20,000
     
--
     
--
   
$
4.09
   
05/01/21
     
28,090
   
$
300,000
     
--
     
--
 
Joseph P. Palm
   
11,833
     
--
     
--
   
$
3.90
   
05/19/21
     
25,105
   
$
300,000
     
--
     
--
 
   
80,000
     
--
     
--
   
$
3.52
   
09/24/21
     
--
     
--
     
--
     
--
 
Gary K. Adams
   
80,000
     
--
     
20,000
   
$
7.14
   
11/14/22
     
--
     
--
     
--
     
--
 
Nicholas N. Carter
   
129,030
     
--
     
--
   
$
4.86
   
1/11/21
     
--
     
--
     
--
     
--
 
   
75,000
     
--
     
75,000
   
$
12.26
   
2/20/24
     
--
     
--
     
--
     
--
 
   
--
     
--
     
--
     
--
     
--
     
34,699
   
$
506,258
     
--
     
--
 
Allen P. McKee
   
--
     
--
     
--
     
--
     
--
     
28,267
   
$
297,369
     
--
     
--
 
Pamela R. Butcher
   
--
     
--
     
--
     
--
     
--
     
21,967
   
$
262,500
     
--
     
--
 

General

A director who is one of our employees receives no additional compensation for his service as a director or as a member of a committee of the Board.  A director who is not one of our employees (a non-employee director) receives compensation for his or her services as described in the following paragraphs per the current policy and upon recommendation by the Compensation Committee and approval by the Board.  Directors are reimbursed for reasonable expenses incurred in connection with attendance at Board and Committee meetings.

Board Compensation

The directors' fees policy adopted in 2015 as recommended by the Compensation Committee proposed annual cash stipends for members of the TREC Board in the amount of $55,000/year
 
 
27

and subsidiary boards of the Company in the amount of $5,000/year for U.S. subsidiaries and $10,000/year for AMAK's Board.  These amounts are to be prorated based upon time of service.  

These amounts were not modified with respect to the 2016 or 2017 year.

Committee Compensation

The directors' fees policy adopted in 2015 as recommended by the Compensation Committee proposed annual cash stipends for members of the Audit Committee in the amount of $15,000, the Compensation Committee in the amount of $10,000, and the Nominations and Governance Committee in the amount of $5,000.  These amounts are to be prorated based upon time of service upon the applicable committee.

These amounts were not modified with respect to the 2016 or 2017 year.  

Equity Compensation

Beginning in 2016 and effective through May 16, 2020, (the date current equity grants to non-employee directors expire), all new equity grants to non-employee directors will be (i) prorated to expire on May 16, 2020 and (ii) limited to the number of shares of restricted Company common stock that equals the number of years then remaining until May 16, 2020 multiplied by $75,000 per year divided by the closing price of the stock on the grant date.  After May 16, 2020, the Company intends to transition to an annual grant of restricted Company common stock to non-employee directors.

In 2015, the equity compensation program for our non-employee directors consisted of grants of 30,000 shares of restricted Company common stock upon appointment of new non-employee directors to vest in equal increments over 5 years (6,000 shares per year).  Prior to 2015, the non-employee directors were eligible to receive stock option awards.  The previous equity compensation policy provided for the grant of 100,000 stock options to be vested over 5 years (20,000 per year) and to be awarded in the quarter following the end of the year to non-employee directors who had attended at least 75% of all called meetings during the year and were serving in full capacity on December 31st of that year.  Certain non-employee directors still hold such stock option awards.

Per Diem Compensation

The directors' fees policy adopted in 2015 allowed per diem payments of $500 per day for non-employee directors who travel to conduct Board business.  Approximately $37,500 was paid for directors' compensation expenses related to per diem payments in 2016.  Approximately $25,500 and $18,500 was paid for directors' compensation expense related to per diem in 2015, and 2014, respectively.

Compensation Committee Interlocks and Insider Participation
 
No member of the Compensation Committee is or has been an executive officer of our Company or had any relationships requiring disclosure by us under the SEC's rules requiring disclosure of
 
 
28

certain relationships and related-party transactions, other than Gary K. Adams.  See "Certain Relationships and Related Transactions" above.  In addition, none of our executive officers has served as a member of a board of directors or a compensation committee (or other committee serving an equivalent function) of any other entity, one of whose executive officers served as a member of the Board or the Committee.  Accordingly, the Committee members have no interlocking relationships required to be disclosed under SEC rules and regulations.  Also, no two directors serve together on both our board and other public company boards or committees.

PROPOSAL NO. 2

RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

We are asking you to ratify the Audit Committee's selection of BKM Sowan Horan, LLP as the Company's independent registered public accounting firm for 2017.  BKM Sowan Horan, LLP has audited the accounts of the Company since June 2010.  The Board considers it desirable to continue the services of BKM Sowan Horan, LLP.

Representatives of BKM Sowan Horan, LLP are expected to be present at the 2017 annual meeting of stockholders to make statements to the stockholders if desired, and to be available to respond to stockholder questions.

The fees billed by BKM Sowan Horan, LLP for professional services rendered to the Company during 2016 and 2015 are set forth below.  The Audit Committee has concluded that the provision of the non-audit services provided by BKM Sowan Horan, LLP to the Company has not and does not impair or compromise their independence, and all such services were pre-approved by the Audit Committee.

Vote Required

The Company's corporate by-laws require the affirmative vote of a majority of those shares present in person or represented by proxy and entitled to vote on this proposal at the annual meeting.

If the stockholders should fail to ratify the selection of the independent registered public accounting firm, the Audit Committee will designate an independent registered public accounting firm as required under the rules of the Exchange Act and in accordance with its charter.

Our Board recommends a vote FOR the ratification of the selection of BKM Sowan Horan, LLP as the Company's independent registered public accounting firm for 2017.

Audit Committee Report

We operate under a written charter approved by us and adopted by the Board of Directors.  Our primary function is to assist the Board of Directors in fulfilling the Board's oversight responsibilities relating to (1) the effectiveness of the Company's internal control over financial reporting, (2) the integrity of the Company's financial statements, (3) the Company's compliance
 
 
29

with legal and regulatory requirements, (4) the qualifications and independence of the Company's independent registered public accounting firm, (5) the performance of the Company's independent registered public accounting firm and internal audit firm and (6) review and approval or ratification of any transaction that would require disclosure under Item 404(a) of Regulation S-K of the rules and regulations of the SEC.

We oversee the Company's financial reporting process on behalf of the Board.  Our responsibility is to monitor this process, but we are not responsible for developing and consistently applying the Company's accounting principles and practices, preparing and maintaining the integrity of the Company's financial statements and maintaining an appropriate system of internal controls, auditing the Company's financial statements and the effectiveness of internal control over financial reporting, or reviewing the company's unaudited interim financial statements.  Those are the responsibilities of management and the Company's independent registered public accounting firm, respectively.

We reviewed and discussed the 2016 audited financial statements with management and BKM Sowan Horan, LLP ("BKM"), the Company's independent registered public accounting firm, together and separately. These discussions and reviews included the reasonableness of significant judgments, significant accounting policies (including critical accounting policies), the auditor's assessment of the quality, not just the acceptability of the Company's accounting principles and other such matters as are required to be discussed with the Audit Committee under the standards of the Public Company Accounting Oversight Board (United States).

During 2016 management conducted its evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2016, based upon the framework in Internal Control – Integrated Framework (2013) by the Committee of Sponsoring Organizations of the Treadway Commission. Management's assessment included an evaluation of the design of our internal control over financial reporting and testing the operating effectiveness of our internal control over financial reporting. Management reviewed the results of the assessment with the Audit Committee of the Board of Directors. Based on its assessment and review with the Audit Committee, management determined that our internal control over financial reporting was not effective as of December 31, 2016, because of the material weakness described below.

We determined that we did not maintain effective internal control over the accounting for our investment in AMAK. Specifically, controls were not appropriately designed, adequately documented and operating effectively related to the accounting by us for: (1) our equity in earnings of AMAK; and (2) changes in our ownership percentage in AMAK as the result of the sale and issuance of shares of AMAK to other investors.  As a result of this material weakness, we restated our financial statements for the three months ended June 30, 2016 and September 30, 2016, respectively. This control deficiency did not result in any material adjustments to our consolidated financial statements for the year ended December 31, 2016.

We reviewed and discussed with management, the internal auditor and BKM, management's report on internal control over financial reporting and BKM's report on their audit of the Company's internal control over financial reporting as of December 31, 2016, both of which are included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.
 

