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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

Filed by the Registrant  x                            Filed by a Party other than the Registrant  ¨

Check the appropriate box:

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PROXY STATEMENT

HARVEST NATURAL RESOURCES, INC.

1177 Enclave Parkway, Suite 300

Houston, Texas 77077

(281) 899-5700

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

This proxy statement and accompanying proxy card are being distributed on or about May 23, 2013.

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2013 ANNUAL MEETING OF STOCKHOLDERS

NOTICE OF ANNUAL MEETING AND PROXY STATEMENT

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PROXY STATEMENT

The Board of Directors (the “Board”) of Harvest Natural Resources, Inc. (“Harvest” or the “Company”) is providing these proxy materials to you in connection with our annual meeting of stockholders, which will take place on June 27, 2013, and soliciting your proxy with respect to the meeting. You are invited to attend the meeting and are requested to vote on the proposals described in this proxy statement.

The information included in this proxy statement relates to the proposals to be voted on at the meeting, the voting process, corporate governance, our Board and its committees, information on the compensation of directors, a discussion and analysis of our compensation program for our executives, information on the compensation paid to our named executive officers and certain other required information. Our 2012 Annual Report to Stockholders is being mailed to you simultaneously with this proxy statement.

There are four proposals scheduled to be voted on at the meeting:

In addition, we will consider such other business as may properly come before the meeting.

On or before May 23, 2013, we mailed to our stockholders of record a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access this proxy statement and our 2012 annual report online.

CORPORATE GOVERNANCE

Corporate governance is part of our culture and a guiding principle in our behavior. The Board has adopted Guidelines for Corporate Governance, which require that independent directors comprise a majority of the Board and that the Chairman of the Board be elected from the independent directors. In addition, the Guidelines for Corporate Governance require that each standing committee of the Board be comprised solely of independent directors. Other matters included in the Guidelines for Corporate Governance are Board and director responsibilities, director qualifications, operation of the Board, director compensation, the operation and responsibilities of Board committees and management responsibilities.

The Board has also adopted a Code of Business Conduct and Ethics, which applies to all of our directors, officers and employees. The Board last amended the Code of Business Conduct and Ethics in December 2010. The Board has not granted any waivers to the Code of Business Conduct and Ethics.

The Guidelines for Corporate Governance, the Code of Business Conduct and Ethics and the charters of all the Board committees are accessible on our website under the Corporate Governance section at http://www.harvestnr.com. Any amendments to or waivers of the Code of Conduct and Business Ethics will also be posted on our website.

Board of Directors

General

Our Board is comprised of seven members.

During 2012, the Board held 12 regularly-scheduled and special meetings. The average attendance in 2012 of all directors at Board and committee meetings was 98 percent. None of our directors attended fewer than 93 percent of the aggregate number of the meetings of the committees on which he serves.

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The non-management directors of the Board meet in regularly-scheduled executive sessions without a member of Company management present. The presiding director at all of these meetings is our Chairman of the Board. Each year the Board conducts a self-evaluation as a means to determine its effectiveness.

Leadership Structure

As prescribed by our Bylaws, the Chairman of the Board has the power to preside over all meetings of the Board. Our Board has selected Mr. Stephen D. Chesebro’ to serve as Chairman of the Board. Mr. Chesebro’ has served in this capacity since 2001. The Board has determined that this structure is appropriate for the Company as it allows our Chief Executive Officer (“CEO”) to focus on his position as an advocate for management’s perspective with regard to the Company’s goals while ensuring that the Board, and therefore the Company, is steered by an objective, independent guide. Additionally, the Board believes that this structure fosters dialogue and debate among the directors.

Risk Oversight

The Board considers oversight of the Company’s risk management efforts to be a responsibility of the entire Board. The Board’s role in risk oversight includes receiving regular reports from members of senior management on areas of material risk to the Company or to the success of a particular project or endeavor under consideration, including operational, financial, legal and regulatory, strategic, political and reputational risks. The full Board (or the appropriate committee, in the case of risks that are under the purview of a particular committee) receives these reports from the appropriate members of management to enable the Board (or committee) to understand the Company’s risk identification, risk management and risk mitigation strategies. Following its discussion of these reports, the Board may offer guidance and suggestions to management, but generally will defer to management to implement any risk mitigation strategies. When a report is vetted at the committee level, the chairperson of that committee subsequently reports on the matter to the full Board. This enables the Board and its committees to coordinate the Board’s risk oversight role.

Part of the Audit Committee’s responsibilities, as set forth in its charter, is to discuss with management the major financial risk exposures faced by the Company and the steps management has taken to monitor and control those exposures, including the Company’s risk assessment and risk management policies. In this regard, management identifies for the Audit Committee the material business risks for the Company and identifies the Company’s internal controls that respond to and mitigate those risks. The Company’s management regularly evaluates these controls, and the Audit Committee is provided regular updates regarding the effectiveness of the controls. The Audit Committee regularly reports to the full Board.

Director Independence

Of our seven directors standing for re-election, six have been affirmatively determined by the Board to be independent, including our non-executive Chairman of the Board. The directors our Board has determined to be independent are Stephen D. Chesebro’, Dr. Igor Effimoff, H. H. Hardee, Robert E. Irelan, Patrick M. Murray and J. Michael Stinson. The Board’s determination of independence is based upon the standards set forth in its Guidelines for Corporate Governance, which may be found under the Corporate Governance section on our website at http://www.harvestnr.com. The Guidelines for Corporate Governance include the New York Stock Exchange independence standards. In making its determination of independence, the Board took into account responses of the directors to questions concerning their employment history, compensation, affiliations and family and other relationships.

Communications with the Board

Stockholders and other individuals may contact our Chairman of the Board, or other independent non-management directors, individually or as a group, for any reason, including to make complaints regarding our accounting, internal accounting controls or auditing matters. The Board may be contacted by mail at our principal executive offices or at our website through an e-mail link under the Corporate Governance section at http://www.harvestnr.com. All of the independent directors have approved a process for collecting, organizing and relaying stockholder communications.

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Attendance at Annual Meeting of Stockholders

It is the policy of the Board that, to the extent possible, all directors attend the annual meeting of stockholders. All directors on the Board at the time of the 2012 Annual Meeting of the Stockholders attended the meeting.

Board Committees

The Board has three standing committees: (1) Audit, (2) Human Resources and (3) Nominating and Corporate Governance. The membership at the conclusion of 2012 and the function of each committee are described below.

X = Committee member

The Audit Committee

The Audit Committee assists the Board in its oversight of:

The Audit Committee acts as a liaison between our independent registered public accounting firm and the Board, and it has the sole authority to appoint or replace the independent registered public accounting firm and to approve any non-audit relationship with the independent registered public accounting firm. Our internal auditor and the independent registered public accounting firm report directly to the Audit Committee.

Our Audit Committee has established procedures for our employees or consultants to make a confidential, anonymous complaint or raise a concern over accounting, internal accounting controls or auditing matters concerning us or any of our companies and is responsible for the proper implementation of such procedures. The Audit Committee is also responsible for understanding and assessing our processes and policies for communications with stockholders, institutional investors, analysts and brokers.

The Audit Committee has access to our records and employees, and has the sole authority to retain independent legal, accounting or other advisors for committee matters. We will provide appropriate funding for the payment of the independent registered public accounting firm and any advisors employed by the Audit Committee.

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The Audit Committee makes regular reports to the Board. Each year the Audit Committee assesses the adequacy of its charter and conducts a self-assessment review to determine its effectiveness.

The Board has determined that each member of the Audit Committee meets the independence standards of the Securities and Exchange Commission’s (“SEC”) requirements, the rules of the New York Stock Exchange and the Company Guidelines for Corporate Governance. No member of the Audit Committee serves on the audit committee of more than three public companies. The Board has further determined that each member of the Audit Committee is financially literate and that Mr. Murray qualifies as an audit committee financial expert, as defined in Item 407(d)(5) of SEC Regulation S-K. Information on the relevant experience of Mr. Murray is set forth in the discussion below under Proposal No. 1.

The Audit Committee operates pursuant to a written charter. The charter is accessible in the Corporate Governance section of our website (http://www.harvestnr.com).

The Human Resources Committee

The primary responsibilities of the Human Resources Committee are to:

The Human Resources Committee has the sole authority to retain a consulting firm to assist and advise on committee matters, including the evaluation of director, CEO, officer and employee compensation. In 2012, the Human Resources Committee engaged Frost Human Resource Consulting as its consulting firm on executive and director compensation to benchmark our executive officer compensation levels with similar positions in our industry peer group.

Executive and director compensation is reviewed at least annually by the Human Resources Committee. The Human Resources Committee makes all decisions regarding the compensation of our executive officers, including base salary, performance-based incentive awards and long-term incentive stock awards. Those decisions are submitted to the Board for approval. The Human Resources Committee also makes all decisions on director compensation and submits those decisions to the Board for approval. The compensation consultant to the Human Resources Committee, if requested, makes recommendations as to the form and amount of executive and director compensation. Our CEO makes separate recommendations to the Human Resources Committee on the form and amount of executive compensation for other executive officers. See the “Compensation Discussion and Analysis” section of this proxy statement for information regarding the Human Resources Committee’s processes and procedures for considering and determining executive compensation.

Each year the Human Resources Committee assesses the adequacy of its charter and conducts a self-assessment review to determine its effectiveness.

The Board has determined that each member of the Human Resources Committee meets the independence requirements of the rules of the New York Stock Exchange and the Company Guidelines for Corporate Governance.

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The Human Resources Committee operates pursuant to a written charter. The charter is accessible in the Corporate Governance section of our website (http://www.harvestnr.com).

