DEF 14A 1 d321640ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN

PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934 (Amendment No.     )

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þ Definitive Proxy Statement

 

¨ Definitive Additional Materials

 

¨ Soliciting Material Pursuant to § 240.14a-12

HECKMANN CORPORATION

 

(Name of Registrant as Specified in its Charter)

N/A

 

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LOGO

HECKMANN CORPORATION

300 Cherrington Parkway, Suite 200

Coraopolis, PA 15108

www.heckmanncorp.com

Dear Stockholder:

On behalf of the Board of Directors, I am pleased to invite you to attend the 2012 Annual Meeting of Stockholders of Heckmann Corporation (NYSE: HEK) to be held on May 8, 2012 at 1:00 p.m., Eastern Daylight Time.

To be cost-effective, we are again holding a virtual Annual Meeting via the Internet. We are offering a live webcast of the Annual Meeting for our stockholders at www.virtualshareholdermeeting.com/heckmann where you will be able to listen to the Annual Meeting, vote electronically, and submit questions to me following the Annual Meeting.

In addition, we are pleased to take advantage of the United States Securities and Exchange Commission rule allowing companies to furnish proxy materials to their stockholders over the Internet. We believe that this delivery process will expedite stockholders’ receipt of proxy materials. This delivery process will also lower the costs and reduce the environmental impact of our Annual Meeting. On March 27, 2012, we mailed to our stockholders of record as of March 19, 2012 a Notice of Annual Meeting of Stockholders, as well as a Notice of Internet Availability of Proxy Materials containing instructions on how to access our Proxy Statement, form of proxy card and Annual Report to Stockholders for the fiscal year ended December 31, 2011. The Notice of Internet Availability of Proxy Materials also provides instructions on how to receive a paper copy of the proxy materials, including a proxy card, by mail and how to vote.

The matters to be acted upon are described in the Notice of Annual Meeting of Stockholders, the Notice of Internet Availability of Proxy Materials and in the Proxy Statement. We encourage you to carefully read these materials, as well as the Annual Report to Stockholders.

I urge you to participate in Heckmann Corporation’s Annual Meeting of Stockholders. Whether or not you plan to attend our live webcast of the Annual Meeting of Stockholders, your vote is very important and I encourage you to vote promptly. You may vote your shares via a toll-free telephone number or over the Internet, as described in the proxy materials, or, if you received a paper copy of the proxy card by mail, you may mark, sign and date the proxy card and return it in the envelope provided. Instructions regarding all three methods of voting are provided in the Notice of Internet Availability of Proxy Materials and on the proxy card. If you do attend the live webcast, you will of course have the right to revoke your proxy and vote your shares at that time if you so desire. If you hold your shares through an account with a broker, nominee, fiduciary or other custodian, please follow the instructions you receive from them to vote your shares.

Thank you for your ongoing support of and continued interest in Heckmann Corporation.

Sincerely,

 

LOGO

Richard J. Heckmann

Chairman and Chief Executive Officer


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LOGO

NOTICE OF THE 2012 ANNUAL MEETING OF STOCKHOLDERS

March 27, 2012

To our Stockholders:

Notice is hereby given that the 2012 Annual Meeting of Stockholders of Heckmann Corporation, a Delaware corporation, will be held on May 8, 2012 at 1:00 p.m., Eastern Daylight Time, via the Internet at www.virtualshareholdermeeting.com/heckmann.

Only stockholders of record that own our common stock at the close of business on March 19, 2012 are entitled to notice of and to vote at this meeting. For ten days prior to the Annual Meeting, a complete list of our stockholders entitled to vote at the meeting will be available for examination by any stockholder, for any purpose relating to the meeting, during ordinary business hours at our principal executive offices located at 300 Cherrington Parkway, Suite 200, Coraopolis, Pennsylvania 15108.

At the meeting, we will consider the following proposals described in detail in the accompanying Proxy Statement:

 

  1 To elect two Class II directors to hold office for a three-year term expiring at the annual meeting of stockholders to be held in 2015 or until their respective successors are elected and qualified, or their earlier death, resignation or removal. The Board of Directors has nominated J. Danforth Quayle and Andrew D. Seidel for election as Class II directors at the meeting;

 

  2 To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2012;

 

  3 To hold an advisory vote on executive compensation;

 

  4 To approve the Amendment to the Company’s 2009 Equity Incentive Plan to increase the number of shares of Common Stock available for award under the plan by 5,000,000 shares, and to increase the limit on shares which may be issued in the form of full value awards by 2,000,000 shares;

 

  5 To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement of the meeting.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 8, 2012. Our proxy statement is attached. Our financial and other information is contained in our Annual Report to Stockholders for the fiscal year ended December 31, 2011. If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials unless specifically requested. This proxy statement and our Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the U.S. Securities and Exchange Commission, are available at www.proxyvote.com. If you received a Notice of Internet Availability of Proxy Materials by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice of Internet Availability of Proxy Materials. In addition, the Notice of Internet Availability of Proxy Materials provides instructions on how stockholders may request to receive proxy materials for future Annual Meeting materials in printed or email form.

YOUR VOTE IS IMPORTANT: Whether or not you plan to attend our live webcast of the Annual Meeting of Stockholders, please vote your shares by the Internet, telephone or mail in order to ensure the presence of a quorum. If you attend the live webcast, you may choose to vote your shares at that time even if you have previously voted your shares. Any proxy may be revoked by the submission of a later dated proxy or a written notice of revocation before close of the Annual Meeting of Stockholders.


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Registered holders may vote:

 

  1 By Internet: go to www.proxyvote.com;

 

  2 By toll-free telephone: call 1-800-690-6903; or

 

  3 By mail (if you received a paper copy of the proxy materials by mail): mark, sign, date and promptly mail the enclosed proxy card in the postage-paid envelope.

Beneficial Stockholders. If your shares are held in the name of a broker, bank or other holder of record, follow the voting instructions you receive from the holder of record to vote your shares.

By Order of the Board of Directors

 

LOGO

Damian C. Georgino

Executive Vice President, Corporate Development and Chief Legal Officer


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LOGO

TABLE OF CONTENTS

 

     Page  

PROXY STATEMENT FOR THE 2012 ANNUAL MEETING OF STOCKHOLDERS

     1   

HOW TO PARTICIPATE IN THE ELECTRONIC MEETING

     1   

SOLICITATION AND VOTING

     1   

Voting Rights and Outstanding Shares

     1   

Vote Required

     2   

Solicitation of Proxies

     2   

Voting Instructions and Revocation of Proxy

     2   

PROPOSAL 1—ELECTION OF DIRECTORS

     4   

Background

     4   

Vote Required and Board Recommendation

     4   

Information Regarding Directors and Nominees

     5   

CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS

     8   

Director Independence

     9   

Executive Sessions

     9   

Committees and Meeting Attendance

     9   

Policy Regarding Director Attendance at Annual Meetings of Stockholders

     10   

Audit Committee

     10   

Compensation Committee

     11   

Nominating and Governance Committee

     11   

Selection of Board Nominees

     12   

Stockholder Nominations

     13   

Stockholder Communications with the Board

     14   

Code of Business Conduct and Ethics

     14   

Corporate Governance Guidelines

     14   

Board Leadership Structure and Role in Risk Management

     15   

Compensation Committee Interlocks and Insider Participation

     15   

AUDIT COMMITTEE MATTERS

     16   

Audit Committee Report

     16   

Change in Independent Registered Public Accounting Firm.

     16   

Independent Registered Public Accounting Firm’s Fees and Services

     17   

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

     18   

 

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     Page  

PROPOSAL 2—RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     19   

Background

     19   

Vote Required and Board Recommendation

     19   

PROPOSAL 3—ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

     20   

Background

     20   

Vote Required and Board Recommendation

     21   

EXECUTIVE OFFICERS

     22   

EXECUTIVE COMPENSATION

     24   

Compensation Discussion and Analysis

     24   

Severance Arrangements and Change-in-Control Payments

     27   

Compensation Committee Report

     29   

Summary Compensation Table

     30   

Grants of Plan-Based Awards

     31   

Executive Employment Agreements and Potential Payments upon Termination or Change-in-Control

     33   

DIRECTOR COMPENSATION

     37   

PROPOSAL 4—AMENDMENT TO 2009 EQUITY INCENTIVE PLAN TO INCREASE NUMBER OF SHARES AVAILABLE UNDER THE PLAN AND THE LIMIT ON SHARES AVAILABLE FOR FULL VALUE AWARDS

     38   

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     48   

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     52   

STOCKHOLDER PROPOSALS FOR THE 2013 ANNUAL MEETING

     53   

DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS

     55   

OTHER MATTERS

     55   

 

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PROXY STATEMENT FOR THE 2012 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 8, 2012.

The accompanying proxy is solicited by the Board of Directors (“Board”) of Heckmann Corporation (the “Company”), a Delaware corporation, for use at its annual meeting of stockholders to be held on May 8, 2012 (“Annual Meeting”) via live webcast on the Internet at www.virtualshareholdermeeting.com/heckmann, or any adjournment or postponement thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders and described below. We first made this proxy statement (“Proxy Statement”) and the attached proxy card available to stockholders on March 27, 2012. You are cordially invited to attend the live webcast of the Annual Meeting and are requested to vote on the proposals described in this Proxy Statement.

The following matters will be considered at the Annual Meeting of Stockholders:

 

  1 To elect two Class II directors to hold office for a three-year term expiring at the annual meeting of stockholders to be held in 2015 or until their respective successors are elected and qualified, or their earlier death, resignation or removal. The Board of Directors has nominated J. Danforth Quayle and Andrew D. Seidel for election as Class II directors at the meeting;

 

  2 To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2012;

 

  3 To hold an advisory vote on executive compensation;

 

  4 To approve the Amendment to the Company’s 2009 Equity Incentive Plan to increase the number of shares of Common Stock available for award under the plan by 5,000,000 shares, and to increase the limit on shares which may be issued in the form of full value awards by 2,000,000 shares;

 

  5 To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement of the meeting.

HOW TO PARTICIPATE IN THE ELECTRONIC MEETING

In order to participate in this year’s Annual Meeting of Stockholders, please log on to www.virtualshareholdermeeting.com/heckmann and click on the “Investors” section and the “Annual Meeting Webcast” link at least 15 minutes prior to the start of the 1:00 p.m. Eastern Daylight Time meeting to provide time to register and download the required audio software, if needed. All stockholders will need to register by entering your name and, if you would like to ask a question during the question and answer session following the Annual Meeting, you will also need to enter the control number received with your Notice of Internet Availability of Proxy Materials or, if you requested a paper copy, the proxy card. Questions that would be appropriate to raise in person and that relate to the purpose of the meeting will be accepted during the meeting. To submit questions, please access the Annual Meeting webcast and select “Ask a Question.”

The webcast replay will be available until December  31, 2012.

SOLICITATION AND VOTING

Voting Rights and Outstanding Shares

Only stockholders of record as of the close of business on March 19, 2012 will be entitled to vote at the Annual Meeting and any adjournment or postponement thereof. As of that date, we had 126,726,124 shares of common stock outstanding, all of which are entitled to vote with respect to all matters to be acted upon at the Annual Meeting. Each stockholder of record as of that date is entitled to one vote for each share of common stock held by such stockholder. Our Bylaws provide that a majority of the outstanding shares of our common

 

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stock entitled to vote, whether present in person or represented by proxy, shall constitute a quorum for the transaction of business at the meeting. Votes for and against, abstentions and “broker non-votes” (shares held by a broker or nominee that does not have the authority, either express or discretionary, to vote on a particular matter) will each be counted as present for purposes of determining the presence of a quorum.

Vote Required

If a quorum is present, the votes required for the proposals to be considered at the Annual Meeting and the treatment of abstentions and broker non-votes in respect of such proposals are as follows:

 

   

Proposal 1: The two nominees for Class II director receiving the highest number of votes will be elected Class II directors. Abstentions and broker non-votes will not have any effect on the election of directors. Note that if your shares are held by a broker or nominee, such broker or nominee will not have authority to vote your shares in the election of directors unless you provide instructions to him or her regarding how you would like your shares to be voted. Stockholders are not permitted to cumulate their shares for purposes of electing directors.

 

   

Proposals 2, 3 and 4: Our Bylaws state that each of the items brought before the stockholders at the Annual Meeting requires the affirmative vote of the holders of a majority of the shares of our common stock present or represented by proxy and entitled to vote at the Annual Meeting. Notwithstanding the vote required by our Bylaws, please be advised that Proposal 2 (ratification of the selection of our independent registered public accounting firm) and Proposal 3 (an advisory vote on executive compensation), are advisory only and are not binding on us. Our Board will consider the outcome of the vote on each of these proposals in considering what action, if any, should be taken in response to the advisory vote by stockholders. Abstentions will have the same effect as an “against” vote, but broker non-votes will not have any effect on the outcome of these proposals. Note that if your shares are held by a broker or nominee, such broker or nominee may exercise his or her discretion to vote your shares for Proposal 2 (ratification of the selection of our independent registered public accounting firm) but such broker or nominee will not have authority to vote your shares on Proposal 3 (an advisory vote on executive compensation) and Proposal 4 (approval of the Amendment to the 2009 Equity Incentive Plan) unless you provide instructions to him or her regarding how you would like your shares to be voted.

Solicitation of Proxies

We will bear the expense of soliciting proxies. Our directors, officers, and other employees, without additional compensation, may solicit proxies personally or in writing, by telephone, e-mail, or otherwise. We are required to request that brokers and nominees who hold stock in their names furnish our proxy materials to the beneficial owners of the stock, and we will reimburse these brokers and nominees for their reasonable expenses incurred in so doing.

Voting Instructions and Revocation of Proxy

All shares of our common stock represented by properly executed proxies received before or at the Annual Meeting will, unless the proxies are revoked, be voted in accordance with the instructions indicated on those proxies. If no instructions are indicated on a proxy, the shares represented by such proxy will be voted as the Board recommends on each proposal. The persons named as proxies will vote on any other matters properly presented at the Annual Meeting in accordance with their best judgment. A stockholder giving a proxy has the power to revoke his or her proxy at any time before it is exercised by delivering to the Corporate Secretary of the Company a written notice revoking the proxy or a duly executed proxy with a later date, or by attending the live webcast of the Annual Meeting and voting his or her shares at that time. Attendance of the live webcast of the Annual Meeting will not, in and of itself, constitute revocation of a proxy.

 

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Stockholders whose shares are registered in their own names may vote (1) by returning a proxy card, (2) via the Internet, or (3) by telephone. Specific instructions to be followed by any registered stockholder interested in voting via the Internet or by telephone are set forth in the Notice of Internet Availability of Proxy Materials and on the proxy card. The Internet and telephone voting procedures are designed to authenticate the stockholder’s identity and to allow the stockholder to vote his or her shares and confirm that his or her voting instructions have been properly recorded. If you do not wish to vote via the Internet or telephone, please complete, sign and return the proxy card.

 

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PROPOSAL 1—ELECTION OF DIRECTORS

(Item 1 on Proxy Card)

Background

We have a classified Board currently consisting of eight members, all but one of whom are non-employee directors, divided into three classes (Class I, Class II and Class III). Directors in each class are elected to serve for three-year staggered terms that expire in successive years. Our Class II directors’ terms expire this year. Accordingly, we are holding an election for our Class II directors at the Annual Meeting, with the Class II directors, if elected, to serve three-year terms.

The Board has nominated J. Danforth Quayle and Andrew D. Seidel for election as Class II directors for three-year terms expiring at the annual meeting of stockholders to be held in 2015 or until their successors are elected and qualified, or their earlier death, resignation or removal. If the nominees decline to serve or become unavailable for any reason, or if any additional vacancy occurs before the election (although we know of no reason to anticipate that this will occur), the proxies may be voted for such substitute nominees as the Board may designate. Each nominee has consented to being named in this Proxy Statement and has agreed to serve if elected.

Vote Required and Board Recommendation

If a quorum is present and voting, the two nominees for Class II director receiving the highest number of votes will be elected as Class II directors. Abstentions and broker non-votes will be counted as shares present for purposes of determining the presence of a quorum, but will have no effect on the result of the vote. The biographical description, including the principal occupation of and other directorships held by each director for at least the past five years, if any, as well as the specific experience, qualifications, attributes and skills that led to the conclusion that each director should serve as a member of the Board is provided below with respect to the Class II nominees as well as the Class I and Class III directors whose terms of office will continue after the Annual Meeting.

THE BOARD RECOMMENDS A VOTE “FOR” THE NOMINEES NAMED ABOVE.

 

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Information Regarding Directors and Nominees

The following table sets forth information regarding our current directors, including the Class II nominees proposed to be elected at the Annual Meeting. There are no family relationships between any directors or executive officers of the Company.

 

Name

   Position with our Company    Age      Director
Since
 

Class II Directors Nominated for Election at the 2012 Annual Meeting of Stockholders Whose Terms, if elected, Will Expire at the 2015 Annual Meeting of Stockholders:

   

J. Danforth Quayle

   Director      65         2007   

Andrew D. Seidel

   Director      49         2008   

Class III Directors Whose Terms Expire at the 2013 Annual Meeting of Stockholders:

  

Richard J. Heckmann

   Chairman and Chief Executive Officer      68         2007   

Alfred E. Osborne, Jr.

   Director      67         2007   

Kevin L. Spence

   Director      55         2010   

Class I Directors Whose Terms Expire at the 2014 Annual Meeting of Stockholders:

     

Edward A. Barkett

   Director      45         2009   

Lou Holtz

   Director      75         2007   

Robert B. Simonds, Jr.

   Vice-Chairman      49         2010   

Class II Directors Nominated for Election at the 2012 Annual Meeting Whose Terms, if Elected, Will Expire at the 2015 Annual Meeting

J. Danforth Quayle has served a director since May 2007. Mr. Quayle is currently the chairman of Cerberus Global Investments, a position he has held since 1999, when he joined Cerberus Capital Management, one of the world’s leading private investment firms, with over $27 billion in committed capital and offices in New York, Chicago, Los Angeles, Atlanta, London, Baarn (The Netherlands), Frankfurt, Osaka and Tokyo. As chairman of Cerberus Global Investments, Mr. Quayle has been actively involved in new business sourcing and marketing for Cerberus in North America, Asia and Europe. Prior to joining Cerberus, Mr. Quayle had served as a congressman and senator from the State of Indiana and as the 44th Vice President of the United States. During his tenure as Vice President, President George H.W. Bush named Mr. Quayle to head of the Council of Competitiveness, which worked to ensure America’s international competitiveness in the 21st century. Mr. Quayle has made official visits to numerous countries and was chairman of the National Space Council. Since leaving public office in 1993, Mr. Quayle has authored three books, including Standing Firm, A Vice-Presidential Memoir. He established and sold an insurance business in Indiana. For two years he was a distinguished visiting professor of international studies at Thunderbird, The American Graduate School of International Management in Phoenix, Arizona. Mr. Quayle is currently a director of Aozora Bank, Tokyo, Japan. In addition, Mr. Quayle has served on many public and private companies’ Boards during the past 20 years, including board and committee service with United States Filter Corporation (“USFilter”) and K2, Inc. (“K2”).

We believe that Mr. Quayle’s broad experience, including government service, provides the Board with unique insight into leadership and oversight responsibilities. His position as Chairman of Cerberus Global Investments coupled with his active involvement in new business sourcing and marketing also makes Mr. Quayle well-suited to advise the Board on its operations and investments. In addition, Mr. Quayle’s long-time service on public and private companies’ boards provides him with a deep understanding of issues facing public companies such as ours.

Andrew D. Seidel has served as a director since October 2008. Since 2006, Mr. Seidel has served as the Chief Executive Officer of Underground Solutions, Inc., a water infrastructure and pipeline company located in Poway, California. From 2000 to 2005, Mr. Seidel served as both Chief Executive Officer and Chief Operating

 

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Officer of USFilter, then a wholly-owned subsidiary of Veolia Environnement, SA (NYSE: VE), until its sale to Siemens, AG. Mr. Seidel also served on the Management Board of Veolia Environnement, SA from 2001 to 2004. From 1991 to 1999, Mr. Seidel served as Chief Operating Officer for the Water & Wastewater Group of US Filter. From 1990 to 1991, he was a senior consultant with Deloitte & Touche Management Consulting and from 1984 to 1989, he held various positions of increasing responsibility within the rocket motor engineering and specialty chemical divisions of Hercules, Inc. Mr. Seidel currently serves as an Advisory Council Member of Vantage Point Venture Partners, one of the largest clean technology funds in the world. Mr. Seidel has also served as a director of Aqua America (NYSE:WTR), USFilter and National Waterworks, a Thomas Lee/JP Morgan water infrastructure business that was sold to Home Depot in 2006. Mr. Seidel received his Bachelor of Science in Chemical Engineering from the University of Pennsylvania in 1984, and his Masters of Business Administration from The Wharton School, University of Pennsylvania, in 1990.

We believe that Mr. Seidel’s more than 20 years of water industry experience provides the Board with an invaluable perspective and expertise relevant to the Company’s business of buying and building companies in the water sector. Mr. Seidel’s experience serving with other public and private companies, including five years in executive positions with Veolia Environnement, SA, and six years in executive positions with Underground Solutions, Inc. also makes him experienced in financial accounting and SEC compliance issues and brings to the Board the insight of a business leader who has evaluated operational and business issues similar to those facing the Company.

Directors with Terms Expiring at the 2013 Annual Meeting (Class III)

Richard J. Heckmann has served our Chairman and Chief Executive Officer and as a director since May 2007. Mr. Heckmann previously served as Chairman of the board of directors and Chief Executive Officer of K2, a manufacturer of sporting goods equipment, until his retirement from K2 on August 8, 2007. K2 was acquired by Jarden Corporation on August 8, 2007. During his tenure as Chairman and Chief Executive Officer of K2 beginning in November 2002, K2 (which was in workout status at that time) more than doubled revenues, which grew from approximately $582 million for the year ended December 31, 2002 to approximately $1.4 billion for the year ended December 31, 2006 and tripled net income which grew from approximately $12.1 million for the year ended December 31, 2002 to approximately $37.7 million for the year ended December 31, 2006. Prior to his involvement in K2, Mr. Heckmann founded USFilter in 1990 and was its Chairman, Chief Executive Officer and President. Through a series of acquisitions, USFilter grew from annualized revenues of approximately $17 million in 1990 to over $5.0 billion in 1999, when it was acquired by Vivendi S.A. of Paris, France in March 1999 for approximately $8.2 billion, including the assumption of approximately $1.8 billion of debt. In addition to 40 years of executive management of large operating companies, Mr. Heckmann has extensive experience with business acquisitions. While he was with USFilter, it successfully completed more than 150 acquisitions. Mr. Heckmann was directly involved in locating targets and conducting business diligence with respect to a significant number of USFilter’s and K2’s acquisitions. During Mr. Heckmann’s tenure at K2, K2 successfully completed more than 20 acquisitions. Mr. Heckmann is also part owner of the National Basketball Association’s Phoenix Suns franchise. In 2003, Mr. Heckmann was appointed to the Corporate Accountability and Listing Standards Committee, a special governance committee of the New York Stock Exchange (“NYSE”). He also served as chairman of the Listed Company Advisory Committee of the NYSE from 2001 to 2003. Mr. Heckmann has served on many public and private company boards during the past 40 years and he currently serves on the board of directors of Jarden Corporation (NYSE: JAH).

We believe that Mr. Heckmann’s extensive experience with business acquisitions and corporate finance and past positions with K2 and USFilter provide the Board with a unique perspective on operational matters and issues involved in the Company’s businesses and strategies. His current position as our Chairman and Chief Executive Officer also brings to the Board knowledge of the day-to-day operations of the Company, which provides invaluable insight to the Board as it reviews the Company’s strategic and financial plans. Mr. Heckmann’s prior involvement with the NYSE as well as his 40 years of service on the boards of many public and private companies also gives him extensive knowledge on the operations of public companies and potential issues facing companies such as ours that are listed on the NYSE.

 

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Alfred E. Osborne, Jr. has served as a director since May 2007. Dr. Osborne is the Senior Associate Dean at the UCLA Anderson School of Management, a position he assumed in July 2003. He has been employed as a professor at UCLA since 1972 and has served the school in various capacities over the years. Currently, he also serves as the faculty director of the Harold Price Center for Entrepreneurial Studies at UCLA, a position he has held since July 2003. Dr. Osborne is a member of the board of directors of Emmaus Life Sciences, Inc., a pharmaceutical company; Kaiser Aluminum, Inc., a fabricated aluminum products manufacturing company; and Wedbush, Inc., a financial services and investment firm. Dr. Osborne also serves as a director of First Pacific Advisors’ Capital, Crescent, International Value, and New Income Funds. Dr. Osborne has served on many public and private company boards during the past 30 years, including service on audit and governance committees. In addition, Dr. Osborne has agreed to join the board of directors of Fulcrum BioEnergy, Inc., a private biofuels company, based in Pleasanton, California. Accordingly, when Fulcrum BioEnergy, Inc. completes a public offering, Dr. Osborne would then be a director on four public company boards, Emmaus Life Sciences, Inc. and Kaiser Aluminum, Inc. (as mentioned above), the Company, and Fulcrum BioEnergy, Inc.

We believe that Dr. Osborne’s background in entrepreneurial studies at UCLA makes him well positioned to understand complex organizational, financial, and managerial issues facing growth-oriented companies which helps the Board understand issues which may exist at our Company as well as the companies that we may acquire. In addition, his service on the board of directors of financial companies provides him with an understanding of financial and accounting issues which makes him a valuable resource to our Board and the Audit Committee. His long-time service on audit and governance committees on the boards of many public and private companies brings to the Board extensive experience with audit matters and governance issues.

Kevin L. Spence has served as a director since December 2010. Mr. Spence is currently the Chief Financial Officer of Purpose Technologies, a position he has held since March 2010. He has 25 years of experience in the financial and accounting fields, with prior positions including Chief Financial Officer of Citation Technologies, Inc., a leader in online document management solutions since 2002, and Executive Vice President and Chief Financial Officer of USFilter from January 1992 to December 2000. Prior to that, he was an audit partner with the international accounting firm of KPMG LLP. Mr. Spence was Chief Financial Officer of GreenCore Technologies, Inc. (f/k/a AquaCell Technologies, Inc.) from January 2007 to December 2008. Mr. Spence also concurrently served as President and Chief Financial Officer of Aquacell Water, Inc., a former wholly owned subsidiary of GreenCore Technologies that shared corporate offices and operated under the same executive management team as GreenCore Technologies after its spin-off in 2006. On November 7, 2008, an involuntary petition for liquidation under Chapter 7 was filed against GreenCore Technology, Inc. in the U.S. Bankruptcy Court for the District of Delaware.

We believe that Mr. Spence’s background as a present and prior Chief Financial Officer of various companies and as an audit partner at KPMG LLP provides the board with keen insight on matters relating to strategic planning, financial reporting and financial management. Mr. Spence’s financial background and broad experience with management issues makes him a valuable resource to the Board and the Audit Committee.

Class I Directors Whose Terms Expire at the 2014 Annual Meeting of Stockholders.

Edward A. Barkett has served as a director since February 2009. Mr. Barkett is the founder and currently the president of Atlas Properties, Inc., a real estate development and management firm, a position he has held since 1993. For nearly 20 years, Mr. Barkett has been actively involved in building and managing complicated businesses, and in real estate investing, development, construction, leasing, and financing throughout the United States. Mr. Barkett is also a member of the board of directors of Bashas’, Inc. the largest grocery store chain in the State of Arizona, and a member of the board of directors of the San Joaquin Partnership, a public/private economic development corporation dedicated to job creation in San Joaquin County, California. Mr. Barkett received a Bachelor of Arts degree in Economics from the University of California at Los Angeles in 1988, and Juris Doctorate and Master of Real Estate Development degrees from the University of Southern California in 1991.

 

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We believe that Mr. Barkett’s background in real estate investing and financing provides the Board with an invaluable perspective on investing which is useful in the Company’s business of buying operating businesses. In addition, Mr. Barkett’s experience actively building and managing complicated businesses provides the Board with significant expertise relevant to the Company’s business of buying and building companies.

Lou Holtz has served as a director since May 2007. Mr. Holtz became a college football television analyst for ESPN in September 2005 after his retirement as the head football coach of the University of South Carolina in November 2004. Prior to joining the University of South Carolina in 1999, Mr. Holtz held various coaching positions, including 11 seasons at the University of Notre Dame from 1986 to 1996, two seasons at the University of Minnesota from 1984 to 1985, seven seasons at the University of Arkansas from 1977 to 1983, four seasons at North Carolina State University from 1972 to 1975 and three seasons at William and Mary College from 1969 to 1971. Mr. Holtz spent 1976 as the head coach of the New York Jets of the National Football League. Mr. Holtz is a noted motivational speaker and is the author of The Fighting Spirit. Mr. Holtz has served on many public and private companies’ boards during the past 20 years, including advisory and consulting services with USFilter and board service with K2. Mr. Holtz is a nationally recognized speaker often engaged by public and private businesses, government, and military organizations to provide insight and guidance on leadership and motivational issues applicable to multiple generations of executives, managers, and employees.