 
30

We have received from BKM the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the audit committee concerning independence, and we have discussed with BKM their independence from the Company and management.  We have also discussed with BKM the matters required to be discussed by PCAOB Auditing Standard No. 16 – Communication with Audit Committees.

Based upon the review and discussions described in this report, the Audit Committee recommended to the Board of Directors that the audited financial statements be accepted and included in the Company's Report on Form 10-K for the year ended December 31, 2016, filed with the SEC.

We also review the Company's internal audit function, including the selection and compensation of the Company's internal auditor.  In June 2016, in accordance with our charter, our committee appointed Sirius Solutions as the Company's internal auditor for 2016.

This report is provided by the following independent directors who comprised the Committee on the 10-K filing date:

Karen A. Twitchell, Chairman
Pamela R. Butcher
John R. Townsend


PRINCIPAL ACCOUNTING FEES AND SERVICES

The table below sets forth the fees that the Company paid BKM. Fees paid were for audits of our financial statements and internal controls for the fiscal years ended December 31, 2016, and 2015, and the review of our financial statements for the quarterly periods in the years ended December 31, 2016, and 2015, and other fees that the company paid for services rendered during the fiscal years ended December 31, 2016, and 2015.

   
2016
   
2015
 
Audit Fees
 
$
425,905
   
$
446,589
 
Audit-Related Fees
   
-
     
-
 
Tax Fees
   
48,486
     
29,068
 
All Other Fees
   
26,685
     
27,969
 

Under its charter, the Audit Committee must pre-approve all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by its independent auditor, subject to the de minimis exceptions for non-audit services under the Securities Exchange Act of 1934, as amended, which are approved by the Audit Committee prior to the completion of the audit.  For 2016 approximately $148,000 is pending Audit Committee approval which is not included in the table above.

Audit Fees

These amounts represent fees billed by BKM for professional services rendered for the audits of the Company's annual financial statements for the years ended December 31, 2016, and 2015,
 
 
31

the reviews of financial statements included in the Company's Quarterly Reports on Form 10-Q, and services related to statutory and regulatory filings and engagements for such fiscal years.  These amounts also include approximately $97,000 during 2016 for work performed related to the audited financial statements of AMAK.

Tax Fees

These amounts represent fees billed by BKM for professional services rendered relating to tax compliance, tax advice and tax planning in the U.S.

All Other Fees

These amounts represent fees billed by BKM for professional services related to the Company's 401(k) audit, for providing consent on Form S-3 filing, reviewing responses to SEC correspondence, and for providing consultation on various issues.

PROPOSAL NO. 3

ADVISORY VOTE ON EXECUTIVE COMPENSATION

Under the rules of the SEC, the Company is required to provide its shareholders with the opportunity to cast a non-binding, advisory vote on the executive compensation for the Company's named executive officers.  This proposal is frequently referred to as a "say-on-pay" vote.  At the 2011 Annual Meeting, shareholders voted, on an advisory basis, in favor of casting the advisory say-on-pay vote on an annual basis.

Our Board recommends an advisory vote "FOR" the following resolution:

Resolved that the shareholders of the Company approve, on an advisory basis, compensation paid to the Company's named executive officers as disclosed pursuant to item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.

The Board of Directors recommends a vote FOR this resolution because it believes that the policies and practices described in the Compensation Discussion and Analysis are effective in achieving the Company's goals of rewarding sustained financial and operating performance and motivating the executives to remain with the Company for long and productive careers.  We urge stockholders to read the Compensation Discussion and Analysis which provides detailed information on the Company's compensation policies and practices and the compensation of our named executive officers.

Vote Required

The Company's corporate by-laws require the affirmative vote of a majority of those shares present in person or represented by proxy and entitled to vote on this proposal at the annual meeting.
 

 
32

Since the vote on this proposal is advisory, it is not binding on the Company.  Nonetheless, the Compensation Committee will take into account the outcome of the vote when making future executive compensation decisions.

PROPOSAL NO. 4

ADVISORY VOTE ON THE FREQUENCY OF THE SAY ON PAY VOTE

Description of Proposal

Exchange Act Section 14A affords stockholders an advisory vote to approve the Company's executive compensation program. The advisory vote on executive compensation is referred to as a "say-on-pay vote." As required by Exchange Act Section 14A, this Proposal 4 affords stockholders an advisory vote on the frequency of future say-on-pay votes. The advisory vote on the frequency of the say-on-pay vote is a nonbinding vote as to how often future say-on-pay votes should occur: every year, every two years, or every three years. In addition, stockholders may abstain from voting on this Proposal 4. Exchange Act Section 14A requires the Company to hold the advisory vote on the frequency of the say-on-pay vote at least once every six years. The Company held its first frequency vote during 2011; therefore, the Company will provide stockholders with the opportunity to vote on a preference for the frequency in connection with this meeting.

In formulating its recommendation, the Board considered that an advisory vote on executive compensation held every year would best enable stockholders to timely express their views on the Company's executive compensation program and enable the Board and the Compensation Committee to determine current stockholder sentiment. While the Company's executive compensation programs are designed to promote a long-term connection between pay and performance, the Board recognizes that executive compensation disclosures are made annually, and holding an annual advisory vote on executive compensation provides the Company with more direct and immediate feedback on our compensation disclosures. However, stockholders should note that because the advisory vote on executive compensation occurs well after the beginning of the compensation year, and because the different elements of our executive compensation programs are designed to operate in an integrated manner and to complement one another, in many cases it may not be appropriate or feasible to change our executive compensation programs in consideration of any one year's advisory vote on executive compensation by the time of the following year's annual meeting of stockholders.

Stockholders are being asked to vote among the following frequency options (not solely for or against the recommendation of the Board):

"EVERY YEAR";
"EVERY TWO YEARS";
"EVERY THREE YEARS"; or
"ABSTAIN".


33




Vote Required

The Company's corporate by-laws require the affirmative vote of a majority of those shares present in person or represented by proxy and entitled to vote on this proposal at the annual meeting.

This advisory vote on the frequency of future say-on-pay votes is not binding on the Company or 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 the vote "EVERY YEAR" (an advisory vote on the compensation of the Company's named executive officers set forth in the Company's proxy statement to occur every year).

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This Compensation Discussion and Analysis presents information about the compensation of our officers named in the Summary Compensation Table below (the "Named Executive Officers" or "NEOs").  Our executive compensation program is designed to promote a strong culture of leadership development, aligned with performance improvement (focused on both growth and productivity) and integrity, which in turn drives financial performance that provides value to our shareholders.  The main components of our executive compensation program include base salary and annual and long-term incentives (total direct compensation).  Our incentive program is designed to emphasize a pay-for-performance relationship.

·
Annual incentive awards consist of cash bonuses generated under our annual incentive program and our legacy profit sharing program.  Cash awards under our annual incentive plan are tied to financial results (Operating Income). Our profit sharing program has historically been available to all employees (including our NEOs) and is based on cash flow from the individual segments of the business.   In 2010 we implemented a new annual incentive program for our NEOs which could have eliminated the need for NEO participation in our profit sharing program, but instead elected to net out any quarterly payments made throughout the year to the NEOS from the bonus generated under the annual incentive program.  Effective January 1, 2017, profit sharing and safety awards will no longer be subtracted from the Company's annual incentive plan and the Compensation Committee (the "Committee") will review the impact of profit sharing to the NEOs on the total cash compensation for NEOs and make adjustments as needed regarding base pay.  The Committee further determined that there would not be a claw back of profit sharing from NEOs for the first and second quarters of 2016.  These changes originated from the Company's inability to meet budget forecasts for 2016.  Both bonuses and profit sharing awards are paid in cash and provide a strong link between pay and performance as they are directly determined by Operating Income and profitability.
 

 
34

·
In February 2015 and March 2016 we issued equity to our executives in the form of restricted stock under the 2012 Stock and Incentive Plan.  The equity-based reward to our executives is correlated to the investment success of our shareholders as the value of the stock granted will fluctuate as our stock price increases or decreases relative to the grant date price.

Our long-term success depends on our people.  We strive to ensure that our employees' contribution and performance are recognized and rewarded through a competitive compensation program.  We target an executive compensation package that is competitive against the market in which we compete for talent.  A substantial portion of any of our executives' annual total compensation package is variable compensation tied to performance (i.e., Operating Income).  We designed our incentive program in such a way that if performance is at or above targeted levels, the executive's total compensation will be at or above targeted levels.  Conversely, if performance is below targeted levels, the executive's compensation will be below targeted levels.