Human Resources Committee Interlocks and Insider Participation

None of the members of the Board’s Human Resources Committee is or has been an officer or employee of the Company or has a relationship requiring disclosure under Item 404(a) of SEC Regulation S-K. No executive officer of the Company serves on the compensation committee or serves as a director of another entity where an executive officer of that entity also serves on the Human Resources Committee or on the Board.

The Nominating and Corporate Governance Committee

The primary responsibilities of the Nominating and Corporate Governance Committee are to:

Each year the Nominating and Corporate Governance Committee assesses the adequacy of its charter and conducts a self-assessment review to determine its effectiveness.

The Board has determined that each member of the Nominating and Corporate Governance Committee meets the independence requirements of the rules of the New York Stock Exchange and the Company Guidelines for Corporate Governance.

The Nominating and Corporate Governance Committee operates pursuant to a written charter. The charter is accessible in the Corporate Governance section of our website (http://www.harvestnr.com).

The Nominating and Corporate Governance Committee will consider nominations for director proposed by our stockholders if such nominations are submitted within the time limits and in the manner prescribed by applicable rule, law and the Company Bylaws. To be timely, a stockholder’s nomination for director must be delivered to or mailed and received by the Secretary of the Company at our principal executive offices not less than 90 days prior to the anniversary date of the immediately preceding annual meeting (which, for the 2014 annual meeting, would be no later than March 29, 2014). A stockholder’s nomination of a director to the Secretary shall (a) identify the nominee or nominees and provide a brief description of their business experience and background, (b) the name and address of the stockholder as they appear on our books, (c) the class and number of shares that are beneficially owned by such stockholder, (d) any material relationship between the nominee(s) and the stockholder and the Company and (e) contact information of the nominee(s) for follow-up information requests by the Board. In addition, if the stockholder’s ownership of our shares, as set forth in the notice, is solely beneficial, documentary evidence of such ownership must accompany the notice. Please see page 60 for additional information on submitting stockholder proposals.

Under the Board’s Guidelines for Corporate Governance, at least a majority of our directors must be independent, and individuals who are more than seventy-two years old or serve on the board of more than three other publicly-held companies are not eligible to serve on the Board.

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The Nominating and Corporate Governance Committee is responsible for assessing the appropriate mix of skills and characteristics required of members of the Board. Factors the Nominating and Corporate Governance Committee shall consider in identifying and evaluating director nominees include:

The Board and the Nominating and Corporate Governance Committee do not have a formal diversity policy. The Board and the Nominating and Corporate Governance Committee consider candidates that will make the board as a whole reflective of a range of talents, skills, diversity and expertise.

In considering these factors, no distinction is drawn between nominees recruited by or for the Board and nominees recommended by stockholders.

The Nominating and Corporate Governance Committee is responsible for periodically reviewing the size, composition and organization of the Board and recommending to the Board policies, changes and other action it deems advisable. During 2012, the Nominating and Corporate Governance Committee considered adding additional Board members, but determined not to do so.

Director Compensation

Our philosophy in determining director compensation is to align compensation with the long-term interests of the stockholders, adequately compensate the directors for their time and effort and establish an overall compensation package that will attract and retain qualified directors. In determining overall director compensation, we seek to strike the right balance between the cash and stock components of director compensation. The Board’s policy is that the directors should hold equity ownership in the Company and that a portion of the director fees should consist of Company equity in the form of restricted stock and stock grants. The Board also believes that directors should develop a meaningful equity position over time and has adopted stock retention guidelines applicable to all directors. These guidelines state directors must retain (i) at least 50 percent of the shares of restricted stock granted to them for at least three years after the restriction lapses and (ii) at least 50 percent of the net shares of stock received through the exercise of an option or stock appreciation right must be retained by a director for at least three years after the exercise date.

Our retainer and meeting fee schedule remained the same in 2012 as it was in 2011, 2010 and 2009. Each non-employee director of the Company received cash compensation as follows:

Our director compensation includes additional compensation for the non-executive Chairman of the Board in recognition of the significant added responsibilities and time commitments of that position. In addition to his compensation as a director, he receives a retainer of $120,000 a year; this 2012 retainer remained the same as the retainer in 2011 and 2010.

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Under the Harvest Natural Resources 2010 Long Term Incentive Plan, directors are eligible to receive restricted stock, restricted stock units (RSU), stock options and stock appreciation rights (SAR) grants. In May 2012, the Board approved an RSU award of up to $100,000 in value for each director.

The following table sets forth the cash and other compensation paid to the non-employee members of our Board of Directors in 2012.

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PROPOSAL NO. 1

ELECTION OF DIRECTORS

There are seven nominees for election to our Board of Directors this year. Information regarding the business experience of each nominee is provided below. All directors are elected annually to serve until the next annual meeting and until their respective successors are elected.

When considering whether directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board to satisfy its oversight responsibilities effectively in light of the Company’s business and structure, the Nominating and Corporate Governance Committee and the Board focused primarily on the information discussed in each of the directors’ individual biographies set forth below.

In particular, with regard to Messrs. Chesebro’, Edmiston, Irelan and Stinson and Dr. Effimoff, the Nominating and Corporate Governance Committee considered their strong backgrounds in the oil and gas sector, believing that their individual experiences at management levels with large multinational corporations engaged in oil and gas exploration and production are invaluable in evaluating the performance of management and other aspects of the Company. The Nominating and Corporate Governance Committee considered Mr. Murray’s individual experiences at management levels with large multinational corporations engaged in oil and gas services as a valuable complement to the experiences of the other directors. Additionally, the Nominating and Corporate Governance Committee considered the engineering education and experiences of Messrs. Chesebro’, Edmiston, Stinson and Irelan and Dr. Effimoff important to understand the goals and challenges of the Company and to effectively advise the direction of the Company in the oil and gas industry. With respect to Messrs. Hardee and Murray, the Nominating and Corporate Governance Committee considered their significant experience, expertise and background with regard to financials and financial and accounting matters and business management. The Nominating and Corporate Governance Committee also considered the broad perspective brought by Mr. Hardee’s and Dr. Effimoff’s experiences in consulting to clients and, with respect to Messrs. Hardee and Murray, serving in directorships in many diverse industries. The Nominating and Corporate Governance Committee also considered the many years of experience with the Company and in the industry represented by Mr. Edmiston, our CEO. Additionally, with respect to Messrs. Chesebro’, Edmiston, Irelan, Murray and Stinson and Dr. Effimoff, the Nominating and Corporate Governance Committee considered their experience in international business vital to the Company’s global strategy. With respect to Mr. Stinson, the Nominating and Corporate Governance Committee believes that his experience in governmental relations on an international level provides valuable insight to assist management in establishing and maintaining their relationships with foreign governments, which is a primary focus of the Company.

OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION TO THE BOARD OF EACH OF THE FOLLOWING NOMINEES.

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PROPOSAL NO. 2

RATIFICATION OF THE APPOINTMENT OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the Board of Directors has appointed PricewaterhouseCoopers LLP as our independent registered public accounting firm to audit our consolidated financial statements for the fiscal year ending December 31, 2013.

If our stockholders do not ratify the selection, the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers LLP but still may retain them. Even if the selection is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.

OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2013.

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PROPOSAL NO. 3

ADVISORY VOTE ON EXECUTIVE COMPENSATION

As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted in July 2010, we are providing our stockholders with an advisory (non-binding) vote on executive compensation of our named executive officers as disclosed in this proxy statement in accordance with the rules of the SEC. We expect that the next such advisory vote will be held at our annual meeting in 2015.

As discussed in the “Compensation Discussion and Analysis” section of this proxy statement, we believe our compensation philosophy and program is designed to attract, motivate and retain key employees by providing competitive total compensation. The Human Resources Committee has structured our executive compensation program to achieve the following key objectives:

We encourage stockholders to read the “Compensation Discussion and Analysis” beginning on page 33 of this proxy statement, which describes in more detail how our executive compensation program operates and is designed to achieve these compensation objectives, as well as the Summary Compensation Table and other detailed information on the compensation of our named executive officers, starting on page 46.

The Human Resources Committee and the Board of Directors believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our named executive officers reported in this proxy statement has contributed to the Company’s recent and long-term success.

Accordingly, and as a matter of good corporate governance, we are asking our stockholders to vote for the following advisory resolution at the 2013 annual meeting of stockholders:

RESOLVED, that the stockholders of Harvest Natural Resources, Inc. (the “Company”) approve the compensation of the Company’s named executive officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement for the Company’s 2013 annual stockholders meeting.

Because your vote is advisory, it will not be binding upon the Company or the Board of Directors. This means it will not overrule any decision by the Company or the Board of Directors, create or change any fiduciary duties of the Company, the Board of Directors or its Human Resources Committee, or create, reverse or nullify any legal obligation of the Company. However, the Board and the Human Resources Committee will review and consider the voting results when making future decisions regarding our executive compensation program.

Required Vote

A majority of the votes cast is required to approve this Proposal 3.

THE BOARD OF DIRECTORS RECOMMENDS AN ADVISORY VOTE “FOR” THIS PROPOSAL 3.

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EQUITY COMPENSATION PLAN INFORMATION

As of December 31, 2012

A description of our equity compensation plans is included in our Form 10-K filed May 2, 2013, Part IV, Item 15, Notes to the Consolidated Financial Statements, Note 9 – Stock-Based Compensation and Stock Purchase Plans.

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In addition to the outstanding options and SARs listed above, there are a total of 284,750 shares of restricted stock awards that were granted under all plans that are outstanding as of December 31, 2012. Of these full value awards, 280,750 shares were granted under equity plans approved by security holders. There were 4,000 shares awarded as inducement grants and not approved by security holders.