We believe that as a successful coach for both collegiate and professional football for over 30 years, Mr. Holtz brings to the Board significant leadership and management skills. Mr. Holtz’s status as a nationally recognized speaker on leadership issues also makes him well-suited to provide the Board with guidance and insight on leadership matters facing the Company. In addition to Mr. Holtz’s ownership interest in several enterprises together with his long-time service on many public and private companies’ boards gives him substantial experience on governance matters and makes him a valuable resource to our Board.

Robert B. Simonds, Jr. has served as a director since May 2010 and as Vice Chairman since October 2010. Mr. Simonds is a long time advocate for water rights and policy issues and in the immediate past was the Chairman of the Blue Ribbon Committee of the Metropolitan Water District (“MWD”) of Southern California, the world’s largest water wholesaler, where he represented the city of Los Angeles from 2004 to 2006. His family owns and controls water rights in Arizona. MWD’s blue ribbon committee makes recommendations for new business models and strategies to position MWD to meet the region’s water-related needs for the future. Mr. Simonds is also the Chairman of the Robert Simonds Company and a seasoned producer of over 30 major motion pictures that have generated in excess of $3.5 billion in worldwide revenue. Titles in his repertoire include Cheaper by the Dozen, Herbie: Fully Loaded, Just Married, The Wedding Singer, Happy Gilmore, Billy Madison, and The Pink Panther franchise. He serves on the board of the Yale School of Management. He is a governor of the Natural History Museum of Los Angeles County. Mr. Simonds graduated summa cum laude from Yale University.

We believe Mr. Simonds brings extensive experience and knowledge in water rights and policy issues that are critical to the Company’s domestic and international operations focusing on buying and building companies in the water sector. In addition, Mr. Simonds’ involvement with MWD is invaluable in providing the Board with insight on the operations and strategic direction of companies in the water sector.

CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS

We believe that effective corporate governance is critical to our long-term success and ability to create value for our stockholders. In connection with our initial public offering, or IPO, our listing on the American Stock Exchange in November 2007 and our subsequent listing on the NYSE in May 2008, and from time to time as appropriate, the Board reviewed and reviews periodically our existing corporate governance policies and practices, as well as related provisions of The Sarbanes-Oxley Act of 2002, current and proposed rules of the

 

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United States Securities and Exchange Commission (“SEC”), and the corporate governance requirements of the NYSE. Based upon its review, the Board has approved charters, policies, procedures and controls that we believe promote and enhance corporate governance, accountability, and responsibility with respect to the Company and a culture of honesty and integrity. Our corporate governance guidelines, code of business conduct and ethics, environmental sustainability policy, and the charters for each of our Board committees are available in the “Governance” section of our website at http://heckmanncorp.com/governance.htm, and are available free of charge upon request addressed to Corporate Secretary, Heckmann Corporation, 300 Cherrington Parkway, Suite 200 Coraopolis, Pennsylvania 15108.

Director Independence

We currently have eight directors on our Board. The rules of the NYSE require listed companies to have a board of directors with at least a majority of independent directors. For a director to qualify as independent, the Board must affirmatively determine that the director has no material relationship with the Company, either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Board has determined that Messrs. Barkett, Holtz, Osborne, Quayle, Simonds and Spence are independent under the NYSE rules.

Executive Sessions

NYSE rules require the Company’s non-management directors to meet at regularly scheduled executive sessions without management. Our Corporate Governance Guidelines, which are discussed more fully below under “Corporate Governance Guidelines,” provide that our non-management directors will meet in executive session without management directors or management present on a regularly scheduled basis, but not less than quarterly. We adopted our Corporate Governance Guidelines in connection with the listing of our common stock on the NYSE, which occurred on May 23, 2008. Our non-management directors held 5 executive sessions during 2011. The director to preside during the executive sessions is determined at the beginning of the meeting. In addition, our Audit Committee charter requires that the members of the Audit Committee meet with our independent auditors in executive session. The members of the Audit Committee held 7 executive sessions with our independent auditors during 2011.

Committees and Meeting Attendance

The Board has an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee. Each of the Board committees operates under a written charter adopted by the Board. The Board committee charters are available in the “Governance” area of our website at http://heckmanncorp.com/governance.htm. Each committee consists of three persons, none of whom is employed by us and all of whom are independent under NYSE rules.

Members of the Audit Committee must also satisfy an additional SEC independence requirement, set forth in Rule 10A-3 promulgated under the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), which provides that they may not accept directly or indirectly any consulting, advisory or other compensatory fee from the Company other than compensation in their capacity as director, or otherwise be an “affiliated person” of the Company. The Board has determined that Messrs. Osborne (Chair), Barkett, and Spence, each of whom is a member of our Audit Committee, all satisfy the heightened SEC independence requirements for Audit Committee members.

The Board and its committees meet periodically in person and via conference calls throughout the year, and also hold special meetings and act by written consent from time to time as appropriate. The Board held 9 meetings during 2011, and the non-management members of the Board held 5 executive sessions. In 2011, each director attended 100% of the meetings of the Board and the total number of meetings held by all Board committees on which such person served (during the periods that such person served; provided, that Dr. Osborne was not present at one of the Audit Committee meetings).

 

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The following table sets forth the three standing committees of the Board, the members of each committee during the last fiscal year and the number of meetings held by each committee.

 

Director

   Audit
Committee
   Compensation
Committee
   Nominating and
Governance
Committee

Edward A. Barkett

   X      

Lou Holtz

      X    X

Alfred E. Osborne, Jr.

   Chair    X    X

J. Danforth Quayle

      Chair    Chair

Andrew D. Seidel

        

Robert B. Simonds, Jr.

        

Kevin L. Spence

   X      

Number of Meetings held in 2011

   7    3    1

Policy Regarding Director Attendance at Annual Meetings of Stockholders

Directors are strongly encouraged to attend our annual meetings of stockholders and we currently expect all of our directors to be in attendance at the Annual Meeting on May 8, 2012. All of our directors attended the 2011 Annual Meeting.

Audit Committee

The members of the Audit Committee are Dr. Osborne (Chair), and Messrs. Barkett and Spence. As noted above, all members of the Audit Committee meet the independence requirements of the NYSE and the additional independence requirements of the SEC. The Audit Committee’s written charter can be found in the “Governance” section of our website at http://heckmanncorp.com/governance.htm. The Audit Committee oversees our accounting and financial reporting processes, internal control systems, independent auditor relationships and the audits of our financial statements. The Audit Committee’s responsibilities include the following:

 

   

selecting and hiring of our independent registered public accounting firm;

 

   

evaluating the qualifications, independence and performance of our independent registered public accounting firm;

 

   

reviewing and approving the audit and non-audit services to be performed by our independent registered public accounting firm;

 

   

reviewing the design, adequacy, implementation and effectiveness of our internal controls established for finance, accounting, legal compliance and ethics;

 

   

reviewing the design, adequacy, implementation and effectiveness of our critical accounting and financial policies;

 

   

overseeing and monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to our financial statements and accounting matters;

 

   

reviewing with management and our independent registered public accounting firm the results of our annual and quarterly financial statements;

 

   

reviewing with management and our independent registered public accounting firm any earnings announcements or other public announcements concerning our operating results;

 

   

reviewing and approving any related party transactions; and

 

   

overseeing, discussing with our Board, management and our independent registered public accounting firm, and, as necessary, making recommendations to our Board regarding how to address, risks relating to accounting matters, financial reporting and legal and regulatory compliance and developments, and the services provided by our independent registered public accounting firm.

 

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Audit Committee Financial Expert. The Board has also determined that Dr. Osborne and Mr. Spence qualify as “audit committee financial experts” as defined under SEC rules and regulations. As noted above, Dr. Osborne and Mr. Spence meet the independence requirements of the NYSE and the additional independence requirements of the SEC. The Audit Committee’s report appears on page 16 of this Proxy Statement.

Compensation Committee

The members of the Compensation Committee of the Board are Mr. Quayle (Chair), Dr. Osborne, and Mr. Holtz. As noted above, all members of the Compensation Committee meet the independence requirements of the NYSE, and all are independent, outside directors within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) and independent non-employee directors within the meaning of Rule 16b-3 promulgated under the Exchange Act. The Compensation Committee’s written charter can be found in the “Governance” section of our website at http://heckmanncorp.com/governance.htm. The Compensation Committee has responsibility for the review, evaluation and approval of executive compensation, including the compensation philosophy, policies and plans for our executive officers.

On behalf of the Board, the Committee monitors and assists the Board in determining compensation for our senior management, directors and employees. The Compensation Committee’s responsibilities include the following:

 

   

setting performance goals for our officers and reviewing their performance against these goals;

 

   

reviewing and recommending compensation and benefit plans for our officers and compensation policies for the Board and members of the Board committees;

 

   

reviewing the terms of offer letters to and employment agreements and arrangements with our officers;

 

   

reviewing and discussing with the Company’s management the section of this Proxy Statement entitled “Compensation Discussion and Analysis” and determining whether to recommend to the Board that such section be included in our Proxy Statement and in our annual report on Form 10-K;

 

   

producing an annual report on executive compensation for inclusion in our Proxy Statement; and

 

   

overseeing, discussing with our Board and management, and, as necessary, making recommendations to the Board regarding how to address, risks relating to employment policies and the Company’s compensation and benefits systems. To assist it in satisfying these oversight responsibilities, the Compensation Committee meets regularly with management to understand the financial, human resources and stockholder implications of compensation decisions being made.

The Board and the Compensation Committee do not discuss or make decisions regarding an executive officer’s compensation in the presence of such executive officer. Except for consulting with the Chairman and Chief Executive Officer, our executive officers, including the named executive officers (as defined below under “Executive Compensation—Compensation Discussion and Analysis”), do not have any role in determining the form or amount of compensation paid to our named executive officers. However, our Chairman and Chief Executive Officer does make recommendations to the Compensation Committee with respect to compensation paid to the other executive officers. For more information on the responsibilities and activities of the Compensation Committee, including the committee’s processes for determining executive compensation, see “Compensation Discussion and Analysis” appearing on page 24 and the Compensation Committee’s report on page 29 of this Proxy Statement. The Compensation Committee engaged Linden Place Financial, LLC as an independent compensation consultant during 2011 for the provision of materials to assist the Compensation Committee in determining management compensation.

Nominating and Governance Committee

The members of the Nominating and Governance Committee are Mr. Quayle (Chair), Mr. Holtz and Dr. Osborne. As noted above, all members of the Nominating and Governance Committee meet the

 

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independence requirements of the NYSE. The Nominating and Governance Committee’s written charter can be found in the “Governance” section of our website at http://heckmanncorp.com/governance.htm. On behalf of the Board, the Nominating and Governance Committee assists the Board by identifying individuals qualified to become directors consistent with criteria established by the Board. The Nominating and Governance Committee’s responsibilities include the following:

 

   

evaluating the composition, size and governance of the Board and its committees and making recommendations regarding future planning and the appointment of directors to committees of our Board;

 

   

administering a policy for considering nominees for election to the Board;

 

   

overseeing our director’s performance and self-evaluation process;

 

   

developing continuing education programs for the Board;

 

   

reviewing our corporate governance principles and providing recommendations to the Board regarding possible changes; and

 

   

overseeing, discussing with our Board and management, and, as necessary, making recommendations to the Board regarding how to address, risks relating to management and Board succession planning, ethics, corporate governance and business practices.

Selection of Board Nominees

The Nominating and Governance Committee reviews the qualifications of potential director candidates in accordance with its charter and our Corporate Governance Guidelines, which are discussed below.

The Nominating and Governance Committee’s consideration of a candidate as a director includes assessment of the individual’s understanding of our business, the individual’s professional and educational background, skills, and abilities and potential time commitment and whether such characteristics are consistent with our Corporate Governance Guidelines and other criteria established by the Nominating and Governance Committee from time to time. To provide such a contribution to the Company, a director must generally possess one or more of the following, in addition to personal and professional integrity:

 

   

experience in corporate management;

 

   

experience with complex business organizations;

 

   

experience as a board member or officer of another publicly held company;

 

   

diversity of expertise, experience in substantive matters related to the Company’s business and professional experience as compared to existing members of our Board and other nominees; and

 

   

practical and mature business judgment.

The Nominating and Governance Committee may also adopt such procedures and criteria not inconsistent with our Corporate Governance Guidelines as it considers advisable for the assessment of director candidates. Other than the foregoing, there are no stated minimum criteria for director nominees. The Nominating and Governance Committee does however recognize that at least one member of the Board should meet the criteria for an “audit committee financial expert” as defined by SEC rules, and that at least a majority of the members of the Board must meet the definition of “independent director” under NYSE rules.

Although we do not currently have a formal policy with regard to the consideration of diversity in identifying candidates for election to the Board, the Nominating and Governance Committee recognizes the benefits associated with a diverse board, and takes diversity considerations into account when identifying candidates. The Nominating and Governance Committee utilizes a broad conception of diversity, including diversity of professional experience, employment history, prior experience on other boards of directors, and more

 

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familiar diversity concepts such as race, gender and national origin. These factors, and others considered useful by the Nominating and Governance Committee, will be reviewed in the context of an assessment of the perceived needs of the Board at a particular point in time. After assessing the perceived needs of the Board, the Nominating and Governance Committee identifies specific individuals as a potential source of director candidates with relevant experience. The priorities and emphasis of the Nominating and Governance Committee and of the Board may change from time to time to take into account changes in business and other trends and the portfolio of skills and experience of current and prospective board members.

The Nominating and Governance Committee establishes procedures for the nomination process and recommends candidates for election to the Board. Consideration of new Board nominee candidates involves a series of internal discussions, review of information concerning candidates, and interviews with selected candidates. Board members or employees typically suggest candidates for nomination to the board. In 2011, we did not employ a search firm or pay fees to other third parties in connection with seeking or evaluating Board nominee candidates.

The Board nominees named in this Proxy Statement were approved by the Nominating and Governance Committee for inclusion in this Proxy Statement, and were each recommended by other members of the Board.

Stockholder Nominations

The Nominating and Governance Committee will consider stockholder recommendations for candidates for the Board if the stockholder complies with the advance notice, information and consent provisions contained in our Bylaws. See “Stockholder Proposals For The 2013 Annual Meeting” below for more information on these requirements.

The Nominating and Governance Committee will evaluate recommendations for director nominees submitted by directors, management or qualifying stockholders in the same manner. All directors and director nominees will be required to submit a completed directors’ and officers’ questionnaire as part of the nominating process. The process may also include interviews and additional background and reference checks for non-incumbent nominees, at the discretion of the Nominating and Governance Committee.

To be in proper written form, our Bylaws provide that a stockholders’ notice to the Corporate Secretary must set forth as to each person whom the stockholder proposes to nominate as a director: (i) the name and record address of such stockholder, (ii) the class or series and number of shares of capital stock of the Company that are owned beneficially or of record by such stockholder, (iii) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) with respect to the nomination, including the nominee, (iv) any derivative positions with respect to shares of the Company’s capital stock held or beneficially held by or on behalf of such stockholder, the extent to which any hedging or other transaction or series of transactions has been entered into with respect to shares of the Company’s capital stock by or on behalf of such stockholder, and the extent to which any other agreement or understanding has been made, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of such stockholder with respect to shares of the Company’s capital stock, (v) a representation that such stockholder is a holder of record entitled to vote at the annual meeting and intends to appear in person or by proxy at the annual meeting to bring such nomination before the annual meeting, (vi) a representation whether the stockholder intends or is part of a group which intends (A) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Company’s outstanding capital stock required to elect the nominee and/or (B) otherwise to solicit proxies from stockholders in support of such nomination, and (vii) any other information relating to such stockholder required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the election of directors in an election contest pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder.

 

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In addition, the stockholder’s notice to our Corporate Secretary with respect to persons that the stockholder proposes to directly nominate as a director must set forth (A) as to each individual whom the stockholder proposes to nominate, all information relating to the person that is required to be disclosed in solicitations of proxies for the election of directors or is otherwise required, pursuant to Regulation 14A (or any successor provisions) under the Exchange Act (including their name, age, business address, residence address, principal occupation or employment, the number of shares beneficially owned by such candidate, and the written consent of the such person to be named in the proxy statement as a nominee and to serve as a director if elected) and (B) such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected.

Stockholder Communications with the Board

Stockholders may communicate with any of the Company’s directors, including the chair of any of the committees of the Board or the non-management directors as a group by writing to them c/o Corporate Secretary, Heckmann Corporation, 200 Cherrington Parkway, Suite 200, Coraopolis, Pennsylvania 15108. Please specify to whom your correspondence should be directed. The Corporate Secretary will promptly forward all correspondence to the Board or any specific committee member, as indicated in the correspondence, except for junk mail, mass mailings, job inquiries, surveys, business solicitations or advertisements, or patently offensive or otherwise inappropriate material. The Company’s Corporate Secretary may forward certain correspondence, such as product-related or service-related inquiries, elsewhere within the Company for review and possible response.

Code of Business Conduct and Ethics

The Company has a Code of Business Conduct and Ethics that is applicable to all directors, officers and employees of the Company. The Code of Business Conduct and Ethics is available in the “Governance” section of the Company’s website at http://heckmanncorp.com/governance.htm and a printed copy may also be obtained by any stockholder upon request. Requests for copies should be directed to the Heckmann Corporation, 200 Cherrington Parkway, Suite 200, Coraopolis, Pennsylvania 15108, Attention: Corporate Secretary. The Company intends to post amendments to or waivers, if any, from its Code of Business Conduct and Ethics (to the extent applicable to the Company’s directors or its chief executive officer, principal financial officer, or principal accounting officer) at this location on its website. Among other matters, this Code of Business Conduct and Ethics is designed to promote:

 

   

honest and ethical conduct;

 

   

avoidance of conflicts of interest;

 

   

full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in our other public communications;

 

   

compliance with applicable governmental laws and regulations and stock exchange rules;

 

   

prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and

 

   

accountability for adherence to the code.

Corporate Governance Guidelines

The Company has adopted Corporate Governance Guidelines that we believe reflect the Board’s commitment to a system of governance that enhances corporate responsibility and accountability. The Nominating and Governance Committee is responsible for implementing the guidelines and making recommendations to the Board concerning corporate governance matters. The guidelines are available in the “Governance” section of our website at http://heckmanncorp.com/governance.htm. We will also furnish copies of the guidelines to any person who requests them. Requests for copies should be directed to the Heckmann Corporation, 200 Cherrington Parkway, Suite 200, Coraopolis, Pennsylvania 15108, Attention: Corporate Secretary.

 

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Among other matters, the guidelines include the following:

 

   

Membership on the Board will be made of up a majority of independent directors who, at a minimum, meet the criteria for independence required by NYSE rules.

 

   

Non-management directors will meet in executive session without management present on a regularly scheduled basis, but not less frequently than quarterly. In the event that the non-management directors include directors that are not independent under the NYSE rules, the independent directors should schedule an executive session at least once a year.

 

   

The Board and its committees each conduct an annual self-evaluation.

 

   

Directors are expected to regularly attend all meetings of the Board and of the committees of which they are members.

 

   

To effectively discharge their oversight duties, directors have full and free access to our officers and employees.

Board Leadership Structure and Role in Risk Management

Our Corporate Governance Guidelines provide that the Board may select either a combined Chief Executive Officer and Chairman or appoint a Chairman who does not also serve as Chief Executive Officer. Currently, our Chief Executive Officer also serves as Chairman. The Board believes this leadership structure is best for the Company at the current time because it provides the Company with a Chief Executive Officer and our Board with a Chairman who is the principal founder of our Company, and who has gained from a long history of service in executive and board positions, significant expertise with respect to the water industry, finance and accounting matters, acquisitions and other strategic matters, and overcoming challenges and seizing upon opportunities public companies encounter. The Board also believes that the current leadership structure achieves independent oversight and management accountability through regular executive sessions of the non-management directors that are mandated by our Corporate Governance Guidelines and through a Board composed of a majority of independent directors. We do not have a designated lead independent director, instead allowing our independent directors as a group the ability to choose who among them is best suited to serve as chairman of each executive session.

The Board is actively involved in oversight of risks that could affect the Company. This oversight is conducted primarily through committees of the Board, as disclosed in the descriptions of each of the committees above, but the full Board has retained responsibility for general oversight of risks. The Board satisfies this responsibility through reports by each committee chair regarding the committee’s considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within the Company.

Compensation Committee Interlocks and Insider Participation

The current members of the Compensation Committee are Messrs. Quayle (Chair), Holtz, and Dr. Osborne. There were no interlocks or insider participation between any member of the Board or Compensation Committee and any member of the board of directors or compensation committee of another company.

 

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AUDIT COMMITTEE MATTERS

Audit Committee Report

The Audit Committee is comprised of three non-employee directors—Dr. Alfred E. Osborne (Chair), Edward A. Barkett and Kevin L. Spence—and operates under a written charter, adopted by the Board, which is posted on the “Governance” section of the Company’s website at http://heckmanncorp.com/governance.htm. We believe the charter is in compliance with SEC regulations and NYSE rules.

The primary purposes of the Audit Committee are to assist the Board in fulfilling its responsibility to oversee (i) the integrity of the financial statements of Heckmann Corporation, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the independent registered public accounting firm’s qualifications and independence, and (iv) the performance of the Company’s independent registered accounting firm and internal audit function. The independent registered public accounting firm reports directly to the Audit Committee.

Management has the primary responsibility for the preparation of the financial statements and the reporting process. The Company’s management has represented to the Audit Committee that the consolidated financial statements for the fiscal year ended December 31, 2011 were prepared in accordance with generally accepted accounting principles. The Company’s independent registered public accounting firm is responsible for auditing these consolidated financial statements. In the performance of its oversight function, the Audit Committee reviewed and discussed the audited consolidated financial statements with management and the independent registered public accounting firm. The Audit Committee discussed with management the critical accounting policies applied by the Company in the preparation of its consolidated financial statements. The Audit Committee also discussed with the Company’s management the process for certifications by the Chief Executive Officer and Chief Financial Officer. The Audit Committee discussed with the independent registered public accounting firm the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol.1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.

In addition, the Audit Committee received from the independent registered public accounting firm the written disclosures required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communication with the Audit Committee concerning independence and discussed with such firm its independence. The Audit Committee also evaluated whether the independent registered public accounting firm’s provision of tax services to the Company was compatible with the registered public accounting firm’s independence and determined it was compatible.

The Board has determined that Dr. Osborne (Chair) and Messrs. Barkett and Spence meet the independence requirements of Rule 10A-3 of the Exchange Act and applicable NYSE independence rules.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board approved, that the audited consolidated financial statements be included in Heckmann Corporation’s Annual Report on Form 10-K for the year ended December 31, 2011 for filing with the SEC.

Alfred E. Osborne, Jr. (Chair)

Kevin L. Spence

Edward A. Barkett

Change in Independent Registered Public Accounting Firm.

On August 15, 2011, the Audit Committee approved the engagement of KPMG LLP (“KPMG”) as the Company’s independent registered public accounting firm for the year ending December 31, 2011 and dismissed GHP Horwath P.C. (“GHP”) as the Company’s independent registered public accounting firm. KPMG’s engagement as the Company’s independent registered public accounting firm commenced on August 15, 2011.

 

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During the years ended December 31, 2010 and 2009, through August 15, 2011 neither the Company nor anyone on its behalf has consulted with KPMG with respect to either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and neither a written report nor oral advice was provided to the Company that KPMG concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).

For the years ended December 31, 2010 and 2009 through August 15, 2011, there were no disagreements with GHP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of GHP, would have caused it to make reference to the subject matter of such disagreement in connection with its reports.

For the years ended December 31, 2010 and 2009, through August 15, 2011, there was one “reportable event” within the meaning of Item 304(a)(1)(v) of Regulation S-K, relating to disclosure of material weaknesses in internal control over financial reporting with respect to the People’s Republic of China operations of the Company’s subsidiary, China Water and Drinks, Inc. (“China Water”). As previously reported, the Company had inherited material weaknesses in China Water’s internal control over financial reporting. The Company subsequently remediated the material weaknesses in China Water’s internal control over financial reporting and, as of December 31, 2010, management concluded that the Company’s internal controls over financial reporting were effective. There were no other “reportable events” as such term is defined in Regulation S-K.

The reports of GHP on the Company’s financial statements for the fiscal years ended December 31, 2010 and 2009, contained no adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except as follows: as disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 filed with the United States Securities and Exchange Commission (“SEC”) on March 11, 2010, and in the Company’s Amended Annual Report on Form 10-K for the fiscal year ended December 31, 2009, filed with the SEC on March 14, 2011, GHP expressed an adverse opinion on the Company’s internal control over financial reporting as of December 31, 2009 due to material weaknesses identified related to the Company’s former subsidiary, China Water.

The Company has provided GHP with a copy of the above disclosures and requested that GHP furnish the Company with a letter addressed to the United States Securities and Exchange Commission stating whether it agrees with the above statements and, if it does not agree, the respects in which it does not agree. A copy of the letter from GHP dated August 18, 2011 was attached as Exhibit 16.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 19, 2011.

Independent Registered Public Accounting Firm’s Fees and Services

The following is a summary of the independent registered public accounting fees billed to us for professional services rendered for the fiscal years ended December 31, 2011 and 2010:

 

Fee Category

   KPMG LLP
2011
     GHP Horwath  P.C.
2011
     GHP Horwath  P.C
2010
 

Audit Fees

   $ 325,000       $ 86,504       $ 708,910   

Audit Related Fees

   $ 35,000       $ 3,518       $ 8,514   

Tax Fees

   $ 86,909       $ 45,937       $ 43,420   

All Other Fees

     —           —           —     

Total Fees

   $ 446,909       $ 135,959       $ 760,844   

 

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Audit fees consists of fees billed for each of 2011 and 2010 for professional services rendered in connection with the audit of our annual consolidated financial statements, reviews of our interim consolidated financial statements included in our Form 10-Q, and assistance with securities offerings, including the review of related documents and issuance of consents.

Audit related fees consists of fees that are reasonably related to the performance of the audit or review of our financial statements and are not reported under the caption “Audit Fees”.

Tax fees consists of fees billed for 2011 and 2010 for tax compliance and tax planning and advisory services.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

The Audit Committee has, by resolution, adopted policies and procedures regarding the pre-approval of the performance by the independent registered public accounting firm of audit and non-audit services. The independent registered public accounting firm may not perform any service unless the approval of the Audit Committee is obtained prior to the performance of the services, except as may otherwise be provided by law or regulation. All services described above were approved by the Audit Committee.

 

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PROPOSAL 2—RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

(Item 2 on Proxy Card)

Background

We are asking the stockholders to ratify the Audit Committee’s appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2012. KPMG LLP is a registered public accounting firm with the Public Company Accounting Oversight Board (“PCAOB”), as required by the Sarbanes-Oxley Act of 2002 and the rules of the PCAOB. In the event the stockholders fail to ratify the appointment, the Audit Committee will reconsider this appointment. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the Company’s and its stockholders’ best interests.

KPMG LLP representatives are expected to attend the 2012 Annual Meeting via conference call. They will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate stockholder questions.

Vote Required and Board Recommendation

The affirmative vote of a majority of the shares of common stock present, in person or by proxy, entitled to vote at the Annual Meeting is required to ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2012. Abstentions and broker non-votes will be counted as present for purposes of determining whether a quorum is present. Abstentions will have the same effect as an “against” vote, but broker non-votes will not have any effect on the outcome of this Proposal.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE

RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM FOR 2012

 

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PROPOSAL 3—ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

(Item 3 on Proxy Card)

Background

In accordance with requirements recently added to Section 14A of the Securities Exchange Act (which were added by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”)) and the related rules of the SEC, we are providing our stockholders with the opportunity to cast a non-binding, advisory vote on the compensation of our named executive officers as disclosed pursuant to the SEC’s executive compensation disclosure rules and set forth in this Proxy Statement (including the Compensation Discussion and Analysis, compensation tables and narratives accompanying those tables).

Our executive compensation programs are designed and regularly reviewed by the Compensation Committee of the Board, which consists entirely of independent directors. As described more fully under “Compensation Philosophy” in the Compensation Discussion and Analysis on page 24 of this Proxy Statement, our executive compensation programs are designed to achieve the following objectives:

 

   

provide a competitive total compensation package sufficient to attract, motivate and retain high caliber, proven performers capable of growing our business.

 

   

support and recognize attainment of our tactical and strategic goals.

 

   

align executive compensation with the interests of our stockholders.

 

   

maintain an appropriate balance between fixed and variable compensation, and long-term and short-term incentives, with recognition of our senior executives’ responsibility for the Company’s overall performance and market value.

 

   

provide long-term retention incentives to secure the services of key contributors to our business over an extended period of time.

The features of our executive compensation programs are described in the Compensation Discussion and Analysis, and include the following highlights which we believe reinforce stockholder interests:

 

   

Prior to 2011, our Chief Executive Officer did not receive any base salary, bonus or equity compensation since our initial public offering in November 2007. Our Chief Executive Officer is currently paid an annual base salary of $500,000, but does not receive any bonus or equity compensation.

 

   

Based on beneficial ownership, our Chairman and Chief Executive Officer is one of our largest stockholders, which significantly aligns his interests with our stockholders’ interests.

 

   

A substantial portion of executive compensation is awarded in the form of long-term equity incentives that have multi-year vesting periods.

 

   

No executive’s target annual cash bonus opportunity is greater than 60% of his base salary.