Executive Compensation Program Design

Base Salary.  Base salaries provide for competitive pay based on the market value of the position and meet the objective of attracting and retaining talent needed to run the business.  Salaries are reviewed by the Committee annually.  Salary increases may be given based on individual factors, such as competencies, skills, experience, performance and market practices.  There are no specific weightings assigned to these individual factors.  Annual salary increases are generally effective in the first quarter.  Increases may also be given when executives assume new roles or are promoted.

The Committee increased 2017 base salaries of the President/Chief Executive Officer, Vice President of Marketing, Vice President of Manufacturing, and Vice President of Accounting and Compliance by 2% over 2016 base salaries, effective April 1, 2017.  The Committee also increased 2017 base salaries for the Chief Financial Officer and President of TC by 1% over 2016, effective April 1, 2017.

Below is a table comparing 2015, 2016 and 2017 executive base salaries.

 
 
Position
 
 
Base Salary
2015
   
 
Base Salary
2016
   
Increase
between
2015 & 2016
   
 
Base Salary
2017
   
Increase
between
2016 & 2017
 
Simon Upfill-Brown – CEO
 
$
374,000
   
$
500,000
   
$
126,000
   
$
510,000
   
$
10,000
 
Sami Ahmad – CFO
   
n/a
     
265,000
     
n/a
     
267,650
     
2,650
 
Connie Cook – VP Accounting
   
225,000
     
250,000
     
25,000
     
255,000
     
5,000
 
Mark Williamson – VP Marketing
   
290,000
     
300,000
     
10,000
     
306,000
     
6,000
 
Ronald Franklin – VP Manufacturing
   
257,000
     
290,000
     
33,000
     
295,800
     
5,800
 
Peter Loggenberg – President of TC
   
350,000
     
350,000
     
--
     
353,500
     
3,500
 

Annual Cash Incentive Plan.  We use pre-bonus Operating Income as the financial metric for annual executive bonus awards.  The Committee believes that this financial metric is a strong indicator of performance.  It excludes items outside of management's control such as tax and interest rates.  In addition, pre-bonus Operating Income is easily determinable because it is a line item on the Company's Consolidated Statements of Income (subject to the add-back of bonuses)
 
 
35

and is equal to Revenues less Operating Costs and Expenses, General and Administrative Expenses and Depreciation.

Once financials are available at the conclusion of the fiscal year, the Committee reviews our pre-bonus Operating Income results and chooses to exclude or adjust certain items to ensure that award payments reflect the core operating performance of the business.  Examples include scenarios where the Company's product prices decline by 50% or more, or increase by 100% or more. Operating Income measures our ability to generate income after covering operating costs and general and administrative expenses.  Operating Income grows by not only increasing revenues through increased sales or improved product prices, but also by maintaining product  margins, reducing costs and managing assets.  The primary challenge lies in maintaining reasonable product margins.  Beginning in 2016, the Committee also had the capability to use safety as a mechanism to apply negative discretion to NEO bonus payouts when safety performance is unsatisfactory.

Thus annual cash bonuses are designed to motivate and reward NEOs and all other eligible executives on the achievement of Company goals for the performance year.  Bonus payouts for the President/CEO and other NEOs are aligned with overall Company performance and shareholder return.  Our annual incentive plan is designed to allow NEOs and other executives to earn up to 200% of their target bonus based upon performance achieved.  Each executive's target bonus is expressed as a percentage of base salary.  The bonus levels below were adopted by the Committee for 2015 and 2016.  Since Mr. Ahmad was not employed until October 2016, his bonus target was pro-rated according to the time he was employed during 2016.

 
Participant Title
Target Bonus
(as % of Base Salary)
 
Max
Maximum Bonus
(as % of Base Salary)
Simon Upfill-Brown - CEO
100%
2.0X
200%
Peter Loggenberg - President of TC
60%
2.0X
120%
Sami Ahmad – CFO
50%
2.0X
100%
Connie Cook - VP Accounting
50%
2.0X
100%
Mark Williamson - VP Marketing
50%
2.0X
100%
Ronald Franklin - VP Manufacturing
50%
2.0X
100%


2016 Payout Design.  In the event that 100% ("Target" performance) of the Operating Income goal is met, then a 1.0X multiple is applied to the participant's target bonus.  Threshold payouts will occur when 80% of the Operating Income goal is met ("Threshold" performance), and a 0.50X multiple is applied to the participant's Target bonus for Threshold performance.  Performance below Threshold (80% Target of Operating Income) results in no payout.  The Maximum payout occurs when actual Operating Income is greater than or equal to 140% of the Operating Income goal ("Maximum" performance).  When Maximum performance is achieved, a 2.00X multiple is applied to the participant's Target bonus.  Payouts are scaled linearly between Threshold and Maximum for performance levels between 80% and 140% of Target performance.  Payouts will be interpolated for actual performance between these points. The President/CEO has discretion to reduce individual cash bonuses payable to other NEOs by 20% based on the President/CEO's personal assessment of their individual performance.

The following payout schedule is applied to 100% of the participant's target bonus which is tied to corporate performance in the form of Operating Income.
 
 
36


 
Payout Level
Corporate Performance
Bonus Multiple
 
Performance Achievement
Maximum
2.00X
140% of Operating Income goal
Target
1.00X
100% of Operating Income goal
Threshold
0.50X
80% of Operating Income goal

Examples of bonus payout calculations for the President/CEO with respect to the 2016 year are as follows:

Base Salary: $500,000
 
Target Bonus as % of Base Salary: 100%
$500,000
Maximum Bonus as % of Base Salary: 200%
$1,000,000

As shown in the table below, the target bonus for our Company CEO, CFO, VP of Accounting and VP of Manufacturing were based 100% on the performance of the Company, while the bonus for the President of TC was based 80% on the performance of TC and 20% on the performance of the Company, and finally, the bonus for SHR Vice President of Marketing was based 80% on the performance of SHR and 20% on the performance of the Company.

 
Pre bonus Operating Income
NEO
TC
SHR
TREC
CEO, CFO, VP of Accounting, VP of Manufacturing
-
-
100%
President of TC
80%
-
20%
SHR Vice President of Marketing
-
80%
20%

Determination of 2016 Performance Goals.  Operating Income Target amounts are set taking into account business conditions, expectations regarding the probability of achievement, and historical financial performance.  Consistent with our philosophy and approach to setting goals, incentive payouts that are above target will be for results that exceed our business plan.  Targets are set at the beginning of the performance period.  The process is summarized below:

 
Beginning of the
Performance Period
 
During the Performance Period
 
End of the Performance Period
Operating Income goals are developed by the Committee and management and  approved by the Committee
Operating Income performance is monitored relative to goals
 
Operating Income goals cannot be changed during the performance period
Management presents actual Operating Income results relative to goals and the Committee reviews actual performance to determine any payouts
 
The Committee may exclude or adjust certain items that are outside the normal course of business, unusual and/or infrequent, and not reflective of our core operating performance for that period
 

 
37

Any adjustments at the end of the performance period will be at the Committee's discretion.

2016 Target (Operating Income) and Results for 2016.  The Committee set a Target of $44.6 million of pre-bonus Operating Income for 2016 for TREC resulting in a Threshold of $35.7 million.  The Target for 2016 represented a 31.2% increase as compared to 2015 and reflected the intent to continue growing the consolidated companies.  SHR's 2016 target was set at $47.0 million of Operating Income, and TC's 2016 target was set at $5.0 million of Operating Income.  Following the end of the 2016 year, we determined that the threshold amounts were not met and no bonuses became payable for the 2016 year.

2017 Target (Operating Income).  After consultation with our NEOs and forecasts from outside analysts, the Committee set a Target of $23.7 million of pre-bonus Operating Income for 2017 for TREC resulting in a Threshold of $19.0 million.  The Target for 2017 represents a 47% decrease as compared to 2016; however, the 2017 target represents a 26.7% increase as compared to 2016 actual results.  SHR's 2017 target was set at $26.0 million of Operating Income and TC's 2017 target was set at $3.6 million of Operating Income. The Committee and management believed these targets to be both realistic and achievable.