A “ stock unit “ is a right to receive on the Payment Date, after vesting thereof, a cash amount equal to the Fair Market Value of one share of the stock on the Payment Date. At December 31, 2012, the Company had 530,006 stock units outstanding. Stock units were granted on June 18, 2009 and vest one-third each year beginning June 18, 2012. Stock units were also granted to employees on May 17, 2012 and vest on May 17, 2015. Stock units granted to directors on May 17, 2012 vest on May 17, 2013. At the sole discretion of the Company, a stock unit may be settled in cash or with shares of the underlying stock from an approved plan that allows the payment of the stock unit in the medium of stock. This compensation plan was not approved by security holders.

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PROPOSAL NO. 4

APPROVAL OF AMENDMENTS THAT INCREASE THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE FOR ISSUANCE UNDER OUR 2010 LONG TERM INCENTIVE PLAN BY 1,025,000 AND INCREASE THE NUMBER OF SHARES THAT MAY BE GRANTED FOR CERTAIN AWARDS

On March 27, 2013, our Board approved, subject to the approval of the Company’s stockholders, certain amendments to the Company’s 2010 Long Term Incentive Plan (the “2010 Plan”). The amendments (1) increase the number of shares that may be granted during the life of the 2010 Plan by 1,025,000 shares and (2) increase the number of shares that may be granted under the 2010 Plan in the form of Full Value Awards or ISOs. Under this Proposal 4, the Company’s stockholders are being asked to approve these amendments. If Proposal 4 is not approved by the Company’s stockholders, the Company will continue to operate the 2010 Plan pursuant to its current provisions.

Purposes of the 2010 Plan

The 2010 Plan was adopted by the Board and approved by the Company’s stockholders in 2010 as an integral part of the Company’s compensation program. The purpose of the 2010 Plan is to provide incentive opportunities for directors, key employees and key consultants, and to align their personal financial interest with the interests of the Company’s stockholders.

Reasons for and Purpose of the Increase in Shares Available for Grant

In 2010, we positioned the Company to focus on a broadened exploration and development strategy. The Company has taken decisive action to recruit top management talent, control costs, and expand opportunities to grow the business. Our management team as well as key employees for our U.S. and Far East Operations, bring years of experience and knowhow to the Company and they are essential to our long term success.

The Company has historically used stock options as the primarily vehicle for long term incentive compensation. Currently, the Company has only 85,006 shares available to grant within its long term incentive plans (2004, 2006 and 2010) which limits our ability to provide competitive long term compensation.

The Board believes that the proposed amendment to the 2010 Plan will assist us in retaining the directors, officers, and key employees necessary to continue to operate and manage the Company’s remaining operations and motivating them to exert their best efforts on behalf of the Company. The increase in the number of shares available for awards will also ensure that we are able to attract future key employees vital to implementing our future strategy. In addition, we expect that the proposed amendment will further align the interests of the directors, officers, and key employees with that of the stockholders.

As of May 17, 2013, options to purchase 1,124,300 shares of the Company’s common stock and 254,900 restricted shares were outstanding under the 2010 Plan and 6 shares of the Company’s common stock remained available for grants under the 2010 Plan. As of May 17, 2013, a total of 45,000 shares remained available for grant under the 2006 plan and a total of 40,000 shares remained available for grant under the 2004 plan.

The Company is asking stockholders now to increase the number of shares available for grants under the 2010 Plan to a modest level that the Company believes will, on the basis of current assumptions, ensure that enough shares remain available for anticipated issuances under the 2010 Plan until May 31, 2014.

The amendment would increase the number of shares that may be granted during the life of the 2010 Plan by 1,025,000 shares.

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Reasons for and Purpose of the Increase in the Number of Shares That May Be Granted in Certain Awards

Currently, under the 2010 Plan the number of shares that may be granted in the form of Full Value Awards is limited to 500,000 and the number of shares that may be granted in the form ISOs is 1,700,000. The Board believes that the proposed amendments to increase the number of shares that may be granted under the 2010 Plan in the form of Full Value Awards or ISOs will assist us in retaining the directors, officers, and key employees necessary to continue to operate and manage the Company’s remaining operations and motivating them to exert their best efforts on behalf of the Company. The increase in the number of shares available for such awards will also ensure that we are able to attract future key employees vital to implementing our future strategy. In addition, we expect that the proposed amendment will further align the interests of the directors, officers, and key employees with that of the stockholders.

FOR THE FOREGOING REASONS, OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE AMENDMENTS THAT INCREASE THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE FOR ISSUANCE UNDER OUR 2010 LONG TERM INCENTIVE PLAN BY 1,025,000 AND INCREASE THE NUMBER OF SHARES THAT MAY BE GRANTED FOR CERTAIN AWARDS.

2010 Plan Highlights

Some of the highlights of the 2010 Plan include:

In addition, the Board has adopted Stock Retention Guidelines applicable to any awards of stock options, stock appreciation rights paid in stock or full value awards under the 2010 Plan. For a discussion of the Stock Retention Guidelines and other guidelines used by the Board in making grants of stock options, stock appreciation rights and full value awards, see page 33 of the Compensation Discussion and Analysis.

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Amendment of the 2010 Plan Description

Specifically, under this Proposal 4, the Company’s stockholders are being asked to approve amendments to Sections 4.2(a), (b) and (c) of the 2010 Plan such that the provisions would provide in their entirety as follows:

4.2 Dedicated Shares; Maximum Awards.

(a) The aggregate number of shares of Stock with respect to which Awards may be granted under the Plan is 2,725,000.

(b) The aggregate number of shares of Stock with respect to which Full Value Awards (awards of Stock under the Plan which are not Options or SARs) may be granted under the Plan is 700,000.

(c) The aggregate number of shares of Stock with respect to which ISOs may be granted under the Plan is 2,725,000.

Vote Required to Approve the Amendment to the 2010 Plan

Under our bylaws, the affirmative vote of the majority of the shares of common stock present or represented at the meeting and entitled to vote on the matter is required for the approval of the amendments to the 2010 Plan. Accordingly, for purposes of approval under our bylaws, shares abstaining and broker non-votes will have no effect on voting on this proposal. However, for this proposal, the New York Stock Exchange requires not only the approval of a majority of the votes cast on the proposal, but also that the total votes cast on the proposal represent over 50% in interest of all of our common stock outstanding as of the record date. Accordingly, for purposes of approval under applicable rules of the New York Stock Exchange, an abstention would be treated as a vote cast against the proposal and a broker non-vote would not affect the determination of whether a majority of votes were cast to approve the proposal and would also not be counted towards the determination of whether over 50% in interest of all of our common stock outstanding as of the record date was represented by the votes cast.

Summary of the 2010 Plan

The following is a summary of the material terms of the 2010 Plan as proposed to be amended by Proposal 4 and is qualified in its entirety by reference to the 2010 Plan. The description of the 2010 Plan contained herein is not intended to be complete and is qualified in its entirety by reference to the complete text of the 2010 Plan. If our stockholders do not approve Proposal 4, the Company will continue to operate the 2010 Plan pursuant to its current provisions.

Purpose

The 2010 Plan is intended to advance the best interests of the Company, its affiliates and its stockholders by providing those persons who have substantial responsibility for the management and growth of the Company and its affiliates with additional performance incentives and an opportunity to obtain or increase their proprietary interest in the Company, thereby encouraging them to continue in their employment or affiliation with the Company or its affiliates.

Term

The 2010 Plan became effective upon stockholder approval and will continue indefinitely until it is terminated. However, no ISOs may be granted under the 2010 Plan on or after the tenth anniversary of the effective date of the 2010 Plan. The 2010 was approved by our stockholders on May 20, 2010.

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Administration

The Human Resources Committee is responsible for administering the 2010 Plan and has the discretionary power to interpret the terms and intent of the 2010 Plan and any 2010 Plan-related documentation, to determine eligibility for awards and the terms and conditions of awards, and to adopt rules, regulations, forms, instruments, and guidelines. Determinations of the Human Resources Committee made under the 2010 Plan are final and binding. The Human Resources Committee may delegate administrative duties and powers to one or more of its members or to one or more officers, agents, or advisors. The Human Resources Committee may also delegate to one or more Company officers the power to designate other employees (other than officers subject to Section 16 of the Securities Exchange Act of 1934, as amended) and third party service providers to be recipients of awards.

Eligibility

Employees and directors of the Company and its subsidiaries who are selected by the Human Resources Committee are eligible to receive awards under the 2010 Plan. There are currently approximately thirty one (31) employees and six (6) directors eligible to receive awards under the 2010 Plan. Consultants who, in the judgment of the Human Resources Committee, may make key contributions to the profitability and growth of the Company are also eligible to receive awards under the 2010 Plan.

Plan Share Limits

The maximum number of shares of common stock issuable under the 2010 Plan, without giving effect to the amendments contemplated by Proposal 4, is 1,700,000 shares, of which no more than 500,000 can be granted as awards other than stock options or SARs that are settled by the issuance of shares of Company stock.

Shares which terminate by expiration, forfeiture, cancellation, or otherwise, are settled in cash in lieu of shares, or exchanged for awards not involving shares, shall again be available for grant.

Participant Award Limits

The 2010 Plan also imposes annual per-participant award limits for employees and executives. The annual per-participant limits are as follows:

The number and kind of shares that may be issued, the number and kind of shares subject to outstanding awards, the option price or grant price applicable to outstanding awards, the annual per-participant award limits, and other value determinations are subject to adjustment by the Human Resources Committee to reflect stock dividends, stock splits, reverse stock splits, and other corporate events or transactions, including without limitation, distributions of stock or property other than normal cash dividends. The Human Resources Committee may also make adjustments to reflect unusual or nonrecurring events.

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Burn Rate

The Company has followed a responsible approach to equity based compensation in the past. As shown in the following table, the Company’s three year annual adjusted burn rate is 3.17%, well below the ISS burn rate cap of 4.57%.