 

   

Our Chairman and Chief Executive Officer does not have an employment agreement, and is not covered by any severance plan, program or policy. Our other executives have employment agreements that we believe provide market-competitive severance benefits and protections.

 

   

The Company’s mix of long-term equity awards, annual bonus structure and oversight of compensation programs are designed to mitigate risk by emphasizing a long-term focus on compensation and financial performance.

We request stockholder approval of the compensation of our named executive officers as disclosed pursuant to the SEC’s executive compensation disclosure rules and set forth in this Proxy Statement (including the Compensation Discussion and Analysis, compensation tables and narratives accompanying those tables).

 

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As an advisory vote, this Proposal is not binding upon the Company. However, the Compensation Committee of the Board, which is responsible for designing and administering our executive compensation programs, values the opinions expressed by stockholders in their vote on this Proposal, and will consider the outcome of the vote when making future compensation decisions for named executive officers.

Vote Required and Board Recommendation

The affirmative vote of a majority of the shares of common stock present, in person or by proxy, entitled to vote at the Annual Meeting is required to approve Proposal No. 3. Abstentions and broker non-votes will be counted as present for purposes of determining whether a quorum is present. Abstentions will have the same effect as an “against” vote, but broker non-votes will not have any effect on the outcome of this Proposal.

THE BOARD RECOMMENDS A VOTE FOR PROPOSAL NO. 3.

 

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EXECUTIVE OFFICERS

The Company’s executive officers are appointed by the Board and serve at the discretion of the Board. Set forth below are the names and certain biographical information regarding the Company’s executive officers as of March 10, 2012.

 

Name

  

Position with our Company

   Age      Executive
Officer
Since
 

Richard J. Heckmann*

   Chairman and Chief Executive Officer      68         2007   

Charles R. Gordon

   President and Chief Operating Officer      54         2010   

Damian C. Georgino

  

Executive Vice President, Corporate Development and Chief Legal Officer

     51         2010   

Brian R. Anderson

   Executive Vice President—Finance      58         2008   

W. Christopher Chisholm

  

Executive Vice President and Chief Financial Officer

     52         2011   

 

* See “Proposal 1—Election of Directors—Information Regarding Directors and Nominees” for biographical information regarding Mr. Heckmann.

Charles Gordon, President and Chief Operating Officer

Mr. Gordon has served as our President and Chief Operating Officer since October 2010. As President and Chief Operating Officer, Mr. Gordon is responsible for the operations of the Company and carrying out our growth and acquisition strategy. Prior to joining our company in 2010, Mr. Gordon served as President and Chief Executive Officer of Siemens Water Technologies, a global business unit of Siemens AG. Siemens Water Technologies is a world leader in products, systems and services for water and wastewater treatment for industrial, institutional and municipal customers. Previously, Mr. Gordon served as Executive Vice President of the Siemens Water & Wastewater Systems Group from 2005 to 2007 and as Executive Vice President of the USFilter Water & Wastewater Services and Products Group from 1999 to 2005. Siemens acquired the USFilter Water and Wastewater business from Veolia Environment in 2004. Prior to 1999, Mr. Gordon’s experience included various executive positions with USFilter during the company’s high growth years. Mr. Gordon received his undergraduate degree from the University of South Dakota and his Masters of Business Administration from the Babcock School of Wake Forest University.

Damian C. Georgino, Executive Vice President, Corporate Development and Chief Legal Officer

Mr. Georgino serves as our Executive Vice President, Corporate Development and Chief Legal Officer. Mr. Georgino has more than 20 years of legal, financial, and operational experience advising and representing U.S. and international companies, including Fortune 50 companies, private equity funds and emerging technology companies. Mr. Georgino has deep global water and energy industry experience and has sourced, negotiated, structured, analyzed, and completed several hundred transactions over the course of his career. He is experienced in successfully completing and managing a variety of corporate and financial transactions and has represented clients in mergers and acquisitions, international corporate transactions, corporate structuring, corporate finance, public and private equity and debt offerings, and venture capital transactions. Prior to joining us, he served as Executive Vice President of Corporate Development and Chief Legal Officer of PICO Holdings Inc., a diversified holding company involved in, among other businesses, water resources and water storage since September 2007. Beginning in 2003, he was a partner with the law firm of Pepper Hamilton LLP. From 2000 to 2003 he was a partner with the international law firm of LeBoeuf, Lamb, Greene and MacRae, LLP (now Dewey & LeBoeuf LLP). Prior to that, Mr. Georgino served as Executive Vice President, General Counsel and Corporate Secretary of US Filter. Mr. Georgino was Manager, Corporate Development and Business Unit General Counsel with Alcoa, Inc. from 1988 until he joined US Filter. Mr. Georgino holds a Juris Doctor and Masters of Business Administration from Emory University, both of which were awarded in 1986.

 

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Brian R. Anderson, Executive Vice President-Finance

Mr. Anderson has served as our Vice President-Finance since November 2011. From 2008 through November 2011, he served as our Executive Vice President and Chief Financial Officer. As Executive Vice President, Finance, Mr. Anderson is involved in financial reporting, integration of acquired businesses and Sarbanes-Oxley compliance. Mr. Anderson joined the Company in 2007 as a consultant. From 2005 through 2007, Mr. Anderson served as the director of business development for K2, which was then a publicly listed manufacturer of sporting goods equipment, where his responsibilities included managing the domestic and international acquisition strategy for K2. From 2003 through 2005, he served as the director of financial accounting for K2, where his responsibilities included developing financial policy for K2. From May 2000 through 2003, he served as the corporate controller of USFilter, which was then a publicly listed provider of water and waste treatment systems and services, and served as assistant corporate controller from January 1997 through May 2000 where his responsibilities included developing and managing all phases of financial reporting for US Filter. Prior to joining US Filter, Mr. Anderson was the corporate controller for Wheelabrator Engineered Systems, a division of Waste Management. Mr. Anderson received a Bachelor of Arts degree with emphasis in finance and accounting from Oregon State University in 1977.

W. Christopher Chisholm, Executive Vice President and Chief Financial Officer

Mr. Chisholm has served as our Executive Vice President and Chief Financial Officer since November 2011. As Chief Financial Officer, he is involved in developing the Company’s overall financial structure, including the financial and accounting controls for all our operating subsidiaries. As Chief Financial Officer, he also is responsible for all finance and accounting related functions of the Company and its operating subsidiaries, including SEC reporting and Sarbanes-Oxley compliance. Prior to joining us, Mr. Chisholm was Executive Vice President and Chief Financial Officer of Envirogen Technologies, Inc. where together with a predecessor entity, Basin Water, Inc., he was employed since 2008. On July 16, 2009, Basin Water, Inc. filed bankruptcy under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. From 2004 to 2008, Mr. Chisholm was Executive Vice President, Finance & Administration and Chief Financial Officer of Veolia Water North America, LLC. From 1997 to 2004, Mr. Chisholm held various positions with USFilter, including Group Controller, Vice President and Chief Financial Officer of the Water and Waste Water Group and Executive Vice President of Finance. Prior to his tenure at USFilter and predecessor companies, Mr. Chisholm was an Audit Senior Manager at KPMG, an international accounting firm. Mr. Chisholm received a Bachelor of Business Administration degree with emphasis in accounting from Northeast Louisiana University, now known as the University of Louisiana at Monroe, and is a Certified Public Accountant.

 

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Overview

This Compensation Discussion and Analysis describes the material elements of compensation awarded to, earned by, or paid during the last completed fiscal year to our Chairman and Chief Executive Officer, our President and Chief Operating Officer, our Executive Vice President and Chief Financial Officer, our Executive Vice President, Corporate Development and Chief Legal Officer, and our Executive Vice President, Finance. These five individuals are referred to collectively as the “named executive officers”. The Compensation Committee of the Board oversees the design and administration of our executive compensation program, with the objectives of providing compensation packages competitive within our industry and with a balanced focus on both short and long-term performance goals. The compensation packages of our named executive officers (other than Mr. Heckmann, as discussed below) consist of base salary, annual cash incentive bonus, and intermediate-term and long-term equity incentive awards.

Stockholder Advisory Vote on Executive Compensation and Frequency of Advisory Vote

In accordance with the requirements of the Dodd-Frank Act, the Company held its first advisory (non-binding) stockholder vote on the compensation of the Company’s named executive officers (commonly known as a “say-on-pay” proposal), and its first stockholder vote on the frequency of say-on-pay proposals, at its 2011 Annual Meeting of Stockholders. At such meeting, the Company’s stockholders approved the overall compensation of the Company’s named executive officers and elected to hold a say-on-pay vote every year. In light of the fact that 98.90% of the Company’s stockholders voting on the matter approved and supported our executive compensation practices at the 2011 Annual Meeting of Stockholders, the Compensation Committee determined to continue its general philosophy and decision-making process related to executive compensation matters in a manner consistent with its prior practices.

Compensation Philosophy

We believe executive compensation programs impact all employees by helping to create a positive environment of goals, expectations and rewards. We also believe that the compensation cost for our employees is an investment in human capital to secure certain knowledge and performance capabilities necessary for our business. To this end, our compensation programs for all employees, including our named executive officers, are designed to meet the following objectives:

 

   

provide a competitive total compensation package sufficient to attract, motivate and retain high caliber, proven performers;

 

   

support and recognize attainment of tactical and strategic goals of our organization;

 

   

align employee compensation with the interests of stockholders;

 

   

maintain an appropriate balance between fixed and variable compensation, and long-term and short-term incentives, with recognition of our senior executives’ responsibility for the Company’s overall performance and market value; and

 

   

provide long-term retention incentives to secure the services of key contributors to our business over an extended period of time.

Notwithstanding this philosophy, our Chairman and Chief Executive Officer, Mr. Heckmann, is also one of our largest stockholders. From our initial public offering in November 2007 through December 31, 2010, Mr. Heckmann did not receive any base salary, cash incentives or equity awards. Effective January 1, 2011, Mr. Heckmann’s annual base salary was established at $500,000, but he received no cash incentive bonus or equity awards. We believe that Mr. Heckmann’s level of stock ownership significantly aligns his interests with

 

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those of our stockholders and ensures that he is incentivized to grow our business for the benefit of our stockholders. The remainder of this discussion focuses on the executive compensation programs in place for our other named executive officers.

Compensation Determinations

The Compensation Committee determines each named executive officer’s compensation package based on the following factors:

 

   

the total portfolio of responsibilities assumed by the named executive officer;

 

   

the current market value of a particular job position, based on the skills, knowledge, experience and competencies required;

 

   

internal pay equity and the comparability of a position as compared to other similar positions within our Company;

 

   

our desire to pay at market or competitive levels based on current economic and business factors;

 

   

individual performance and contributions to Company performance; and

 

   

the prior year financial performance and projected growth of the Company.

In assessing whether our compensation programs meet our compensation objectives and the relation of our compensation programs to our business objectives, the Compensation Committee receives regular updates on our business results from management and reviews our quarterly financial statements and management projections. In addition, our Chairman and Chief Executive Officer annually reviews the performance of each of the executive officers (other than himself, whose performance is reviewed by the Compensation Committee with input from the full Board of Directors), and makes compensation recommendations to the Compensation Committee for consideration. The Compensation Committee has the discretion to approve, modify or reject any recommended compensation adjustments or awards.

In addition, during 2011, the Compensation Committee retained Linden Place Financial, LLC (“Linden Place Financial”), an independent compensation consultant, to assist with our review of the compensation packages provided to our executives.

In September 2011, the Compensation Committee, with the assistance of Linden Place Financial, selected a comparative peer group for compensation assessments based on industry similarity and similarity in size and to the Company’s projected annual revenue. The Compensation Committee expects to evaluate the composition of the peer group annually. In 2011, overall compensation package assessments were conducted with regard to the named executive officers, and short-term incentive bonus decisions were guided, in part, by review of the peer group data and in part by reference to industry survey data provided for the Oil and Gas Field Services, Nationwide by the Economic Research Institute and additional survey data for validation purposes from Mercer, LLC. The companies comprising the peer group were Basic Energy Services, Inc.; Complete Production Services, Inc.; and Key Energy Services, Inc. In addition, our members of the Compensation Committee are familiar with competitive compensation programs based on their collective experiences owning and managing other companies and sitting on other private and public companies’ boards of directors. The Compensation Committee does not “benchmark” executive compensation at any particular level in comparison with other companies, but instead uses the peer group data, industry surveys and familiarity with compensation programs to conduct an overall assessment of competitiveness.

Linden Place Financial reports directly to the Compensation Committee and does no other work for the Company. The Compensation Committee has sole authority to determine the terms of Linden Place Financial’s retention and services and Linden Place Financial’s interactions with management are generally limited to information provided to the Compensation Committee.

 

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Components of Named Executive Officer Compensation

The Compensation Committee is committed to a strong, positive link between our short-term and long-term objectives and our compensation practices. The executive compensation program for our named executive officers, other than Mr. Heckmann, is comprised of four basic components: base salary; annual fixed cash incentives and an additional discretionary incentive opportunity; periodic intermediate-term incentive awards in the form of restricted stock; and long-term incentive awards in the form of stock options. The latter two components, intermediate- and long-term equity-based incentive awards, were incorporated into our executive compensation program with approval of the 2009 Equity Incentive Plan by the stockholders at the 2009 Annual Meeting. The Committee believes that this combination of fixed and variable components, and annual, intermediate and long-term components, has been appropriately structured in order for us to achieve our compensation objectives described above.

Base Salary. Base salaries provide a fixed component and minimum level of compensation for our executives, taking into account their responsibilities, level of experience, individual performance and internal pay equity considerations. Base salaries for our named executive officers are initially established by the terms of the employment agreement between the Company and the named executive officer, and then subject to annual evaluation by the Compensation Committee. The Company has recognized that to attract talented employees from secure positions at other more stable or mature companies, and to retain those employees, we must be able to pay competitive base salaries (supplemented by cash and equity incentive compensation). In addition, the Compensation Committee takes into account Company performance, executive responsibility, individual execution of duties and internal pay alignment in reviewing compensation. After reviewing the base salaries of our named executive officers in light of these factors, the Compensation Committee determined that none of the named executive officers’ base salaries would be increased during 2011. However, as noted above, and after considering the above factors as well as the total compensation and benefits provided to Mr. Heckmann, Mr. Heckmann’s credentials and experience, and his continuing role as Chairman and Chief Executive Officer, the Compensation Committee established a base salary of $500,000 for Mr. Heckmann effective January 1, 2011.

Annual Cash Incentive Opportunity. Pursuant to their employment agreements, Messrs. Georgino and Anderson are each eligible to receive a guaranteed bonus each year equal to 30% of base salary, respectively, and Mr. Chisholm is eligible to receive a guaranteed bonus equal to 10% of his base salary, provided in each case that the executive remains employed by the Company on the date of payment (see “Executive Employment Agreements and Potential Payments upon Termination or Change-in-Control” below for more information about potential severance benefits). In addition, Messrs. Georgino, Anderson, Chisholm and Gordon are each eligible to earn a variable discretionary bonus each year, depending on the subjective review of their individual contributions and overall Company performance, as recommended by our Chief Executive Officer and reviewed and determined by the Compensation Committee. The discretionary bonus opportunity for each of Messrs. Georgino and Anderson is up to a maximum of 30% of his respective base salary, for Mr. Chisholm is up to 50% of his base salary, and for Mr. Gordon is up to 60% of his base salary. For their services performed in 2011, the guaranteed bonuses paid to the named executive officers were as follows: to Mr. Georgino, $60,000; to Mr. Anderson, $52,500; and to Mr. Chisholm, $3,219 (a prorated bonus). The Compensation Committee is reviewing individual contributions and overall Company performance during 2011, and has not yet determined to award discretionary bonuses to the named executive officers for their services performed in 2011. The maximum bonus for 2011 (determined as an aggregate of both guaranteed bonus and discretionary bonus) which may be awarded to any named executive officer will not exceed 60% of base salary.

Intermediate-Term Incentive Awards. We believe that the periodic use of intermediate-term incentive awards in the form of restricted stock, granted under our 2009 Equity Incentive Plan, is an important component of our executive compensation program. We believe that in general, for each of our executives, such grants of restricted stock will provide an incentive to remain in our employ without the need for a short-term significant increase in our stock price, due to the inherent value of the stock underlying the awards (as opposed to stock option awards, which lose incentive and retention value if our stock price falls below the exercise price). During 2011, we granted 100,000 shares of restricted stock to each of Messrs. Georgino and Anderson, 50,000 shares of

 

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restricted stock to Mr. Gordon as provided for in his employment agreement (see “Executive Employment Agreements and Potential Payments upon Termination or Change-in-Control” below for more information), and 150,000 shares of restricted stock to Mr. Chisholm in connection with his commencement of employment, which in each case will fully vest if the executive remains in the employ of the Company on the third anniversary of the grant date (see the “Grants of Plan-Based Awards” table below for more information).

Long-Term Incentive Awards. We currently utilize stock options, granted under our 2009 Equity Incentive Plan, as the primary vehicle for providing long-term compensation incentives to our named executive officers and other management employees. The Compensation Committee believes that stock options are an important part of compensation packages granted to these employees because they help attract and retain talented employees; the value received by the recipient of a stock option is based on the growth of our stock price, thereby creating and enhancing incentives to increase our stock price and maximize stockholder value; and they create a balance with shorter-term incentives such as base salary and bonuses and intermediate-term incentives such as restricted stock. The Compensation Committee determines the terms of and the number of shares underlying stock option awards to the named executive officers, and takes into account the recommendations of our Chairman and Chief Executive Officer in making decisions with regard to the other named executive officers.

In determining the number of applicable shares and the vesting schedule of stock options granted to named executive officers and other employees, the Compensation Committee generally takes into account the individual’s position, tenure with the Company, scope of responsibility, value of stock options in relation to the other elements of the individual’s total compensation and, where applicable, the need to attract and retain the individual for his or her current position. All stock option grants have an exercise price of at least fair market value on the date of grant, and are required to be approved by the Compensation Committee. The Company does not time the award of stock options or other equity-based compensation to coincide with the release of favorable or unfavorable information about the Company.

As discussed in more detail in the narrative for the “Grants of Plan-Based Awards” table below, in 2011, the Committee determined to award 150,000 stock options to Mr. Chisholm in connection with his commencement of employment, and 100,000 stock options to Mr. Gordon as was provided for under his employment agreement; in each case, the stock option awards vest ratably over three years, provided that the executive remains employed as of each vesting date (see “Executive Employment Agreements and Potential Payments upon Termination or Change-in-Control” below for more information). The Compensation Committee believes that the number of stock options awarded to each executive was a critical factor in each executive’s decision to commence employment with the Company. No other stock option awards were granted to the named executive officers in 2011.

Severance Arrangements and Change-in-Control Payments

Our Chairman and Chief Executive Officer, Mr. Heckmann, is not a party to any employment agreement with the Company, and he is not entitled to any severance or other payments in connection with any termination of his employment. We have entered into employment agreements with each of our other named executive officers that contain provisions that provide certain severance and change-in-control benefits, which are fully discussed in the “Executive Employment Agreements and Potential Payments Upon Termination or Change-in-Control” section below. We believe these employment agreements provide severance and change-in-control protection under market-competitive terms.

Our outlook with respect to these change-in-control provisions is that they are appropriate because they make it easier for the executives to focus on the best interests of our Company and stockholders rather than the implications for them personally in the event our Company faces the possibility of a change-in-control. These provisions were designed to:

 

   

be consistent with current market practices;

 

   

afford reasonable protection without creating any undue windfall;

 

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enhance the Company’s ability to retain key employees during critical but uncertain times; and

 

   

enhance an acquiror’s potential interest in retaining key executives.

Severance payments are only made under the employment agreements if the named executive officer executes a full general release of claims in favor of the Company. We believe that these severance and change-in-control payment provisions in our executive employment agreements are necessary in order for us to provide competitive compensation within our industry and to encourage our named executive officers to remain in our employ.

Assessment of Risk

The Compensation Committee takes risk into consideration when reviewing and approving executive compensation, including when it approved our executive compensation program and as reflected in our 2011 compensation actions. After assessing the possible risks, the Compensation Committee has concluded that the current executive compensation programs, reflected in our 2011 compensation actions, do not encourage inappropriate or excessive risk-taking and do not create the likelihood of a material adverse impact on the Company. In making its determination, the Compensation Committee considered the structure of our compensation plans, including the use of fixed base salaries, fixed and discretionary short-term incentives and equity-based intermediate and long-term equity incentive awards, and capped bonus opportunities under our short-term incentive plans.

Tax and Accounting Information

Section 162(m) of the Code and regulations adopted thereunder place limits on deductibility of compensation in excess of $1.0 million paid in any one year to certain of our named executive officers, unless this compensation qualifies as “performance based” as determined under regulations of the U.S. Treasury Department. The non-performance based compensation paid in cash to each of our named executive officers did not exceed the $1.0 million limit per officer in 2011, and the Compensation Committee does not anticipate that the non-performance based compensation to be paid in cash to our named executive officers will exceed that limit in 2012.

Our equity compensation plan is designed to be performance-based so that full value awards such as performance awards which vest solely based on performance may be performance-based compensation and deductible under Section 162(m). Stock options granted at or above market value will also be performance-based compensation and deductible under Section 162(m). However, full value awards which vest based on time will not be qualified as performance-based and may not be deductible.

Although it will consider the tax implications of its compensation decisions, the Compensation Committee believes its primary focus should be to attract, retain, and motivate high caliber executives and to align the executives’ interests with those of our stockholders. Thus, while in the course of structuring our compensation policies the Compensation Committee considers ways to maintain the tax deductibility of the compensation for named executive officers, the Compensation Committee intends to retain the necessary discretion to compensate executives in a manner in keeping with overall compensation goals and strategies, and may choose to provide compensation which may not be deductible by reason of Section 162(m).

In addition, the Compensation Committee has considered and will continue to consider the impact of the requirement under FASB ASC Topic 718 (previously SFAS 123R) that we record in our financial statements the expense incurred when stock options are granted to employees. In addition, the Compensation Committee will examine the tax impact on employees and the potential tax deductions to the Company with respect to the exercise of stock option grants. We do not pay or reimburse any named executive officers for any taxes due upon exercise of a stock option or upon the vesting of a restricted stock award.

 

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Compensation Committee Report

The Compensation Committee has reviewed and discussed with the Company’s management the Compensation Discussion and Analysis (“CD&A”) set forth above. Based on such review and discussion, the Compensation Committee has recommended to the Board of the Company that the CD&A be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 and this Proxy Statement.

J. Danforth Quayle (Chair)

Alfred E. Osborne, Jr.

Lou Holtz

 

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Summary Compensation Table

The following table and accompanying notes provide information with respect to the compensation of the Company’s named executive officers during fiscal years 2011, 2010, and 2009.

 

Name and Principal Position

   Year      Salary
($)(1)
     Bonus
($)(2)
     Stock
Awards
($)(3)
     Option
Awards
($)(4)
     Total
($)
 

Richard J. Heckmann

     2011       $ 500,000         —           —           —         $ 500,000   

Chairman and Chief Executive Officer

     2010         —           —           —           —           —     
     2009         —           —           —           —           —     

Charles R. Gordon

     2011       $ 302,917         —         $ 262,000       $ 245,000       $ 809,917   

President and Chief Operating Officer

     2010       $ 75,000         —           —         $ 1,020,000       $ 1,095,000   
     2009         —           —           —           —           —     

Damian C. Georgino

     2011       $ 203,442       $ 60,000       $ 614,000         —         $ 877,442   

Executive Vice President, Corporate Development and Chief Legal officer

     2010       $ 15,385         —           —         $ 334,550       $ 349,935   
     2009         —           —           —           —           —     

Brian R. Anderson

     2011       $ 175,000       $ 52,500       $ 614,000         —         $ 841,500   

Executive Vice President Finance

     2010       $ 175,000       $ 105,000         —           —         $ 280,000   
     2009       $ 175,000       $ 52,500       $ 525,000       $ 275,400       $ 1,027,900   

W. Christopher Chisholm

     2011       $ 27,885       $ 3,219       $ 964,500       $ 459,000       $ 1,454,604   

Executive Vice President and Chief Financial Officer

     2010         —           —           —           —           —     
     2009         —           —           —           —           —     

 

(1) Mr. Heckmann did not receive any salary, bonus or equity awards during 2009 and 2010. Effective January 1, 2011, he began to receive base salary at the rate of $500,000 per annum. Mr. Gordon commenced employment with the Company on October 1, 2010, and Mr. Georgino commenced employment with the Company on December 6, 2010. Mr. Chisholm commenced employment with the Company on November 15, 2011, with his base salary paid at the rate of $250,000 per annum.

 

(2) Amounts in the Bonus column reflect payment of the guaranteed cash short-term incentive bonuses paid to the named executive officers for their services performed in 2011, as follows: to Mr. Georgino, $60,000; to Mr. Anderson, $52,500; and to Mr. Chisholm, $3,219. Mr. Chisholm’s short-term incentive bonus was a prorated award based on his guaranteed bonus of $25,000 and his commencement of employment in November 2011. See the “Executive Employment Agreements and Potential Payments upon Termination or Change-in-Control” section below for more information about the bonus arrangements for the named executive officers.

 

(3) Messrs. Gordon, Georgino, Anderson and Chisholm each received restricted stock awards in 2011, granted under our 2009 Equity Incentive Plan. The restricted stock grants vest upon the third anniversary of the grant date, as the design of the awards is to provide market competitive compensation for services across multiple years. However, the dollar amount reflected in this column (for the 2011 awards and for Mr. Anderson’s restricted stock award in 2009) is equal to the aggregate grant date fair value of such restricted stock computed in accordance with FASB ASC Topic 718, meaning the entire value of the grant is presented in a lump sum. For a discussion of the assumptions and methodologies used to calculate the grant date fair value of these restricted stock awards, as well as the equity award made to Mr. Anderson in 2009, please see the discussion of equity awards contained in Note 8 to the Company’s consolidated financial statements included as part of the Company’s Annual Report filed with the SEC on Form 10-K for the fiscal year ending December 31, 2011. See the “Grants of Plan-Based Awards” table below for more information about the awards granted in 2011.

 

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(4) Messrs. Gordon and Chisholm each received stock option awards in 2011, granted under our 2009 Equity Incentive Plan pursuant to their respective employment agreements. None of the other named executive officers received any options in 2011. The stock option grant to Mr. Gordon becomes vested in three substantially equal annual installments on each of the first three anniversaries of the grant date, subject to his continued employment on each vesting date. The stock option grant to Mr. Chisholm becomes one-third vested on the first anniversary of the grant date, and an additional 1/36 becomes vested monthly thereafter over the succeeding twenty-four month period, subject to his continued employment on each vesting date. These awards are intended to provide market-competitive compensation for services across multiple years. However, the dollar amount reflected in this column is equal to the aggregate grant date fair value of such options computed in accordance with FASB ASC Topic 718 ($2.45 for Mr. Gordon, and $3.06 for Mr. Chisholm), meaning the entire value of the grant is presented in a lump sum. The amounts shown for the option awards granted in 2010 and 2009 also reflect the aggregate grant date fair value with respect to the 2009 and 2010 fiscal years in accordance with FASB ASC Topic 718. For a discussion of the assumptions and methodologies used to calculate the grant date fair value of these option awards, please see the discussion of equity awards contained in Note 8 to the Company’s consolidated financial statements included as part of the Company’s Annual Report filed with the SEC on Form 10-K for the fiscal year ending December 31, 2011. See the “Grants of Plan-Based Awards” table below for more information about the awards granted in 2011.

Grants of Plan-Based Awards in 2011

The following table sets forth certain information regarding grants of plan-based awards during 2011 to our named executive officers.

 

Name

   Grant Date      All Other Stock
Awards:
Number of
Shares of
Stock or Units
(#)(1)
     All Other Option
Awards:
Number of
Securities
Underlying  Options
(#)(2)
     Exercise or
Base Price of
Option Awards
($/Sh)
     Grant Date Fair
Value of Stock
and Option
Awards ($)(3)
 

Richard J. Heckmann

     —           —           —           —           —     

Charles R. Gordon

     10/3/11         50,000         —           —           262,000   
     10/3/11         —           100,000         5.24         245,000   

Damian C. Georgino

     7/1/11         100,000         —           —           614,000   

Brian R. Anderson

     7/1/11         100,000         —           —           614,000   

W. Christopher Chisholm

     11/15/11         150,000         —           —           964,500   
     11/15/11         —           150,000         6.43         459,000   

 

(1) Mr. Gordon, Mr. Georgino, Mr. Anderson, and Mr. Chisholm, respectively, each received an award of restricted stock in 2011. Each executive’s grant was awarded under the Company’s 2009 Equity Incentive Plan. Each executive’s restricted stock award becomes fully vested on the third anniversary of the grant date, subject to his continued employment on such vesting date. Each executive’s restricted stock award may also vest in connection with certain terminations of the executive’s employment, as described in more detail in the “Executive Employment Agreements and Potential Payments upon Termination or Change-in-Control” section below.