Profit Sharing Program.  The profit sharing program is available to all employees, including NEOs, based upon quarterly performance.  Profit sharing is done on a quarterly basis when cash flow permits.  There is no set formula for calculating or allocating profit sharing as it is based upon several factors including profit, cash flow, expectations and special cash needs of the Company.  In 2010 the Committee adopted a written policy governing employee profit sharing which was subsequently amended in March 2017.  Pursuant to the amended policy, the pool of funds available for profit sharing during any particular calendar quarter cannot exceed 12% of estimated earnings before interest, depreciation, taxes and amortization ("EBITDA") for that quarter.  In addition, the President/CEO must submit a recommended level of profit sharing with proposed employee allocations to the Committee for approval. The amount of the total award allocated to each NEO and to each employee is based on (i) current base salary and pay levels, (ii) instances of individual superior performance, and (iii) instances of individual sub-standard performance.  The NEO profit sharing amount cannot exceed 10% of the total profit sharing payout, and no NEO will be allocated more than $10,000 per quarter.  The Company has a wide range of salary and pay levels, and in general employees at the lower end of the pay scale will be granted higher awards as a percentage of their base pay.  Under the policy, the Committee has authority to revise the amount of funding available for profit sharing, as well as, to adjust individual allocations.

Prior to 2016, all profit sharing awards to NEOs and other participants in the Annual Cash Incentive Plan were netted out of any cash bonuses paid out under the Company's Annual Cash Incentive Plan.  Pursuant to the amended profit sharing policy, profit sharing will not be deducted from the Company's Annual Cash Incentive Plan.

As an incentive for safe work performance, a safety award program is incorporated into the profit sharing program. As part of this program, SHR and TC pay every employee, including NEOs and other executives, a $500 net award at the end of each calendar quarter in which there are no lost-time or recordable accidents.  This program has been very successful in encouraging employees to watch out for one another and to work safely.
 

 
38

Long-Term Incentive

In the past, stock options and restricted stock were periodically awarded to our NEOs and other executives in an effort to align their interests with those of our shareholders since both equity vehicles increase in value only if the price of the Company's stock increases.  Although some of our employees still hold unexercised stock option awards that are reflected in the compensation tables below, we did not grant any stock options during 2016.

On January 14, 2015, the Committee determined it would be prudent for the Company to cease making stock option grants to NEOs and only grant restricted stock, because it would be simpler, less costly and less dilutive to our stockholders and a better match with the equity award programs at our peers.  The Committee decided to grant 100% time-based restricted stock awards for 2015, and beginning with the 2016 year, to implement a performance component where the restricted shares vest contingent upon a set level of performance using threshold, target and maximum goals.   The Committee set up three tiers of target percentages of base salary for long term incentive ("LTI") compensation to be granted annually to the NEOs.

 
Applicable Tier
Participants
Target LTI as
Percentage of Base Salary
Tier 1
President/CEO
150%
Tier 2
Executive Vice Presidents
115%
Tier 3
Other Executive Officers
55%

For 2016 the Committee adopted an LTI award program with overlapping annual grants of restricted stock for the NEOs.  The awards will be granted out of the 2012 Stock and Incentive Compensation Plan.  Under the new LTI award program, time-vested awards will comprise 50% of the LTI award.  The time-vested awards will vest ratably over a 3 year period, subject to the acceleration or forfeiture provisions described below.

Performance based awards will comprise the remaining 50% of the annual LTI award value.  The performance period for performance based awards is 3 years and actual shares delivered will be determined at the end of the performance period based upon performance relative to pre-established goals.  Return on Invested Capital ("ROIC") and Earnings Per Share Growth ("EPS Growth) are the two performance measures that will be utilized.  Each measure will be equally weighted at 50% meaning that half of the performance based award (25% of the total award) will be allocated to each measure.  Performance will be measured on a relative basis where performance is measured against the Company's peer group.  Performance will range from 0% to 200% of the target award.

The Company's performance for the performance awards over the 3 year period will be ranked against a peer group resulting in the application of a single multiplier to the target award value under each performance measure used.  The peer group will be reviewed on an annual basis and with each new annual award the peer group can be modified for new awards.  Once a peer group is established at the outset of the performance period the companies within do not change except when consolidation among peers in the marketplace occurs.  In 2016, A. Schulman, Inc. was removed and FutureFuel Corp. and American Vanguard Corp. were added to our previous peer group.  The peer group list for 2016 awards is as follows:
 
39


KMG Chemicals Inc.                                                                                  Quaker Chemical Corp. Chase Corporation
Hawkins Inc. Innospec Inc.                Stepan Company
Kraton Performance Polymers                                                                 OMNOVA Solutions Inc.                                                            American Vanguard Corp.
FutureFuel Corp.

If the Company percentile is below 25%, the performance based award will be forfeited.  If the Company percentile is between 25% and 50%, the amount earned will be determined by interpolation (between 50% and 100% of grant earned).  If the Company percentile is between 50% and 100%, the amount earned will be determined by interpolation (between 100% and 200% of grant earned.  Forfeiture of a performance based award will occur if EPS Growth is negative.

 
Performance
 
Percentile
Earned
Percentile
Below Threshold
<25th
0%
Threshold
25th
50%
Target
50th
100%
Maximum (highest)
100th
200%

Upon any termination of employment, unvested shares and unearned performance based awards will be forfeited, except under the following scenarios:

Change in Control
Double trigger vesting.
Death and Disability
Pro rata vesting for restricted stock, options and performance shares.
Involuntary Termination Without Cause
Unvested restricted stock and stock options are forfeited and all performance awards expire and terminate.
Retirement
Pro rata vesting for restricted stock and options, as well as pro rata vesting for performance awards based on actual performance, subject to minimum 6 month service requirement after grant.

On February 17, 2016, the Committee approved the grant of restricted shares on March 1, 2016, based upon that day's closing price to the NEOs based upon the target percentages indicated below:

 
 
Position
 
 
Target LTI
(as % of Base
 Salary)
   
 
 
Base Salary
2016
   
 
 
 
Target LTI
 
President and CEO
   
120
%
 
$
500,000
   
$
600,000
 
Vice President of Accounting
   
60
%
   
250,000
     
150,000
 
Vice President of Marketing
   
55
%
   
300,000
     
165,000
 
Vice President of Manufacturing
   
55
%
   
290,000
     
159,500
 
President of Trecora Chemical
   
55
%
   
350,000
     
192,500
 
 

 
40

The closing price on March 1, 2016, was $9.39 resulting in the grant of target shares indicated below:
 
 
 
Employee Name
 
 
 
Title
 
 
 
Total Restricted
Shares Granted
   
 
Time Vesting Period #1
3/01/16-
2/28/17
   
 
Time Vesting Period #2
3/01/17-
2/28/18
   
 
Time Vesting Period #3
3/01/18-
2/28/19
   
 Performance Vesting Period
3/01/16-
2/28/19
 
Simon Upfill-Brown
President /CEO
   
63,898
     
10,650
     
10,650
     
10,650
     
31,948
 
Ronald Franklin
VP Manufacturing
   
16,986
     
2,831
     
2,831
     
2,831
     
8,493
 
Connie Cook
Sec/Treas/VP Accounting
   
15,974
     
2,662
     
2,662
     
2,662
     
7,988
 
Mark Williamson
VP Marketing
   
17,572
     
2,929
     
2,929
     
2,929
     
8,785
 
Peter Loggenberg
President Trecora Chemical
   
20,501
     
3,417
     
3,417
     
3,417
     
10,250
 
Total
     
134,931
                                 

These shares are subject to the approval of the amendment of the Company's Stock and Incentive Plan as detailed in Proposal No. 5 and the approval and ratification of certain awards as described in Proposal 6.

Perquisites.  We provide benefits that we believe are standard in the industry to all employees. These benefits consist of a group medical and dental insurance program for employees and their qualified dependents, group life insurance for employees and their spouses, accidental death and dismemberment coverage for employees, a Company sponsored cafeteria plan and a 401(k) employee savings and investment plan. The Company matches employee deferral amounts, including amounts deferred by named executive officers, up to a total of 6% of the employee's eligible salary, excluding annual cash bonuses, subject to certain regulatory limitations.  During 2016 company vehicles were supplied to each of our NEOs for business and personal travel.  Our use of perquisites as an element of compensation is very limited.  We do not view perquisites as a significant element of our comprehensive compensation structure.

Governance of Pay Setting Process

In setting total direct compensation, a consistent approach is applied for all executives:

We compare our NEOs to analogous positions within the market in terms of specific duties, responsibilities, and job scope.

Each position has an established target annual incentive award opportunity, executive benefits and perquisites.  These incentive levels and benefits are reviewed by the Committee on an annual basis to determine their relative level of competitiveness with the market.

We generally target all elements of pay and total direct compensation to be positioned between the 25th and 50th percentiles of our peer group.

Individual executive pay positioning will vary based on the requirements of the job (competencies and skills), the executive's experience and performance, and the organizational structure (internal alignment and pay relationships).
 
