Note 16—Stockholders’ Equity

Common Stock

Our certificate of incorporation contains restrictions on the transfer of certain of our securities in order to preserve the net operating loss carryovers, capital loss carryovers, general business credit carryovers, alternative minimum tax credit carryovers, and foreign tax credit carryovers, as well as any “net unrealized built-in loss” within the meaning of Section 382 of the Internal Revenue Service Code, of us or any direct or indirect subsidiary thereof. These restrictions include provisions regarding approval by our Board of Directors of transfers of common stock by holders of five percent or more of the outstanding common stock. Our debt agreements restrict the payment of dividends.

On September 22, 2016, we issued approximately 4 million shares of our common stock to certain pre-existing investors and other investors in the Rights Offering at a purchase price of $12.25 per share. The gross proceeds from the Rights Offering were approximately $49.9 million, before deducting expenses of approximately $0.9 million, for net proceeds of approximately $49.0 million. The net proceeds from the Rights Offering were used to repay all accrued and unpaid interest and a portion of the outstanding principal amount on the Bridge Notes.

Registration Rights Agreements

In connection with our emergence from bankruptcy on August 31, 2012, we entered into a registration rights agreement (“Registration Rights Agreement”) providing the stockholders party thereto (“Stockholders”) with certain registration rights.

The Registration Rights Agreement states that at any time after the consummation of a qualified public offering, any Stockholder or group of Stockholders that, together with its or their affiliates, holds more than fifteen percent of the Registrable Shares (as defined in the Registration Rights Agreement), will have the right to require us to file with the SEC a registration statement for a public offering of all or part of its Registrable Shares (each a “Demand Registration”), by delivery of written notice to the company (each, a “Demand Request”).

Within 90 days after receiving the Demand Request, we must file with the SEC the registration statement with respect to the Demand Registration, subject to certain limitations as set forth in the Registration Rights Agreement. We are required to use commercially reasonable efforts to cause the registration statement to be declared effective as soon as practicable after such filing.

In addition, subject to certain exceptions, if we propose to register any class of common stock for sale to the public, we are required, subject to certain conditions, to include all Registrable Shares with respect to which we have received written requests for inclusion.

In connection with the closing of a private placement, we entered into an additional registration rights agreement with the purchasers of the shares. Under this registration rights agreement, we agreed to file a registration statement relating to the shares of common stock with the SEC within 60 days after the closing date of the sale which would be declared effective within 180 days of the closing date of the sale. We also agreed to use commercially reasonable efforts to keep the registration statement effective until the earliest to occur of (i) the disposition of all registrable securities, (ii) the availability under Rule 144 of the Securities Act of 1933, as amended, for each holder of registrable securities to immediately freely resell such registrable securities without volume restrictions, or (iii) the third anniversary of the effective date of the registration statement.

This registration rights agreement also provides the right for a holder or group of holders of more than $50 million of registrable securities to demand that we conduct an underwritten public offering of the registrable securities. However, the demanding holders are limited to a total of three such underwritten offerings, with no more than one demand request for an underwritten offering made in any 365 day period. Additionally, this registration rights agreement contains customary indemnification rights and obligations for both us and the holders of registrable securities.

If this registration statement does not remain effective for the applicable effectiveness period described above then from that date until cured, we must pay, as liquidated damages and not as a penalty, an amount in cash equal to 0.25% of the purchaser’s allocated purchase price per calendar month, not to exceed 0.75% of the allocated purchase price.

The registration rights granted in each rights agreement are subject to customary indemnification and contribution provisions, as well as customary restrictions such as suspension periods and, if a registration is for an underwritten offering, limitations on the number of shares to be included in the underwritten offering imposed by the managing underwriter.

In connection with the completion of the Company’s private unregistered offering of its 5.00% Convertible Senior Notes, the Company entered into a Registration Rights Agreement (the “Convertible Notes Registration Rights Agreement”), dated as of June 21, 2016, with the initial purchasers in the offering of the 5.00% Convertible Senior Notes. The Convertible Notes Registration Rights Agreement requires the Company (i) to file with the SEC a shelf registration statement covering resales of the shares of common stock, if any, issuable upon conversion of the 5.00% Convertible Senior Notes and in respect of any make-whole premium, (ii) to use its best efforts to cause, if not a well-known seasoned issuer, such shelf registration statement to be declared effective by the SEC within 180 days after June 21, 2016, and (iii) to use its best efforts to keep such shelf registration statement effective until the earlier of (A) the 120^th calendar day immediately following the maturity date of the 5.00% Convertible Senior Notes or (B) the date on which there are no longer outstanding any 5.00% Convertible Senior Notes or restricted shares of the common stock that have been received upon conversion of the 5.00% Convertible Senior Notes or in respect of any make-whole premium.