 

(2)

Mr. Chisholm received a stock option award in 2011 in connection with his commencement of employment with the Company. Pursuant to the terms of his employment agreement, Mr. Gordon received an additional stock option award in 2011 in connection with his continued employment with the Company. Each executive’s option grant was awarded under the Company’s 2009 Equity Incentive Plan, and was granted with an exercise price at fair market value on the date of grant. Mr. Gordon’s option grant becomes vested in three substantially equal annual installments on each of the first three anniversaries of the grant date, subject to his continued employment on each vesting date. The stock option grant to Mr. Chisholm becomes one-third vested on the first anniversary of the grant date, and an additional 1/36 becomes vested monthly

 

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  thereafter over the succeeding twenty-four month period, subject to his continued employment on each vesting date. Each executive’s option grant may also vest in connection with certain terminations of the executive’s employment, as described in more detail in the “Executive Employment Agreements and Potential Payments upon Termination or Change-in-Control” section below.

 

(3) The dollar amount reflected in this column for the restricted stock and option awards is equal to the aggregate grant date fair value of such award computed in accordance with FASB ASC Topic 718. For a discussion of the assumptions and methodologies used to calculate the grant date fair value of these awards, please see the discussion of equity awards contained in Note 8 to the Company’s consolidated financial statements included as part of the Company’s Annual Report filed with the SEC on Form 10-K for the fiscal year ending December 31, 2011.

Outstanding Equity Awards at 2011 Fiscal Year End

The following table discloses certain information regarding all equity awards outstanding for each of our named executive officers as of December 31, 2011. All of these awards were granted under our 2009 Equity Incentive Plan. Some values contained in the table below have not been, and may never be, realized. The options might never be exercised and the value, if any, will depend on the share price on the exercise date.

 

     Option Awards      Stock Awards  

Name

   Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
    Option
Exercise
Price
($)
     Option
Expiration
Date
     Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
    Market Value
of Shares or
Units of Stock
That
Have Not
Vested
($)(5)
 

Richard J. Heckmann

     —          —          —           —           —          —     

Brian R. Anderson

     90,000 (1)      45,000 (1)    $ 3.98         08/13/2019         100,000 (1)    $ 665,000   

Charles R. Gordon

     166,667 (2)      333,333 (2)    $ 3.91         10/06/2020         50,000 (2)    $ 332,500   
     —          100,000 (2)    $ 5.24         10/02/2021         —          —     

Damian C. Georgino

     50,000 (3)      100,000 (3)    $ 4.26         12/02/2020         100,000 (3)    $ 665,000   

W. Christopher Chisholm

     —          150,000 (4)    $ 6.43         11/14/2021         150,000 (4)    $ 997,500   

 

(1) Options were granted on August 13, 2009, and became one-third vested on August 13, 2010 and August 13, 2011. The remaining 45,000 unvested options will vest on August 13, 2012. The restricted stock award was granted on July 1, 2011, and is scheduled to fully vest on the third anniversary of the grant date, July 1, 2014. In each case, vesting will occur only if Mr. Anderson remains employed as of such date (but, see “Executive Employment Agreements and Potential Payments upon Termination or Change-in-Control” below for more information about potential accelerated vesting severance benefits).

 

(2) 500,000 options were granted on October 7, 2010, and 100,000 options were granted on October 3, 2011. 166,667 options from the 2010 grant vested on October 7, 2011. The remaining unvested options vest as follows: (i) 166,667 unvested options from the 2010 grant vest on each of October 7, 2012 and October 7, 2013, and (ii) 100,000 unvested options from the 2011 grant vest one-third on October 3, 2012, one-third on October 3, 2013, and one-third on October 3, 2014. The restricted stock award was granted on October 3, 2011, and is scheduled to fully vest on the third anniversary of the grant date, October 3, 2014. In each case, vesting will occur only if Mr. Gordon remains employed as of such date (but, see “Executive Employment Agreements and Potential Payments upon Termination or Change-in-Control” below for more information about potential accelerated vesting severance benefits).

 

(3)

150,000 options were granted on December 6, 2010 and became one-third vested on December 3, 2011. The remaining 100,000 unvested options become vested 1/36 on each monthly anniversary over the succeeding twenty-four month period. The restricted stock award was granted on July 1, 2011, and will fully vest on the third anniversary of the grant date, July 1, 2014. In each case, vesting will occur only if Mr. Georgino

 

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  remains employed as of such date (but, see “Executive Employment Agreements and Potential Payments upon Termination or Change-in-Control” below for more information about potential accelerated vesting severance benefits).

 

(4) 150,000 options were granted on November 15, 2011 and will become one-third vested on November 15, 2012, and 1/36 of the options vest on each monthly anniversary thereafter over the succeeding twenty-four month period. 150,000 shares of restricted stock were granted on November 15, 2011, and will fully vest on the third anniversary of the grant date, November 15, 2014. In each case, vesting will occur only if Mr. Chisholm remains employed as of such date (but, see “Executive Employment Agreements and Potential Payments upon Termination or Change-in-Control” below for more information about potential accelerated vesting severance benefits).

 

(5) Market value has been calculated based on the value of $6.65 per share, the closing price of our stock on December 30, 2011.

Executive Employment Agreements and Potential Payments upon Termination or Change-in-Control

Current Executive Officers. We do not have an employment agreement with Richard J. Heckmann, and Mr. Heckmann is not entitled to any severance or other payments in connection with his termination of employment. We have entered into employment agreements with Messrs. Anderson, Gordon, Georgino and Chisholm that provide each with certain severance benefits in the event his employment is terminated by us other than for cause or if the executive resigns with good reason.

The employment agreement with Mr. Anderson is for a perpetually renewing term of one year, while the employment agreements with Messrs. Gordon, Georgino and Chisholm have three-year terms. The employment agreements provide Messrs. Anderson, Gordon, Georgino and Chisholm with annual salaries of $175,000, $300,000, $200,000 and $250,000, respectively, subject to annual review by the Compensation Committee. The employment agreements for Messrs. Anderson and Georgino entitle each executive to receive a guaranteed bonus of 30% of annual salary, and also provide for an opportunity to receive an additional discretionary bonus of up to 30% of annual salary. Under Mr. Gordon’s agreement, beginning in 2011, he is eligible for a bonus of up to 60% of annual salary pursuant to a bonus plan or plans approved by the Company from time to time. Under Mr. Chisholm’s agreement, he is entitled to receive a guaranteed bonus of 10% of annual salary and an opportunity to receive an additional discretionary bonus of up to 50% of annual salary. Each executive’s agreement also provides for health and vacation benefits, and contemplates that the executive will be eligible for future equity or other incentive awards. Mr. Gordon’s agreement also provides for an annual grant of 100,000 stock options and 50,000 shares of restricted stock.

The employment agreements for Messrs. Anderson, Gordon, Georgino and Chisholm provide for the following payments and benefits if the executive is terminated by us without cause or resigns for good reason:

 

   

For Mr. Anderson, (i) a lump-sum payment of an amount reached by mutual agreement, but no less than an amount equal to his most recent twelve months’ base salary and bonus (including both the guaranteed and maximum discretionary bonus components), (ii) reimbursement for health premiums under COBRA for a period of up to 12 months, and (iii) if the termination is without cause, full vesting of all outstanding equity awards.

 

   

For Mr. Gordon, (i) payment of an amount equal to his most recent twelve months’ base salary in installments over a period of 12 months, (ii) payment of a pro-rata portion of the annual bonus he would have otherwise earned at the same time as bonuses are paid to continuing employees, and (iii) reimbursement for health premiums under COBRA for a period of up to 12 months.

 

   

For Mr. Georgino, (i) a lump-sum payment of an amount equal to his most recent twelve months’ base salary (and if the termination is without cause, twelve months of his guaranteed bonus), (ii) reimbursement for health premiums under COBRA for a period of up to 12 months, and (iii) full vesting of all outstanding equity awards.

 

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For Mr. Chisholm, (i) a lump-sum payment of an amount equal to his most recent twelve months’ base salary (and if the termination is without cause, twelve months of his guaranteed bonus), (ii) reimbursement for health premiums under COBRA for a period of up to 12 months, and (iii) full vesting of all outstanding equity awards.

In the event of a termination by us without cause or, for Messrs. Gordon, Georgino or Chisholm, resignation for good reason, in either case, in connection with a change-in-control of the Company (which generally means a termination within one year after a change-in-control or, for Mr. Anderson, a termination within six months prior to the date of the change-in-control), Messrs. Anderson, Gordon, Georgino and Chisholm will be entitled to receive the following enhanced payments and benefits in lieu of those described above:

 

   

For Mr. Anderson, (i) a lump-sum payment of an amount equal to two times the sum of his annual base salary in effect on the termination date (or in effect immediately prior to the change-in-control, if higher) and his maximum annual bonus (including both the guaranteed and discretionary bonus components), (ii) reimbursement for health premiums under COBRA or an individual health care plan for a period of up to 24 months, and (iii) full vesting of all outstanding equity awards.

 

   

For Mr. Gordon, (i) a lump-sum payment of an amount equal to two times the sum of his annual base salary in effect on the termination date (or in effect immediately prior to the change-in-control, if higher) and his annual bonus for the year immediately prior to the year in which the change-in-control occurs (ii) reimbursement for health premiums under COBRA or an individual health care plan for a period of up to 24 months, and (iii) full vesting of all outstanding equity awards.

 

   

For Mr. Georgino, (i) a lump-sum payment of an amount equal to two times the sum of his annual base salary and guaranteed bonus, in each case as in effect on the termination date or immediately prior to the change-in-control, whichever is higher, (ii) reimbursement for health premiums under COBRA or an individual health care plan for a period of up to 24 months, and (iii) full vesting of all outstanding equity awards.

 

   

For Mr. Chisholm, (i) a lump-sum payment of an amount equal to two times the sum of his annual base salary and guaranteed bonus, in each case as in effect on the termination date or immediately prior to the change-in-control, whichever is higher, (ii) reimbursement for health premiums under COBRA or an individual health care plan for a period of up to 24 months, and (iii) full vesting of all outstanding equity awards.

Under the employment agreements for Messrs. Anderson, Georgino and Chisholm, in the event the executive’s employment terminates due to death or disability, each executive’s agreement entitles him to receive the same severance payments described above for a non-change-in-control related termination by us without cause. Under his employment agreement, Mr. Gordon will become entitled to an amount equal to 12 months’ base salary, payable over 12 months, upon termination due to disability.

In order to receive the severance payments and benefits described above, each executive is required to execute a full general release of claims in favor of the Company.

For purposes of the employment agreements, “cause” is generally deemed to exist if the executive, at any time: commits a material breach of his employment agreement, is guilty of gross negligence in connection with or affecting the business or affairs of the Company, is guilty of insubordination, intentionally misappropriates or destroys intellectual property, or is convicted of, or pleads no contest to, a felony criminal offense.

For purposes of the employment agreements for Messrs. Anderson and Gordon, “good reason” generally means a material reduction in an executive’s authority, duties, and executive responsibilities with the Company, a change in direct reporting to anyone of lesser rank than the Chief Executive Officer, or a material breach of his employment agreement by the Company. For purposes of the employment agreements for Messrs. Georgino and Chisholm, “good reason” generally means a material reduction in base salary, a material change in his employment location, a material reduction in duties, position or responsibilities, or a material breach of his employment agreement by the Company.

 

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In the tables below, we summarize the estimated payments and benefits that will be made to Messrs. Anderson, Gordon, Georgino and Chisholm upon a termination of employment in the various circumstances listed. These payments and benefits would be provided by the Company. Please see “Compensation Discussion and Analysis” above for a discussion of how the level of these payments and benefits was determined. The tables should be read together with the above description of our employment agreements with Messrs. Anderson, Gordon, Georgino and Chisholm. The major assumptions that we used in creating the tables are set forth directly below.

Date of Termination. The tables assume that any triggering event took place on December 31, 2011, with base salaries in effect at the end of the 2011 fiscal year and bonuses payable at the maximum 60% of base salary being used for purposes of any severance payout calculation.

Bonus. The tables below use the amount of the maximum bonuses (aggregate of 60% of base salary) payable, to Messrs. Anderson, Gordon, Georgino and Chisholm for services during 2011.

Equity Acceleration upon a Change-in-Control. In addition to the accelerated vesting of equity awards upon a qualifying termination pursuant to the employment agreements described above, the outstanding equity awards held by Messrs. Anderson, Gordon, Georgino and Chisholm will become fully vested in connection with a change-in-control if the awards are not assumed by the acquiror or canceled in exchange for a payment equal to the value of the awards. For purposes of calculating the value of shares underlying accelerated awards, we have used $6.65, the closing price of a share of our common stock on December 30, 2011.

Health Benefits. The monthly costs of health benefits that may be payable on termination as set forth in our employment agreements with Messrs. Anderson, Gordon, Georgino and Chisholm have been estimated to be $1,083 each as of December 31, 2011.

The following table describes the potential payments upon termination for Charles Gordon, our President and Chief Operating Officer.

 

Executive Benefits and Payments
Upon Termination

   Termination
without Cause
     Resignation for
Good Reason
     Termination
in connection
with a
Change-in-
Control
     Death or
Disability
     Termination
for Cause
     Resignation
other than
for Good
Reason
 

Charles R. Gordon

                 

Cash Compensation

                 

Base Salary

   $ 300,000       $ 300,000       $ 600,000       $ 300,000       $ 0       $ 0   

Bonus

   $ 180,000       $ 180,000       $ 360,000       $ 0       $ 0       $ 0   

Equity Awards and Health Benefits

                 

Acceleration of Unvested Equity Grants

   $ 0       $ 0       $ 1,245,832       $ 0       $ 0       $ 0   

Health Benefits

   $ 12,996       $ 12,996       $ 25,992       $ 0       $ 0       $ 0   

Total

   $ 492,996       $ 492,996       $ 2,231,824       $ 300,000       $ 0       $ 0   

 

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The following table describes the potential payments upon termination for Damian C. Georgino, our Executive Vice President, Corporate Development and Chief Legal Officer.

 

Executive Benefits and Payments
Upon Termination

   Termination
without Cause
     Resignation for
Good Reason
     Termination
in connection
with a
Change-in-
Control
     Death or
Disability
     Termination
for Cause
     Resignation
other than
for Good
Reason
 

Damian C. Georgino

                 

Cash Compensation

                 

Base Salary

   $ 200,000       $ 200,000       $ 400,000       $ 200,000       $ 0       $ 0   

Bonus

   $ 60,000       $ 0       $ 120,000       $ 60,000       $ 0       $ 0   

Equity Awards and Health Benefits

                 

Acceleration of Unvested Equity Grants

   $ 904,000       $ 904,000       $ 904,000       $ 904,000       $ 0       $ 0   

Health Benefits

   $ 12,996       $ 12,996       $ 25,992       $ 12,996       $ 0       $ 0   

Total

   $ 1,176,996       $ 1,116,996       $ 1,449,992       $ 1,176,996       $ 0       $ 0   

The following table describes the potential payments upon termination for Brian R. Anderson, our Executive Vice President—Finance.

 

Executive Benefits and Payments
Upon Termination

   Termination
without Cause
     Resignation for
Good Reason
     Termination
in connection
with a
Change-in-
Control
     Death or
Disability
     Termination
for Cause
     Resignation
other than
for Good
Reason
 

Brian R. Anderson

                 

Cash Compensation

                 

Base Salary

   $ 175,000       $ 175,000       $ 350,000       $ 175,000       $ 0       $ 0   

Bonus

   $ 105,000       $ 105,000       $ 210,000       $ 105,000       $ 0       $ 0   

Equity Awards and Health Benefits

                 

Acceleration of Unvested Equity Grants

   $ 785,150       $ 0       $ 785,150       $ 785,150       $ 0       $ 0   

Health Benefits

   $ 12,996       $ 12,996       $ 25,992       $ 12,996       $ 0       $ 0   

Total

   $ 1,078,146       $ 292,996       $ 1,371,142       $ 1,078,146       $ 0       $ 0   

The following table describes the potential payments upon termination for W. Christopher Chisholm, our Executive Vice President and Chief Financial Officer.

 

Executive Benefits and Payments
Upon Termination

   Termination
without Cause
     Resignation for
Good Reason
     Termination
in connection
with a
Change-in-
Control
     Death or
Disability
     Termination
for Cause
     Resignation
other than
for Good
Reason
 

W. Christopher Chisholm

                 

Cash Compensation

                 

Base Salary

   $ 250,000       $ 250,000       $ 500,000       $ 250,000       $ 0       $ 0   

Bonus

   $ 25,000       $ 0       $ 50,000       $ 25,000       $ 0       $ 0   

Equity Awards and Health Benefits

                 

Acceleration of Unvested Equity Grants

   $ 1,030,500       $ 1,030,500       $ 1,030,500       $ 1,030,500       $ 0       $ 0   

Health Benefits

   $ 12,996       $ 12,996       $ 25,992       $ 12,996       $ 0       $ 0   

Total

   $ 1,318,496       $ 1,293,496       $ 1,606,492       $ 1,318,496       $ 0       $ 0   

 

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2011 DIRECTOR COMPENSATION

Directors of publicly traded companies have substantial responsibilities and time commitments, and there is a competitive market for highly qualified and experienced directors. As such, the Compensation Committee seeks to provide appropriate compensation to directors taking into account these factors. Based on a review of our historical practices and a general review of market-competitive practices, our Compensation Committee determined in 2011 that the annual retainer for all non-executive members of the Board will be $75,000 per annum, paid in the form of restricted stock under our 2009 Equity Incentive Plan. In addition, members of the Board who serve on the Audit Committee receive a cash amount of $1,000 per Audit Committee meeting attended, with the chairperson receiving an additional $1,000 per meeting. These restricted stock awards vest 1/2 on each of the first two anniversaries following the grant date. Directors are also reimbursed for their out-of-pocket expenses incurred in traveling to a Board meeting. The following table provides information on the compensation of the members of our Board (who are not also our employees) during 2011. The compensation paid to Mr. Heckmann, who is one of our employees, is presented above in the Summary Compensation Table and the related tables. Mr. Heckmann did not receive any additional compensation for his service as a director. In addition, as Mr. Simonds was appointed to the office of Vice Chairman of the Board, and is considered an executive member of the Board, the Compensation Committee did not grant Mr. Simonds an award of restricted stock for services performed in 2011.

 

Name

   Fees Earned or
Paid in Cash ($)(1)
     Stock Awards
($)(2)(3)
     Total
($)
 

Edward A. Barkett

     7,000         74,060         81,060   

Lou Holtz

     —           74,060         74,060   

Alfred E. Osborne, Jr.

     12,000         74,060         86,060   

J. Danforth Quayle

     —           74,060         74,060   

Andrew D. Seidel

     —           74,060         74,060   

Robert B. Simonds, Jr.

     —           —           —     

Kevin L. Spence

     7,000         74,060         81,060   

 

(1) Directors who are members of our Audit Committee receive $1,000 in fees per meeting attended, and our Chairperson of the Audit Committee (Dr. Osborne) receives an additional $1,000 in fees per meeting attended.

 

(2) Each of our non-employee directors, with the exception of Mr. Simonds, received an award of 14,000 restricted shares in 2011 that vest 1/2 on each of the first two anniversaries of the grant date. The dollar amount reflected above is equal to the aggregate grant date fair value of the restricted shares ($5.29) computed in accordance with FASB ASC Topic 718. For a discussion of the assumptions and methodologies used to calculate the grant date fair value of these awards, please see the discussion of equity awards contained in Note 8 to the Company’s consolidated financial statements included as part of the Company’s Annual Report filed with the SEC on Form 10-K for the fiscal year ending December 31, 2011.

 

(3) As of December 31, 2011, our non-employee directors held the following number of stock options and unvested restricted stock awards. All awards consist of restricted stock except for the 500,000 stock options granted to Mr. Simonds in 2010.

 

Name

   Number of awards  

Edward A. Barkett

     24,000   

Lou Holtz

     24,000   

Alfred E. Osborne, Jr.

     24,000   

J. Danforth Quayle

     24,000   

Andrew D. Seidel

     24,000   

Robert B. Simonds, Jr.

     510,000   

Kevin L. Spence

     14,000   

 

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PROPOSAL 4—AMENDMENT TO 2009 EQUITY INCENTIVE PLAN TO INCREASE

NUMBER OF SHARES AVAILABLE UNDER THE PLAN AND THE LIMIT ON

SHARES AVAILABLE FOR FULL VALUE AWARDS

(Item 4 on Proxy Card)

We are asking our stockholders to approve an amendment to the 2009 Equity Incentive Plan. The proposed amendment will increase the number of shares of Common Stock that may be issued pursuant to the 2009 Equity Incentive Plan by 5,000,000 shares, to a total of 10,000,000 shares. In addition, the amendment will raise the limitation on the number of shares which may be issued under the Plan in the form of full value awards by 2,000,000, to a total of 4,000,000 shares.

The 2009 Plan currently authorizes the issuance of up to 5,000,000 shares of our Common Stock, with no more than 2,000,000 issuable in the form of full value awards. In determining the amount of the increases contemplated by the proposed amendment to the 2009 Equity Incentive Plan, the Compensation Committee considered the fact that as of December 31, 2011, a total of 3,210,000 shares were subject to outstanding awards under the 2009 Equity Incentive Plan, with 826,607 shares previously having been issued. Approval of the amendment would allow the Compensation Committee to continue to grant incentive awards and reward opportunities that are tied to performance of the Common Stock, and continue to grant full-value forms of awards where it deems such awards appropriate.

No other changes to the 2009 Plan are being proposed.

The proposed amendment to the 2009 Equity Incentive Plan is attached hereto as Appendix A, and the 2009 Equity Incentive Plan, as previously approved by the shareholders on May 6, 2009, is attached hereto as Appendix B.

As of March 26, 2012, the closing price of our common stock as reported on the NYSE was $4.59 per share.

The classes of persons eligible to participate in the 2009 Equity Incentive Plan and the approximate number of persons in each such class are currently as follows: non-employee directors (7 persons); executive officers (5 persons); employees other than executive officers (1,173 persons); and consultants (0 persons). The basis of participation by any person is the grant of an award by the Compensation Committee. Awards are made to individuals who the Compensation Committee believes have the ability to contribute to the growth and profitability of the Company.

Summary of 2009 Equity Incentive Plan

The following summary provides a general description of the material features of the 2009 Equity Incentive Plan, and is qualified in its entirety by reference to the full text of the plan attached as Appendix B.

General. The purpose of the Plan is to advance the interests of the Company and its stockholders by providing an incentive program that will enable the Company to attract and retain employees, consultants and directors and to provide them with an equity interest in the growth and profitability of the Company. These incentives are provided through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, other stock-based awards and cash-based awards.

Authorized Shares. A total of 5,000,000 shares of the Company’s common stock was authorized for issuance under the Plan upon its approval by the stockholders in 2009. Shares issued under the Plan may consist of any combination of authorized but unissued or reacquired shares of the Company’s common stock. The proposed amendment will increase the number of shares of the Company’s common stock that may be issued under the Plan by 5,000,000 to a total of 10,000,000.

 

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Share Counting. If any award granted under the Plan expires or otherwise terminates for any reason without having been exercised or settled in full, or if shares subject to forfeiture or repurchase are forfeited or repurchased by the Company for not more than the participant’s purchase price, any such shares reacquired or subject to a terminated award will again become available for issuance under the Plan. Shares will not be treated as having been issued under the Plan and will therefore not reduce the number of shares available for issuance to the extent an award is settled in cash. Shares that are withheld or reacquired by the Company in satisfaction of a tax withholding obligation or that are tendered in payment of the exercise price of an option will not be made available for new awards under the Plan. Upon the exercise of a stock appreciation right or net-exercise of an option, the number of shares available under the Plan will be reduced by the gross number of shares for which the award is exercised.

Adjustments for Capital Structure Changes. Appropriate and proportionate adjustments will be made to the number of shares authorized under the Plan, to the numerical limits on certain types of awards described below, and to outstanding awards in the event of any change in our common stock through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares or similar change in our capital structure, or if we make a distribution to our stockholders in a form other than common stock (excluding normal cash dividends) that has a material effect on the fair market value of our common stock. In such circumstances, the Compensation Committee also has the discretion under the Plan to adjust other terms of outstanding awards as it deems appropriate.

Full Value Award Limit. In addition to the limitation described above on the total number of shares of our common stock that will be authorized for issuance under the Plan, the plan limits the number of shares that may be issued under certain types of awards, subject to adjustment as described above under “Share Counting” and “Adjustments for Capital Structure Changes.” No more than 2,000,000 shares may be issued under the Plan pursuant to “full value awards,” which are defined by the Plan as awards settled in stock other than an option, stock appreciation right or restricted stock or other stock-based award for which the company will receive monetary consideration equal to the grant date fair market value of the shares subject to the award. The proposed amendment will increase the number of shares of the Company’s common stock that may be issued in the form of full value awards under the Plan by 2,000,000 to a total of 4,000,000.

Other Award Limits. To enable compensation provided in connection with certain types of awards to qualify as “performance-based” within the meaning of Section 162(m) of the Code, the Plan establishes a limit on the maximum aggregate number of shares or dollar value for which such awards may be granted to an employee in any fiscal year, as follows:

 

   

No more than 500,000 shares under stock-based awards.

 

   

No more than $2,500,000 for each full fiscal year contained in the performance period under cash-based awards.

Administration. The Plan generally will be administered by the Compensation Committee of the Board, although the Board retains the right to appoint another of its committees to administer the Plan or to administer the Plan directly. In the case of awards intended to qualify for the performance-based compensation exemption under Section 162(m) of the Code, administration of the Plan must be by a compensation committee comprised solely of two or more “outside directors” within the meaning of Section 162(m). (For purposes of this summary, the term “Committee” will refer to either such duly appointed committee or the Board.) Subject to the provisions of the Plan, the Committee determines in its discretion the persons to whom and the times at which awards are granted, the types and sizes of awards, and all of their terms and conditions. The Committee may, subject to certain limitations on the exercise of its discretion required by Section 162(m) or otherwise provided by the Plan, amend, cancel or renew any award, waive any restrictions or conditions applicable to any award, and accelerate, continue, extend or defer the vesting of any award. The Plan provides, subject to certain limitations, for indemnification by the Company of any director, officer or employee against all reasonable expenses, including

 

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attorneys’ fees, incurred in connection with any legal action arising from such person’s action or failure to act in administering the Plan. All awards granted under the Plan will be evidenced by a written or digitally signed agreement between the Company and the participant specifying the terms and conditions of the award, consistent with the requirements of the Plan. The Committee will interpret the Plan and awards granted thereunder, and all determinations of the Committee generally will be final and binding on all persons having an interest in the Plan or any award.

Prohibition of Option and Stock Appreciation Right Repricing. The Plan expressly provides that, without the approval of a majority of the votes cast in person or by proxy at a meeting of our stockholders, the Committee may not provide for any of the following with respect to underwater options or stock appreciation rights: (1) either the cancellation of such outstanding options or stock appreciation rights in exchange for the grant of new options or stock appreciation rights at a lower exercise price or the amendment of outstanding options or stock appreciation rights to reduce the exercise price, (2) the issuance of new full value awards in exchange for the cancellation of such outstanding options or stock appreciation rights, or (3) the cancellation of such outstanding options or stock appreciation rights in exchange for payments in cash.

Eligibility. Awards may be granted to employees, directors and consultants of the Company or any present or future parent or subsidiary corporation or other affiliated entity of the Company. Incentive stock options may be granted only to employees who, as of the time of grant, are employees of the Company or any parent or subsidiary corporation of the Company.

Stock Options. The Committee may grant nonstatutory stock options, incentive stock options within the meaning of Section 422 of the Code, or any combination of these. The exercise price of each option may not be less than the fair market value of a share of our common stock on the date of grant. However, any incentive stock option granted to a person who at the time of grant owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company (a “10% Stockholder”) must have an exercise price equal to at least 110% of the fair market value of a share of common stock on the date of grant.

The Plan provides that the option exercise price may be paid in cash, by check, or cash equivalent; by means of a broker-assisted cashless exercise; by means of a net-exercise procedure; to the extent legally permitted, by tender to the Company of shares of common stock owned by the participant having a fair market value not less than the exercise price; by such other lawful consideration as approved by the Committee; or by any combination of these. Nevertheless, the Committee may restrict the forms of payment permitted in connection with any option grant. No option may be exercised unless the participant has made adequate provision for federal, state, local and foreign taxes, if any, relating to the exercise of the option, including, if permitted or required by the Company, through the participant’s surrender of a portion of the option shares to the Company.

Options will become vested and exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the Committee. The maximum term of any option granted under the Plan is ten years, provided that an incentive stock option granted to a 10% Stockholder must have a term not exceeding five years. Unless otherwise permitted by the Committee, an option generally will remain exercisable for three months following the participant’s termination of service, provided that if service terminates as a result of the participant’s death or disability, the option generally will remain exercisable for 12 months, but in any event the option must be exercised no later than its expiration date, and provided further that an option will terminate immediately upon a participant’s termination for cause (as defined by the Plan).

Options are nontransferable by the participant other than by will or by the laws of descent and distribution, and are exercisable during the participant’s lifetime only by the participant. However, an option may be assigned or transferred to certain family members or trusts for their benefit to the extent permitted by the Committee and, in the case of an incentive stock option, only to the extent that the transfer will not terminate its tax qualification.