Types of Awards

The 2010 Plan provides that the Human Resources Committee may grant awards of various types, each of which will be evidenced by an award agreement. A description of each of the types of awards follows.

Stock Options

The Human Resources Committee may grant both incentive stock options (“ISOs”) and nonqualified stock options (“NSOs”) under the 2010 Plan. Eligibility for ISOs is limited to employees of the Company and its subsidiaries.

The exercise price for options cannot be less than 100% of the fair market value of the Company’s common stock on the date the option is granted. The price for shares under an ISO may not be less than 110% of the fair market value of the Company’s common stock on the date the ISO is granted if the recipient holds more than 10% of the Company’s outstanding common stock on such date. “Fair market value” under the 2010 Plan is calculated as the closing price at which the Company’s common stock has been sold on the applicable date as reported by the New York Stock Exchange Composite Transactions. The Human Resources Committee will determine the period during which an option may be exercised, provided that the latest expiration date cannot be later than the fifth anniversary of the date of grant. In the case of an ISO granted to a recipient who holds more than 10% of the Company’s outstanding common stock on such grant date, the ISO will expire on the fifth anniversary of the date the ISO is granted.

The exercise price may be paid with cash or its equivalent, with previously acquired shares of common stock of the Company, or by other means approved by the Human Resources Committee, including by means of a broker-assisted exercise.

Stock Appreciation Rights

The Human Resources Committee may grant stock appreciation rights (“SARs”) under the 2010 Plan either alone or in tandem with stock options. The grant price of a freestanding SAR cannot be less than the fair market value of the common stock on the date of grant. The grant price of a SAR granted in tandem with a stock option will be the same as the option price of the tandem option. The Human Resources Committee will determine the period during which a SAR may be exercised, provided that SARs cannot be exercised later than the fifth anniversary of the date of grant.

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Freestanding SARs may be exercised on such terms as the Human Resources Committee determines and tandem SARs may be exercised by relinquishing the related portion of the tandem option. Upon exercise of a SAR, the holder will receive from the Company shares of common stock, cash, or a combination of shares and cash, as determined by the Human Resources Committee, equal in value to the difference between the fair market value of the common stock subject to the SAR, determined as described above, and the grant price.

Restricted Stock and Restricted Stock Units

The Human Resources Committee may award restricted stock and restricted stock units. Restricted stock awards consist of shares of the Company’s common stock that are transferred to the participant subject to restrictions that may result in forfeiture of the recipient’s rights to the transferred common stock if specified conditions are not satisfied.

Restricted stock unit awards are awards whose value is determined with reference to a shares of the Company’s common stock. The value of each restricted stock unit will be equal to the fair market value of the Company’s common stock. At the time of grant, the recipient of the restricted stock unit award does not receive a transfer of shares of the Company’s common stock. After the recipient’s rights under the restricted stock unit award vests, the recipient will be entitled to payment under the award which may be paid in cash or shares of the Company’s common stock.

A holder of restricted stock is treated as a current stockholder and is entitled to dividend and voting rights, whereas the holder of a restricted stock unit award is treated as a stockholder with respect to the award only when, and if, shares of common stock are delivered under the award in the future. The Human Resources Committee will determine the restrictions and conditions applicable to each award of restricted stock or restricted stock units.

Performance Awards

The Human Resources Committee may grant performance awards subject to the fulfillment of conditions and the attainment of performance goals over such periods as the Human Resources Committee determines in writing and sets forth in a written award agreement between the Company and the participant; provided however, that the performance period for any performance award will not be less than one year. A committee comprised solely of “outside directors” under section 162(m) of the Internal Revenue Code must grant performance awards, and “Committee” as used in this section shall mean this committee.

Performance awards may be either performance shares or performance units. Performance shares are similar to restricted stock awards, except that vesting of the award is determined by reference to an acceptable performance criteria. Performance units are similar to restricted stock units and are unfunded bookkeeping entries generally having initial values equal to the fair market value of a share of the Company’s common stock determined on the grant date. Performance awards specify a predetermined amount of performance shares or performance units that may be earned by the participant to the extent that one or more predetermined performance goals are attained within the predetermined performance period. To the extent earned, performance awards may be settled in cash, shares of common stock or a combination thereof.

Prior to the start of the applicable performance period, or as permitted pursuant to Section 162(m) of the Internal Revenue Code, the Committee establishes one or more performance goals applicable to the award. Performance goals are based on the attainment of specified target levels with respect to one or more selected measures of business or financial performance. The performance goals may vary from participant to participant, group to group, and period to period. The performance goals for performance unit and performance share awards and any other awards granted under the Plan that are intended to constitute “qualified performance-based compensation” will be based upon, but not limited to, one or more of the following:

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The Committee will determine whether the performance targets or goals that have been chosen for a particular performance award have been met and may provide in an award that any evaluation of performance may include or exclude any of the following that are objectively determinable and that occur during the performance period to which the award is subject: asset write-downs, litigation, claims, judgments, or settlements; the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reporting results; any reorganization and restructuring programs; extraordinary nonrecurring items as described in ASC 225-20 Extraordinary and Unusual Items and/or in management’s discussion of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year; acquisitions or divestitures; and foreign exchange gains and losses.

Awards that are designed to qualify as performance-based compensation may not be adjusted upward. However, the Committee has the discretion to adjust these awards downward. In addition, the Committee has the discretion to make awards that do not qualify as performance-based compensation. Generally, awards may be paid in the form of cash, shares of common stock, or in any combination, as determined by the Committee.

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Substitution Awards

The Human Resources Committee may grant awards under the 2010 Plan in substitution for stock options and other awards held by employees and directors of other entities who are about to become employees or affiliated with the Company or any of its affiliates, or whose employer or corporation with respect to which it provides services is about to become an affiliate as the result of a merger or consolidation of the Company with another corporation, or the acquisition by the Company of substantially all the assets of another corporation, or the acquisition by the Company of at least fifty percent (50%) of the issued and outstanding stock of another corporation as the result of which such other corporation will become a subsidiary of the Company. The terms and conditions of such substitute awards may vary from the requirements in the 2010 Plan to the extent the Board deems appropriate to conform, in whole or in part, to the provisions of the award in substitution for which they are granted.

Cash-Based Awards

The Human Resources Committee may grant cash-based awards. The terms and conditions, including whether the vesting of such awards is dependent upon the achievement of specific performance goals, of each cash-based award shall be determined by the Human Resources Committee. Payment under any cash-based award will be made in cash.

Other Stock-Based Awards

The Human Resources Committee may grant equity-based or equity-related awards, referred to as “other stock-based awards,” other than options, SARs, restricted stock, restricted stock units, or performance shares. The terms and conditions of each other stock-based award shall be determined by the Human Resources Committee. Payment under any other stock-based awards will be made in common stock or cash, as determined by the Human Resources Committee.

Nonemployee Director Awards

The 2010 Plan can also be used to grant equity awards to nonemployee directors, so that they too will develop a sense of proprietorship and personal involvement in the development and financial success of the Company and so that their interests will be more aligned with those of the Company’s stockholders.

Nonemployee directors can be granted any of the awards available under the 2010 Plan, except incentive stock options which are only available for employees. The Board shall from time to time determine the nature and number of awards to be granted to nonemployee directors.

Adjustments and Other Amendment Provisions

Termination of Employment

The Human Resources Committee will determine how each award will be treated following termination of the holder’s employment with or service for the Company, including the extent to which unvested portions of the award will be forfeited and the extent to which options, SARs, or other awards requiring exercise will remain exercisable.

Treatment of Awards upon a Change of Control and Related Transactions

The existence of outstanding awards under the 2010 Plan will not affect in any way the Company’s right or power, or the right or power of the Company’s stockholders, to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company’s capital structure or business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference shares ahead of or affecting the Company’s common stock or stock rights, the dissolution or liquidation of the Company, or any sale or transfer of all or any part of the Company’s assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

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The Company’s issuance of stock of any class or series, or securities convertible into, or exchangeable for, stock of any class or series, for cash or property, or for labor or services either upon direct sale or upon the exercise of rights or warrants to subscribe for them, or upon conversion or exchange of stock or obligations of the Company convertible into, or exchangeable for, stock or other securities, shall not affect, and no adjustment by reason of such issuance shall be made with respect to, the number or price of shares of the Company’s common stock then subject to outstanding options or other awards.

If the Company shall effect a capital readjustment or any increase or reduction of the number of shares of the Company’s common stock outstanding, without receiving compensation therefore in money, services or property, then:

(a) the number and per share price of the Company’s common stock subject to outstanding awards under the 2010 Plan shall be appropriately adjusted as to entitle a holder of an award under the 2010 Plan to receive upon exercise of the award, for the same aggregate cash consideration, the equivalent total number of the Company’s common stock the holder would have received had the holder exercised his or her award in full immediately prior to the event requiring the adjustment, and

(b) the number of the Company’s common stock then reserved to be issued under the 2010 Plan shall be adjusted.

If, while unexercised, awards remain outstanding under the 2010 Plan:

(a) the Company shall not be the surviving entity in any merger, consolidation or other reorganization (or survives only as a subsidiary of an entity other than an entity that was wholly-owned by the Company immediately prior to such merger, consolidation or other reorganization),

(b) the Company sells, leases or exchanges or agrees to sell, lease or exchange all or substantially all of its assets to any other person or entity (other than an entity wholly-owned by the Company),

(c) the Company is to be dissolved, or

(d) the Company is a party to any other corporate transaction (as defined under Section 424(a) of the Internal Revenue Code and applicable Department of Treasury regulations) that is not described in clauses (a), (b) or (c) of this sentence (each such event is referred to herein as a “Corporate Change”),

then, except as otherwise provided in an award agreement or other agreement between the holder of the award and the Company (provided that such exceptions shall not apply in the case of a reincorporation merger), or as a result of the Human Resources Committee’s effectuation of one or more of the alternatives described in the next paragraph below, there shall be no acceleration of the time at which any award then outstanding may be exercised.