If the Company does not fulfill its obligations under the Convertible Notes Registration Rights Agreement, it will be required to pay the holders of the 5.00% Convertible Senior Notes liquidated damages in the form of additional interest on the 5.00% Convertible Senior Notes. Such additional interest will accrue at a rate per year equal to: (i) 0.25% of the principal amount of the 5.00% Convertible Senior Notes to, and including, the 90^th day following such registration default and (ii) 0.50% of the principal amount of the 5.00% Convertible Senior Notes from, and after, the 91^st day following such registration default. In no event will the liquidated damages exceed 0.50% per year.

In connection with the issuance by the Company of its 2.50% convertible subordinated bridge notes (the “Bridge Notes”), the Company entered into a registration rights agreement (the “Bridge Notes Registration Rights Agreement”), dated as of July 14, 2016 with the purchasers of the Bridge Notes. The Bridge Notes Registration Rights Agreement required the Company to file with the SEC a shelf registration statement covering resales of the shares of common stock, if any, issuable upon conversion of the Bridge Notes, (ii) to use its commercially reasonable efforts to cause such shelf registration statement to be declared effective by the SEC no later than (A) the earlier of December 14, 2016 or 60 days after the filing deadline for the shelf registration statement or (B) if earlier, five business days after the date on which the SEC informs the Company that it will not review the shelf registration statement, and (iii) to use its commercially reasonable efforts to keep such shelf registration statement effective until the earlier of (A) the date on which all of such shares have been sold, (B) the date on which such shares may be sold without volume restrictions under Rule 144 of the Securities Act of 1933, as amended, or (C) the third anniversary of the effective date of such shelf registration statement.

If the Company does not fulfill its obligations under the Bridge Notes Registration Rights Agreement with respect to the filing deadline, effectiveness deadline, or effectiveness period of a registration statement, it will be required to pay the holders of the Bridge Notes liquidated damages in an amount in cash equal to 1.00% of such holder’s “Allocated Purchase Price,” which is the amount effectively paid by such holder for the Common Stock acquired upon conversion of the Bridge Notes, per calendar month or portion thereof prior to the cure of such event of default. The maximum payment of liquidated damages to any such holder associated with all events of default will not exceed 5.00% of such holder’s Allocated Purchase Price.

In connection with the Hawaii Refinery Expansion, we entered into a registration rights agreement with IES (the "IES Registration Rights Agreement"). Under the IES Registration Rights Agreement, we agreed to file with the SEC within three (3) days after the closing date of the Hawaii Refinery Expansion and to use our commercially reasonable efforts to cause to become effective a registration statement relating to the resales of the common stock issued in connection with the Hawaii Refinery Expansion (the “IES Shares”), with an effectiveness deadline as promptly as practicable after filing of the prospectus relating to the registration statement, but in no event later than (i) ninety (90) days after the closing of the Hawaii Refinery Expansion, or (ii) if earlier, three (3) business days after the date on which the SEC informs us (A) that the SEC will not review the registration statement or (B) that we may request acceleration of the effectiveness of the registration statement. We also agreed to use our commercially reasonable efforts to keep the registration statement effective until the earliest to occur of (a) the disposition of the IES Shares, (b) the availability under Rule 144 for each holder of the IES Shares to immediately freely resell such IES Shares without notice, current information, manner of sale, or volume restrictions, or (c) the fifth anniversary of the effective date of the registration statement. The registration statement required by the IES Rights Agreement was filed with the SEC on December 21, 2018.

In connection with the Washington Refinery Acquisition (as defined in Note 22—Subsequent Events), we entered into a registration rights agreement with the seller of U.S. Oil (the "USOR Registration Rights Agreement"). Under the USOR Registration Rights Agreement, we agreed to file with the SEC within five (5) days after the closing date of the Washington Refinery Acquisition and to use our commercially reasonable efforts to cause to become effective a registration statement relating to the resales of 2,363,776 shares of our common stock issued in connection with the Washington Refinery Acquisition (the “USOR Shares”), with an effectiveness deadline as promptly as practicable after filing of the prospectus relating to the registration statement, but in no event later than (i) sixty (60) days after the closing of the Washington Refinery Acquisition, or (ii) if earlier, five (5) business days after the date on which the SEC informs us (A) that the SEC will not review the registration statement or (B) that we may request the effectiveness of the registration statement and we make such request. In addition, the USOR Registration Rights Agreement provides the holders of the USOR Shares with certain customary demand, shelf takedown, and piggyback registration rights, subject to certain exceptions and to certain customary limitations (including with respect to minimum offering size and maximum number of demands and underwritten shelf takedowns). The registration statement required by the USOR Registration Rights Agreement was filed with the SEC on January 16, 2019.