 

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Stock Appreciation Rights. The Committee may grant stock appreciation rights either in tandem with a related option (a “Tandem SAR”) or independently of any option (a “Freestanding SAR”). A Tandem SAR requires the option holder to elect between the exercise of the underlying option for shares of common stock or the surrender of the option and the exercise of the related stock appreciation right. A Tandem SAR is exercisable only at the time and only to the extent that the related stock option is exercisable, while a Freestanding SAR is exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the Committee. The exercise price of each Tandem SAR must be the exercise price of the related option, and the exercise price of each Freestanding SAR may not be less than the fair market value of a share of our common stock on the date of grant.

Upon the exercise of any stock appreciation right, the participant is entitled to receive an amount equal to the excess of the fair market value of the underlying shares of common stock as to which the right is exercised over the aggregate exercise price for such shares. Payment of this amount upon the exercise of a Tandem SAR may be made only in shares of common stock whose fair market value on the exercise date equals the payment amount. At the Committee’s discretion, payment of this amount upon the exercise of a Freestanding SAR may be made in cash, shares of common stock, or any combination thereof. The maximum term of any stock appreciation right granted under the Plan is ten years.

Stock appreciation rights are generally nontransferable by the participant other than by will or by the laws of descent and distribution, and are generally exercisable during the participant’s lifetime only by the participant. If permitted by the Committee, a Tandem SAR related to a nonstatutory stock option and a Freestanding SAR may be assigned or transferred to certain family members or trusts for their benefit to the extent permitted by the Committee. Other terms of stock appreciation rights are generally similar to the terms of comparable stock options.

Restricted Stock Awards. The Committee may grant restricted stock awards under the Plan either in the form of a restricted stock purchase right, giving a participant an immediate right to purchase common stock, or in the form of a restricted stock bonus, in which stock is issued in consideration for services to the Company rendered by the participant. The Committee determines the purchase price payable under restricted stock purchase awards, which may be less than the then current fair market value of our common stock. Restricted stock awards may be subject to vesting conditions based on such service or performance criteria as the Committee specifies, including the attainment of one or more performance goals similar to those described below in connection with performance awards. Shares acquired pursuant to a restricted stock award may not be transferred by the participant until vested. Unless otherwise provided by the Committee, a participant will forfeit any shares of restricted stock as to which the vesting restrictions have not lapsed prior to the participant’s termination of service. Unless otherwise determined by the Committee, participants holding restricted stock will have the right to vote the shares and to receive any dividends paid, except that dividends or other distributions paid in shares will be subject to the same restrictions as the original award.

Restricted stock award rights are generally nontransferable by the participant other than by will or by the laws of descent and distribution, and are generally exercisable during the participant’s lifetime only by the participant.

Restricted Stock Units. The Committee may grant restricted stock units under the Plan, which represent rights to receive shares of our common stock at a future date determined in accordance with the participant’s award agreement. No monetary payment is required for receipt of restricted stock units or the shares issued in settlement of the award, the consideration for which is furnished in the form of the participant’s services to the Company. The Committee may grant restricted stock unit awards subject to the attainment of one or more performance goals similar to those described below in connection with performance awards, or may make the awards subject to vesting conditions similar to those applicable to restricted stock awards. Unless otherwise provided by the Committee, a participant will forfeit any restricted stock units which have not vested prior to the participant’s termination of service. Participants have no voting rights or rights to receive cash dividends with respect to restricted stock unit awards until shares of common stock are issued in settlement of such awards.

 

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However, the Committee may grant restricted stock units that entitle their holders to dividend equivalent rights, which are rights to receive additional restricted stock units for a number of shares whose value is equal to any cash dividends the Company pays.

Restricted stock unit award rights are generally nontransferable by the participant other than by will or by the laws of descent and distribution, and are generally exercisable during the participant’s lifetime only by the participant.

Performance Awards. The Committee may grant performance awards subject to such conditions and the attainment of such performance goals over such periods as the Committee determines in writing and sets forth in a written agreement between the Company and the participant. These awards may be designated as performance shares or performance units, which consist of unfunded bookkeeping entries generally having initial values equal to the fair market value determined on the grant date of a share of common stock in the case of performance shares, and a monetary value established by the Committee at the time of grant in the case of performance units. Performance awards will specify a predetermined amount of performance shares or performance units that may be earned by the participant to the extent that one or more performance goals are attained within a predetermined performance period. To the extent earned, performance awards may be settled in cash, shares of common stock (including shares of restricted stock that are subject to additional vesting) or any combination thereof.

Prior to the beginning of the applicable performance period or such later date as permitted under Section 162(m) of the Code, the Committee will establish one or more performance goals applicable to the award. Performance goals will be based on the attainment of specified target levels with respect to one or more measures of business or financial performance of the Company and each subsidiary corporation consolidated with the Company for financial reporting purposes, or such division or business unit of the Company as may be selected by the Committee. The Committee, in its discretion, may base performance goals on one or more of the following such measures: revenue; sales; expenses; operating income; gross margin; operating margin; earnings before any one or more of: stock-based compensation expense, interest, taxes, depreciation and amortization; pre-tax profit; net operating income; net income; economic value added; free cash flow; operating cash flow; balance of cash, cash equivalents and marketable securities; stock price; earnings per share; return on stockholder equity; return on capital; return on assets; return on investment; employee satisfaction; employee retention; market share; customer satisfaction; product development; research and development expenses; completion of an identified special project; and completion of a joint venture or other corporate transaction.

The target levels with respect to these performance measures may be expressed on an absolute basis or relative to an index, budget or other standard specified by the Committee. The degree of attainment of performance measures will be calculated in accordance with generally accepted accounting principles, if applicable, but prior to the accrual or payment of any performance award for the same performance period, and, according to criteria established by the Committee, excluding the effect (whether positive or negative) of changes in accounting standards or any extraordinary, unusual or nonrecurring item occurring after the establishment of the performance goals applicable to a performance award.

Following completion of the applicable performance period, the Committee will certify in writing the extent to which the applicable performance goals have been attained and the resulting value to be paid to the participant. The Committee retains the discretion to eliminate or reduce, but not increase, the amount that would otherwise be payable on the basis of the performance goals attained to a participant who is a “covered employee” within the meaning of Section 162(m) of the Code. However, no such reduction may increase the amount paid to any other participant. The Committee may make positive or negative adjustments to performance award payments to participants other than covered employees to reflect the participant’s individual job performance or other factors determined by the Committee. In its discretion, the Committee may provide for a participant awarded performance shares to receive dividend equivalent rights with respect to cash dividends paid on the Company’s common stock. The Committee may provide for performance award payments in lump sums or installments. If any payment is to be made on a deferred basis, the Committee may provide for the payment of dividend equivalent rights or interest during the deferral period.

 

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Unless otherwise provided by the Committee, if a participant’s service terminates due to the participant’s death or disability prior to completion of the applicable performance period, the final award value will be determined at the end of the performance period on the basis of the performance goals attained during the entire performance period but will be prorated for the number of months of the participant’s service during the performance period. If a participant’s service terminates prior to completion of the applicable performance period for any other reason, the Plan provides that, unless otherwise determined by the Committee, the performance award will be forfeited. No performance award may be sold or transferred other than by will or the laws of descent and distribution prior to the end of the applicable performance period.

Cash-Based Awards and Other Stock-Based Awards. The Committee may grant cash-based awards or other stock-based awards in such amounts and subject to such terms and conditions as the Committee determines. Cash-based awards will specify a monetary payment or range of payments, while other stock-based awards will specify a number of shares or units based on shares or other equity-related awards. Such awards may be subject to vesting conditions based on continued performance of service or subject to the attainment of one or more performance goals similar to those described above in connection with performance awards. Settlement of awards may be in cash, shares of common stock, or any combination thereof, as determined by the Committee. A participant will have no voting rights with respect to any such award unless and until shares are issued pursuant to the award. The committee may grant dividend equivalent rights with respect to other stock-based awards. The effect on such awards of the participant’s termination of service will be determined by the Committee and set forth in the participant’s award agreement.

Rights under cash-based awards or other stock-based awards are generally nontransferable by the participant other than by will or by the laws of descent and distribution.

Change-in-Control. Unless otherwise defined in a participant’s award or employment agreement, the Plan provides that a “Change-in-Control” occurs upon (a) a person or entity (with certain exceptions described in the Plan) becoming the direct or indirect beneficial owner of more than 50% of the Company’s voting stock; (b) a liquidation or dissolution of the Company; or (c) the occurrence of any of the following events upon which the stockholders of the Company immediately before the event do not retain immediately after the event direct or indirect beneficial ownership of more than 50% of the voting securities of the Company, its successor or the entity to which the assets of the company were transferred: (i) a sale or exchange by the stockholders in a single transaction or series of related transactions of more than 50% of the Company’s voting stock; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange or transfer of all or substantially all of the assets of the Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company).

If a Change-in-Control occurs, the surviving, continuing, successor or purchasing entity or its parent may, without the consent of any participant, either assume or continue outstanding awards or substitute substantially equivalent awards for its stock. Stock-based awards will be deemed assumed if, for each share subject to the award prior to the Change-in-Control, its holder is given the right to receive the same amount of consideration that a stockholder would receive as a result of the Change-in-Control. Any awards which are not assumed or continued in connection with a Change-in-Control or exercised or settled prior to the Change-in-Control will terminate effective as of the time of the Change-in-Control. Subject to the restrictions of Section 409A of the Code, the Committee may provide for the acceleration of vesting or settlement of any or all outstanding awards upon such terms and to such extent as it determines. The Plan also authorizes the Committee, in its discretion and without the consent of any participant, to cancel each or any award denominated in shares of stock upon a Change-in-Control in exchange for a payment to the participant with respect each vested share (and each unvested share if so determined by the Committee) subject to the canceled award of an amount equal to the excess of the consideration to be paid per share of common stock in the Change-in-Control transaction over the exercise price per share, if any, under the award. The vesting of all awards held by non-employee directors will be accelerated in full upon a Change-in-Control.

 

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Awards Subject to Section 409A of the Code. Certain awards granted under the Plan may be deemed to constitute “deferred compensation” within the meaning of Section 409A of the Code, providing rules regarding the taxation of nonqualified deferred compensation plans, and the regulations and other administrative guidance issued pursuant to Section 409A. Any such awards will be required to comply with the requirements of Section 409A. Notwithstanding any provision of the Plan to the contrary, the Committee is authorized, in its sole discretion and without the consent of any participant, to amend the Plan or any award agreement as it deems necessary or advisable to comply with Section 409A.

Amendment, Suspension or Termination. The Plan will continue in effect until its termination by the Committee, provided that no awards may be granted under the Plan following the tenth anniversary of the Plan’s effective date, which will be the date on which it is approved by the stockholders. The Committee may amend, suspend or terminate the Plan at any time, provided that no amendment may be made without stockholder approval that would increase the maximum aggregate number of shares of stock authorized for issuance under the Plan, change the class of persons eligible to receive incentive stock options or require stockholder approval under any applicable law. No amendment, suspension or termination of the Plan may affect any outstanding award unless expressly provided by the Committee, and, in any event, may not adversely affect an outstanding award without the consent of the participant unless necessary to comply with any applicable law, regulation or rule, including, but not limited to, Section 409A of the Code, or unless expressly provided in the terms and conditions governing the award.

Summary of United States Federal Income Tax Consequences

The following summary is intended only as a general guide to the United States federal income tax consequences of participation in the Plan and does not attempt to describe all possible federal or other tax consequences of such participation or tax consequences based on particular circumstances.

Incentive Stock Options. A participant recognizes no taxable income for regular income tax purposes as a result of the grant or exercise of an incentive stock option qualifying under Section 422 of the Code. Participants who neither dispose of their shares within two years following the date the option was granted nor within one year following the exercise of the option will normally recognize a capital gain or loss upon the sale of the shares equal to the difference, if any, between the sale price and the purchase price of the shares. If a participant satisfies such holding periods upon a sale of the shares, we will not be entitled to any deduction for federal income tax purposes. If a participant disposes of shares within two years after the date of grant or within one year after the date of exercise (a “disqualifying disposition”), the difference between the fair market value of the shares on the option exercise date and the exercise price (not to exceed the gain realized on the sale if the disposition is a transaction with respect to which a loss, if sustained, would be recognized) will be taxed as ordinary income at the time of disposition. Any gain in excess of that amount will be a capital gain. If a loss is recognized, there will be no ordinary income, and such loss will be a capital loss. Any ordinary income recognized by the participant upon the disqualifying disposition of the shares generally should be deductible by us for federal income tax purposes, except to the extent such deduction is limited by applicable provisions of the Code.

In general, the difference between the option exercise price and the fair market value of the shares on the date of exercise of an incentive stock option is treated as an adjustment in computing the participant’s alternative minimum taxable income and may be subject to an alternative minimum tax which is paid if such tax exceeds the regular tax for the year. Special rules may apply with respect to certain subsequent sales of the shares in a disqualifying disposition, certain basis adjustments for purposes of computing the alternative minimum taxable income on a subsequent sale of the shares and certain tax credits which may arise with respect to participants subject to the alternative minimum tax.

Nonstatutory Stock Options. Options not designated or qualifying as incentive stock options are nonstatutory stock options having no special tax status. A participant generally recognizes no taxable income upon receipt of such an option. Upon exercising a nonstatutory stock option, the participant normally recognizes ordinary income equal to the difference between the exercise price paid and the fair market value of the shares on the date when

 

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the option is exercised. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of stock acquired by the exercise of a nonstatutory stock option, any gain or loss, based on the difference between the sale price and the fair market value of the shares on the exercise date, will be taxed as capital gain or loss. We generally should be entitled to a tax deduction equal to the amount of ordinary income recognized by the participant as a result of the exercise of a nonstatutory stock option, except to the extent such deduction is limited by applicable provisions of the Code.

Stock Appreciation Rights. A Participant recognizes no taxable income upon the receipt of a stock appreciation right. Upon the exercise of a stock appreciation right, the participant generally will recognize ordinary income in an amount equal to the excess of the fair market value of the underlying shares of common stock on the exercise date over the exercise price. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant in connection with the exercise of the stock appreciation right, except to the extent such deduction is limited by applicable provisions of the Code.

Restricted Stock. A participant acquiring restricted stock generally will recognize ordinary income equal to the excess of the fair market value of the shares on the “determination date” over the price paid, if any, for such shares. The “determination date” is the date on which the participant acquires the shares unless the shares are subject to a substantial risk of forfeiture and are not transferable, in which case the determination date is the earlier of (i) the date on which the shares become transferable or (ii) the date on which the shares are no longer subject to a substantial risk of forfeiture (e.g., when they become vested). If the determination date follows the date on which the participant acquires the shares, the participant may elect, pursuant to Section 83(b) of the Code, to designate the date of acquisition as the determination date by filing an election with the Internal Revenue Service no later than 30 days after the date on which the shares are acquired. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of shares acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value of the shares on the determination date, will be taxed as capital gain or loss. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.

Restricted Stock Unit, Performance, Cash-Based and Other Stock-Based Awards. A participant generally will recognize no income upon the receipt of a restricted stock unit, performance share, performance unit, cash-based or other stock-based award. Upon the settlement of such awards, participants normally will recognize ordinary income in the year of settlement in an amount equal to the cash received and the fair market value of any substantially vested shares of stock received. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. If the participant receives shares of restricted stock, the participant generally will be taxed in the same manner as described above under “Restricted Stock.” Upon the sale of any shares received, any gain or loss, based on the difference between the sale price and the fair market value of the shares on the determination date (as defined above under “Restricted Stock”), will be taxed as capital gain or loss. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.

New Plan Benefits

The grant of awards under the 2009 Equity Incentive Plan is discretionary. As of the date of this Proxy Statement, there has been no determination with respect to future awards under the 2009 Equity Incentive Plan. Therefore, it is not possible at present to determine the amount or form of any award that will be available for future grant to any individual according to the 2009 Equity Incentive Plan, as amended. Please refer to the Grants of Plan-Based Awards Table in this Proxy Statement to review equity awards made to our named executive officers in 2011.

 

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Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information as of December 31, 2011, with respect to shares of our common stock that may be issued under the Heckmann Corporation 2009 Equity Incentive Plan, which is our only existing equity compensation plan under which grants can be made. Stockholders approved the plan on May 6, 2009.

Equity Compensation Plan Information

 

Plan Category

   Number of securities to
be issued upon exercise
of outstanding awards
(a)
    Weighted Average
exercise price of
outstanding awards
(b)
     Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column(a)) (c)
 

Equity compensation plans approved by stockholders

     3,210,000 (1)    $ 4.84         963,393 (2) 

Equity compensation plans not approved by stockholders

     —          —           —     

Total

     3,210,000      $ 4.84         963,393   

 

(1) The sum of options to acquire 2,709,750 shares of common stock and 1,326,857 shares of restricted stock awarded under the Heckmann Corporation 2009 Equity Incentive Plan, less 826,607 shares issued thereunder.

 

(2) Available as of December 31, 2011.

The following table lists each person named in the Summary Compensation Table, each director nominee, all current executive officers as a group, all current directors (other than executive officers) as a group, each associate of the foregoing persons, each other person who received at least five percent of the options under the 2009 Equity Incentive Plan, and all current employees of the Company (other than executive officers) as a group, indicating, as of December 31, 2011, the aggregate number of options granted under the 2009 Equity Incentive Plan to each of the foregoing since the inception of the 2009 Equity Incentive Plan in 2009 and the weighted average exercise price of such options.

 

Name and Principal Position

   Options granted
Under the 2009
Equity
Incentive Plan
From Inception
     Weighted Average
Exercise Price
 

Richard J. Heckmann, Chairman and Chief Executive Officer

     —         $ —     

Charles R. Gordon, President and Chief Operating Officer

     600,000       $ 2.13   

Damian C. Georgino, Executive Vice President, Corporate Development and Chief Legal Officer

     150,000       $ 4.26   

Brian R. Anderson, Executive Vice President Finance

     135,000       $ 3.98   

W. Christopher Chisholm, Executive Vice President and
Chief Financial Officer

     150,000       $ 6.43   

J. Danforth Quayle

     —           —     

Andrew D. Seidel

     —           —     

All Current Executive Officers as a Group (5 persons)

     1,035,000       $ 3.30   

All Current Directors (other than Executive Officers) as a
Group (7 persons)

     500,000      $ 3.91   

Associates of Named Executive Officers, Directors and Director Nominees

     —           —     

All Current Employees (other than Executive Officers) as a
Group (1,173 persons)

     742,500       $ 5.75   

 

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Vote Required and Board Recommendation

Approval of this proposal requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote on this proposal. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have the same effect as a negative vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have authority to vote your shares. Broker non-votes will have no effect on the outcome of this vote. Abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum.

The Board believes that the proposed adoption of Proposal 4 is in the best interests of the Company and its stockholders.

THE BOARD RECOMMENDS A VOTE FOR PROPOSAL NO. 4.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Our Board has adopted a written policy regarding the review, approval and ratification of any related party transaction. Under this policy, our Audit Committee will review the relevant facts and circumstances of each related party transaction, including if the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party and the extent of the related party’s interest in the transaction, and either approve or disapprove the related party transaction. Any related party transaction may be consummated, and may continue, only if the Audit Committee has approved or ratified such transaction in accordance with the guidelines set forth in the policy.

A “related party transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we were, are or will be a participant and in which any related party had, has or will have a direct or indirect interest (other than solely as a result of being a director or a less than five percent beneficial owner of another entity). A “related party” is any (a) person who is or was (since the beginning of the company’s last fiscal year) an executive officer, director or nominee for election as a director, (b) greater than five percent beneficial owner of any class of the Company’s voting securities, or (c) immediate family member of any of the foregoing, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of such person, and anyone (other than a tenant or employee) sharing the household of such person.

We have an arrangement with Heckmann Enterprises LLC (“Heckmann Enterprises”), with regard to which Mr. Heckmann, our Chairman and Chief Executive Officer, is the sole member, for our use of an airplane owned by Heckmann Enterprises. The airplane may be used by us solely for business-related purposes. Pursuant to the arrangement, which was approved by the Compensation Committee of the Board of Directors, we partially reimburse Heckmann Enterprises an hourly fee (currently $6,000 per hour) for the use of the airplane. However, Heckmann Enterprises pays all costs and expenses relating to the operation and ownership of the airplane. During 2011, these payments made by the Company to Heckmann Enterprises totaled approximately $675,000. We believe that this arrangement is at least as favorable to the Company as an arrangement with a third party for aircraft use. The arrangement may be terminated by either us or Heckmann Enterprises at any time.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the beneficial ownership of our common stock on March 5, 2012, by (i) those persons known by management of the Company to beneficially own 5% or more of our common stock, (ii) each director and director nominee, (iii) our named executive officers, and (iv) all executive officers and directors of the Company as a group.

 

     Common Stock  

Name and Address of Beneficial Owner(1)

   Amount and Nature
of Beneficial
Ownership(2)
     Percent of
Class
 

Richard J. Heckmann(3)

     12,349,236         9.74

Chairman and Chief Executive Officer

     

Charles R. Gordon(4)(5)

     650,000         *

President and Chief Operating Officer

     

Lou Holtz

     222,232         *

Director

     

Edward A. Barkett

     54,000         *

Director

     

J. Danforth Quayle(6)(7)

     169,616         *

Director

     

Andrew D. Seidel(8)

     81,000         *

Director

     

Alfred E. Osborne, Jr.(9)

     130,616         *

Director

     

Kevin L. Spence

     14,000         *

Director

     

Robert B. Simonds, Jr.(10)

     600,000         *

Director and Vice-Chairman

     

Brian R. Anderson(11)

     405,000         *

Executive Vice President, Finance

     

W. Christopher Chisholm(12)

     300,000         *

Executive Vice President and Chief Financial Officer

     

Damian C. Georgino(13)(14)

     252,000         *

Executive Vice President, Corporate Development and Chief Legal Officer

     

Executive officers, directors and director-nominees as a group

     15,227,700         12.02

FMR LLC(15)

82 Devonshire Street

Boston, Massachusetts 02109

     16,084,246         12.69

BlackRock, Inc.(16)

40 East 52nd Street

New York, NY 10022

     8,398,426         6.63

Steinberg Asset Management, LLC(17)

12 East 49th Street

Suite 1202

New York, NY 10017

     8,287,635         6.54

S.A.C. Capital Advisors, L.P.(18)

72 Cummings Point Road

Stamford, CT 06902

     8,149,650         6.43

 

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* Represents beneficial ownership of less than 1% of the outstanding shares of our common stock.

 

(1) Unless otherwise indicated, the address for each director, director-nominee and officer is c/o Heckmann Corporation, 300 Cherrington Parkway, Suite 200, Coraopolis, Pennsylvania 15108. Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. The information in this table is based on statements in filings with the SEC, or other reliable information available to the Company.

 

(2) Beneficial ownership of shares and percentage ownership are determined in accordance with the rules of the SEC. In calculating the number of shares beneficially owned by an individual or entity and the percentage ownership of that individual or entity, shares underlying options or warrants held by that individual or entity that are either currently exercisable or exercisable within 60 days from March 5, 2012 are deemed outstanding. For each individual and group, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of the 126,726,124 shares of common stock outstanding on March 5, 2012 plus the number of shares of common stock that such person or group had the right to acquire on or within 60 days after March 5, 2012. No shares of common stock held by a director, director nominee or officer has been pledged as security. The Company is not aware of any arrangement or pledge of common stock that could result in a change of control of the Company.

 

(3) Based solely on information contained in the Schedule 13G/A filed with the SEC on February 14, 2012, Mr. Heckmann beneficially owns 12,349,236 shares of common stock as follows: (i) Mr. Heckmann holds of record 181,500 shares of common stock, (ii) Mr. Heckmann is deemed to be the indirect owner of 29,000 shares of common stock that are held of record by Mr. Heckmann’s spouse, Wendy Hope Heckmann, (iii) Mr. Heckmann is deemed to be the indirect owner of 9,000 shares of common stock that are held of record by two of his children, each of whom resides with Mr. Heckmann, (iv) Mr. Heckmann indirectly owns 12,129,736 shares of common stock that are held of record by Heckmann Acquisition, LLC, a Delaware limited liability company, of which Heckmann Enterprises, Inc., a California corporation, is the sole member; Mr. Heckmann is sole shareholder of Heckmann Enterprises, Inc.

 

(4) Includes 500,000 shares of employee stock options, 166,666.33 shares of which vested on October 7, 2011, and 166,666.33 shares vesting on completion of each additional full year of service thereafter, until fully vested.

 

(5) Includes 100,000 shares of employee stock options, with 33,333.33 shares vesting on October 3, 2012, and 33,333.33 shares vesting on completion of each additional full year of service thereafter, until fully vested.

 

(6) Includes 110,616 shares that are held of record by the James D. Quayle 2000 Irrevocable Trust.

 

(7) Includes 25,000 shares that are held of record by the BTC Inc. Retirement Trust.

 

(8) Includes 44,000 shares that are held of record by the Andrew D. Seidel Living Trust.

 

(9) Includes 106,616 shares that are held of record by the Alfred E. Osborne Jr. and Nancy Rahnasto Osborne Trust.

 

(10) Includes 500,000 shares of employee stock options, 166,666.33 shares of which vested on October 7, 2011, and 166,666.33 shares vesting on completion of each additional full year of service thereafter, until fully vested.

 

(11) Includes 135,000 shares of employee stock options, 45,000 shares of which vested on August 13, 2010, and 45,000 shares vesting on completion of each additional full year of service thereafter, until fully vested.

 

(12) Includes 150,000 shares of employee stock options, with 50,000 shares vesting on November 15, 2012, and 50,000 shares vesting on completion of each additional full year of service thereafter, until fully vested.

 

(13) Includes 150,000 shares of employee stock options, 50,000 shares of which vested on December 3, 2011, and 50,000 shares vesting on completion of each additional full year of service thereafter, until fully vested.

 

(14) Includes (i) 1,000 shares held in trust, in which Mr. Georgino is trustee, for the benefit of his son, and (ii) 1,000 shares held in trust, in which Mr. Georgino is trustee, for the benefit of his daughter.

 

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(15) Based solely on the information contained in the Schedule 13G/A filed with the SEC on February 14, 2012 by FMR LLC, a parent holding company. FMR LLC has the sole power to vote or to direct the voting of 5,774,251 shares, and the sole power to dispose or to direct the disposition of 16,084,246 shares. Fidelity Management & Research Company (“Fidelity”), a wholly-owned subsidiary of FMR LLC and an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, is the beneficial owner of 10,309,995 shares as a result of acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940. Edward C. Johnson 3d (Chairman of FMR LLC) and FMR LLC, through its control of Fidelity, and the funds each has sole power to dispose of the 10,309,995 shares owned by the Funds. Family members of Edward C. Johnson 3d are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. Neither FMR LLC nor Edward C. Johnson 3d, has the sole power to vote or direct the voting of the shares owned directly by the Fidelity Funds, which power resides with the Funds’ Boards of Trustees. Fidelity carries out the voting of the shares under written guidelines established by the Funds’ Boards of Trustees. Strategic Advisers, Inc., 82 Devonshire Street, Boston, MA 02109, a wholly-owned subsidiary of FMR LLC and an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, provides investment advisory services to individuals. As such, FMR LLC’s beneficial ownership includes 728,399 shares beneficially owned through Strategic Advisers, Inc. Pyramis Global Advisors Trust Company (“PGATC”), 900 Salem Street, Smithfield, Rhode Island, 02917, an indirect wholly-owned subsidiary of FMR LLC and a bank as defined in Section 3(a)(6) of the Securities Exchange Act of 1934, is the beneficial owner of 5,045,852 shares as a result of its serving as investment manager of institutional accounts owning such shares. Edward C. Johnson 3d and FMR LLC, through its control of PGATC, each has sole dispositive power over 5,045,852 shares and sole power to vote or to direct the voting of 5,045,852 shares of common stock owned by the institutional accounts managed by PGATC as reported above.

 

(16) Based solely on information contained in the Schedule 13G/A filed with the SEC on February 13, 2012 by BlackRock, Inc., which indicates that various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, these shares of common stock. No one person’s interest is more than 5% of the total outstanding common shares.

 

(17) Based solely on the information contained in the Schedule 13G filed with the SEC on February 14, 2012 by Steinberg Asset Management LLC. Michael A. Steinberg may be deemed to have beneficial ownership of the securities beneficially owned by Steinberg Asset Management, LLC and Michael A. Steinberg & Company, Inc. In addition, the securities reported as beneficially owned by Michael A. Steinberg include securities held by Mr. Steinberg’s wife and children as well as securities held in trust for Mr. Steinberg’s children of which Mr. Steinberg is trustee.

 

(18) Based solely on the information contained in the Schedule 13G filed with the SEC on February 14, 2012, by S.A.C. Capital Advisors, L.P., S.A.C. Capital Advisors, Inc., S.A.C Capital Associates, LLC, CR Intrinsic Investors, LLC and Steven A. Cohen pursuant to their joint filing agreement dated February 14, 2012. S.A.C Capital Advisors LP, S.A.C Capital Advisors Inc. and Mr. Cohen beneficially own 7,849,650 shares subject to shared voting and shared dispositive power. CR Intrinsic Investors, LLC and Mr. Cohen own 300,000 shares subject to shared voting and shared dispositive power.