 

 
41

We also consider internal pay equity when establishing compensation levels.  Currently, we believe that our compensation level for each of our NEOs reflects his or her job responsibility and scope appropriately and scale down from the CEO in a reasonable manner.

Exceptions to normal practice may be made based on critical business and people needs.

Role of the Compensation Committee in Establishing Pay Levels

The Committee (comprised of only independent directors) establishes, reviews and approves all elements of the executive compensation program.  A copy of the Compensation Committee Charter is available on our website.  During 2016 and 2015 the Committee engaged Pearl Meyer & Partners ("PM&P") to serve as its independent outside executive compensation consultant.  PM&P's primary role is to provide advice and perspective regarding market compensation trends that may impact decisions we make about our executive compensation program and practices.  In connection with its engagement of PM&P and based on the information presented to it, the Committee assessed the independence of PM&P pursuant to applicable SEC and NYSE rules and concluded that PM&P's work for the Committee did not raise any conflict of interest for 2016.  The Company incurred expenses during 2016 and 2015 payable to PM&P in the amount of $37,800 and $51,511, respectively.  Management has the responsibility for effectively implementing the executive compensation program.  Additional responsibilities of the Committee, management and the consultant include:

The Committee reviews and approves business goals and objectives relevant to executive compensation, evaluates the performance of the President/CEO in light of these goals and objectives, and determines and establishes the President/CEO's compensation level.

Based on review of market data, individual performance and internal pay comparisons, the Committee independently sets the pay for our President/CEO and reviews and approves all NEO and other executive pay arrangements.

Role of Management in Establishing Pay Levels

The President/CEO makes recommendations on program design and pay levels other than his own, where appropriate, and oversees the implementation of such programs and directives approved by the Committee.

The President/CEO develops pay recommendations for his direct reports and other key executives based on the results of PM&P's analysis of current market compensation levels.  This includes all of our NEOs (with the exception of the President/CEO himself).

Our Vice President of Accounting provides the financial information used by the Committee to make decisions with respect to incentive compensation goals and related payouts.



42


Role of the Compensation Consultant in Establishing Pay Levels

The compensation consultant is responsible for gathering, analyzing and presenting peer group pay practices and relevant data to the Committee.  They do not have the authority to determine pay.

The consultant provides periodic updates to the Committee regarding various tax, accounting and regulatory issues that could have an impact on executive compensation design, administration and/or disclosure.

Regulatory Considerations

We account for the equity compensation expense for our executives under the rule of ASC 718, which requires us to estimate and record an expense for each award of equity compensation over the vesting period of the award.  Accounting rules also require us to record cash compensation as an expense at the time the obligation is accrued.

Pursuant to Section 162(m) of the Code ("Section 162(m)"), certain compensation paid to our CEO and our three most highly compensated executive officers (other than our CFO) in excess of $1 million is not tax deductible, except to the extent it constitutes performance-based compensation. We have the ability to design certain elements of compensation for our executive officers to be performance-based compensation under Section 162(m) in order to maintain the deductibility of that compensation when we have determined that performance-based compensation was appropriate for those executive officers.  The Committee considers its primary goal to design compensation strategies that further the best interests of our stockholders. In certain cases, it may determine that the amount of tax deductions lost is not significant when compared to the potential opportunity a compensation program provides for creating long-term stockholder value. The Committee therefore retains the ability to evaluate the performance of our executive officers and to pay appropriate compensation, even if some or all of it may be non-deductible.

Employment Arrangements

Contemporaneously with the acquisition of TC, the Company entered into an Employment Contract ("Employment Contract") and Severance Agreement and Covenant Not to Compete, Solicit and Disclose ("Severance Agreement") with Peter Loggenberg on October 1, 2014.  Pursuant to the Employment Contract, TREC agreed to employ Mr. Loggenberg as president of TC with duties typical of that position.  Mr. Loggenberg is to be paid a base salary of $350,000 subject to adjustment on an annual basis by the Board.  He also received a $35,000 signing bonus and grant of 7,000 restricted shares of the Company's common stock.  The Employment Contract may be terminated for or without "good cause."  Upon a dismissal or termination of employment other than for good cause, the Company will pay a cash severance to Mr. Loggenberg in an amount equal to one-year of his then annual base salary (excluding bonuses, grants of stock and/or stock options, profit sharing, benefits, and perquisites).  The cash severance shall be payable in six (6) equal monthly installments.  As used in Mr. Loggenberg's Employment Contract, "good cause" means his commission of a crime involving moral turpitude, embezzling any funds or property of the Company or commission of any other dishonest act towards the
 
 
43

Company, or the Company's determination that he was under the influence of alcohol or illegal drugs during working hours.

We have not entered into definitive employment agreements with any of our other executives.  All other executives serve at the discretion of the Board with no fixed term of employment.

Peer Group Comparisons

We compare executive compensation against a peer group.  The peer group shown below was established by the Committee in 2016.  As noted previously, in 2016 the Committee removed A. Schulman Inc. and added American Vanguard Corp. and FutureFuel Corp. to the list.  Peer group proxy data provides sufficient comparisons for the executives, but because the companies are structured differently, not all peers have incumbents in the respective positions.  Some jobs have no peer benchmarks available from proxy data, such as Vice President of Marketing, which necessitates the use of industry specific and general industry related surveys as an additional data source.  The consultant's survey data provides expanded data to compare our executives' positions.  Peer group and survey data provides a focal point in our examination of compensation trends across the petrochemical and chemical processing industry.  All of the companies in the peer group are specialty and/or commodity chemical producers.

KMG Chemicals Inc. Quaker Chemical Corp.     Chase Corporation
Hawkins Inc.               Innospec Inc.                     Stepan Company
Kraton Performance Polymers OMNOVA Solutions Inc. American Vanguard Corp.
FutureFuel Corp.

Peer group market analysis is one of several factors considered in the pay setting process.  Peer group practices are analyzed periodically for the pay element making up total direct compensation, and periodically for other elements (such as executive benefits and perquisites).  Three years of proxy data were analyzed for each of the Company's ten peer companies.  In order to emphasize peer and industry long-term incentive practices, proxy data was the primary source used for long-term incentives and total direct compensation to develop market values for the compensation analysis.  In addition to peer group comparisons, we also used surveys from the consultant in the pay setting process.  Survey sources included proprietary energy sector and other general and industry executive compensation databases.  We used a combination of proxy and survey data to develop market values.  All data was summarized to relevant statistics (e.g., median, 25th percentile and 75th percentile), and where applicable, survey data was bracketed to reflect a range of data appropriate for the Company's revenue scope.  Data was segmented by revenue ranges (e.g., $100 million to $500 million) to ensure that the most appropriate information was used in the analysis.  The strategy behind the sources of data is to promote the best mix of authorities for competitive positions, utilize industry data for line operations and line executives and some general industry mix to staff executive positions, and balance the proxy data with published authorities to help smooth the volatility of executive changes in the peer group.  Market values of cash compensation were correlated to company size as measured by revenue and the data the Committee considered was size-adjusted where possible to reflect our general revenue level.  This process made the market data points directly applicable to the Company.
 

 
44

The Committee adopted the philosophy of targeting pay between the 25th to 50th percentile range of market data based on several factors including the relative size of the Company compared with some of the peers.

The table below sets forth the 2016 targeted compensation elements for each of our NEOs.  These target amounts represent the amount of realizable compensation that we intend or expect for each of our NEOs to receive during the 2016 year and takes into account awards that were granted in prior years.

 
 
 
 
 
Executive
 
 
 
 
 
2016
Base Salary
   
Annual
Incentive Plan
Target
(Profit Sharing
 and Cash Bonus)
   
Long-Term
 Incentive
Compensation(1)(2)
   
Total Direct
 Compensation
Target
 
Simon Upfill-Brown
President & CEO
     Compensation Amount
 
$
500,000
   
$
500,000
   
$
665,852
   
$
1,665,852
 
Sami Ahmad
Chief Financial Officer
      Compensation Amount
 
$
265,000
   
$
132,500
     
--
   
$
397,500
 
Connie J. Cook
Vice President of Accounting and Compliance
     Compensation Amount
 
$
250,000
   
$
125,000
   
$
176,804
   
$
551,804
 
Mark D. Williamson
Vice President of Marketing
     Compensation Amount
 
$
300,000
   
$
150,000
   
$
229,815
   
$
679,815
 
Ron Franklin
Vice President of Manufacturing
     Compensation Amount
 
$
290,000
   
$
145,000
   
$
208,230
   
$
643,230
 
Peter Loggenberg
President Trecora Chemical
     Compensation Amount
 
$
350,000
   
$
210,000
   
$
101,599
   
$
661,599
 

(1)
The compensation amount for each NEO shown reflects the Company's accounting expense disregarding any estimates for forfeitures of options granted to the NEOs by the Compensation Committee in the first quarter of 2011 and 2014 which vest over four (4) years in equal increments and the value of restricted stock granted in the first quarter of 2015 which vests over four (4) years in equal increments. For Mr. Upfill-Brown this amount represents the value of options granted in the second quarter of 2013 and the first quarter of 2014 which vest over the next (4) years in equal increments and the value of restricted stock granted in the first quarter of 2015 which vests over four (4) years in equal increments.
(2)
The compensation amount also represents the Company's accounting expense disregarding any estimates for forfeitures of restricted stock granted to the NEOs in the first quarter of 2015 which vests over 4 years and in the first quarter of 2016 with half vesting over 3 years and the remainder upon the achievement of certain performance metrics.  The compensation amount does not correspond to the actual value that will be realized by the non-employee directors.