Incentive Plans

Our incentive compensation plans are described below.

Long Term Incentive Plan

On December 20, 2012, our Board of Directors (“Board”) approved the Par Petroleum Corporation 2012 Long Term Incentive Plan (“Incentive Plan” or “LTIP”). Under the Incentive Plan, the Board, or a committee of the Board, may grant incentive stock options, nonstatutory stock options, restricted stock, and restricted stock units to directors and other employees or those of our subsidiaries. On February 16, 2016 and February 27, 2018, the Board approved the amendment and restatement of the Incentive Plan to increase the number of shares issuable under the Amended and Restated LTIP. The Company’s shareholders ratified the amended and restated Incentive Plan on June 2, 2016 and May 8, 2018, respectively. The maximum number of shares that may be granted under the LTIP is 6.0 million shares of common stock. At December 31, 2018, 2.3 million shares were available for future grants and awards under the LTIP.

Restricted stock and restricted stock units awarded under the Incentive Plan are subject to restrictions, terms, and conditions, including forfeitures, as may be determined by the Board. During the period in which such restrictions apply, unless specifically provided otherwise in accordance with the terms of the Incentive Plan, the recipient of the restricted stock would be the record owner of the shares and have all of the rights of a stockholder with respect to the shares, including the right to vote and the right to receive dividends or other distributions made or paid with respect to the shares. The recipient of restricted stock units shall not have any of the rights of a stockholder of the Company; the Compensation Committee of the Board shall be entitled to specify with respect to any restricted stock unit award that upon the payment of a dividend by the Company, the Company will hold in escrow an amount in cash equal to the dividend that would have been paid on the restricted stock units had they been converted into the same number of shares of common stock and held by the recipient on that date. Upon adjustment and vesting of the restricted stock unit, any cash payment due with respect to such dividends shall be made to the recipient. The fair value of the restricted stock and stock units is generally determined based upon the quoted market price of our common stock on the date of grant. Restricted stock awards generally vest ratably over a four-year period. Restricted stock units do not vest ratably, rather they vest in full at the end of three years.

Stock options are issued with an exercise price equal to the fair market value of our common stock on the date of grant and are subject to such other terms and conditions as may be determined by the Board. The options generally expire eight years from the grant date, unless granted by the Board for a shorter term. Option grants generally vest ratably over a four-year period.

Stock Purchase Plan

On June 12, 2014, the Board adopted a Stock Purchase Plan (as amended, the “SPP”) plan. The SPP is limited to the Company’s qualifying executive officers and directors who qualify as accredited investors under Rule 501(a) of the Securities Act of 1933, as amended. The SPP provides that each participant may, subject to compliance with securities laws and other regulations and only during “window periods” as described in our insider trading policy as in effect from time to time, until the later to occur of (a) December 31, 2015 or (b) the eighteen month anniversary of the date that the participant commenced his or her employment or service with us, purchase, in a single transaction, up to $1 million of shares of our common stock (“the SPP Shares”) at a per share purchase price equal to the closing price of the common stock on the date of purchase. The sale or transfer of the SPP Shares by such participant would be limited for the earlier of (i) two years from the date of purchase or (ii) the termination of the participant’s service with us or any affiliates for any reason. Additionally, the SPP provides that each purchasing participant will be granted a number of shares of restricted common stock under the Incentive Plan equal to 20% of the SPP Shares purchased with 50% of the restricted common stock vesting on each of the two annual anniversaries of the date of grant. Each purchasing participant will also be granted nonstatutory stock options with a 5-year term to purchase a number of shares of common stock under the Incentive Plan (with an exercise price equal to the Fair Market Value as defined in the Incentive Plan on the date of grant) equal to certain specified percentages of the SPP Shares purchased based on a Black-Scholes model with 50% of the options vesting on each of the two annual anniversaries of the date of grant. Such percentages are as follows: 50% for a non-employee chairman of the Board, 35% for non-employee members of the Board, and 50% - 70% for executive officers.