 

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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s officers and directors, and persons who own more than ten percent (10%) of a registered class of the Company’s equity securities, to file reports of securities ownership and changes in such ownership with the SEC. Officers, directors and greater than ten percent stockholders also are required by rules promulgated by the SEC to furnish the Company with copies of all Section 16(a) forms they file. Based solely on a review of the copies of such forms in our possession and on written representations from reporting persons, we believe that during 2011 all of our executive officers and directors filed the required reports on a timely basis under Section 16(a).

 

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STOCKHOLDER PROPOSALS FOR THE 2013 ANNUAL MEETING

Pursuant to Rule 14a-8 promulgated under the Exchange Act, proposals of stockholders intended for inclusion in the proxy statement to be furnished to all stockholders entitled to vote at our 2013 annual meeting of stockholders must be received at our principal executive offices not later than December 5, 2012, which is 120 days prior to the first anniversary of the mailing date of this proxy statement. Any proposal must comply with the requirements as to form and substance established by the SEC for such proposal to be included in our proxy statement.

Our Bylaws require that any stockholder proposal that is not submitted for inclusion in next year’s proxy statement under SEC Rule 14a-8, but is instead sought to be presented directly at the 2013 Annual Meeting, must be received at our principal executive offices not earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the first anniversary of the 2012 annual meeting. As a result, proposals, including director nominations, submitted pursuant to these provisions of our Bylaws must be received no earlier than the close of business on January 8, 2013 and no later than the close of business on February 7, 2013.

In addition, our Bylaws provide certain requirements that must be met for business to be properly brought before an annual meeting of stockholders. Pursuant to our Bylaws, only business brought before the 2013 annual meeting in accordance with the following procedures may be transacted. Business may be brought before an annual meeting of stockholders only (1) if specified in the notice of meeting by or at the direction of the Board or (2) by a stockholder who is a stockholder of record at the time of the giving of the required notice described below, who is entitled to vote at the meeting, and who complies with the following notice procedures. For business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice of such business in proper written form to our Corporate Secretary.

Our Bylaws provide that to be timely, a stockholder’s notice must be delivered to our Corporate Secretary at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting. However, if the date of the annual meeting is advanced by more than 30 days prior to or more than 60 days after the anniversary of the prior year’s annual meeting, notice by a stockholder for the current year’s annual meeting must be delivered (A) not earlier than the close of business on the 120th calendar day prior to such annual meeting nor (B) later than the close of business on the 10th calendar day following the earlier of (1) the day on which notice of the meeting was mailed or (2) the day on which we first publicly announce the date of such meeting.

To be in proper written form, our Bylaws provide that a stockholder’s notice to the Corporate Secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting (i) the name and record address of such stockholder, (ii) the class or series and number of shares of capital stock of the Company that are owned beneficially or of record by such stockholder, (iii) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) with respect to the proposal, (iv) any derivative positions with respect to shares of the Company’s capital stock held or beneficially held by or on behalf of such stockholder, the extent to which any hedging or other transaction or series of transactions has been entered into with respect to shares of the Company’s capital stock by or on behalf of such stockholder, and the extent to which any other agreement or understanding has been made, the effect or intent of which is to mitigate loss, manage risk or benefit from share price changes, or increase or decrease the voting power of such stockholder with respect to shares of the Company’s capital stock, (v) a representation that such stockholder is a holder of record entitled to vote at the annual meeting and intends to appear in person or by proxy at the annual meeting to propose such business at the annual meeting, (vi) a representation whether the stockholder intends or is part of a group which intends (A) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Company’s outstanding capital stock required to adopt the proposal and/or (B) otherwise to solicit proxies from stockholders in support of such proposal, and (vii) any other information

 

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relating to such stockholder required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the proposal pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder.

In addition, the stockholder’s notice to our Corporate Secretary with respect to any other business (other than the nomination of persons for the election of directors) must set forth (i) a brief description of the business desired to be brought before the annual meeting, (ii) the text of the proposal or business (including the text of any resolutions proposed for consideration), (iii) the reasons for conducting such business at the annual meeting, and (iv) any material interest in such business of such stockholder.

Stockholders should submit their proposals to Heckmann Corporation, 300 Cherrington Parkway, Suite 200 Coraopolis, PA 15108, Attention: Corporate Secretary.

 

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DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS

To reduce the expense of delivering duplicate proxy materials to stockholders who may have more than one account holding the Company’s common stock but sharing the same address, we have adopted a procedure approved by the SEC called “householding.” Under this procedure, certain stockholders of record who have the same address and last name, and who do not participate in electronic delivery of proxy materials, will receive only one copy of our Notice of Internet Availability of Proxy Materials and, as applicable, any additional proxy materials that are delivered until such time as one or more of these stockholders notifies us that they want to receive separate copies. This procedure reduces duplicate mailings and saves printing costs and postage fees, as well as natural resources. Stockholders who participate in householding will continue to have access to and utilize separate proxy voting instructions.

If you receive a single set of proxy materials as a result of householding, and you would like to have separate copies of our Notice of Internet Availability of Proxy Materials, annual report, or proxy statement mailed to you, please submit a request to Heckmann Corporation, 300 Cherrington Parkway, Suite 200 Coraopolis, Pennsylvania 15108, Attention: Investor Relations or contact the Company at (412) 329-7275, and we will promptly send you what you have requested without charge. However, please note that if you want to receive a paper proxy or voting instruction form or other proxy materials for purposes of this year’s Annual Meeting, you should follow the instructions included in the Notice of Internet Availability of Proxy Materials that was sent to you. You can also contact our Investor Relations department at the phone number above if you received multiple copies of the annual meeting materials and would prefer to receive a single copy in the future, or if you would like to opt out of householding for future mailings.

OTHER MATTERS

We are not aware of any matters other than those discussed in the foregoing materials contemplated for action at the Annual Meeting. The persons named in the proxies will vote in accordance with the recommendation of the Board on any other matters incidental to the conduct of, or otherwise properly brought before, the Annual Meeting. Discretionary authority for them to do so is contained in the proxy.

Any stockholder or stockholder’s representative who, because of a disability, may need special assistance or accommodation to allow him or her to participate at the Annual Meeting, may request reasonable assistance or accommodation from the Company by contacting the Company by mail at 300 Cherrington Parkway, Suite 200 Coraopolis, Pennsylvania 15108, or by phone at (760) 341-3606. To provide the Company sufficient time to arrange for reasonable assistance or accommodation, please submit all requests by April 30, 2012.

Whether you intend to attend the live webcast of the Annual Meeting or not, we urge you to return your signed proxy promptly.

By Order of the Board of Directors,

Damian C. Georgino

Executive Vice President, Corporate Development and Chief Legal Officer

 

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Appendix A

FORM OF

FIRST AMENDMENT

OF THE

HECKMANN CORPORATION 2009 EQUITY INCENTIVE PLAN

WHEREAS, Heckmann Corporation, a Delaware corporation (the “Company”) established and sponsors the Heckmann Corporation 2009 Equity Incentive Plan, effective as of May 6, 2009 (the “Plan”);

WHEREAS, 5,000,000 shares of Company common stock were originally reserved for issuance pursuant to awards granted under the Plan, as approved by the shareholders on May 6, 2009;

WHEREAS, pursuant to Section 17 of the Plan, the Compensation Committee of the Board of Directors of the Company has reserved the right to amend the Plan at any time, provided that approval of Company shareholders is required for any amendment to increase the maximum aggregate number of shares of stock that may be issued under the Plan;

WHEREAS, the Company now desires to amend the Plan, subject to shareholder approval, to increase the number of shares reserved for issuance pursuant to awards granted under the Plan by 5,000,000 shares to 10,000,000 shares;

WHEREAS, the Company now desires to further amend the Plan, subject to shareholder approval, to increase the number of shares which may be issued under the Plan pursuant to “full value awards” (which are defined by the Plan as awards settled in stock other than an option, stock appreciation right or restricted stock or other stock-based award for which the company will receive monetary consideration equal to the grant date fair market value of the shares subject to the award) by 2,000,000 shares to 4,000,000 shares; and

NOW, THEREFORE, pursuant to the power reserved by Section 17 of the Plan and subject to approval by the Company shareholders, the Plan be and hereby is amended in the following particulars:

 

  1. By substituting the following for Section 4.1 of the Plan in its entirety:

“4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.2 and Section 4.3, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be equal to ten million (10,000,000) and shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof.”

 

  2. By substituting the following for Section 5.4(a) of the Plan in its entirety:

“(a) Aggregate Limit on Full Value Awards. The maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to the exercise or settlement of Full Value Awards shall not exceed four million (4,000,000), subject to adjustment as provided in Section 4.2 and Section 4.3.”

IN WITNESS WHEREOF, this First Amendment, having been first duly authorized, approved and adopted, is hereby executed below by a duly authorized officer of the Company on this      day of May, 2012.

 

HECKMANN CORPORATION
By:  
 

 

Its:  


Table of Contents

Appendix B

HECKMANN CORPORATION 2009 EQUITY INCENTIVE PLAN

TABLE OF CONTENTS

 

      Page  

1.      Establishment, Purpose and Term of Plan

     B-4   

1.1     Establishment

     B-4   

1.2     Purpose

     B-4   

1.3     Term of Plan

     B-4   

2.      Definitions and Construction

     B-4   

2.1     Definitions

     B-4   

2.2     Construction

     B-9   

3.      Administration

     B-9   

3.1     Administration by the Committee

     B-9   

3.2     Authority of Officers

     B-9   

3.3     Administration with Respect to Insiders

     B-10   

3.4     Committee Complying with Section 162(m)

     B-10   

3.5     Powers of the Committee

     B-10   

3.6     Option or SAR Repricing

     B-10   

3.7     Indemnification

     B-11   

4.      Shares Subject to Plan

     B-11   

4.1     Maximum Number of Shares Issuable

     B-11   

4.2     Share Counting

     B-11   

4.3     Adjustments for Changes in Capital Structure

     B-11   

5.      Eligibility, Participation and Award Limitations

     B-12   

5.1     Persons Eligible for Awards

     B-12   

5.2     Participation in the Plan

     B-12   

5.3     Incentive Stock Option Limitations

     B-12   

5.4     Other Award Limits

     B-13   

6.      Stock Options

     B-13   

6.1     Exercise Price

     B-13   

6.2     Exercisability and Term of Options

     B-13   

6.3     Payment of Exercise Price

     B-13   

6.4     Effect of Termination of Service

     B-14   

6.5     Transferability of Options

     B-15   


Table of Contents
      Page  

7.      Stock Appreciation Rights

     B-15   

7.1     Types of SARs Authorized

     B-15   

7.2     Exercise Price

     B-15   

7.3     Exercisability and Term of SARs

     B-15   

7.4     Exercise of SARs

     B-15   

7.5     Deemed Exercise of SARs

     B-16   

7.6     Effect of Termination of Service

     B-16   

7.7     Transferability of SARs

     B-16   

8.      Restricted Stock Awards

     B-16   

8.1     Types of Restricted Stock Awards Authorized

     B-16   

8.2     Purchase Price

     B-16   

8.3     Purchase Period

     B-16   

8.4     Payment of Purchase Price

     B-17   

8.5     Vesting and Restrictions on Transfer

     B-17   

8.6     Voting Rights; Dividends and Distributions

     B-17   

8.7     Effect of Termination of Service

     B-17   

8.8     Nontransferability of Restricted Stock Award Rights

     B-17   

9.      Restricted Stock Unit Awards

     B-18   

9.1     Grant of Restricted Stock Unit Awards

     B-18   

9.2     Purchase Price

     B-18   

9.3     Vesting

     B-18   

9.4     Voting Rights, Dividend Equivalent Rights and Distributions

     B-18   

9.5     Effect of Termination of Service

     B-19   

9.6     Settlement of Restricted Stock Unit Awards

     B-19   

9.7     Nontransferability of Restricted Stock Unit Awards

     B-19   

10.    Performance Awards

     B-19   

10.1   Types of Performance Awards Authorized

     B-19   

10.2   Initial Value of Performance Shares and Performance Units

     B-19   

10.3   Establishment of Performance Period, Performance Goals and Performance Award Formula

     B-19   

10.4   Measurement of Performance Goals

     B-20   

10.5   Settlement of Performance Awards

     B-21   

10.6   Voting Rights; Dividend Equivalent Rights and Distributions

     B-22   

10.7   Effect of Termination of Service

     B-22   

10.8   Nontransferability of Performance Awards

     B-23   


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      Page  

11.    Cash-Based Awards and Other Stock-Based Awards

     B-23   

11.1   Grant of Cash-Based Awards

     B-23   

11.2   Grant of Other Stock-Based Awards

     B-23   

11.3   Value of Cash-Based and Other Stock-Based Awards

     B-23   

11.4   Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards

     B-23   

11.5   Voting Rights; Dividend Equivalent Rights and Distributions

     B-24   

11.6   Effect of Termination of Service

     B-24   

11.7   Nontransferability of Cash-Based Awards and Other Stock-Based Awards

     B-24   

12.    Standard Forms of Award Agreement

     B-24   

12.1   Award Agreements

     B-24   

12.2   Authority to Vary Terms

     B-24   

13.    Change in Control

     B-25   

13.1   Effect of Change in Control on Awards

     B-25   

13.2   Effect of Change in Control on Nonemployee Director Awards

     B-25   

13.3   Federal Excise Tax Under Section 4999 of the Code

     B-26   

14.    Compliance with Securities Law

     B-26   

15.    Compliance with Section 409A

     B-26   

15.1   Awards Subject to Section 409A

     B-26   

15.2   Deferral and/or Distribution Elections

     B-27   

15.3   Subsequent Elections

     B-27   

15.4   Payment of Section 409A Deferred Compensation

     B-27   

16.    Tax Withholding

     B-29   

16.1   Tax Withholding in General

     B-29   

16.2   Withholding in Shares

     B-29   

17.    Amendment, Suspension or Termination of Plan

     B-29   

18.    Miscellaneous Provisions

     B-29   

18.1   Repurchase Rights

     B-29   

18.2   Forfeiture Events

     B-29   

18.3   Provision of Information

     B-30   

18.4   Rights as Employee, Consultant or Director

     B-30   

18.5   Rights as a Stockholder

     B-30   

18.6   Delivery of Title to Shares

     B-30   

18.7   Fractional Shares

     B-30   

18.8   Retirement and Welfare Plans

     B-30   

18.9   Beneficiary Designation

     B-30   

18.10 Severability

     B-30   

18.11 No Constraint on Corporate Action

     B-31   

18.12 Unfunded Obligation

     B-31   

18.13 Choice of Law

     B-31   


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Heckmann Corporation

2009 Equity Incentive Plan

1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

1.1 Establishment. The Heckmann Corporation 2009 Equity Incentive Plan (the Plan) is hereby established effective as of May 6, 2009, the date of its approval by the stockholders of the Company (the Effective Date).

1.2 Purpose. The purpose of the Plan is to advance the interests of the Participating Company Group and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group. The Plan seeks to achieve this purpose by providing for Awards in the form of Options, Stock Appreciation Rights, Restricted Stock Purchase Rights, Restricted Stock Bonuses, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards and Other Stock-Based Awards.

1.3 Term of Plan. The Plan shall continue in effect until its termination by the Committee; provided, however, that all Awards shall be granted, if at all, within ten (10) years from the Effective Date.

2. DEFINITIONS AND CONSTRUCTION.

2.1 Definitions. Whenever used herein, the following terms shall have their respective meanings set forth below:

(a) Affiliate means (i) an entity, other than a Parent Corporation, that directly, or indirectly through one or more intermediary entities, controls the Company or (ii) an entity, other than a Subsidiary Corporation, that is controlled by the Company directly or indirectly through one or more intermediary entities. For this purpose, the term “control” (including the term “controlled by”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of the relevant entity, whether through the ownership of voting securities, by contract or otherwise; or shall have such other meaning assigned such term for the purposes of registration on Form S-8 under the Securities Act.

(b) Award means any Option, Stock Appreciation Right, Restricted Stock Purchase Right, Restricted Stock Bonus, Restricted Stock Unit, Performance Share, Performance Unit, Cash-Based Award or Other Stock-Based Award granted under the Plan.

(c) Award Agreement means a written or electronic agreement between the Company and a Participant setting forth the terms, conditions and restrictions of the Award granted to the Participant.

(d) Board means the Board of Directors of the Company.

(e) Cash-Based Award means an Award denominated in cash and granted pursuant to Section 11.

(f) Cause means, unless such term or an equivalent term is otherwise defined with respect to an Award by the Participant’s Award Agreement or by a written contract of employment or service, any of the following: (i) the Participant’s theft, dishonesty, willful misconduct, breach of fiduciary duty for personal profit, or falsification of any Participating Company documents or records; (ii) the Participant’s material failure to abide by a Participating Company’s code of conduct or other policies (including, without limitation, policies relating to confidentiality and reasonable workplace conduct); (iii) the Participant’s unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or corporate opportunity of a Participating Company (including, without limitation, the Participant’s improper use or disclosure of a Participating Company’s confidential or proprietary information); (iv) any intentional act by the Participant which has a material detrimental effect on a Participating Company’s reputation or business; (v) the Participant’s repeated failure or inability to perform any reasonable assigned duties after written notice from a Participating Company of, and a reasonable opportunity to cure, such failure or inability;


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(vi) any material breach by the Participant of any employment, service, non-disclosure, non-competition, non-solicitation or other similar agreement between the Participant and a Participating Company, which breach is not cured pursuant to the terms of such agreement; or (vii) the Participant’s conviction (including any plea of guilty or nolo contendere) of any criminal act involving fraud, dishonesty, misappropriation or moral turpitude, or which impairs the Participant’s ability to perform his or her duties with a Participating Company.

(g) Change in Control means, unless such term or an equivalent term is otherwise defined with respect to an Award by the Participant’s Award Agreement or by a written contract of employment or service, the occurrence of any of the following:

(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total Fair Market Value or total combined voting power of the Company’s then-outstanding securities entitled to vote generally in the election of Directors; provided, however, that a Change in Control shall not be deemed to have occurred if such degree of beneficial ownership results from any of the following: (A) an acquisition by any person who on the Effective Date is the beneficial owner of more than fifty percent (50%) of such voting power, (B) any acquisition directly from the Company, including, without limitation, pursuant to or in connection with a public offering of securities, (C) any acquisition by the Company, (D) any acquisition by a trustee or other fiduciary under an employee benefit plan of a Participating Company or (E) any acquisition by an entity owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the voting securities of the Company; or

(ii) an Ownership Change Event or series of related Ownership Change Events (collectively, a Transaction) in which the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding securities entitled to vote generally in the election of Directors or, in the case of an Ownership Change Event described in Section 2.1(dd)(iii), the entity to which the assets of the Company were transferred (the Transferee), as the case may be; or

(iii) a liquidation or dissolution of the Company;

provided, however, that a Change in Control shall be deemed not to include a transaction described in subsections (i) or (ii) of this Section 2.1(g) in which a majority of the members of the board of directors of the continuing, surviving or successor entity, or parent thereof, immediately after such transaction is comprised of Incumbent Directors. For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary corporations or other business entities. The Committee shall determine whether multiple sales or exchanges of the voting securities of the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive.

(h) Code means the Internal Revenue Code of 1986, as amended, and any applicable regulations or administrative guidelines promulgated thereunder.

(i) Committee means the Compensation Committee and such other committee or subcommittee of the Board, if any, duly appointed to administer the Plan and having such powers in each instance as shall be specified by the Board. If, at any time, there is no committee of the Board then authorized or properly constituted to administer the Plan, the Board shall exercise all of the powers of the Committee granted herein, and, in any event, the Board may in its discretion exercise any or all of such powers.

(j) Company means Heckmann Corporation, a Delaware corporation, or any successor corporation thereto.


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(k) Consultant means a person engaged to provide consulting or advisory services (other than as an Employee or a member of the Board) to a Participating Company, provided that the identity of such person, the nature of such services or the entity to which such services are provided would not preclude the Company from offering or selling securities to such person pursuant to the Plan in reliance on registration on Form S-8 under the Securities Act.

(l) “Covered Employee means, at any time the Plan is subject to Section 162(m), any Employee who is or may reasonably be expected to become a “covered employee” as defined in Section 162(m), or any successor statute, and who is designated, either as an individual Employee or a member of a class of Employees, by the Committee no later than the earlier of (i) the date that is ninety (90) days after the beginning of the Performance Period, or (ii) the date on which twenty-five percent (25%) of the Performance Period has elapsed, as a “Covered Employee” under this Plan for such applicable Performance Period.

(m) Director means a member of the Board.

(n) Disability means the permanent and total disability of the Participant, within the meaning of Section 22(e)(3) of the Code.

(o) Dividend Equivalent Right means the right of a Participant, granted at the discretion of the Committee or as otherwise provided by the Plan, to receive a credit for the account of such Participant in an amount equal to the cash dividends paid on one share of Stock for each share of Stock represented by an Award held by such Participant.

(p) Employee means any person treated as an employee (including an Officer or a member of the Board who is also treated as an employee) in the records of a Participating Company and, with respect to any Incentive Stock Option granted to such person, who is an employee for purposes of Section 422 of the Code; provided, however, that neither service as a member of the Board nor payment of a director’s fee shall be sufficient to constitute employment for purposes of the Plan. The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such individual’s employment or termination of employment, as the case may be. For purposes of an individual’s rights, if any, under the terms of the Plan as of the time of the Company’s determination of whether or not the individual is an Employee, all such determinations by the Company shall be final, binding and conclusive as to such rights, if any, notwithstanding that the Company or any court of law or governmental agency subsequently makes a contrary determination as to such individual’s status as an Employee.

(q) Exchange Act means the Securities Exchange Act of 1934, as amended.

(r) Fair Market Value means, as of any date, the value of a share of Stock or other property as determined by the Committee, in its discretion, or by the Company, in its discretion, if such determination is expressly allocated to the Company herein, subject to the following:

(i) Except as otherwise determined by the Committee, if, on such date, the Stock is listed or quoted on a national or regional securities exchange or quotation system, the Fair Market Value of a share of Stock shall be the closing price of a share of Stock as quoted on the national or regional securities exchange or quotation system constituting the primary market for the Stock, as reported in The Wall Street Journal or such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or quotation system, the date on which the Fair Market Value shall be established shall be the last day on which the Stock was so traded or quoted prior to the relevant date, or such other appropriate day as shall be determined by the Committee, in its discretion.

(ii) Notwithstanding the foregoing, the Committee may, in its discretion, determine the Fair Market Value on the basis of the opening, closing, or average of the high and low sale prices of a share of Stock on such date or the preceding trading day, the actual sale price of a share of Stock received by a Participant, any other reasonable basis using actual transactions in the Stock as reported on a national or regional securities exchange or quotation system, or on any other basis consistent with the


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requirements of Section 409A. The Committee may vary its method of determination of the Fair Market Value as provided in this Section for different purposes under the Plan to the extent consistent with the requirements of Section 409A.

(iii) If, on such date, the Stock is not listed or quoted on a national or regional securities exchange or quotation system, the Fair Market Value of a share of Stock shall be as determined by the Committee in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse, and in a manner consistent with the requirements of Section 409A.

(s) Full Value Award means any Award settled in Stock, other than (i) an Option, (ii) a Stock Appreciation Right, or (iii) a Restricted Stock Purchase Right or an Other Stock-Based Award under which the Company will receive monetary consideration equal to the Fair Market Value (determined on the effective date of grant) of the shares subject to such Award.

(t) Incentive Stock Option means an Option intended to be (as set forth in the Award Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of the Code.

(u) Incumbent Director means a director who either (i) is a member of the Board as of the Effective Date, or (ii) is elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination, but who was not elected or nominated in connection with an actual or threatened proxy contest relating to the election of directors of the Company.

(v) Insider means an Officer, Director or any other person whose transactions in Stock are subject to Section 16 of the Exchange Act.

(w) Net-Exercise means a procedure by which the Participant will be issued a number of shares of Stock upon the exercise of an Option determined in accordance with the following formula:

N = X*((A-B)/A), where

“N” = the number of shares of Stock to be issued to the Participant upon exercise of the Option (rounded down to the nearest whole number);

“X” = the total number of shares with respect to which the Participant has elected to exercise the Option;

“A” = the Fair Market Value of one (1) share of Stock determined on the exercise date; and

“B” = the exercise price per share (as defined in the Participant’s Award Agreement)

(x) Nonemployee Director means a Director who is not an Employee.

(y) Nonemployee Director Award means an Award granted to a Nonemployee Director.

(z) Nonstatutory Stock Option means an Option not intended to be (as set forth in the Award Agreement) an incentive stock option within the meaning of Section 422(b) of the Code.

(aa) Officer means any person designated by the Board as an officer of the Company.

(bb) Option means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to the Plan.

(cc) Other Stock-Based Award means an Award denominated in shares of Stock and granted pursuant to Section 11.

(dd) Ownership Change Event means the occurrence of any of the following with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company).


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(ee) Parent Corporation means any present or future “parent corporation” of the Company, as defined in Section 424(e) of the Code.

(ff) Participant means any eligible person who has been granted one or more Awards.

(gg) Participating Company means the Company or any Parent Corporation, Subsidiary Corporation or Affiliate.

(hh) Participating Company Group means, at any point in time, the Company and all other entities collectively which are then Participating Companies.

(ii) Performance Award means an Award of Performance Shares or Performance Units.

(jj) Performance Award Formula means, for any Performance Award, a formula or table established by the Committee pursuant to Section 10.3 which provides the basis for computing the value of a Performance Award at one or more threshold levels of attainment of the applicable Performance Goal(s) measured as of the end of the applicable Performance Period.

(kk) “Performance-Based Compensation” means compensation under an Award that satisfies the requirements of Section 162(m) for certain performance-based compensation paid to Covered Employees.

(ll) Performance Goal means a performance goal established by the Committee pursuant to Section 10.3.

(mm) Performance Period means a period established by the Committee pursuant to Section 10.3 at the end of which one or more Performance Goals are to be measured.

(nn) Performance Share means a right granted to a Participant pursuant to Section 10 to receive a payment equal to the value of a Performance Share, as determined by the Committee, based on performance.

(oo) Performance Unit means a right granted to a Participant pursuant to Section 10 to receive a payment equal to the value of a Performance Unit, as determined by the Committee, based upon performance.

(pp) Restricted Stock Award means an Award of a Restricted Stock Bonus or a Restricted Stock Purchase Right.

(qq) Restricted Stock Bonus means Stock granted to a Participant pursuant to Section 8.

(rr) Restricted Stock Purchase Right means a right to purchase Stock granted to a Participant pursuant to Section 8.

(ss) Restricted Stock Unit means a right granted to a Participant pursuant to Section 9 to receive a share of Stock on a date determined in accordance with the provisions of such Sections, as applicable, and the Participant’s Award Agreement.

(tt) Rule 16b-3 means Rule 16b-3 under the Exchange Act, as amended from time to time, or any successor rule or regulation.

(uu) SAR or Stock Appreciation Right means a right granted to a Participant pursuant to Section 7 to receive payment, for each share of Stock subject to such Award, of an amount equal to the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the Award over the exercise price.

(vv) Section 162(m) means Section 162(m) of the Code.

(ww) Section 409A means Section 409A of the Code.

(xx) Section 409A Deferred Compensation means compensation provided pursuant to an Award that constitutes deferred compensation subject to and not exempted from the requirements of Section 409A.

(yy) Securities Act means the Securities Act of 1933, as amended.

(zz) Service means a Participant’s employment or service with the Participating Company Group, whether in the capacity of an Employee, a Director or a Consultant. Unless otherwise provided by the


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Committee, a Participant’s Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders such Service or a change in the Participating Company for which the Participant renders such Service, provided that there is no interruption or termination of the Participant’s Service. Furthermore, a Participant’s Service shall not be deemed to have terminated if the Participant takes any military leave, sick leave, or other bona fide leave of absence approved by the Company. However, unless otherwise provided by the Committee, if any such leave taken by a Participant exceeds ninety (90) days, then on the ninety-first (91st) day following the commencement of such leave the Participant’s Service shall be deemed to have terminated, unless the Participant’s right to return to Service is guaranteed by statute or contract. Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, an unpaid leave of absence shall not be treated as Service for purposes of determining vesting under the Participant’s Award Agreement. A Participant’s Service shall be deemed to have terminated either upon an actual termination of Service or upon the business entity for which the Participant performs Service ceasing to be a Participating Company. Subject to the foregoing, the Company, in its discretion, shall determine whether the Participant’s Service has terminated and the effective date of such termination.

(aaa) Stock means the common stock of the Company, as adjusted from time to time in accordance with Section 4.3.

(bbb) Subsidiary Corporation means any present or future “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code.

(ccc) Ten Percent Owner means a Participant who, at the time an Option is granted to the Participant, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of a Participating Company (other than an Affiliate) within the meaning of Section 422(b)(6) of the Code.

(ddd) Trading Compliance Policy means the written policy of the Company pertaining to the purchase, sale, transfer or other disposition of the Company’s equity securities by Directors, Officers, Employees or other service providers who may possess material, nonpublic information regarding the Company or its securities.

(eee) Vesting Conditions mean those conditions established in accordance with the Plan prior to the satisfaction of which shares subject to an Award remain subject to forfeiture or a repurchase option in favor of the Company exercisable for the Participant’s monetary purchase price, if any, for such shares upon the Participant’s termination of Service.

