Stock-Based Compensation

As of December 31, 2017, we have two principal share-based compensation plans (collectively, the “Long-Term Incentive Compensation Plan”).

The compensation cost charged against income for these plans was $39.8 million, $22.8 million and $26.9 million for the years ended December 31, 2017, 2016 and 2015, respectively. Our accounting policy for the recognition of compensation expense for awards with pro-rata vesting is to expense the costs ratably over the vesting periods.

Additionally, HEP maintains a share-based compensation plan for Holly Logistic Services, L.L.C.'s non-employee directors and certain executives and employees. Compensation cost attributable to HEP’s share-based compensation plan was $2.5 million, $2.7 million and $3.5 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Restricted Stock and Restricted Stock Units

Under our Long-Term Incentive Compensation Plan, we grant certain officers and other key employees restricted stock unit awards with awards generally vesting over a period of two to three years. We previously granted restricted stock to certain officers and key employees with awards vesting over a period of three years. Certain restricted stock unit award recipients have the right to receive dividends, however, restricted stock units do not have any other rights of absolute ownership. Restricted stock award recipients are generally entitled to all the rights of absolute ownership of the restricted shares from the date of grant including the right to vote the shares and to receive dividends. Upon vesting, restrictions on the restricted shares and restricted share units lapse at which time they convert to common shares. In addition, we grant non-employee directors restricted stock unit awards, which typically vest over a period of one year and are payable in stock. The fair value of each restricted stock and restricted stock unit award is measured based on the grant date market price of our common shares and is amortized over the respective vesting period.

A summary of restricted stock and restricted stock unit activity and changes during the year ended December 31, 2017 is presented below:



Restricted Stock and Restricted Stock Units	Grants		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value ($000)

Outstanding at January 1, 2017 (non-vested)	1,188,774		$	28.87
Granted ⁽¹⁾	1,426,106		35.02
Vesting (transfer/conversion to common stock)	(817,601	)	30.41
Forfeited	(71,091	)	30.20
Outstanding at December 31, 2017 (non-vested)	1,726,188		$	33.51	$	88,415

(1) Includes restricted stock units issued to employees in the PCLI acquisition.

In connection with our February 1, 2017 PCLI acquisition, we issued 472,276 restricted stock units to PCLI employees as replacement units for unvested awards issued under the legacy PCLI plan. The fair value of these awards totaled $13.3 million and is based on a February 1, 2017 grant date value of $28.12 per unit. Of this total, $6.6 million is recognized as an increase to our PCLI purchase price as it represents the value of the awards attributable to pre-acquisition services, and the remaining $6.7 million is to be recognized as compensation expense over the two-year vesting period.

For the years ended December 31, 2017, 2016 and 2015, restricted stock and restricted stock units vested having a grant date fair value of $24.9 million, $18.4 million and $14.2 million, respectively. For the years ended December 31, 2016 and 2015, we granted restricted stock and restricted stock units having a weighted average grant date fair value of $21.66 and $49.92, respectively. As of December 31, 2017, there was $33.9 million of total unrecognized compensation cost related to non-vested restricted stock and restricted stock unit grants. That cost is expected to be recognized over a weighted-average period of 1.6 years.

Performance Share Units

Under our Long-Term Incentive Compensation Plan, we grant certain officers and other key employees performance share units, which are payable in stock upon meeting certain criteria over the service period, and generally vest over a period of three years. Under the terms of our performance share unit grants, awards are subject to “financial performance” and “market performance” criteria. Financial performance is based on our financial performance compared to a peer group of independent refining companies, while market performance is based on the relative standing of total shareholder return achieved by HollyFrontier compared to peer group companies. The number of shares ultimately issued under these awards can range from zero to 200% of target award amounts. As of December 31, 2017, estimated share payouts for outstanding non-vested performance share unit awards averaged approximately 110% of target amounts.

A summary of performance share unit activity and changes during the year ended December 31, 2017 is presented below:



Performance Share Units	Grants

Outstanding at January 1, 2017 (non-vested)	703,939
Granted	239,964
Vesting and transfer of ownership to recipients	(151,599	)
Forfeited	(99,643	)
Outstanding at December 31, 2017 (non-vested)	692,661

For the year ended December 31, 2017, we issued 138,374 shares of common stock, representing a 91% payout on vested performance share units having a grant date fair value of $6.6 million. For the years ended December 31, 2016 and 2015, we issued common stock upon the vesting of the performance share units having a grant date fair value of $7.4 million and $10.4 million, respectively. As of December 31, 2017, there was $15.6 million of total unrecognized compensation cost related to non-vested performance share units having a grant date fair value of $33.94 per unit. That cost is expected to be recognized over a weighted-average period of 2.1 years.