The following table summarizes our compensation costs recognized in General and administrative expense (excluding depreciation) and Operating expense (excluding depreciation) under the Incentive Plan and Stock Purchase Plan (in thousands):



	Years Ended December 31,
	2018		2017		2016
Restricted Stock Awards	$	3,483	$	4,263	$	2,975
Restricted Stock Units	$	835	$	502	$	1,255
Stock Option Awards	$	1,878	$	2,439	$	2,352

Employee Stock Purchase Plan

On February 27, 2018, our Board approved the Par Pacific Holdings, Inc. 2018 Employee Stock Purchase Plan (“ESPP”). Beginning in 2019, eligible employees may elect to purchase the Company's common stock at 85% of the market price on the purchase date. Eligible employees may invest from 0% to 10% of their annual income subject to a $15 thousand annual maximum. The Board, or a committee of the Board, is authorized to set the market price discount percentages, any holding periods, and other purchasing terms and timing. The Company’s shareholders ratified the ESPP on May 8, 2018. The maximum number of shares that may be granted under the ESPP is 500 thousand shares of common stock. As of December 31, 2018, no purchases had been made under the ESPP.

Restricted Stock Awards and Restricted Stock Units

The following table summarizes our restricted stock activity, including performance restricted stock units, (in thousands, except per share amounts):



	Shares		Weighted- Average Grant Date Fair Value
Unvested balance at December 31, 2017	543		$	16.23
Granted	309		$	17.45
Vested	(184	)	$	17.62
Forfeited	(41	)	$	17.39
Unvested balance at December 31, 2018	627		$	17.14

The total fair value of restricted stock and restricted stock units that vested during the years ended December 31, 2018, 2017, and 2016 was $3.3 million, $4.0 million, and $3.6 million, respectively. The estimated weighted-average grant-date fair value per share of restricted stock and restricted stock units granted during the years ended December 31, 2018, 2017, and 2016 was $17.45, $15.25, and $17.32, respectively.

As of December 31, 2018, 2017, and 2016, there was approximately $5.8 million, $5.7 million, and $6.2 million, of total unrecognized compensation costs related to restricted stock awards and restricted stock units, which are expected to be recognized on a straight-line basis over a weighted-average period of 2.46 years, 2.39 years, and 2.50 years, respectively.

During the years ended December 31, 2018 and 2017, we granted 49 thousand and 45 thousand performance restricted stock units to executive officers, respectively. These performance restricted stock units had a fair value of approximately $0.8 million and $0.7 million, respectively, and are subject to certain annual performance targets as defined by our Board of Directors.

As of December 31, 2018, there were approximately $0.9 million of total unrecognized compensation costs related to the performance restricted stock units, which are expected to be recognized on a straight-line basis over a weighted-average period of 1.87 years.

Stock Option Grants

The fair value of each option is estimated on the grant date using the Black-Scholes option pricing model. The expected term represents the period of time that options are expected to be outstanding and is based upon the term of the option. The expected volatility represents the extent to which our stock price is expected to fluctuate between the grant date and the expected term of the award. We do not use an expected dividend yield in our fair value measurement as we are restricted from payment of dividends. The risk-free rate is the implied yield available on U.S. Treasury securities with a remaining term equal to the expected term of the option at the date of grant. The weighted-average assumptions used to measure stock options granted during 2018, 2017, and 2016 are presented below.



	2018	2017	2016
Expected life from date of grant (years)	5.3	5.3	4.4
Expected volatility	36.2%	42.0%	39.8%
Expected dividend yield	—%	—%	—%
Risk-free interest rate	2.50%	1.97%	1.16%

The following table summarizes our stock option activity (in thousands, except per share amounts):



	Number of Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term in Years	Aggregate Intrinsic Value
Outstanding balance at December 31, 2017	1,979	$	19.52	5.5	$	1,431
Issued	252	17.34
Outstanding balance at December 31, 2018	2,231	$	19.27	4.8	$	—
Exercisable, end of year	1,440	$	19.66	3.8	$	—

The estimated weighted-average grant-date fair value per share of options granted during the year ended December 31, 2018, 2017, and 2016 was $6.30, $5.81, and $3.79, respectively.

As of December 31, 2018 and 2017, there were approximately $3.4 million and $3.5 million, respectively, of total unrecognized compensation costs related to stock option awards, that are expected to be recognized on a straight-line basis over a weighted-average period of 2.32 and 1.74 years, respectively.