No later than 10 days after the approval by the Company’s stockholders of such Corporate Change, the Human Resources Committee, acting in its sole and absolute discretion, shall act to effect one or more of the following alternatives, which may be effective no earlier than the date of such Corporate Change, which may vary among individual holders of awards granted under the 2010 Plan and which may vary among awards held by any individual holder of an award granted under the 2010 Plan:

(1) accelerate the time on or after a Corporate Change at which some or all of the awards then outstanding may be exercised, after which all such awards that remain unexercised and all rights of holders of awards thereunder shall terminate;

(2) require the mandatory surrender to the Company by all or selected holders of awards granted under the 2010 Plan of some or all of the then outstanding awards held by such holders as of a date, on or after such Corporate Change, in which event the Committee shall thereupon cancel such award and the Company shall pay to each such holder an amount of cash per share equal to the excess, if any, of the per share price offered to stockholders of the Company in connection with such Corporate Change over the exercise prices under such award for such shares;

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(3) with respect to all or selected holders of awards granted under the 2010 Plan, have some or all of their then outstanding awards assumed or have a new award of a similar nature substituted for some or all of their then outstanding awards under the 2010 Plan by an entity which is a party to the transaction resulting in such Corporate Change and which is then employing such holder or which is affiliated or associated with such holder in the same or a substantially similar manner as the Company prior to the Corporate Change, or a parent or subsidiary of such entity, provided that (A) such assumption or substitution is on a basis where the excess of the aggregate fair market value of the Company’s common stock subject to the award immediately after the assumption or substitution over the aggregate exercise price of such common stock is equal to the excess of the aggregate fair market value of all common stock subject to the award immediately before such assumption or substitution over the aggregate exercise price of such common stock, and (B) the assumed rights or the substituted rights will have the same terms and conditions as the rights under the existing award assumed or substituted for;

(4) provide that the number and class or series of common stock covered by an award shall be adjusted so that such award when exercised shall thereafter cover the number and class or series of common stock or other securities or other awards (including, without limitation, cash) to which the holder of such award would have been entitled pursuant to the terms of the agreement or plan relating to such Corporate Change if, immediately prior to such Corporate Change, the holder of such award had been the holder of record of the number of shares of the Company’s common stock then covered by such award; or

(5) make such adjustments to awards then outstanding as the Committee deems appropriate to reflect such Corporate Change.

If the Human Resources Committee chooses to effect one or more of the alternatives set out in paragraphs (3), (4) or (5) above, it may, in its sole and absolute discretion and without the consent or approval of any holder of an award granted under the 2010 Plan, accelerate the time at which some or all awards then outstanding may be exercised to a date on or after such Corporate Change. With respect to a reincorporation merger in which holders of the Company’s ordinary shares will receive one ordinary share of the successor corporation for each ordinary share of the Company, none of the alternatives set forth above shall apply and, without Human Resources Committee action, each award shall automatically convert into a similar award of the successor corporation exercisable for the same number of ordinary shares of the successor as the award was exercisable for ordinary shares of stock of the Company. In the event of changes in the Company’s outstanding common stock by reason of recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges or other relevant changes in capitalization occurring after the date of the grant of any award and not otherwise provided for above, any outstanding award and any award agreements evidencing such award shall be subject to adjustment by the Human Resources Committee in its sole and absolute discretion as to the number and price of the Company’s common stock or other consideration subject to such award. In the event of any such change in the Company’s outstanding common stock, the aggregate number of shares of common stock available under the 2010 Plan may be appropriately adjusted by the Human Resources Committee.

After a merger of one or more corporations into the Company or after a consolidation of the Company and one or more corporations in which the Company shall be the surviving corporation, each holder of a restricted stock or performance stock award granted under the 2010 Plan shall be entitled to have his award appropriately adjusted based on the manner in which the shares of the Company’s common stock were adjusted under the terms of the agreement of merger or consolidation.

Amendment of Awards or Plan and Adjustment of Awards

The Human Resources Committee may at any time alter, amend, modify, suspend, or terminate the 2010 Plan or any outstanding award in whole or in part. No amendment of the 2010 Plan will be made without stockholder approval if stockholder approval is required by law. No amendment to an award agreement may adversely affect the rights of any participant without his or her consent under an outstanding award, unless specifically provided for in the 2010 Plan.

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Additional Provisions

Neither ISOs nor, except as the Human Resources Committee otherwise expressly determines, other awards may be transferred other than by will or by the laws of descent and distribution. During a recipient’s lifetime, an ISO and, except as the Human Resources Committee may determine, other non-transferable awards requiring exercise, may be exercised only by the recipient.

Notwithstanding any other provision in the Plan or an award agreement, if the Human Resources Committee finds by a majority vote that a holder committed certain “bad acts” then some or all of the holder’s awards and net proceeds realized with respect to any such awards, will be forfeited on such terms as determined by the Human Resources Committee. For purposes of this provision, “bad acts” include: (a) commission of fraud, embezzlement, theft, felony or an act of dishonesty in the course of employment by or affiliation with the Company or an affiliate which conduct damaged the Company or affiliate, (b) disclosure of trade secrets of the Company or an affiliate, or (c) violation of the terms of any non-competition, non-disclosure or similar agreement with respect to the Company or any affiliate to which the holder is a party.

If provided in the award agreement, a participant’s rights to an award may be subject to a participant agreeing to not compete with the Company or any of its subsidiaries, and to not solicit away the Company’s business or employees. In addition, participants may be subject to nondisclosure and nondisparagement requirements. A breach of these restrictions may result in cancellation of awards or the recovery by the Company of gain realized under an award.

If the Company pays the holder with stock, the holder will not have any rights as a stockholder with respect to stock covered by an option, a SAR, a restricted stock unit or a performance award until the stock is issued by the Company.

New Plan Benefits

The future benefits or amounts that would be received under the 2010 Plan by executive officers, nonemployee directors and nonexecutive officer employees are discretionary and are therefore not determinable at this time. In addition, the benefits or amounts that would have been received by or allocated to such persons for the last completed fiscal year if the Plan had been in effect cannot be determined.

Federal Income Tax Consequences

The following discussion summarizes certain federal income tax consequences of the issuance and receipt of awards under the 2010 Plan under the law as in effect on the date of this proxy statement. The summary does not purport to cover all federal employment tax or other federal tax consequences that may be associated with the 2010 Plan, nor does it cover state, local, or non-U.S. taxes.

The federal income tax consequences applicable to the Company in connection with awards under the 2010 Plan are complex and depend, in large part, on the surrounding facts and circumstances. Under current federal income tax laws, a participant will generally recognize income with respect to grants of awards under the 2010 Plan as follows.

Incentive Stock Options.

When the Human Resources Committee grants an employee an Incentive Stock Option to purchase shares of Common Stock under the 2010 Plan, the employee will not be required to recognize any U.S. federal taxable income as a result of the grant or as a result of the employee’s exercise of the Incentive Stock Option; however, the difference between the exercise price and the fair market value of the shares of Common Stock at the time of exercise is an item of tax preference that may require payment of an alternative minimum tax. On the sale of the shares acquired through exercise of an Incentive Stock Option (assuming such sale does not occur within two years of the date of grant of the option or within one year from the date of exercise), any gain (or loss) will be taxed as long term capital gain (or loss) and the Company will not be entitled to any deduction in connection with the sale (or

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the grant or exercise) of the Incentive Stock Option. With respect to a sale of shares that occurs after the later of two years from the date of grant and one year from the date of exercise, the tax basis of the shares for the purpose of a subsequent sale includes the option price paid for the shares.

However, if the employee sells the shares acquired upon exercise of an Incentive Stock Option before the later of (i) two years from the date of grant and (ii) one year from the date of exercise, the employee will be treated as having received, at the time of sale, compensation taxable as ordinary income, and the Company will be entitled to a corresponding deduction. The amount treated as compensation income is the excess of the fair market value of the shares at the time of exercise over the exercise price, and any amount realized in excess of the fair market value of the shares at the time of exercise would be treated as long or short term capital gain, depending on how long such shares were held. With respect to a sale of shares that occurs before the later of two years from the date of grant and one year from the date of exercise, the tax basis of the shares for the purpose of a subsequent sale includes the option price paid for the shares and the compensation income reported at the time of sale of the shares.

Nonqualified Stock Options.

When the Human Resources Committee grants a Nonqualified Stock Option to purchase shares of Common Stock under the 2010 Plan, the recipient will not be required to recognize any U.S. federal taxable income as a result of the grant. However, the recipient will be required to recognize ordinary income on the date the recipient exercises the Nonqualified Stock Option. Generally, the measure of the income will be equal to the difference between the fair market value of the shares of Common Stock acquired on the date the shares are acquired and the option price. The tax basis of the shares acquired on exercise of the Nonqualified Stock Option for the purpose of a subsequent sale includes the option price paid and the ordinary income reported on exercise of the Nonqualified Stock Option. The income reportable on exercise of the Nonqualified Stock Option by an employee is subject to federal tax withholding. Generally, the Company will be entitled to a deduction in the amount reportable as income by the recipient on the exercise of a Nonqualified Stock Option. Generally, the Company will be entitled to a deduction in the amount reportable as income by the recipient on the exercise of a Nonqualified Stock Option.

Stock Appreciation Rights.