2.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

3. ADMINISTRATION.

3.1 Administration by the Committee. The Plan shall be administered by the Committee. All questions of interpretation of the Plan, of any Award Agreement or of any other form of agreement or other document employed by the Company in the administration of the Plan or of any Award shall be determined by the Committee, and such determinations shall be final, binding and conclusive upon all persons having an interest in the Plan or such Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or Award Agreement or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest therein. All expenses incurred in connection in the administration of the Plan shall be paid by the Company.

3.2 Authority of Officers. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election which is the responsibility of or which is allocated to the Company herein, provided the Officer has apparent authority with respect to such matter, right, obligation, determination or election.


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3.3 Administration with Respect to Insiders. With respect to participation by Insiders in the Plan, at any time that any class of equity security of the Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements, if any, of Rule 16b-3.

3.4 Committee Complying with Section 162(m). If the Company is a “publicly held corporation” within the meaning of Section 162(m), the Board may establish a Committee of “outside directors” within the meaning of Section 162(m) to approve the grant of any Award intended to result in the payment of Performance-Based Compensation.

3.5 Powers of the Committee. In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Committee shall have the full and final power and authority, in its discretion:

(a) to determine the persons to whom, and the time or times at which, Awards shall be granted and the number of shares of Stock, units or monetary value to be subject to each Award;

(b) to determine the type of Award granted;

(c) to determine the Fair Market Value of shares of Stock or other property;

(d) to determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and any shares acquired pursuant thereto, including, without limitation, (i) the exercise or purchase price of shares pursuant to any Award, (ii) the method of payment for shares purchased pursuant to any Award, (iii) the method for satisfaction of any tax withholding obligation arising in connection with any Award, including by the withholding or delivery of shares of Stock, (iv) the timing, terms and conditions of the exercisability or vesting of any Award or any shares acquired pursuant thereto, (v) the Performance Measures, Performance Period, Performance Award Formula and Performance Goals applicable to any Award and the extent to which such Performance Goals have been attained, (vi) the time of the expiration of any Award, (vii) the effect of the Participant’s termination of Service on any of the foregoing, and (viii) all other terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto not inconsistent with the terms of the Plan;

(e) to determine whether an Award will be settled in shares of Stock, cash, or in any combination thereof;

(f) to approve one or more forms of Award Agreement;

(g) to amend, modify, extend, cancel or renew any Award or to waive any restrictions or conditions applicable to any Award or any shares acquired pursuant thereto;

(h) to accelerate, continue, extend or defer the exercisability or vesting of any Award or any shares acquired pursuant thereto, including with respect to the period following a Participant’s termination of Service;

(i) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt sub-plans or supplements to, or alternative versions of, the Plan, including, without limitation, as the Committee deems necessary or desirable to comply with the laws or regulations of or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose citizens may be granted Awards; and

(j) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement and to make all other determinations and take such other actions with respect to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with the provisions of the Plan or applicable law.

3.6 Option or SAR Repricing. Without the affirmative vote of holders of a majority of the shares of Stock cast in person or by proxy at a meeting of the stockholders of the Company at which a quorum representing a majority of all outstanding shares of Stock is present or represented by proxy, the Board shall not approve a program providing for either (a) the cancellation of outstanding Options or SARs having exercise prices per share greater than the then Fair Market Value of a share of Stock (Underwater Awards) and the grant in substitution


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therefore of new Options or SARs having a lower exercise price, Full Value Awards or payments in cash, or (b) the amendment of outstanding Underwater Awards to reduce the exercise price thereof. This Section shall not be construed to apply to “issuing or assuming a stock option in a transaction to which Section 424(a) applies,” within the meaning of Section 424 of the Code or to an adjustment pursuant to Section 4.3.

3.7 Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or the Committee or as officers or employees of the Participating Company Group, members of the Board or the Committee and any officers or employees of the Participating Company Group to whom authority to act for the Board, the Committee or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same.

4. SHARES SUBJECT TO PLAN.

4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Sections 4.2 and 4.3, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be equal to five million (5,000,000) and shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof.

4.2 Share Counting. If an outstanding Award for any reason expires or is terminated or canceled without having been exercised or settled in full, or if shares of Stock acquired pursuant to an Award subject to forfeiture or repurchase are forfeited or repurchased by the Company for an amount not greater than the Participant’s purchase price, the shares of Stock allocable to the terminated portion of such Award or such forfeited or repurchased shares of Stock shall again be available for issuance under the Plan. Shares of Stock shall not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash. Upon payment in shares of Stock pursuant to the exercise of an SAR, the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the SAR is exercised. If the exercise price of an Option is paid by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Participant, or by means of a Net-Exercise, the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the Option is exercised. Shares withheld or reacquired by the Company in satisfaction of tax withholding obligations pursuant to Section 16.2 shall not again be available for issuance under the Plan.

4.3 Adjustments for Changes in Capital Structure. Subject to any required action by the stockholders of the Company and the requirements of Sections 409A and 424 of the Code to the extent applicable, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting normal cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number and kind of shares subject to the Plan and to any outstanding Awards, in the Award limits set forth in Section 5.3 and in the exercise or purchase price per share under any outstanding Award in order to prevent dilution or enlargement of Participants’ rights under the Plan. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.” If a majority of the shares which are of the same class as the shares that are subject to outstanding Awards are


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exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the New Shares), the Committee may unilaterally amend the outstanding Awards to provide that such Awards are for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise or purchase price per share of, the outstanding Awards shall be adjusted in a fair and equitable manner as determined by the Committee, in its discretion. Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number, and in no event may the exercise or purchase price under any Award be decreased to an amount less than the par value, if any, of the stock subject to such Award. The Committee in its discretion, may also make such adjustments in the terms of any Award to reflect, or related to, such changes in the capital structure of the Company or distributions as it deems appropriate, including modification of Performance Goals, Performance Award Formulas and Performance Periods. The adjustments determined by the Committee pursuant to this Section shall be final, binding and conclusive.

The Committee may, without affecting the number of shares of Stock reserved or available hereunder, authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate, subject to compliance with Section 409A and any other applicable provisions of the Code.

5. ELIGIBILITY, PARTICIPATION AND AWARD LIMITATIONS.

5.1 Persons Eligible for Awards. Awards may be granted only to Employees, Consultants and Directors.

5.2 Participation in the Plan. Awards are granted solely at the discretion of the Committee. Eligible persons may be granted more than one Award. However, eligibility in accordance with this Section shall not entitle any person to be granted an Award, or, having been granted an Award, to be granted an additional Award.

5.3 Incentive Stock Option Limitations.

(a) Maximum Number of Shares Issuable Pursuant to Incentive Stock Options. Subject to adjustment as provided in Sections 4.2 and 4.3, the maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to the exercise of Incentive Stock Options shall not exceed five million (5,000,000). The maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to all Awards other than Incentive Stock Options shall be the number of shares determined in accordance with Section 4.1, subject to adjustment as provided in Sections 4.2 and 4.3.

(b) Persons Eligible. An Incentive Stock Option may be granted only to a person who, on the effective date of grant, is an Employee of the Company, a Parent Corporation or a Subsidiary Corporation (each being an ISO-Qualifying Corporation). Any person who is not an Employee of an ISO-Qualifying Corporation on the effective date of the grant of an Option to such person may be granted only a Nonstatutory Stock Option.

(c) Fair Market Value Limitation. To the extent that options designated as Incentive Stock Options (granted under all stock option plans of the Participating Company Group, including the Plan) become exercisable by a Participant for the first time during any calendar year for stock having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount shall be treated as Nonstatutory Stock Options. For purposes of this Section, options designated as Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of stock shall be determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for a limitation different from that set forth in this Section, such different limitation shall be deemed incorporated herein effective as of the date and with respect to such Options as required or permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section, the Participant may designate which portion of such Option the Participant is exercising. In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Upon exercise, shares issued pursuant to each such portion shall be separately identified.


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5.4 Other Award Limits.

(a) Aggregate Limit on Full Value Awards. The maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to the exercise or settlement of Full Value Awards shall not exceed two million (2,000,000), subject to adjustment as provided in Sections 4.2 and 4.3.

(b) Section 162(m) Award Limits. Subject to adjustment as provided in Section 4.3, no Employee shall be granted within any fiscal year of the Company one or more Awards which in the aggregate are for more than five hundred thousand (500,000) shares or, if applicable, which could result in such Employee receiving more than Two Million Five Hundred Thousand dollars ($2,500,000) for each full fiscal year of the Company contained in the Performance Period for such Award.

6. STOCK OPTIONS.

Options shall be evidenced by Award Agreements specifying the number of shares of Stock covered thereby, in such form as the Committee shall from time to time establish. Award Agreements evidencing Options may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

6.1 Exercise Price. The exercise price for each Option shall be established in the discretion of the Committee; provided, however, that (a) the exercise price per share shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the Option and (b) no Incentive Stock Option granted to a Ten Percent Owner shall have an exercise price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise price lower than the minimum exercise price set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner qualifying under the provisions of Section 424(a) of the Code.

6.2 Exercisability and Term of Options. Options shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such Option; provided, however, that (a) no Option shall be exercisable after the expiration of ten (10) years after the effective date of grant of such Option and (b) no Incentive Stock Option granted to a Ten Percent Owner shall be exercisable after the expiration of five (5) years after the effective date of grant of such Option. Subject to the foregoing, unless otherwise specified by the Committee in the grant of an Option, each Option shall terminate ten (10) years after the effective date of grant of the Option, unless earlier terminated in accordance with its provisions.

6.3 Payment of Exercise Price.

(a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option shall be made (i) in cash, by check or in cash equivalent, (ii) by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Participant having a Fair Market Value not less than the exercise price, (iii) by delivery of a properly executed notice of exercise together with irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System) (a Cashless Exercise), (iv) by delivery of a properly executed notice electing a Net-Exercise, (v) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (vi) by any combination thereof. The Committee may at any time or from time to time grant Options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of consideration.


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(b) Limitations on Forms of Consideration.

(i) Tender of Stock. Notwithstanding the foregoing, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or attestation would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock. Unless otherwise provided by the Committee, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Participant for such period of time, if any, as the Company may require (and not used for another Option exercise by attestation during such period) or were not acquired, directly or indirectly, from the Company.

(ii) Cashless Exercise. The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options by means of a Cashless Exercise, including with respect to one or more Participants specified by the Company notwithstanding that such program or procedures may be available to other Participants.

6.4 Effect of Termination of Service.

(a) Option Exercisability. Subject to earlier termination of the Option as otherwise provided herein and unless otherwise provided by the Committee, an Option shall terminate immediately upon the Participant’s termination of Service to the extent that it is then unvested and shall be exercisable after the Participant’s termination of Service to the extent it is then vested only during the applicable time period determined in accordance with this Section and thereafter shall terminate.

(i) Disability. If the Participant’s Service terminates because of the Disability of the Participant, the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participant’s Service terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any event no later than the date of expiration of the Option’s term as set forth in the Award Agreement evidencing such Option (the Option Expiration Date).

(ii) Death. If the Participant’s Service terminates because of the death of the Participant, the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participant’s Service terminated, may be exercised by the Participant’s legal representative or other person who acquired the right to exercise the Option by reason of the Participant’s death at any time prior to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date. The Participant’s Service shall be deemed to have terminated on account of death if the Participant dies within three (3) months after the Participant’s termination of Service.

(iii) Termination for Cause. Notwithstanding any other provision of the Plan to the contrary, if the Participant’s Service is terminated for Cause or if, following the Participant’s termination of Service and during any period in which the Option otherwise would remain exercisable, the Participant engages in any act that would constitute Cause, the Option shall terminate in its entirety and cease to be exercisable immediately upon such termination of Service or act.

(iv) Other Termination of Service. If the Participant’s Service terminates for any reason, except Disability, death or Cause, the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participant’s Service terminated, may be exercised by the Participant at any time prior to the expiration of three (3) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.

(b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, other than termination of Service for Cause, if the exercise of an Option within the applicable time periods set forth in Section 6.4(a) is prevented by the provisions of Section 14 below, the Option shall remain exercisable until the later of (i) thirty (30) days after the date such exercise first would no longer be prevented by such provisions or (ii) the end of the applicable time period under Section 6.4(a), but in any event no later than the Option Expiration Date.


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6.5 Transferability of Options. During the lifetime of the Participant, an Option shall be exercisable only by the Participant or the Participant’s guardian or legal representative. An Option shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Option, an Option shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S-8 under the Securities Act or, in the case of an Incentive Stock Option, only as permitted by applicable regulations under Section 421 of the Code in a manner that does not disqualify such Option as an Incentive Stock Option.

7. STOCK APPRECIATION RIGHTS.

Stock Appreciation Rights shall be evidenced by Award Agreements specifying the number of shares of Stock subject to the Award, in such form as the Committee shall from time to time establish. Award Agreements evidencing SARs may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

7.1 Types of SARs Authorized. SARs may be granted in tandem with all or any portion of a related Option (a “Tandem SAR”) or may be granted independently of any Option (a “Freestanding SAR”). A Tandem SAR may only be granted concurrently with the grant of the related Option.

7.2 Exercise Price. The exercise price for each SAR shall be established in the discretion of the Committee; provided, however, that (a) the exercise price per share subject to a Tandem SAR shall be the exercise price per share under the related Option and (b) the exercise price per share subject to a Freestanding SAR shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the SAR.

7.3 Exercisability and Term of SARs.

(a) Tandem SARs. Tandem SARs shall be exercisable only at the time and to the extent, and only to the extent, that the related Option is exercisable, subject to such provisions as the Committee may specify where the Tandem SAR is granted with respect to less than the full number of shares of Stock subject to the related Option. The Committee may, in its discretion, provide in any Award Agreement evidencing a Tandem SAR that such SAR may not be exercised without the advance approval of the Company and, if such approval is not given, then the Option shall nevertheless remain exercisable in accordance with its terms. A Tandem SAR shall terminate and cease to be exercisable no later than the date on which the related Option expires or is terminated or canceled. Upon the exercise of a Tandem SAR with respect to some or all of the shares subject to such SAR, the related Option shall be canceled automatically as to the number of shares with respect to which the Tandem SAR was exercised. Upon the exercise of an Option related to a Tandem SAR as to some or all of the shares subject to such Option, the related Tandem SAR shall be canceled automatically as to the number of shares with respect to which the related Option was exercised.

(b) Freestanding SARs. Freestanding SARs shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such SAR; provided, however, that no Freestanding SAR shall be exercisable after the expiration of ten (10) years after the effective date of grant of such SAR.

7.4 Exercise of SARs. Upon the exercise (or deemed exercise pursuant to Section 7.5) of an SAR, the Participant (or the Participant’s legal representative or other person who acquired the right to exercise the SAR by reason of the Participant’s death) shall be entitled to receive payment of an amount for each share with respect to which the SAR is exercised equal to the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR over the exercise price. Payment of such amount shall be made (a) in the case of a Tandem SAR, solely in shares of Stock in a lump sum upon the date of exercise of the SAR and (b) in the case of a Freestanding SAR, in cash, shares of Stock, or any combination thereof as determined by the Committee, in a lump sum upon the date of exercise of the SAR. When payment is to be made in shares of Stock, the number of


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shares to be issued shall be determined on the basis of the Fair Market Value of a share of Stock on the date of exercise of the SAR. For purposes of Section 7, an SAR shall be deemed exercised on the date on which the Company receives notice of exercise from the Participant or as otherwise provided in Section 7.5.

7.5 Deemed Exercise of SARs. If, on the date on which an SAR would otherwise terminate or expire, the SAR by its terms remains exercisable immediately prior to such termination or expiration and, if so exercised, would result in a payment to the holder of such SAR, then any portion of such SAR which has not previously been exercised shall automatically be deemed to be exercised as of such date with respect to such portion.

7.6 Effect of Termination of Service. Subject to earlier termination of the SAR as otherwise provided herein and unless otherwise provided by the Committee, an SAR shall be exercisable after a Participant’s termination of Service only to the extent and during the applicable time period determined in accordance with Section 6.4 (treating the SAR as if it were an Option) and thereafter shall terminate.

7.7 Transferability of SARs. During the lifetime of the Participant, an SAR shall be exercisable only by the Participant or the Participant’s guardian or legal representative. An SAR shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Award, a Tandem SAR related to a Nonstatutory Stock Option or a Freestanding SAR shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form  S-8 under the Securities Act.

8. RESTRICTED STOCK AWARDS.

Restricted Stock Awards shall be evidenced by Award Agreements specifying whether the Award is a Restricted Stock Bonus or a Restricted Stock Purchase Right and the number of shares of Stock subject to the Award, in such form as the Committee shall from time to time establish. Award Agreements evidencing Restricted Stock Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

8.1 Types of Restricted Stock Awards Authorized. Restricted Stock Awards may be granted in the form of either a Restricted Stock Bonus or a Restricted Stock Purchase Right. Restricted Stock Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 10.4. If either the grant of or satisfaction of Vesting Conditions applicable to a Restricted Stock Award is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 10.3 through 10.5(a).

8.2 Purchase Price. The purchase price for shares of Stock issuable under each Restricted Stock Purchase Right shall be established by the Committee in its discretion. No monetary payment (other than applicable tax withholding) shall be required as a condition of receiving shares of Stock pursuant to a Restricted Stock Bonus, the consideration for which shall be services actually rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable state corporate law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock subject to a Restricted Stock Award.

8.3 Purchase Period. A Restricted Stock Purchase Right shall be exercisable within a period established by the Committee, which shall in no event exceed thirty (30) days from the effective date of the grant of the Restricted Stock Purchase Right.


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8.4 Payment of Purchase Price. Except as otherwise provided below, payment of the purchase price for the number of shares of Stock being purchased pursuant to any Restricted Stock Purchase Right shall be made (a) in cash, by check or in cash equivalent, (b) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (c) by any combination thereof.

8.5 Vesting and Restrictions on Transfer. Shares issued pursuant to any Restricted Stock Award may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. During any period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, such shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of other than pursuant to an Ownership Change Event or as provided in Section 8.8. The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Award that, if the satisfaction of Vesting Conditions with respect to any shares subject to such Restricted Stock Award would otherwise occur on a day on which the sale of such shares would violate the provisions of the Trading Compliance Policy, then satisfaction of the Vesting Conditions automatically shall be determined on the next trading day on which the sale of such shares would not violate the Trading Compliance Policy. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.

8.6 Voting Rights; Dividends and Distributions. Except as provided in this Section, Section 8.5 and any Award Agreement, during any period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, the Participant shall have all of the rights of a stockholder of the Company holding shares of Stock, including the right to vote such shares and to receive all dividends and other distributions paid with respect to such shares; provided, however, that if so determined by the Committee and provided by the Award Agreement, such dividends and distributions shall be subject to the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which such dividends or distributions were paid. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.3, any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant is entitled by reason of the Participant’s Restricted Stock Award shall be immediately subject to the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which such dividends or distributions were paid or adjustments were made.

8.7 Effect of Termination of Service. Unless otherwise provided by the Committee in the Award Agreement evidencing a Restricted Stock Award, if a Participant’s Service terminates for any reason, whether voluntary or involuntary (including the Participant’s death or disability), then (a) the Company shall have the option to repurchase for the purchase price paid by the Participant any shares acquired by the Participant pursuant to a Restricted Stock Purchase Right which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service and (b) the Participant shall forfeit to the Company any shares acquired by the Participant pursuant to a Restricted Stock Bonus which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company.

8.8 Nontransferability of Restricted Stock Award Rights. Rights to acquire shares of Stock pursuant to a Restricted Stock Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or the laws of descent and distribution. All rights with respect to a Restricted Stock Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.


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9. RESTRICTED STOCK UNIT AWARDS.

Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying the number of Restricted Stock Units subject to the Award, in such form as the Committee shall from time to time establish. Award Agreements evidencing Restricted Stock Units may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

9.1 Grant of Restricted Stock Unit Awards. Restricted Stock Unit Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 10.4. If either the grant of a Restricted Stock Unit Award or the Vesting Conditions with respect to such Award is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 10.3 through 10.5(a).

9.2 Purchase Price. No monetary payment (other than applicable tax withholding, if any) shall be required as a condition of receiving a Restricted Stock Unit Award, the consideration for which shall be services actually rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable state corporate law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock issued upon settlement of the Restricted Stock Unit Award.

9.3 Vesting. Restricted Stock Unit Awards may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Unit Award that, if the satisfaction of Vesting Conditions with respect to any shares subject to the Award would otherwise occur on a day on which the sale of such shares would violate the provisions of the Trading Compliance Policy, then the satisfaction of the Vesting Conditions automatically shall be determined on the first to occur of (a) the next trading day on which the sale of such shares would not violate the Trading Compliance Policy or (b) the later of (i) last day of the calendar year in which the original vesting date occurred or (ii) the last day of the Company’s taxable year in which the original vesting date occurred.

9.4 Voting Rights, Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to shares of Stock represented by Restricted Stock Units until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Restricted Stock Unit Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date such Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated. Such Dividend Equivalent Rights, if any, shall be paid by crediting the Participant with additional whole Restricted Stock Units as of the date of payment of such cash dividends on Stock. The number of additional Restricted Stock Units (rounded to the nearest whole number) to be so credited shall be determined by dividing (a) the amount of cash dividends paid on such date with respect to the number of shares of Stock represented by the Restricted Stock Units previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date. Such additional Restricted Stock Units shall be subject to the same terms and conditions and shall be settled in the same manner and at the same time as the Restricted Stock Units originally subject to the Restricted Stock Unit Award. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.3, appropriate adjustments shall be made in the Participant’s Restricted Stock Unit Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of the Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Vesting Conditions as are applicable to the Award.


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9.5 Effect of Termination of Service. Unless otherwise provided by the Committee and set forth in the Award Agreement evidencing a Restricted Stock Unit Award, if a Participant’s Service terminates for any reason, whether voluntary or involuntary (including the Participant’s death or disability), then the Participant shall forfeit to the Company any Restricted Stock Units pursuant to the Award which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service.

9.6 Settlement of Restricted Stock Unit Awards. The Company shall issue to a Participant on the date on which Restricted Stock Units subject to the Participant’s Restricted Stock Unit Award vest or on such other date determined by the Committee, in its discretion, and set forth in the Award Agreement one (1) share of Stock (and/or any other new, substituted or additional securities or other property pursuant to an adjustment described in Section 9.4) for each Restricted Stock Unit then becoming vested or otherwise to be settled on such date, subject to the withholding of applicable taxes, if any. If permitted by the Committee, the Participant may elect, consistent with the requirements of Section 409A, to defer receipt of all or any portion of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section, and such deferred issuance date(s) and amount(s) elected by the Participant shall be set forth in the Award Agreement. Notwithstanding the foregoing, the Committee, in its discretion, may provide for settlement of any Restricted Stock Unit Award by payment to the Participant in cash of an amount equal to the Fair Market Value on the payment date of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section.

9.7 Nontransferability of Restricted Stock Unit Awards. The right to receive shares pursuant to a Restricted Stock Unit Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to a Restricted Stock Unit Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.

10. PERFORMANCE AWARDS.

Performance Awards shall be evidenced by Award Agreements in such form as the Committee shall from time to time establish. Award Agreements evidencing Performance Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

10.1 Types of Performance Awards Authorized. Performance Awards may be granted in the form of either Performance Shares or Performance Units. Each Award Agreement evidencing a Performance Award shall specify the number of Performance Shares or Performance Units subject thereto, the Performance Award Formula, the Performance Goal(s) and Performance Period applicable to the Award, and the other terms, conditions and restrictions of the Award.

10.2 Initial Value of Performance Shares and Performance Units. Unless otherwise provided by the Committee in granting a Performance Award, each Performance Share shall have an initial monetary value equal to the Fair Market Value of one (1) share of Stock, subject to adjustment as provided in Section 4.3, on the effective date of grant of the Performance Share, and each Performance Unit shall have an initial monetary value established by the Committee at the time of grant. The final value payable to the Participant in settlement of a Performance Award determined on the basis of the applicable Performance Award Formula will depend on the extent to which Performance Goals established by the Committee are attained within the applicable Performance Period established by the Committee.

10.3 Establishment of Performance Period, Performance Goals and Performance Award Formula. In granting each Performance Award, the Committee shall establish in writing the applicable Performance Period, Performance Award Formula and one or more Performance Goals which, when measured at the end of the Performance Period, shall determine on the basis of the Performance Award Formula the final value of the Performance Award to be paid to the Participant. Unless otherwise permitted in compliance with the requirements under Section 162(m) with respect to each Performance Award intended to result in the payment of Performance-Based Compensation, the Committee shall establish the Performance Goal(s) and Performance


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Award Formula applicable to each Performance Award no later than the earlier of (a) the date ninety (90) days after the commencement of the applicable Performance Period or (b) the date on which 25% of the Performance Period has elapsed, and, in any event, at a time when the outcome of the Performance Goals remains substantially uncertain. Once established, the Performance Goals and Performance Award Formula applicable to a Covered Employee shall not be changed during the Performance Period. The Company shall notify each Participant granted a Performance Award of the terms of such Award, including the Performance Period, Performance Goal(s) and Performance Award Formula.

10.4 Measurement of Performance Goals. Performance Goals shall be established by the Committee on the basis of targets to be attained (Performance Targets) with respect to one or more measures of business or financial performance (each, a Performance Measure), subject to the following:

(a) Performance Measures. Performance Measures shall have the same meanings as used in the Company’s financial statements, or, if such terms are not used in the Company’s financial statements, they shall have the meaning applied pursuant to generally accepted accounting principles, or as used generally in the Company’s industry. Performance Measures shall be calculated with respect to the Company and each Subsidiary Corporation consolidated therewith for financial reporting purposes or such division or other business unit as may be selected by the Committee. For purposes of the Plan, the Performance Measures applicable to a Performance Award shall be calculated in accordance with generally accepted accounting principles, if applicable, but prior to the accrual or payment of any Performance Award for the same Performance Period and excluding the effect (whether positive or negative) of any change in accounting standards or any extraordinary, unusual or nonrecurring item, as determined by the Committee, occurring after the establishment of the Performance Goals applicable to the Performance Award. Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of Performance Measures in order to prevent the dilution or enlargement of the Participant’s rights with respect to a Performance Award. Performance Measures may be one or more of the following, as determined by the Committee:

 

  (i) revenue;

 

  (ii) sales;

 

  (iii) expenses;

 

  (iv) operating income;

 

  (v) gross margin;

 

  (vi) operating margin;

 

  (vii) earnings before any one or more of: stock-based compensation expense, interest, taxes, depreciation and amortization;

 

  (viii) pre-tax profit;

 

  (ix) net operating income;

 

  (x) net income;

 

  (xi) economic value added;

 

  (xii) free cash flow;

 

  (xiii) operating cash flow;

 

  (xiv) balance of cash, cash equivalents and marketable securities;

 

  (xv) stock price;

 

  (xvi) earnings per share;

 

  (xvii) return on stockholder equity;

 

  (xviii) return on capital;


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  (xix) return on assets;

 

  (xx) return on investment;

 

  (xxi) employee satisfaction;

 

  (xxii) employee retention;

 

  (xxiii) market share;

 

  (xxiv) customer satisfaction;

 

  (xxv) product development;

 

  (xxvi) research and development expenses;

 

  (xxvii) completion of an identified special project; and

 

  (xxviii) completion of a joint venture or other corporate transaction.

(b) Performance Targets. Performance Targets may include a minimum, maximum, target level and intermediate levels of performance, with the final value of a Performance Award determined under the applicable Performance Award Formula by the level attained during the applicable Performance Period. A Performance Target may be stated as an absolute value or as a value determined relative to an index, budget or other standard selected by the Committee.

10.5 Settlement of Performance Awards.

(a) Determination of Final Value. As soon as practicable following the completion of the Performance Period applicable to a Performance Award, the Committee shall certify in writing the extent to which the applicable Performance Goals have been attained and the resulting final value of the Award earned by the Participant and to be paid upon its settlement in accordance with the applicable Performance Award Formula.

(b) Discretionary Adjustment of Award Formula. In its discretion, the Committee may, either at the time it grants a Performance Award or at any time thereafter, provide for the positive or negative adjustment of the Performance Award Formula applicable to a Performance Award granted to any Participant who is not a Covered Employee to reflect such Participant’s individual performance in his or her position with the Company or such other factors as the Committee may determine. If permitted under a Covered Employee’s Award Agreement, the Committee shall have the discretion, on the basis of such criteria as may be established by the Committee, to reduce some or all of the value of the Performance Award that would otherwise be paid to the Covered Employee upon its settlement notwithstanding the attainment of any Performance Goal and the resulting value of the Performance Award determined in accordance with the Performance Award Formula. No such reduction may result in an increase in the amount payable upon settlement of another Participant’s Performance Award that is intended to result in Performance-Based Compensation.

(c) Effect of Leaves of Absence. Unless otherwise required by law or a Participant’s Award Agreement, payment of the final value, if any, of a Performance Award held by a Participant who has taken in excess of thirty (30) days in unpaid leaves of absence during a Performance Period shall be prorated on the basis of the number of days of the Participant’s Service during the Performance Period during which the Participant was not on an unpaid leave of absence.

(d) Notice to Participants. As soon as practicable following the Committee’s determination and certification in accordance with Sections 10.5(a) and (b), the Company shall notify each Participant of the determination of the Committee.