The SEC's calculation of total compensation, as shown in the 2016 Summary Compensation Table set forth below, includes several items that are driven by accounting and actuarial assumptions, which are not necessarily reflective of compensation actually realized by the NEOs in a particular year.  To supplement the SEC required disclosure, we have included the additional table below, which shows compensation actually realized by each NEO as reported on the NEO's W-2 form for each of the years shown.

45


2016 Realized Compensation Table

Name and Principal Position
Year
 
Realized
Compensation(1)
 
Simon Upfill-Brown
CEO/President
2016
 
$
1,053,091
 
2015
   
910,325
 
2014
   
558,305
 
Sami Ahmad(2)
CFO
2016
   
70,397
 
Connie J. Cook
CFO
2016
   
421,990
 
2015
   
412,655
 
2014
   
275,180
 
Mark D. Williamson
VP of Marketing - SHR
2016
   
579,835
 
2015
   
563,146
 
2014
   
406,054
 
Ronald R. Franklin
VP of Manufacturing
2016
   
494,980
 
2015
   
520,931
 
2014
   
369,662
 
Peter M. Loggenberg(3)
President of Trecora Chemical
2016
   
493,589
 
2015
   
465,252
 
2014
   
116,224
 

(1)
Amounts reported as realized compensation differ substantially from the amounts determined under SEC rules and reported as total compensation in the 2016 Summary Compensation Table.  Realized compensation is not a substitute for total compensation.  For a reconciliation of amounts reported as realized compensation and amounts reported as total compensation, see below.  For more information on total compensation as calculated under SEC rules, see the narrative and notes accompanying the 2016 Summary Compensation Table set forth on page 49.
(2)
Mr. Ahmad's amounts only reflect one quarter in 2016 since he joined the Company in October 2016.
(3)
Mr. Loggenberg's amounts only reflect one quarter in 2014 due to the acquisition closing date of October 1, 2014, for Trecora Chemical.

The amounts reported in the 2016 Realized Compensation Table reflect income for the years shown as reported on the NEOs' W-2 forms.  The amounts differ substantially from the amount reported as total compensation in the 2016 Summary Compensation Table required under SEC rules and are not a substitute for the amounts reported in the 2016 Summary Compensation Table.  For 2016, realized compensation represents: (1) total compensation, as determined under applicable SEC rules, minus (2) the aggregate grant date fair value of equity awards (as reflected in the Stock and Option Awards columns) and (3) the Company's 401(k) contributions (as reflected in the 2016 All Other Compensation Table above).  In addition, realized compensation reflects any bonus actually paid in the year shown, whereas total compensation under SEC rules, reflects any bonus earned for the year shown.

The charts below illustrate that a large portion of our NEOs' pay is performance based (e.g., approximately 70% of our President/CEO's pay is performance based and approximately 50% of our other NEOs' pay is performance based).

46

 
                                                                                                                                                                                   





 
Compensation and Risk

We believe that our performance-based compensation program creates appropriate incentives to increase long-term shareholder value.  This program has been designed and administered in a manner that discourages undue risk-taking by employees.  Relevant features of this program include:

limits on annual incentive and long-term performance awards, thereby defining and capping potential payouts;

application of an annual incentive metric that aligns employees with the common goal of increasing Operating Income;
 

 
47

use of a long-term incentive vehicles—stock options and/or restricted stock—that vests over a number of years, thereby providing strong incentives for sustained operational and financial performance;

Committee discretion to adjust payouts under the annual incentive plan to reflect the core operating performance of the company but prohibits discretion for payouts above stated maximum awards; and

annual bonuses to executives are awarded after the Company and its subsidiaries' pre-bonus Operating Income for the fiscal year are determined which means that the annual bonus is delayed and at risk to the executives based on the actual net operating performance of the Company and its subsidiaries.

Executive Compensation Program for 2016

Results - Company Performance Highlights

Results of our 2016 performance year were:

TREC
o
Target Pre-bonus Operating Income of $44.6 million
o
Threshold level of $35.7 million
o
Actual Pre-bonus Operating Income was $18.7 million which was 41.9% of the Target level

SHR
o
Target Operating Income of $47.0 million
o
Threshold level of $37.6
o
Actual Operating Income was $26.1 million which was 55.4% of the Target

TC
o
Target Operating Income of $5.0 million
o
Threshold level of $4.0 million
o
Actual Operating Income was a loss of approximately $0.9 million

 As noted above, based on these results our executives did not qualify for a bonus under the annual incentive program.

Report of the Compensation Committee

Management has prepared the Compensation Discussion and Analysis of the compensation program for NEOs (beginning on page 34).  The Committee has reviewed and discussed the Compensation Discussion and Analysis for fiscal year 2016 with management.  Based on this review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company's 2017 Proxy Statement.

48



This report is provided by the following independent directors who comprise the committee:

John R. Townsend, Chairman
Joseph P. Palm
Allen P. McKee
Gary K. Adams
 Karen A. Twitchell
Pamela R. Butcher

Compensation Committee Interlocks and Insider Participation

During 2016 no member of the Committee had a relationship that required disclosure as a Compensation Committee interlock.

Executive Compensation Tables

2016 Summary Compensation Table

The following table sets forth information regarding 2016 compensation for each NEO; 2015 and 2014 compensation is presented for executives who were also NEOs in 2015 and 2014.  This table should be read in conjunction with the explanations provided above.  It sets forth summary compensation information for the year ended December 31, 2016, for the Company's (i) chief executive officer, (ii) both individuals that served as chief financial officer, and (iii) each of the Company's three most highly compensated executives other than the chief executive officer and the chief financial officer who were serving as executive officers of the Company as of December 31, 2016.  
 
2016 Summary Compensation Table
Name and
Principal Position
Year
Salary
($)
 
Bonus
($)
 
Stock
Award(s)
($)(1)
 
Option Award(s)
($)(2)
 
Non-Equity
Incentive Plan
Compensation
($)
 
All Other
Compensation
($)(3)
 
Total
($)
 
Simon Upfill-Brown
President/CEO since July2015; previously Executive Vice President
2016
 
492,308
   
--
   
600,000
   
--
   
--
   
59,973
   
1,152,281
 
2015
 
423,615
   
468,007
   
98,658
   
--
   
--
   
43,047
   
1,424,988
 
2014
 
336,858
   
464,096
   
--
   
354,710
   
--
   
34,421
   
1,190,085
 
Sami Ahmad(5)
Chief Financial Officer since Oct 2016
2016
 
66,250
   
--
   
--
   
--
   
--
   
4,147
   
70,397
 
Connie J. Cook
Vice President of Accounting & Compliance since Oct 2016; previously Chief Financial Officer
 2016
 
253,365
   
--
   
150,000
   
--
   
--
   
44,187
   
447,552
 
 2015
 
232,741
   
137,624
   
28,353
   
--
   
--
   
29,095
   
537,951
 
 2014
 
192,484
   
162,755
   
--
   
160,988
   
--
   
26,073
   
542,300
 
 
 