The grant of a SAR under the 2010 Plan generally will not result in the recognition of any U.S. federal taxable income by the recipient or a deduction for the Company at the time of grant. However, the recipient will be required to recognize ordinary income on the date the recipient exercises the SAR. Generally, the measure of the income will be equal to the amount realized on exercise of the SAR. The income reportable on exercise of the SAR by an employee is subject to federal tax withholding. Generally, the Company will be entitled to a deduction in the amount reportable as income by the recipient on the exercise of a SAR.

Restricted Stock Awards.

The grant of a Restricted Stock Award under the 2010 Plan generally will not result in the recognition of any U.S. federal taxable income by the recipient or a deduction for the Company, at the time of grant unless the recipient timely makes an election under section 83(b) of the Internal Revenue Code. Upon the expiration of the forfeiture restrictions applicable to the Restricted Stock Award (i.e., as the shares become vested), the recipient will recognize ordinary income in an amount equal to the excess of the fair market value of those shares at that time over the amount (if any) the recipient paid for the shares. The income realized by an employee is subject to federal tax withholding. The Company will be entitled to a deduction in the amount and at the time the recipient recognizes income. If an election under Section 83(b) of the Internal Revenue Code has not been made, any dividends received with respect to any Restricted Stock Award that are not vested (i.e., the forfeiture restrictions have not yet lapsed) generally will be treated as compensation that is taxable as ordinary income to the recipient and the Company will be entitled to a corresponding deduction. With respect to any Restricted Stock Award that is vested (i.e., the forfeiture restrictions have lapsed), the recipient will be taxed on any dividends on such shares as the dividends are paid to the recipient and the Company will not be entitled to deductions with respect to the dividends.

If the recipient of the Restricted Stock Award makes an election under Section 83(b) of the Internal Revenue Code within 30 days of the date of transfer of the restricted shares awarded under the Restricted Stock Award, the recipient will recognize ordinary income on the date the shares are awarded. The amount of ordinary

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income required to be recognized is an amount equal to the excess, if any, of the fair market value of the shares on the date of award over the amount, if any, paid for such shares. In such case, the recipient will not be required to recognize additional ordinary income when the shares vest. However, if the shares are later forfeited, a loss can only be recognized up to the amount the individual paid, if any, for the shares of Common Stock.

Restricted Stock Unit Awards.

The grant of a restricted stock unit award under the 2010 Plan generally will not result in the recognition of any U.S. federal taxable income by the recipient or a deduction for the Company at the time of grant. At the time a restricted stock unit award vests the recipient will recognize ordinary income and the Company will be entitled to a corresponding deduction. Generally, the measure of the income and deduction will be the excess of the fair market value of the Common Stock at the time the restricted stock unit is settled over the fair market value of the Common Stock at the time the restricted stock unit was granted.

Performance Stock and Performance Unit Awards.

Performance stock awards granted under the 2010 Plan generally have the same tax consequences as Restricted Stock Awards as discussed above (except that the compensation deduction limitation described below generally will not apply). A recipient of a performance unit award under the 2010 Plan generally will not realize U.S. federal taxable income at the time of grant of the award, and the Company will not be entitled to a deduction at that time with respect to the award. When the performance goals applicable to the performance unit award are attained and amounts are due under the award, the holder of the award will be treated as receiving compensation taxable as ordinary income, and the Company will be entitled to a corresponding deduction.

Cash-Based Awards and Other Stock-Based Awards.

The grant of a cash-based award under the 2010 Plan generally will not result in the recognition of any U.S. federal taxable income by the recipient or a deduction for the Company at the time of grant. At the time a cash-based award is settled in cash, the recipient will recognize ordinary income and the Company will be entitled to a corresponding deduction. Generally the measure of the income and deduction will be the amount of cash received by the recipient of the award at the time the cash-based award is settled. Other stock-based awards granted under the 2010 Plan generally have the same tax consequences as restricted stock unit awards.

Compensation Deduction Limitation.

Under section 162(m) of the Internal Revenue Code, the Company’s federal income tax deductions for certain compensation paid to designated executives is limited to $1 million per year. These executives include the Company’s Chief Executive Officer and the next three highest compensated officers. Section 162(m) of the Internal Revenue Code provides an exception to this limitation for certain “performance based” compensation approved by a committee consisting solely of at least two “outside directors”. The Company believes that stock options, SARs and performance based awards granted under the 2010 Plan generally should qualify as performance based compensation for purposes of section 162(m) of the Internal Revenue Code.

Compliance with Section 409A.

Awards granted under the 2010 Plan shall be designed, granted and administered in such a manner that they are either exempt from the application of, or comply with, the requirements of section 409A of the Internal Revenue Code and the Department of Treasury rules and regulations issued thereunder (collectively, “Section 409A”). If the Human Resources Committee determines that an award granted under the 2010 Plan, payment, distribution, deferral election, transaction, or any other action or arrangement contemplated by the provisions of the 2010 Plan would, if undertaken, cause a holder of an award to become subject to additional taxes under Section 409A, then unless the Human Resources Committee specifically provides otherwise, such award, payment, distribution, deferral election, transaction or other action or arrangement shall not be given effect to the extent it causes such result and the related provisions of the 2010 Plan and/or award agreement for the award will be deemed modified, or, if necessary, suspended in order to comply with the requirements of Section 409A to the extent determined appropriate by the

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Human Resources Committee, in each case without the consent of or notice to holder of the award. The period of exercisability of an option or a SAR shall not be extended to the extent that such extension would subject holder of that option or SAR to additional taxes under Section 409A.

Other Information

The 2010 Plan became effective on May 20, 2010. The 2010 Plan shall continue indefinitely unless terminated sooner by the Human Resources Committee.

The 2010 Plan provides that an award may not be transferred except in the event of the employee’s death or unless otherwise required by law. Other terms and conditions of each award will be set forth in award agreements, which can be amended by the Human Resources Committee. Awards under the 2010 Plan may earn dividends or dividend equivalents, as determined by the Human Resources Committee.

It is presently intended that the 2010 Plan constitute an “unfunded” plan for incentive and deferred compensation.

On May 13, 2013, the closing price of the common stock as reported in The Wall Street Journal on the New York Stock Exchange-Composite Transactions was $2.94.

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EXECUTIVE OFFICERS

The following table provides information regarding each of our executive officers.

Stephen C. Haynes has served as our Vice President, Chief Financial Officer and Treasurer since May 19, 2008. Mr. Haynes performed various financial consulting engagements from January 1, 2008 until his appointment with Harvest. Previously, he served as Chief Financial Officer for Cygnus Oil and Gas Corporation for the period February 1, 2006 through December 31, 2007. Before joining Cygnus, Mr. Haynes was the Corporate Controller with Carrizo Oil and Gas for the period January 1, 2005 through January 31, 2006. Mr. Haynes served as an independent consultant from March 2001 through end of 2004. From March 1990 through December 2000, Mr. Haynes served in a series of increasing responsibilities in international managerial and executive positions with British Gas, culminating in his appointments as Vice President-Finance of Atlantic LNG, a joint venture of British Gas and several industry partners in Trinidad and Tobago. Mr. Haynes is a Certified Public Accountant, holds a Master of Business Administration degree with a concentration in Finance from the University of Houston and a Bachelor of Business Administration degree in Accounting from Sam Houston State University. He also attended the Executive Development Program at Harvard University.

Keith L. Head has served as our Vice President, General Counsel and Corporate Secretary since May 7, 2007. He joined Texas Eastern upon graduation from law school and remained with the same organization through mergers with Panhandle Eastern, Duke Energy Corporation and Cinergy Corp. Mr. Head held various business development positions with Duke Energy Corporation from 1995 to 2001. His corporate development work included the identification, evaluation and negotiation of acquisitions in Latin America, North America and the United Kingdom. Mr. Head was Senior Vice President and General Counsel at Duke Energy North America from 2001 to 2004 and Associate General Counsel of Duke Energy Corporation from 2004 through December 2006. After leaving Duke Energy, Mr. Head joined Harvest in May 2007. He currently serves on two non-profit boards: MentorCONNECT and the Texas Accountants and Lawyers for the Arts. He is also a board member of the Houston chapter of The General Counsel Forum. Mr. Head holds a Bachelor of Science degree in Business Administration from the University of North Carolina. He received both a Juris Doctorate and Masters in Business Administration from the University of Texas in 1983.

Karl L. Nesselrode has served as Vice President, Engineering and Business Development of the Company since November 17, 2003. From August 9, 2007 to August 2, 2010, he accepted a long-term secondment to Petrodelta as its Operations and Technical Manager while remaining an officer of Harvest. From February 2002 until November 2003, Mr. Nesselrode was President of Reserve Insights, LLC, a strategy and management consulting company for oil and gas. He was employed with Anadarko Petroleum Corporation as Manager Minerals and Special Projects from July 2000 to February 2002. Mr. Nesselrode served in various managerial positions with Union Pacific Resources Company from August 1979 to July 2000. Mr. Nesselrode earned a Bachelor of Science in Petroleum Engineering from the University of Tulsa in 1979 and completed Harvard Business School Program for Management Development in 1995.

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Robert Speirs has served as Senior Vice President, Eastern Operations since July of 2011. Prior to his promotion, his title had been Vice President, Eastern Operations since December 6, 2007. He joined Harvest in June 2006 as President and General Manager, Russia. Previously Mr. Speirs was President of Marathon Petroleum Russia and General Director of their wholly-owned subsidiary, KhantyMansciskNefte Gas Geologia from March 2004 through May 2006. Prior to joining Marathon, Mr. Speirs was Executive Vice President of YUKOS EP responsible for engineering and construction from June 2001. During both these periods, Mr. Speirs spent considerable time in West Siberia where he oversaw substantial increases in production at both companies. From November 1997 until March 2001, Mr. Speirs resided in Jakarta where he served as President of Premier Oil Indonesia. During this period, Premier was active in all phases of the Upstream business, culminating in the commissioning of the West Natuna Gas Project. Prior to 1997, Mr. Speirs was with Conoco for 21 years in various leadership positions in the US, UK, Russia, Indonesia, Singapore and Dubai, UAE. Mr. Speirs earned a Bachelor of Science degree with Honors in Engineering Science from the University of Edinburgh. He also attended the Executive Management Program at INSEAD.