(e) Payment in Settlement of Performance Awards. As soon as practicable following the Committee’s determination and certification in accordance with Sections 10.5(a) and (b), but in any event within the Short-Term Deferral Period described in Section 15.1 (except as otherwise provided below or consistent with the requirements of Section 409A), payment shall be made to each eligible Participant (or such Participant’s legal representative or other person who acquired the right to receive such payment by reason


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of the Participant’s death) of the final value of the Participant’s Performance Award. Payment of such amount shall be made in cash, shares of Stock, or a combination thereof as determined by the Committee. Unless otherwise provided in the Award Agreement evidencing a Performance Award, payment shall be made in a lump sum. If permitted by the Committee, the Participant may elect, consistent with the requirements of Section 409A, to defer receipt of all or any portion of the payment to be made to Participant pursuant to this Section, and such deferred payment date(s) elected by the Participant shall be set forth in the Award Agreement. If any payment is to be made on a deferred basis, the Committee may, but shall not be obligated to, provide for the payment during the deferral period of Dividend Equivalent Rights or interest.

(f) Provisions Applicable to Payment in Shares. If payment is to be made in shares of Stock, the number of such shares shall be determined by dividing the final value of the Performance Award by the Fair Market Value of a share of Stock determined by the method specified in the Award Agreement. Shares of Stock issued in payment of any Performance Award may be fully vested and freely transferable shares or may be shares of Stock subject to Vesting Conditions as provided in Section 8.5. Any shares subject to Vesting Conditions shall be evidenced by an appropriate Award Agreement and shall be subject to the provisions of Sections 8.5 through 8.8 above.

10.6 Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to shares of Stock represented by Performance Share Awards until the date of the issuance of such shares, if any (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Performance Share Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date the Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date on which the Performance Shares are settled or the date on which they are forfeited. Such Dividend Equivalent Rights, if any, shall be credited to the Participant in the form of additional whole Performance Shares as of the date of payment of such cash dividends on Stock. The number of additional Performance Shares (rounded to the nearest whole number) to be so credited shall be determined by dividing (a) the amount of cash dividends paid on the dividend payment date with respect to the number of shares of Stock represented by the Performance Shares previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date. Dividend Equivalent Rights may be paid currently or may be accumulated and paid to the extent that Performance Shares become nonforfeitable, as determined by the Committee. Settlement of Dividend Equivalent Rights may be made in cash, shares of Stock, or a combination thereof as determined by the Committee, and may be paid on the same basis as settlement of the related Performance Share as provided in Section 10.5. Dividend Equivalent Rights shall not be paid with respect to Performance Units. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.3, appropriate adjustments shall be made in the Participant’s Performance Share Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of the Performance Share Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Performance Goals as are applicable to the Award.

10.7 Effect of Termination of Service. Unless otherwise provided by the Committee and set forth in the Award Agreement evidencing a Performance Award, the effect of a Participant’s termination of Service on the Performance Award shall be as follows:

(a) Death or Disability. If the Participant’s Service terminates because of the death or Disability of the Participant before the completion of the Performance Period applicable to the Performance Award, the final value of the Participant’s Performance Award shall be determined by the extent to which the applicable Performance Goals have been attained with respect to the entire Performance Period and shall be prorated based on the number of months of the Participant’s Service during the Performance Period. Payment shall be made following the end of the Performance Period in any manner permitted by Section 10.5.

(b) Other Termination of Service. If the Participant’s Service terminates for any reason except death or Disability before the completion of the Performance Period applicable to the Performance Award, such


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Award shall be forfeited in its entirety; provided, however, that in the event of an involuntary termination of the Participant’s Service, the Committee, in its discretion, may waive the automatic forfeiture of all or any portion of any such Award and determine the final value of the Performance Award in the manner provided by Section 10.7(a). Payment of any amount pursuant to this Section shall be made following the end of the Performance Period in any manner permitted by Section 10.5.

10.8 Nontransferability of Performance Awards. Prior to settlement in accordance with the provisions of the Plan, no Performance Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to a Performance Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.

11. CASH-BASED AWARDS AND OTHER STOCK-BASED AWARDS.

Cash-Based Awards and Other Stock-Based Awards shall be evidenced by Award Agreements in such form as the Committee shall from time to time establish. Award Agreements evidencing Cash-Based Awards and Other Stock-Based Awards may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

11.1 Grant of Cash-Based Awards. Subject to the provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms and conditions, including the achievement of performance criteria, as the Committee may determine.

11.2 Grant of Other Stock-Based Awards. The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted securities, stock-equivalent units, stock appreciation units, securities or debentures convertible into common stock or other forms determined by the Committee) in such amounts and subject to such terms and conditions as the Committee shall determine. Such Awards may involve the transfer of actual shares of Stock to Participants, or payment in cash or otherwise of amounts based on the value of Stock and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.

11.3 Value of Cash-Based and Other Stock-Based Awards. Each Cash-Based Award shall specify a monetary payment amount or payment range as determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of shares of Stock or units based on such shares of Stock, as determined by the Committee. The Committee may require the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. If the Committee exercises its discretion to establish performance criteria, the final value of Cash-Based Awards or Other Stock-Based Awards that will be paid to the Participant will depend on the extent to which the performance criteria are met. The establishment of performance criteria with respect to the grant or vesting of any Cash-Based Award or Other Stock-Based Award intended to result in Performance-Based Compensation shall follow procedures substantially equivalent to those applicable to Performance Awards set forth in Section 10.

11.4 Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards. Payment or settlement, if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash, shares of Stock or other securities or any combination thereof as the Committee determines. The determination and certification of the final value with respect to any Cash-Based Award or Other Stock-Based Award intended to result in Performance-Based Compensation shall comply with the requirements applicable to Performance Awards set forth in Section 10. To the extent applicable, payment or settlement with respect to each Cash-Based Award and Other Stock-Based Award shall be made in compliance with the requirements of Section 409A.


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11.5 Voting Rights; Dividend Equivalent Rights and Distributions. Participants shall have no voting rights with respect to shares of Stock represented by Other Stock-Based Awards until the date of the issuance of such shares of Stock (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), if any, in settlement of such Award. However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Other Stock-Based Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date such Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated. Such Dividend Equivalent Rights, if any, shall be paid in accordance with the provisions set forth in Section 9.4. Dividend Equivalent Rights shall not be granted with respect to Cash-Based Awards. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.3, appropriate adjustments shall be made in the Participant’s Other Stock-Based Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of such Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Vesting Conditions and performance criteria, if any, as are applicable to the Award.

11.6 Effect of Termination of Service. Each Award Agreement evidencing a Cash-Based Award or Other Stock-Based Award shall set forth the extent to which the Participant shall have the right to retain such Award following termination of the Participant’s Service. Such provisions shall be determined in the discretion of the Committee, need not be uniform among all Cash-Based Awards or Other Stock-Based Awards, and may reflect distinctions based on the reasons for termination, subject to the requirements of Section 409A, if applicable.

11.7 Nontransferability of Cash-Based Awards and Other Stock-Based Awards. Prior to the payment or settlement of a Cash-Based Award or Other Stock-Based Award, the Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. The Committee may impose such additional restrictions on any shares of Stock issued in settlement of Cash-Based Awards and Other Stock-Based Awards as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such shares of Stock are then listed and/or traded, or under any state securities laws or foreign law applicable to such shares of Stock.

12. STANDARD FORMS OF AWARD AGREEMENT.

12.1 Award Agreements. Each Award shall comply with and be subject to the terms and conditions set forth in the appropriate form of Award Agreement approved by the Committee and as amended from time to time. No Award or purported Award shall be a valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement, which execution may be evidenced by electronic means. Any Award Agreement may consist of an appropriate form of Notice of Grant and a form of Agreement incorporated therein by reference, or such other form or forms, including electronic media, as the Committee may approve from time to time.

12.2 Authority to Vary Terms. The Committee shall have the authority from time to time to vary the terms of any standard form of Award Agreement either in connection with the grant or amendment of an individual Award or in connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of any such new, revised or amended standard form or forms of Award Agreement are not inconsistent with the terms of the Plan.


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13. CHANGE IN CONTROL.

13.1 Effect of Change in Control on Awards. Subject to the requirements and limitations of Section 409A, if applicable, the Committee may provide for any one or more of the following:

(a) Accelerated Vesting. In its discretion, the Committee may provide in the grant of any Award or at any other time may take such action as it deems appropriate to provide for acceleration of the exercisability, vesting and/or settlement in connection with a Change in Control of each or any outstanding Award or portion thereof and shares acquired pursuant thereto upon such conditions, including termination of the Participant’s Service prior to, upon, or following such Change in Control, and to such extent as the Committee shall determine.

(b) Assumption, Continuation or Substitution. In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the Acquiror), may, without the consent of any Participant, either assume or continue the Company’s rights and obligations under each or any Award or portion thereof outstanding immediately prior to the Change in Control or substitute for each or any such outstanding Award or portion thereof a substantially equivalent award with respect to the Acquiror’s stock, as applicable. For purposes of this Section, if so determined by the Committee in its discretion, an Award denominated in shares of Stock shall be deemed assumed if, following the Change in Control, the Award confers the right to receive, subject to the terms and conditions of the Plan and the applicable Award Agreement, for each share of Stock subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled; provided, however, that if such consideration is not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise or settlement of the Award, for each share of Stock subject to the Award, to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control. Any Award or portion thereof which is neither assumed or continued by the Acquiror in connection with the Change in Control nor exercised or settled as of the time of consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control.

(c) Cash-Out of Outstanding Stock-Based Awards. The Committee may, in its discretion and without the consent of any Participant, determine that, upon the occurrence of a Change in Control, each or any Award denominated in shares of Stock or portion thereof outstanding immediately prior to the Change in Control and not previously exercised or settled shall be canceled in exchange for a payment with respect to each vested share (and each unvested share, if so determined by the Committee) of Stock subject to such canceled Award in (i) cash, (ii) stock of the Company or of a corporation or other business entity a party to the Change in Control, or (iii) other property which, in any such case, shall be in an amount having a Fair Market Value equal to the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control, reduced (but not below zero) by the exercise or purchase price per share, if any, under such Award. In the event such determination is made by the Committee, an Award having an exercise or purchase price per share equal to or greater than the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control may be canceled without payment of consideration to the holder thereof. Payment pursuant to this Section (reduced by applicable withholding taxes, if any) shall be made to Participants in respect of the vested portions of their canceled Awards as soon as practicable following the date of the Change in Control and in respect of the unvested portions of their canceled Awards in accordance with the vesting schedules applicable to such Awards.

13.2 Effect of Change in Control on Nonemployee Director Awards. Subject to the requirements and limitations of Section 409A, if applicable, including as provided by Section 15.4(e), in the event of a Change in Control, each outstanding Nonemployee Director Award shall become immediately exercisable and vested in full and, except to the extent assumed, continued or substituted for pursuant to Section 13.1(b), shall be settled effective immediately prior to the time of consummation of the Change in Control.


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13.3 Federal Excise Tax Under Section 4999 of the Code.

(a) Excess Parachute Payment. In the event that any acceleration of vesting pursuant to an Award and any other payment or benefit received or to be received by a Participant would subject the Participant to any excise tax pursuant to Section 4999 of the Code due to the characterization of such acceleration of vesting, payment or benefit as an “excess parachute payment” under Section 280G of the Code, the Participant may elect to reduce the amount of any acceleration of vesting called for under the Award in order to avoid such characterization.

(b) Determination by Independent Accountants. To aid the Participant in making any election called for under Section 13.3(a), no later than the date of the occurrence of any event that might reasonably be anticipated to result in an “excess parachute payment” to the Participant as described in Section 13.3(a), the Company shall request a determination in writing by independent public accountants selected by the Company (the Accountants). As soon as practicable thereafter, the Accountants shall determine and report to the Company and the Participant the amount of such acceleration of vesting, payments and benefits which would produce the greatest after-tax benefit to the Participant. For the purposes of such determination, the Accountants may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Participant shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make their required determination. The Company shall bear all fees and expenses the Accountants charge in connection with their services contemplated by this Section.

14. COMPLIANCE WITH SECURITIES LAW.

The grant of Awards and the issuance of shares of Stock pursuant to any Award shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities and the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, no Award may be exercised or shares issued pursuant to an Award unless (a) a registration statement under the Securities Act shall at the time of such exercise or issuance be in effect with respect to the shares issuable pursuant to the Award, or (b) in the opinion of legal counsel to the Company, the shares issuable pursuant to the Award may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to issuance of any Stock, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.

15. COMPLIANCE WITH SECTION 409A.

15.1 Awards Subject to Section 409A. The Company intends that Awards granted pursuant to the Plan shall either be exempt from or comply with Section 409A, and the Plan shall be so construed. The provisions of this Section 15 shall apply to any Award or portion thereof that constitutes or provides for payment of Section 409A Deferred Compensation. Such Awards may include, without limitation:

(a) A Nonstatutory Stock Option or SAR that includes any feature for the deferral of compensation other than the deferral of recognition of income until the later of (i) the exercise or disposition of the Award or (ii) the time the stock acquired pursuant to the exercise of the Award first becomes substantially vested.

(b) Any Restricted Stock Unit Award, Performance Award, Cash-Based Award or Other Stock-Based Award that either (i) provides by its terms for settlement of all or any portion of the Award at a time or upon an event that will or may occur later than the end of the Short-Term Deferral Period (as defined below) or (ii) permits the Participant granted the Award to elect one or more dates or events upon which the Award will be settled after the end of the Short-Term Deferral Period.


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Subject to the provisions of Section 409A, the term “Short-Term Deferral Period means the 2 1/2 month period ending on the later of (i) the 15th day of the third month following the end of the Participant’s taxable year in which the right to payment under applicable portion of the Award is no longer subject to a substantial risk of forfeiture or (ii) the 15th day of the third month following the end of the Company’s taxable year in which the right to payment under the applicable portion of the Award is no longer subject to a substantial risk of forfeiture. For this purpose, the term “substantial risk of forfeiture” shall have the meaning provided by Section 409A.

15.2 Deferral and/or Distribution Elections. Except as otherwise permitted or required by Section 409A, the following rules shall apply to any compensation deferral and/or payment elections (each, an “Election”) that may be permitted or required by the Committee pursuant to an Award providing Section 409A Deferred Compensation:

(a) Elections must be in writing and specify the amount of the payment in settlement of an Award being deferred, as well as the time and form of payment as permitted by this Plan.

(b) Elections shall be made by the end of the Participant’s taxable year prior to the year in which services commence for which an Award may be granted to such Participant.

(c) Elections shall continue in effect until a written revocation or change in Election is received by the Company, except that a written revocation or change in Election must be received by the Company prior to the last day for making the Election determined in accordance with paragraph (b) above or as permitted by Section 15.3.

15.3 Subsequent Elections. Except as otherwise permitted or required by Section 409A, any Award providing Section 409A Deferred Compensation which permits a subsequent Election to delay the payment or change the form of payment in settlement of such Award shall comply with the following requirements:

(a) No subsequent Election may take effect until at least twelve (12) months after the date on which the subsequent Election is made.

(b) Each subsequent Election related to a payment in settlement of an Award not described in Section 15.4(a)(ii), 15.4(a)(iii) or 15.4(a)(vi) must result in a delay of the payment for a period of not less than five (5) years from the date on which such payment would otherwise have been made.

(c) No subsequent Election related to a payment pursuant to Section 15.4(a)(iv) shall be made less than twelve (12) months before the date on which such payment would otherwise have been made.

(d) Subsequent Elections shall continue in effect until a written revocation or change in the subsequent Election is received by the Company, except that a written revocation or change in a subsequent Election must be received by the Company prior to the last day for making the subsequent Election determined in accordance the preceding paragraphs of this Section  15.3.

15.4 Payment of Section 409A Deferred Compensation.

(a) Permissible Payments. Except as otherwise permitted or required by Section 409A, an Award providing Section 409A Deferred Compensation must provide for payment in settlement of the Award only upon one or more of the following:

(i) The Participant’s “separation from service” (as such term is defined by Section 409A);

(ii) The Participant’s becoming “disabled” (as such term is defined by Section 409A);

(iii) The Participant’s death;

(iv) A time or fixed schedule that is either (i) specified by the Committee upon the grant of an Award and set forth in the Award Agreement evidencing such Award or (ii) specified by the Participant in an Election complying with the requirements of Section 15.2 or 15.3, as applicable;

(v) A change in the ownership or effective control or the Company or in the ownership of a substantial portion of the assets of the Company determined in accordance with Section 409A; or

(vi) The occurrence of an “unforeseeable emergency” (as such term is defined by Section 409A).


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(b) Required Delay in Payment to Specified Employee Pursuant to Separation from Service. Notwithstanding any provision of the Plan or an Award Agreement to the contrary, except as otherwise permitted by Section 409A, no payment pursuant to Section 15.4(a)(i) in settlement of an Award providing for Section 409A Deferred Compensation may be made to a Participant who is a “specified employee” (as such term is defined by Section 409A) as of the date of the Participant’s separation from service before the date (the Delayed Payment Date) that is six (6) months after the date of such Participant’s separation from service, or, if earlier, the date of the Participant’s death. All such amounts that would, but for this paragraph, become payable prior to the Delayed Payment Date shall be accumulated and paid on the Delayed Payment Date.

(c) Payment Upon Disability. All distributions payable by reason of a Participant becoming disabled shall be paid in a lump sum or in periodic installments as established by the Participant’s Election. If the Participant has made no Election with respect to distributions upon becoming disabled, all such distributions shall be paid in a lump sum upon the determination that the Participant has become disabled.

(d) Payment Upon Death. If a Participant dies before complete distribution of amounts payable upon settlement of an Award subject to Section 409A, such undistributed amounts shall be distributed to his or her beneficiary under the distribution method for death established by the Participant’s Election upon receipt by the Committee of satisfactory notice and confirmation of the Participant’s death. If the Participant has made no Election with respect to distributions upon death, all such distributions shall be paid in a lump sum upon receipt by the Committee of satisfactory notice and confirmation of the Participant’s death.

(e) Payment Upon Change in Control. Notwithstanding any provision of the Plan or an Award Agreement to the contrary, to the extent that any amount constituting Section 409A Deferred Compensation would become payable under this Plan by reason of a Change in Control, such amount shall become payable only if the event constituting a Change in Control would also constitute a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A. Any Award which constitutes Section 409A Deferred Compensation and which would vest and otherwise become payable upon a Change in Control as a result of the failure of the Acquiror to assume, continue or substitute for such Award in accordance with Section 13.1(b) shall vest to the extent provided by such Award but shall be converted automatically at the effective time of such Change in Control into a right to receive, in cash on the date or dates such award would have been settled in accordance with its then existing settlement schedule (or as required by Section 15.4(b)), an amount or amounts equal in the aggregate to the intrinsic value of the Award at the time of the Change in Control.

(f) Payment Upon Unforeseeable Emergency. The Committee shall have the authority to provide in the Award Agreement evidencing any Award providing for Section 409A Deferred Compensation for payment in settlement of all or a portion of such Award in the event that a Participant establishes, to the satisfaction of the Committee, the occurrence of an unforeseeable emergency. In such event, the amount(s) distributed with respect to such unforeseeable emergency cannot exceed the amounts reasonably necessary to satisfy the emergency need plus amounts necessary to pay taxes reasonably anticipated as a result of such distribution(s), after taking into account the extent to which such emergency need is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship) or by cessation of deferrals under the Award. All distributions with respect to an unforeseeable emergency shall be made in a lump sum as soon as practicable following the Committee’s determination that an unforeseeable emergency has occurred. The Committee’s decision with respect to whether an unforeseeable emergency has occurred and the manner in which, if at all, the payment in settlement of an Award shall be altered or modified, shall be final, conclusive, and not subject to approval or appeal.

(g) Prohibition of Acceleration of Payments. Notwithstanding any provision of the Plan or an Award Agreement to the contrary, this Plan does not permit the acceleration of the time or schedule of any payment under an Award providing Section 409A Deferred Compensation, except as permitted by Section 409A.


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16. TAX WITHHOLDING.

16.1 Tax Withholding in General. The Company shall have the right to deduct from any and all payments made under the Plan, or to require the Participant, through payroll withholding, cash payment or otherwise, to make adequate provision for, the federal, state, local and foreign taxes (including social insurance), if any, required by law to be withheld by any Participating Company with respect to an Award or the shares acquired pursuant thereto. The Company shall have no obligation to deliver shares of Stock, to release shares of Stock from an escrow established pursuant to an Award Agreement, or to make any payment in cash under the Plan until the Participating Company Group’s tax withholding obligations have been satisfied by the Participant.

16.2 Withholding in Shares. The Company shall have the right, but not the obligation, to deduct from the shares of Stock issuable to a Participant upon the exercise or settlement of an Award, or to accept from the Participant the tender of, a number of whole shares of Stock having a Fair Market Value, as determined by the Company, equal to all or any part of the tax withholding obligations of any Participating Company. The Fair Market Value of any shares of Stock withheld or tendered to satisfy any such tax withholding obligations shall not exceed the amount determined by the applicable minimum statutory withholding rates.

17. AMENDMENT, SUSPENSION OR TERMINATION OF PLAN.

The Committee may amend, suspend or terminate the Plan at any time. However, without the approval of the Company’s stockholders, there shall be (a) no increase in the maximum aggregate number of shares of Stock that may be issued under the Plan (except by operation of the provisions of Section 4.3), (b) no change in the class of persons eligible to receive Incentive Stock Options, and (c) no other amendment of the Plan that would require approval of the Company’s stockholders under any applicable law, regulation or rule, including the rules of any stock exchange or quotation system upon which the Stock may then be listed or quoted. No amendment, suspension or termination of the Plan shall affect any then outstanding Award unless expressly provided by the Committee. Except as provided by the next sentence, no amendment, suspension or termination of the Plan may adversely affect any then outstanding Award without the consent of the Participant. Notwithstanding any other provision of the Plan to the contrary, the Committee may, in its sole and absolute discretion and without the consent of any Participant, amend the Plan or any Award Agreement, to take effect retroactively or otherwise, as it deems necessary or advisable for the purpose of conforming the Plan or such Award Agreement to any present or future law, regulation or rule applicable to the Plan, including, but not limited to, Section 409A.

18. MISCELLANEOUS PROVISIONS.

18.1 Repurchase Rights. Shares issued under the Plan may be subject to one or more repurchase options, or other conditions and restrictions as determined by the Committee in its discretion at the time the Award is granted. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.

18.2 Forfeiture Events.

(a) The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of Service for Cause or any act by a Participant, whether before or after termination of Service, that would constitute Cause for termination of Service.

(b) If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, any Participant who knowingly or through gross negligence engaged in the misconduct, or who


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knowingly or through gross negligence failed to prevent the misconduct, and any Participant who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, shall reimburse the Company for (i) the amount of any payment in settlement of an Award received by such Participant during the twelve- (12-) month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document embodying such financial reporting requirement, and (ii) any profits realized by such Participant from the sale of securities of the Company during such twelve- (12-) month period.

18.3 Provision of Information. Each Participant shall be given access to information concerning the Company equivalent to that information generally made available to the Company’s common stockholders.

18.4 Rights as Employee, Consultant or Director. No person, even though eligible pursuant to Section 5, shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. Nothing in the Plan or any Award granted under the Plan shall confer on any Participant a right to remain an Employee, Consultant or Director or interfere with or limit in any way any right of a Participating Company to terminate the Participant’s Service at any time. To the extent that an Employee of a Participating Company other than the Company receives an Award under the Plan, that Award shall in no event be understood or interpreted to mean that the Company is the Employee’s employer or that the Employee has an employment relationship with the Company.

18.5 Rights as a Stockholder. A Participant shall have no rights as a stockholder with respect to any shares covered by an Award until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such shares are issued, except as provided in Section 4.3 or another provision of the Plan.

18.6 Delivery of Title to Shares. Subject to any governing rules or regulations, the Company shall issue or cause to be issued the shares of Stock acquired pursuant to an Award and shall deliver such shares to or for the benefit of the Participant by means of one or more of the following: (a) by delivering to the Participant evidence of book entry shares of Stock credited to the account of the Participant, (b) by depositing such shares of Stock for the benefit of the Participant with any broker with which the Participant has an account relationship, or (c) by delivering such shares of Stock to the Participant in certificate form.

18.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise or settlement of any Award.

18.8 Retirement and Welfare Plans. Neither Awards made under this Plan nor shares of Stock or cash paid pursuant to such Awards may be included as “compensation” for purposes of computing the benefits payable to any Participant under any Participating Company’s retirement plans (both qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant’s benefit.

18.9 Beneficiary Designation. Subject to local laws and procedures, each Participant may file with the Company a written designation of a beneficiary who is to receive any benefit under the Plan to which the Participant is entitled in the event of such Participant’s death before he or she receives any or all of such benefit. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. If a married Participant designates a beneficiary other than the Participant’s spouse, the effectiveness of such designation may be subject to the consent of the Participant’s spouse. If a Participant dies without an effective designation of a beneficiary who is living at the time of the Participant’s death, the Company will pay any remaining unpaid benefits to the Participant’s legal representative.

18.10 Severability. If any one or more of the provisions (or any part thereof) of this Plan shall be held invalid, illegal or unenforceable in any respect, such provision shall be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions (or any part thereof) of the Plan shall not in any way be affected or impaired thereby.


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18.11 No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise affect the Company’s or another Participating Company’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or another Participating Company to take any action which such entity deems to be necessary or appropriate.

18.12 Unfunded Obligation. Participants shall have the status of general unsecured creditors of the Company. Any amounts payable to Participants pursuant to the Plan shall be considered unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974. No Participating Company shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Participant account shall not create or constitute a trust or fiduciary relationship between the Committee or any Participating Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s creditors in any assets of any Participating Company. The Participants shall have no claim against any Participating Company for any changes in the value of any assets which may be invested or reinvested by the Company with respect to the Plan.

18.13 Choice of Law. Except to the extent governed by applicable federal law, the validity, interpretation, construction and performance of the Plan and each Award Agreement shall be governed by the laws of the State of California, without regard to its conflict of law rules.

IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the foregoing sets forth the Heckmann Corporation 2009 Equity Incentive Plan as duly adopted by the Board on May     , 2009.

 

/s/

Damian C. Georgino, Corporate Secretary


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LOGO

 

HECKMANN CORPORATION 300 CHERRINGTON PARKWAY SUITE 200 CORAOPOLIS, PA 15108

VOTE BY INTERNET

Before The Meeting—Go to www.proxyvote.com

Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

During The Meeting—Go to www.virtualshareholdermeeting.com/HEK2012

You may attend the Meeting via the Internet and vote during the Meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.

VOTE BY PHONE—1-800-690-6903

Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions.

VOTE BY MAIL

Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:

M44064-P23417 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

HECKMANN CORPORATION For Withhold For All To withhold authority to vote for any individual All All Except nominee(s), mark “For All Except” and write the The Heckmann Corporation Board of Directors number(s) of the nominee(s) on the line below. unanimously recommends a vote FOR:

1. The election of two Class II directors for a three-year term. ¨ ¨ ¨

NOMINEES:

01) J. Danforth Quayle 02) Andrew D. Seidel

For Against Abstain

2. Ratification of the appointment of KPMG LLP as independent registered public accounting firm for the fiscal year ending December 31, 2012. ¨ ¨ ¨

3. The advisory vote on the Company’s executive compensation. ¨ ¨ ¨

4. The amendment to the 2009 Equity Incentive Plan. ¨ ¨ ¨

IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED AND EMPOWERED TO VOTE UPON OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND ALL CONTINUATIONS, ADJOURNMENTS OR POSTPONEMENTS THEREOF, INCLUDING, IF SUBMITTED TO A VOTE OF THE STOCKHOLDERS, A MOTION TO ADJOURN THE ANNUAL MEETING TO ANOTHER TIME OR PLACE FOR

THE PURPOSE OF SOLICITING ADDITIONAL PROXIES.

To change the address on your account, please check the box at right and indicate your new address in the address space on the reverse side. Please note that changes to the registered name(s) on the account may not be submitted via this method. ¨

Please check the box at the right to indicate if you plan to attend this meeting. ¨ ¨

Yes No

Note: Please sign exactly as your name or names appears on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.

Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date


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LOGO

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING:

The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.

Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone or the Internet.

M44065-P23417

ANNUAL MEETING OF STOCKHOLDERS

HECKMANN CORPORATION

May 8, 2012 at 1:00 p.m. EDT

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF HECKMANN CORPORATION.

The undersigned, having read the Notice of Annual Meeting of Stockholders and the Proxy Statement dated March 27, 2012, receipt of which are hereby acknowledged, hereby appoint(s) Richard J. Heckmann and Damian C. Georgino, or either of them, with full power and authority to act without the other and with full power of substitution, as proxies to represent and vote, as directed herein, all shares the undersigned is entitled to vote at the annual meeting of stockholders of Heckmann Corporation to be held via the Internet at www.virtualshareholdermeeting.com/HEK2012, on May 8, 2012 at 1:00 p.m. EDT, and at all continuations, adjournments or postponements thereof. You are encouraged to specify your choice by marking the appropriate box. Please complete your voting selection, date, sign and mail your proxy card in the envelope provided as soon as possible. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Director’s recommendations.

PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.

Address Changes/Comments: ______________________________________________________________________________

 

(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)

Continued and to be signed on reverse side