49

 
Mark D. Williamson
Vice President of Marketing, Petrochemical Company
2016
 
298,462
   
--
   
165,000
   
--
   
--
   
61,454
   
524,916
 
2015
 
300,809
   
193,884
   
36,552
   
--
   
--
   
45,049
   
725,547
 
2014
 
277,937
   
231,708
   
--
   
185,850
   
--
   
35,568
   
731,063
 
Ron Franklin
Vice President of Manufacturing 
2016
 
288,154
   
--
   
159,500
   
--
   
--
   
46,531
   
494,185
 
2015
 
273,845
   
171,578
   
32,392
   
--
   
--
   
33,282
   
645,623
 
2014
 
246,209
   
228,084
   
--
   
181,988
   
--
   
32,143
   
688,424
 
Peter M. Loggenberg(6)
President of
Specialty Wax Company
2016
 
350,000
   
--
   
192,500
   
--
   
--
   
33,090
   
575,590
 
2015
 
363,462
   
89,358
   
44,108
   
--
   
--
   
31,994
   
528,922
 
2014
 
78,077
   
35,742
   
79,310
   
--
   
--
   
2,405
   
195,534
 

(1)
This column represents the dollar amounts for the years shown of the grant date fair value of restricted stock awards that were granted in those years, calculated in accordance with SEC rules.  For purposes of the time-based restricted stock awards granted in 2016, fair value is calculated using the closing price of a share of our stock on the date of grant.  For purposes of the performance-based restricted stock awards granted in 2016, fair value is calculated based on the probability of attaining the target performance goals on the date of grant.  Assuming that maximum performance was the probable outcome on the date of grant, the grant date value of the performance-based restricted stock awards granted in 2016 would have been $300,000, $75,000, $82,500, $79,750, $96,250 for each of Mr. Uphill-Brown, Ms. Cook, and Messrs. Williamson, Franklin and Loggenberg, respectively.  Amounts for 2015 reflect the Company's fiscal year accounting expense.  Amounts for all years do not correspond to the actual value that will be realized by the NEOs. For information on the valuation assumptions used in calculating the amounts in this column, see "Note 2 – Summary of Significant Accounting Policies – Share-Based Compensation" and "Note 16– Share-Based Compensation" in the notes to our consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
(2)
This column represents the dollar amounts for the years shown of grant date fair value of options that vested in those years. Amounts reflect the Company's fiscal year accounting expense and do not correspond to the actual value that will be realized by the NEOs.
(3)
See the 2016 All Other Compensation Table below for additional information.
(4)
Mr. Ahmad was appointed the Company's Chief Financial Officer effective as of October 1, 2016.  As such, the amounts included for Mr. Ahmad reflect only amounts actually earned or paid in connection with his employment with the Company from October 1, 2016 through December 31, 2016.
(5)
Mr. Loggenberg became the President of Trecora Chemical effective as of October 1, 2014, the acquisition closing date of Trecora Chemical.  As such, the amounts included for Mr. Loggenberg in 2014 reflect only amounts that were actually earned or paid from October 1, 2014 through December 31, 2014.

2016 All Other Compensation Table

We provided our NEOs with additional benefits, reflected in the table below for 2016, that we believe are reasonable, competitive and consistent with the Company's overall executive compensation program. The costs of these benefits constitute only a small percentage of each NEO's total compensation.

50



2016 All Other Compensation

Name of Executive
 
Company
401(k)
Contributions
   
 
Profit
Sharing
Award
   
Safety
Award
   
Personal
Use of
Company
Car
   
Life
Insurance
Premiums
   
Total
 
Upfill-Brown
 
$
24,000
   
$
16,300
   
$
3,028
   
$
13,429
   
$
3,216
   
$
59,973
 
Ahmad
   
-
     
100
     
1,485
     
2,397
     
165
     
4,147
 
Cook
   
15,115
     
12,300
     
3,022
     
12,959
     
791
     
44,187
 
Williamson
   
15,900
     
13,000
     
3,028
     
26,310
     
3,216
     
61,454
 
Franklin
   
15,900
     
12,300
     
3,028
     
13,329
     
1,974
     
46,531
 
Loggenberg
   
15,900
     
--
     
2,546
     
13,750
     
894
     
33,090
 


Grants of Plan-Based Awards

The following table presents information concerning plan-based awards granted to each NEO during 2016 under the 2012 Stock and Incentive Plan which stockholders approved in 2012.  The table also provides the range of bonus awards that could become payable pursuant to the Annual Cash Incentive Plan. Mr. Ahmad did not receive any equity awards during the 2016 year since he was not employed until October 2016.

         
Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards (1)
 
Estimated Future
Payouts under
Equity Incentive
Plan Awards (2)
 
All Other Stock Awards:
     
Name
Grant
Date
Approval Date
 
Threshold
($)
 
Target
($)
   
Maximum
($)
 
Threshold
(#)
   
Target
(#)
   
Maximum
(#)
 
Number of Shares of Stock
(#)(3)
 
Grant Date Fair Value of Stock Awards ($)(4)
 
Simon Upfill-Brown
03/01/16
2/17/2016
                 
15,974
     
31,949
     
63,898
   
31,949
   
300,000
 
       
250,000
   
500,000
     
1,000,000
                                   
Sami Ahmad
       
16,563
   
33,125
     
66,250
                                   
Mark Williamson
03/01/16
2/17/2016
                       
4,393
     
8,785
     
17,572
   
8,785
   
82,500
 
       
75,000
   
150,000
     
300,000
                                   
Connie Cook
03/01/16
2/17/2016
                       
3,994
     
7,988
     
15,974
   
7,988
   
75,000
 
       
62,500
   
125,000
     
250,000
                                   
Ronald Franklin
03/01/16
2/17/2016
                       
4,246
     
8,493
     
16,986
   
8,493
   
79,750
 
       
72,500
   
145,000
     
290,000
                                   
Peter Loggenberg
03/01/16
2/17/2016
                       
5,125
     
10,250
     
20,501
   
10,250
   
96,250
 
       
105,000
   
210,000
     
420,000
                                   
 

 
51

(1)
Represents the threshold, target and maximum amount of awards that could have been paid pursuant to the Annual Cash Incentive Plan for the 2016 year.  No payouts were awarded under this plan for 2016.  Mr. Ahmad's amounts were prorated based upon his hire date of October 1, 2016.
(2)
Represents the threshold, target and maximum number of shares that could be subject to the performance-based restricted stock awards granted in 2016.  Fifty percent of the performance awards will be calculated based upon ROIC, and the remaining fifty percent will be based on EPS Growth. The actual amount of shares that may become vested will be determined as of December 31, 2018, the end of the performance period.
(3)
Represents time-based restricted stock awards, granted at a closing price on March 1, 2016, of $9.39 per share.
(4)
Represents the aggregate grant date fair value of both the time-based and performance-based awards granted on March 1, 2016.

Narrative Description to Summary Compensation Table and Grants of Plan-Based Awards

The table below shows a comparison to the base salary and bonus amounts that each executive received in 2016 in comparison to that NEO's total compensation for the 2016 year.  Because we did not pay any bonuses for the 2016 year, the percentages were calculated based on base salary amounts to total compensation amounts.

Name of Executive
Salary/Bonus in
Comparison to
Total Compensation
Simon Upfill-Brown
43%
Sami Ahmad*
94%
Connie Cook
57%
Mark Williamson
57%
Ronald Franklin
58%
Peter Loggenberg
61%

* Mr. Ahmad was not eligible to receive equity awards during the 2016 year due to his starting date of October 1, 2016.

2016 Outstanding Equity Awards at Fiscal Year-End

The following table presents information concerning outstanding equity awards held by the NEOs.  This table includes unexercised (both vested and unvested) option and restricted stock awards that were not satisfied as of December 31, 2016.  Each equity grant is shown separately for each NEO.  Mr. Ahmad did not hold any outstanding equity awards; therefore, he is not included in the table.
 