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COMPENSATION DISCUSSION AND ANALYSIS

Introduction

Harvest’s Compensation Discussion and Analysis describes the Company’s compensation program for the executive officers identified in the Summary Compensation Table. Throughout this proxy statement we refer to these individuals as “named executive officers.” They are James A. Edmiston, President and CEO; Stephen C. Haynes, Vice President, Chief Financial Officer and Treasurer; Robert Speirs, Senior Vice President – Eastern Operations; Karl L. Nesselrode, Vice President – Engineering & Business Development; and Keith L. Head, Vice President – General Counsel and Corporate Secretary.

Summary of Executive Compensation Decisions Made in 2012/2013

During 2012, our executive compensation decisions included:

During 2013, our executive compensation decisions included:

Company Overview and Compensation Objectives

As a Company, our focus is on acquiring exploration, development, and producing properties in proven and active hydrocarbon systems. We operate from our Houston, Texas headquarters with regional/technical offices in the United Kingdom and Singapore and field offices in Jakarta, Indonesia; Port Gentil, Gabon; and Muscat, Oman.

In 2012, we achieved the following results:

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The following graphs highlight the Company results for 2012:

Note: Annual Net Production and Net Proved and Probable Reserves for 2010 include production and reserves from the Utah asset which were sold in 2011. (MBOE = Thousand Barrels of Oil Equivalent)

The HR Committee has the discretion to exercise their judgment in weighing the achievement of specific performance measures. For 2012, it considered total shareholder return, reserves, social responsibility/governance and safety as well as strategic individual objectives for the named executive officers. Total shareholder return (“TSR”) was up 22.9% in 2012 and the Company remained in the top quartile of its Peer Group over a three-year period from 2010—2012. Proved and probable reserves were down slightly by 4% from the prior year. We calculate TSR as year-end share price minus beginning year share price divided by beginning year share price. Annual net production in 2012 was up 14% over the prior year. Companywide health and safety programs were implemented in 2012. There were no Foreign Corrupt Practices Act (“FCPA”) incidents in 2012. Ethics and compliance guidelines were revised in 2012, and there was one contractor lost time accident in 2012. Given the operational and technical challenges faced by the Company, the Committee determined that the management team effectively managed the exploration assets we controlled and operated during the year.

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Compensation Philosophy

Our compensation philosophy is to offer a competitive total compensation package to enable us to attract, motivate and retain key executives. Our compensation objectives include:

The HR Committee oversees the development and execution of our compensation program. The HR Committee annually reviews our compensation philosophy and tests its ability to promote meeting the objectives stated above. The HR Committee recommends compensation for the named executive officers, short-term cash bonuses, long-term cash and non-cash compensation and submits its recommendations to the Board for approval. Three independent directors comprise the HR Committee. The HR Committee meets as needed, but no less than quarterly to review compensation and benefit programs with management. It subsequently approves any changes. Our Human Resources, Accounting and Legal Department employees handle the day-to-day design and administration of employee compensation and benefit programs available to our employees.

Say-on-Pay Results

We hold our Say-on-Pay vote every other year. At our May 20, 2011 annual stockholders meeting, Harvest received strong support for the 2011 compensation program from over 90% of the stockholders eligible to vote. This year, we will hold our second Say-on Pay vote at our June 27, 2013 annual stockholders meeting (See Proposal #3). The Committee continues to evaluate our programs and the environment in which we operate to assess whether improvements are needed.

Setting Executive Compensation

Our compensation program consists of several forms of compensation: base salary, annual performance-based incentive awards, long-term incentives and personal benefits. Base salary and annual performance-based incentive awards are generally cash-based. Long-term incentives typically consist of stock options, stock appreciation rights, restricted stock units and/or restricted stock awards. The Committee reviews the compensation recommendations from the CEO and our independent consultants’ advice on competitive trends regarding base salary, annual incentive awards and long-term incentives. The Committee exercises its collective judgment in establishing executive compensation based on performance, compensation history and market information. The recommendations are then made to the full Board for its approval.

The Role of the Compensation Consultant —Compensation Consultant Independence

In 2012, the HR Committee engaged Frost Human Resource Consulting (“Frost HR Consulting”), as the HR Committee’s independent compensation consultant, to benchmark our executive officer compensation levels with similar positions in our industry peer group. The Committee reviews the relationship annually for any conflicts of interest. To ensure Frost HR Consulting’s independence:

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Peer Group and Compensation Surveys

The HR Committee considers market information from compensation surveys and peer company proxy statements when determining compensation for each of the executive officers. In May 2012, the HR Committee reviewed proxy statement data from a peer group of companies. The surveys used for benchmarking included:

Each year, the HR Committee reviews the composition of the peer group and the compensation paid at these companies, as well as their corporate performance and other comparative factors in determining the appropriate compensation levels for our executives. No company in our peer group shares our unique risk profile, which is a function of our portfolio of producing assets and exploratory prospects, as well as the regulatory and political environments in which we operate. Therefore, the HR Committee uses its judgment and business experience in addition to the peer group data in determining executive compensation.

The HR Committee selects peer companies for their shared similarities, including a common industry oil exploration focus, assets, market capitalization and enterprise value, among other factors. Revenue at the peer companies ranges from $35 million to $423 million for 2012 versus $405 million for Harvest, which is our 32% interest of gross revenue from oil sales in our unconsolidated affiliate, Petrodelta, S.A. Our peer companies typically compete with us for executive talent. Our current industry peer group consists of the following companies:

For 2012, Frost HR Consulting benchmarked the 25th, 50th and 75th percentiles for the data sources mentioned above to provide the HR Committee with an understanding of competitive pay practices. These surveys, equally weighted with the proxy data, consider each element of compensation and are collectively referred to as the “market data” throughout this Compensation Discussion and Analysis. Frost HR Consulting also provides the HR Committee with advice on equity incentive compensation trends, including types and value of awards being used by other public companies.

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The Role of the Executives in Human Resources Committee Meetings

The HR Committee invites our CEO, Vice President, Administration and Human Resources and Vice President, General Counsel and Corporate Secretary to attend their meetings. The Vice President, Administration and Human Resources acts as the HR Committee Secretary and provides reports on plan administration and human resources policies and programs. The Vice President, General Counsel and Corporate Secretary provides legal advice on human resource matters. The CEO makes recommendations with respect to specific compensation decisions. The HR Committee, without management present, regularly meets in executive session and with its compensation consultant to review executive compensation matters including market data as well as peer group information.

The CEO makes detailed recommendations to the HR Committee on performance evaluations, base salary changes, and both equity and annual incentive-based compensation for executive officers and senior management (other than the CEO). From time to time, the CEO and members of management are invited to participate in HR Committee meetings to provide information regarding our strategic objectives, financial performance and recommendations regarding compensation plans. Management may be asked to prepare information for any HR Committee meeting. Depending on the agenda for a particular meeting, these materials may include:

Executive Compensation Components

Our compensation program components are designed to reward executive officers’ contributions, while considering our specific operating situation and how they manage this situation consistent with our strategy. Factors considered in compensating our executives include individual experience, skill sets that are required for multi-national oil and gas operations and their proven record of performance. It is essential that we recruit and retain executives that understand the risk and complexity of global operations and our unique business strategy. All of our executive officers are mid-to-late career executives who have worked for larger energy companies and have alternatives; they decided to join the Company for the challenge and potential reward of working for a small, entrepreneurial organization.

The principal components of compensation and their purpose for executive officers in 2012 are:

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Base Salary

We pay base salaries to our executive officers to compensate them for specific job responsibilities during the calendar year. In determining base salaries for our executive officers, the HR Committee considers market and competitive benchmark data for the executive’s level of responsibility targeting between the 50th and 75th percentile of executive officers in comparable companies, with variation based on individual executive skill sets. Compared to 2011 market data, our base salaries were between 95.6% and 106.2% of the target market median.

For 2012, the HR Committee moved the Company’s salary management review to February from May to better address cash compensation decisions for both salaries and bonuses. Consequently, in March 2012 the CEO received an annualized salary increase for 2012 of 1.8% and the other named executive officers received an average annualized increase of 3.3%. In March 2013, the CEO received an annual salary increase of 3.5% and the other named executive officers each received an annualized increase of 3.5% as well.

Annual Performance-Based Incentive Awards

Each year, in addition to individual performance objectives, the HR Committee establishes Company performance measures for determining annual incentive awards as follows:

These measures and their weightings are reviewed and modified, if appropriate, in light of changing Company priorities and strategic objectives. The corporate targets and weightings are set by the CEO and reviewed and approved by the HR Committee. The HR Committee focuses on these corporate goals in evaluating Company performance for the purpose of compensation. Individual performance results of the named executive officers are measured and assessed by the CEO.

Among these corporate goals, Total Shareholder Return was weighted at 60%. In 2012, the Company realized a Total Shareholder Return of 22.9% placing it in the first quartile among its selected peer group.

Reserves/Production/EMV was weighted at 30%. The primary measurement for this target is year-over-year P2 reserve additions; although 3P and contingent resources are also taken into consideration. For 2012, proved and probable reserves remained essentially flat over 2011, net of 2012 production. However, production increased by 14.7% over 2011 at Petrodelta, our Venezuelan affiliate.

Social Responsibility and Governance was weighted at 10% and is used at the discretion of the CEO and the Committee in deciding the final corporate rating. As expected, there were no violations of our FCPA policies or our Code of Business Conduct and Ethics. One of our contractors did experience a lost time accident in 2012.

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Individual performance and operational results were combined with the Company performance results and weighted equally to determine each executive’s final annual incentive award. Target award levels for annual incentives are set at 100% of base salary for the CEO and 60% of base salary for the other named executive officers. For 2012 performance, awarded in February 2013, the CEO received 137% of his bonus target as a performance-based incentive award. The other named executive officers’ individual awards ranged from 130% to 143% of their bonus targets.

The HR Committee and the Board each determined that management exceeded expectations in meeting the 2012 Company and individual performance targets.

We believe the Company should have the ability to recover compensation paid to executive officers and key employees under certain circumstances. As a result, the HR Committee adopted the following policy statement in 2011:

“In the event the Board of Directors determines that any fraud or intentional misconduct caused or was a substantial contributing factor to a restatement of our financial statements, the Board of Directors may require reimbursement of any annual incentive compensation paid to an executive officer or certain other key employees to the extent the bonus paid exceeded what would have been paid had the financial results been properly reported. This policy will apply to all annual incentives paid after January 2012.”

Long-Term Incentive Compensation

On May 20, 2010, our stockholders approved the 2010 Long-Term Incentive Plan (the “2010 Plan”). This 2010 Plan allows us to recover any award that the Company deems was not warranted after any restatement of corporate performance.

Long-term incentive awards have been granted under our 2001, 2004, 2006 and 2010 Long Term Incentive Plans (“LTIPs”) and the awards are granted to our executive officers to align their personal financial interests with our stockholders. The LTIPs include provisions for stock options, stock appreciation rights, restricted stock, restricted stock units and cash awards.

Our policy on stock awards is focused on determining the right mix of retention and ownership requirements to drive and motivate our executive officers’ behavior consistent with long-term interests of stockholders. The HR Committee is the administrator of our LTIPs and, subject to Board approval, has full power to determine the size of awards to our executives, to determine the terms and conditions of grants in a manner consistent with the LTIPs and to amend the terms and conditions of any outstanding award.

The CEO presents individual stock award recommendations for executive officers to the HR Committee, and after review and discussion the HR Committee submits its recommendation to the Board for approval. The HR Committee’s policy is to grant awards on the date the Board approves them. Stock options and restricted stock will be granted once each calendar year on a predetermined date or at the effective date of a new hire or promotion, but not within six months of a previous award to the same individual. The price of options and the value of a restricted stock award issued to a new employee will be set at the closing price on the employee’s effective start date. The price of options and the value of a restricted stock award issued to an employee as a result of a promotion will be set at the closing price on the effective date of that promotion. Under no circumstances will a grant date be set retroactively.

The Board has adopted stock retention guidelines as an additional means to promote ownership of stock by executive officers and directors. The guidelines apply to any award of restricted stock or options to purchase our stock granted to executive officers and directors after February 2004. Under these guidelines, an executive officer or director must retain at least 50% of the shares of restricted stock for at least three years after the restriction lapses. Consequences for failure to adhere to these guidelines shall be determined by the HR Committee in its discretion including, without limitation, actions with respect to future compensation and future grants of stock options or restricted stock and performance measures. Under our Insider Trading Policy, executive officers and directors are strictly prohibited from speculative trading in the Company’s securities, including short sales and buying or selling puts or calls on the Company’s securities.

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The long-term incentive awards for 2012 included stock options, stock appreciation rights (“SARs”), which can be settled as cash or equity, and restricted stock units (“RSUs”), which can be settled as cash or equity. This mix provides upside potential with the stock options and a more stable award in the form of restricted stock units. Of the total award value, 70% was allocated to options and 30% to restricted shares.

Mix of Long Term Incentives Awarded in 2012

As of December 31, 2012, almost all of the total shares available for grant as options under the LTIPs approved by our stockholders have been granted:

Personal Benefits

Our executive officers are covered under the same health and welfare plans, including our 401(k) plan, as all employees. The executive officers also receive supplemental life insurance to cover the risks of extensive travel required in conducting our global business. We pay 100% of all premiums for the following benefits for employees and their eligible dependents:

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We do not offer a pension plan or a non-qualified deferred compensation plan for executive officers or employees. In 2012, we did not offer perquisites to executive officers or other employees. We offer relocation and Foreign Service premiums to employees serving in an international location. The amount of the premium will vary depending upon the living conditions, political situation and general safety conditions of the international location. Expatriate employees are also provided housing and utilities allowances where applicable. They also receive a cost of living allowance to cover the differential between normal living expenses in the host and home countries and will continue to participate in the employee benefit plans available to home country employees.

Total Direct Compensation

Executive Compensation Compared to Market Data

Compared to 2011 market data, total direct compensation ranged between 82% and 128% of the target market median for all named executive officers. In 2012, their compensation (after their March 2012 base salary increases) fell at the following percentiles:

Executive Compensation Mix

The general mix of compensation for target-level performances in the annual incentive plan, plus the net annualized present value of long-term compensation grants, can range as follows, depending upon the executive officer. The Committee considered the following general percentage mix in establishing the total compensation for the Company’s executive officers for 2012 target performance. It is important to note that the influences on Company financial performance and stock price performance could significantly change the basic mix of compensation components as a percentage of total compensation:

For the CEO, 73.6% of his total direct compensation is considered “at-risk.” The other named executive officers have 67% of their total direct compensation at risk.

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Note: Annual incentive (“AI”) for Messrs. Edmiston, Nesselrode and Head includes a special accomplishment award for the sale of Utah in 2011.

Tax and Accounting Implications of Executive Compensation

Deductibility of Executive Compensation

As part of its role, the HR Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended, which imposes a limit of $1.0 million on the amount that a publicly-held corporation may deduct in any year for the compensation paid or accrued with respect to its named executive officers unless the compensation is performance based. None of our executive officers currently receives compensation exceeding the limits imposed by Section 162(m). While we cannot predict with certainty how executive compensation might be affected in the future by Section 162(m) or applicable tax regulations issued, we intend to preserve the tax deductibility of all executive compensation while maintaining our executive compensation program as described in this Compensation Discussion and Analysis.

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Employment Agreements

We have entered into Executive Employee Agreements with our current named executive officers: Messrs. Edmiston, Haynes, Speirs, Nesselrode and Head. Two other executive officers who are not named also have executive employment agreements. The contracts have an initial term, which automatically extends for one year upon each anniversary unless a one-year notice not to extend is given by the executive. The current term of the Executive Employment Agreements is through May 31, 2013.

See the table titled “Potential Payments under Termination or Change of Control” in the Compensation of Executive Officers section below for details on the above information.

The HR Committee believes the termination payment included in these Executive Employment Agreements is needed to attract and retain the executives necessary to achieve our business objectives. However, the HR Committee also believes termination payments should not be guaranteed. Accordingly, a termination payment will not be paid if a termination occurs after notice and lapse of the notice period to terminate the Executive Employment Agreement. Also, a termination payment will not be made if the executive officer resigns other than for good reason. Good reason under the employment contracts includes: (1) a material breach of the employment agreement by the Company; (2) failure to maintain or reelect the executive officer to his position; (3) a significant reduction of the executive officer’s duties, position or responsibilities; (4) a substantial reduction, without good business reasons, of the facilities and perquisites available to the executive officer; (5) a reduction by the Company of the executive officer’s monthly base salary; (6) failure of the Company to continue the executive officer’s participation in any bonus, incentive, profit sharing, performance, savings, retirement or pension policy, plan, program or arrangement on substantially the same or better basis relative to other participants; or (7) the relocation of the executive officer more than fifty miles from the location of the Company’s principal office.

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Change of Control

Since it is in our best interest to retain executive officers during uncertain times who will act in the best interests of the stockholders without concern for personal outcome, our Executive Employment Agreements provide benefits in the event of loss of employment for employees in good standing due to a change of control. Change of control is defined as the acquisition of 50% or more of our voting stock, the cessation of the incumbent board of directors to constitute a majority of the board of directors, or the reorganization, merger, or sale or disposition of at least 50% of our assets where we are not the surviving entity. Change of control severance benefits apply to terminations taking place between 240 days before a change of control and 730 days after a change of control.

The change of control benefits in the Executive Employment Agreements contain a double trigger in that both a change of control must occur and the executive officer must be terminated without cause or resign for good reason within a specified period of time after the change of control. The HR Committee believes that the double trigger avoids unnecessarily rewarding an executive officer when a change of control occurs and the executive officer’s status is not changed as a result. However, because of the significant uncertainty that can arise during a period of a potential or actual change of control, the Committee has provided greater benefits to the executive officer in the event of a termination resulting from a change of control. Change of control benefits are detailed in the “Potential Payments under Termination or Change of Control” table in the Compensation of Executive Officers section below.

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HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the members of the Board’s HR Committee is or has been an officer or employee of the Company or has a relationship requiring disclosure under Item 404(a) of SEC Regulation S-K. No executive officer of the Company serves on the compensation committee or serves as a director of another entity where an executive officer of that entity also serves on the HR Committee or on the Board.

HUMAN RESOURCES COMMITTEE REPORT

The HR Committee has reviewed and discussed with management the Compensation Discussion and Analysis filed in this document. Based on such review and discussions, the HR Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.

R. E. Irelan, Committee Chairman

Igor Effimoff

J. Michael Stinson

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COMPENSATION OF EXECUTIVE OFFICERS

Summary Compensation Table

The following table summarizes the compensation of the Company’s named executive officers for the three most recently completed fiscal years ended December 31, 2012, 2011 and 2010.

Notes:

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