52

 
   
Option Awards
   
Stock Awards
 
Name
 
Number of Securities Underlying Unexercised Options
(#) Exercisable (1)
   
Number of Securities Underlying Unexercised Options
(#) Unexercisable
   
Option
Exercise Price
($)
   
Option Expiration Date
   
Number of Shares or Units of Stock That Have Not Vested
(#)(2)
   
Market Value of Shares or Units of Stock That Have Not Vested
($)(3)
   
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4)
   
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3)
 
Simon Upfill-Brown
                                               
2013 Option
   
62,500
     
22,500
     
7.71
   
05/28/23
     
--
     
--
     
--
     
--
 
2014 Option
   
60,000
     
60,000
     
12.26
   
02/20/24
     
--
     
--
     
--
     
--
 
2015 RS
   
--
     
--
     
--
     
--
     
22,109
     
306,210
     
--
     
--
 
2016 RS (Time-Based)
   
--
     
--
     
--
     
--
     
31,949
     
442,494
     
--
     
--
 
2016 RS (ROIC)
   
--
     
--
     
--
     
--
     
--
     
--
     
15,974
     
221,240
 
2016 RS (EPS Growth)
   
--
     
--
     
--
     
--
     
--
     
--
     
15,975
     
221,254
 
Connie J. Cook
                                                               
2011 Option
   
58,650
     
--
     
4.86
   
01/11/21
     
--
     
--
     
--
     
--
 
2014 Option
   
23,500
     
23,500
     
12.26
   
02/20/24
     
--
     
--
     
--
     
--
 
2015 RS
   
--
     
--
     
--
     
--
     
6,362
     
88,114
     
--
     
--
 
2016 RS (Time-Based)
   
--
     
--
     
--
     
--
     
7,987
     
110,620
     
--
     
--
 
2016 RS (ROIC)
   
--
     
--
     
--
     
--
     
--
     
--
     
3,993
     
55,303
 
2016 RS (EPS Growth)
   
--
     
--
     
--
     
--
     
--
     
--
     
3,994
     
55,317
 
Mark D. Williamson
                                                               
2011 Option
   
50,830
     
--
     
4.86
   
01/11/21
     
--
     
--
     
--
     
--
 
2014 Option
   
32,500
     
32,500
     
12.26
   
02/20/24
     
--
     
--
     
--
     
--
 
2015 RS
   
--
     
--
     
--
     
--
     
8,199
     
113,556
     
--
     
--
 
2016 RS (Time-Based)
   
--
     
--
     
--
     
--
     
8,786
     
121,686
     
--
     
--
 
2016 RS (ROIC)
   
--
     
--
     
--
     
--
     
--
     
--
     
4,393
     
60,843
 
2016 RS (EPS Growth)
   
--
     
--
     
--
     
--
     
--
     
--
     
4,393
     
60,843
 
 
 
53

 
Ronald Franklin
                                                               
2010 Option
   
10,000
     
--
     
2.47
   
06/22/17
     
--
     
--
     
--
     
--
 
2011 Option
   
58,650
     
--
     
4.86
   
01/11/21
     
--
     
--
     
--
     
--
 
2014 Option
   
29,000
     
29,000
     
12.26
   
02/20/24
     
--
     
--
     
--
     
--
 
2015 RS
   
--
     
--
     
--
     
--
     
7,266
     
100,634
     
--
     
--
 
2016 RS (Time-Based)
   
--
     
--
     
--
     
--
     
8,493
     
117,628
     
--
     
--
 
2016 RS (ROIC)
   
--
     
--
     
--
     
--
     
--
     
--
     
4,246
     
58,807
 
2016 RS (EPS Growth)
   
--
     
--
     
--
     
--
     
--
     
--
     
4,247
     
58,821
 
Peter Loggenberg
                                                               
2015 RS
   
--
     
--
     
--
     
--
     
9,896
     
137,060
     
--
     
--
 
2016 RS (Time-Based)
   
--
     
--
     
--
     
--
     
10,250
     
141,963
     
--
     
--
 
2016 RS (ROIC)
   
--
     
--
     
--
     
--
     
--
     
--
     
5,125
     
70,981
 
2016 RS (EPS Growth)
   
--
     
--
     
--
     
--
     
--
     
--
     
5,125
     
70,981
 

(1) The 2010 option award was granted to Mr. Franklin on May 9, 2010, and vested as follows: 50% on June 22, 2010 and 2011, respectively.  The 2011 option awards were granted on January 12, 2011 and vested as follows: 25% on January 11, 2012; 2013; 2014 and 2015, respectively.  The 2013 option award was granted to Mr. Upfill-Brown on May 29, 2013 and vests as follows: 25% on May 28, 2014; 2015, 2016 and 2017, respectively.  The 2014 option awards were granted on February 21, 2014, and vest as follows: 25% on February 21, 2015; 2016; 2017 and 2018, respectively.
(2) The 2015 restricted stock awards were granted on February 10, 2015 and include the following awards: 29,479 shares to Mr. Upfill-Brown, 8,482 shares to Ms. Cook, 10,932 shares to Mr. Williamson, 9,688 shares to Mr. Franklin and 13,194 shares to Mr. Loggenberg and vest as follows: 25% on February 9, 2016; 2017; 2018 and 2019, respectively.  The 2016 time-based restricted stock awards were granted on March 1, 2016 and vest as follows: one third on February 28, 2017; 2018; and 2019, respectively.
(3) The market value of stock reported is calculated by multiplying the number of shares by the closing market price on December 30, 2016, the last day of trading on the NYSE for the 2016 fiscal year, which was $13.85 per share.
(4) The 2016 ROIC restricted stock awards and 2016 EPS Growth restricted stock awards were granted on March 1, 2016 and have a three-year performance period.  Payouts will range from 0% to 200% of the target award.  The number shown represents the payout assuming threshold performance.  For more information on these awards and the associated performance metrics, please see "—Executive Compensation Program Design—Long-Term Incentive," above.

2016 Option Exercises and Stock Vested

The following table presents information concerning NEO option awards that were exercised and stock awards that vested during the fiscal year ended December 31, 2016.
 
 
54


   
Option awards
   
Stock awards
 
Name
 
Number of shares acquired on exercise
(#)
   
Value realized on exercise
($)1
   
Number of shares acquired on vesting
(#)
   
Value realized on vesting
($)2
 
Simon Upfill-Brown
   
     
     
7,370
   
$
70,752
 
Sami Ahmad
   
     
     
     
 
Connie Cook
   
5,000
   
$
35,900
     
2,120
   
$
20,352
 
Mark Williamson
   
20,000
   
$
176,200
     
2,733
   
$
26,237
 
Ronald Franklin
   
     
     
2,422
   
$
23,251
 
Peter Loggenberg
   
     
     
3,298
   
$
31,661
 

(1)
Amounts reflected in this column are based on the difference between the closing price of the Company's common stock on the date or dates of exercise and the exercise price of the option exercised on such date.
(2)
Amounts reflected in this column are based on the closing price of the Company's common stock on the date or dates of vesting for each NEO's restricted stock award.

No Pension Benefits for 2016

Although we do maintain qualified retirement plans for certain employees, none of our current NEOs participate in any plan that provides for specified retirement payments or benefits, such as tax-qualified defined benefit plans or supplemental executive retirement plans.

Potential Payments upon Termination or Change in Control

Mr. Loggenberg Employment Arrangements

The Company entered into an Employment Contract ("Employment Contract") and Severance Agreement and Covenant Not to Compete, Solicit and Disclose ("Severance Agreement") with Peter Loggenberg on October 1, 2014.  The Employment Contract may be terminated for or without "good cause."  Upon a dismissal or termination of employment other than for good cause, the Company will pay a cash severance to Mr. Loggenberg in an amount equal to one year of his then annual base salary (excluding bonuses, grants of stock and/or stock options, profit sharing, benefits, and perquisites).  The cash severance shall be payable in six (6) equal monthly installments.

As used in Mr. Loggenberg's Employment Contract, "good cause" means his commission of a crime involving moral turpitude, embezzling any funds or property of the Company or commission of any other dishonest act towards the Company, or the Company's determination that he was under the influence of alcohol or illegal drugs during working hours.

Restricted Stock and Option Awards

The following table shows how unvested restricted stock and option grants are treated upon a change in control and/or termination of employment.


55


Change in Control
Double trigger vesting.
Death and Disability
Pro rata vesting for restricted stock, options and performance shares.
Involuntary Termination Without Cause
Unvested restricted stock and stock options are forfeited and all performance awards expire and terminate.
Retirement
Pro rata vesting for restricted stock and options, as well as pro rata vesting for performance awards based on actual performance, subject to minimum 6 month service requirement after grant.

The table below discloses the amount of compensation and/or other benefits due to the NEOs in the event of a change in control or their termination of employment, assuming such change in control or termination of employment occurred on December 31, 2016.   These values are considered to be our best estimates of values potentially due to our NEOs but actual values could not be determined until an actual termination of employment or a change in control event were to occur.  Mr. Ahmad did not hold any outstanding equity awards in 2016; therefore, he is not included in the table.

Name
 
Change in Control
   
Termination Without Cause 1
   
Termination Due to Death or Disability
   
Retirement
 
Simon Upfill-Brown
                       
   Restricted Stock Acceleration 2
 
$
1,191,197
   
$
--
   
$
215,224
   
$
215,224
 
   Option Acceleration 3
 
$
233,550
   
$
--
   
$
123,677
   
$
123,677
 
   TOTAL
 
$
1,424,747
   
$
--
   
$
338,901
   
$
338,901
 
Connie Cook
                               
   Restricted Stock Acceleration 2
 
$
309,354
   
$
--