Note G — Incentive Plans

Prior to the separation and distribution, our employees participated in the Murphy Oil 2007 Long-Term Incentive Plan (the “2007 Plan”) and the Murphy Oil 2012 Long-Term Incentive Plan (the “2012 Plan”) and received Murphy Oil restricted stock awards and options to purchase shares of Murphy Oil common stock. While participating in these two plans, costs resulting from share-based payment transactions were allocated and recognized as an expense in the financial statements using a fair value-based measurement method over the periods that the awards vested. Certain employees of the Company have received annual grants in the form of Murphy Oil stock options, restricted stock units and other forms of share based payments prior to the separation and distribution. Accordingly, the Company has accounted for expense for these plans in accordance with SAB Topic 1-B for periods prior to the separation and distribution.

2013 Long-Term Incentive Plan

Effective August 30, 2013, certain of our employees participate in the Murphy USA 2013 Long-Term Incentive Plan (the “MUSA 2013 Plan”). The MUSA 2013 Plan authorizes the Executive Compensation Committee of our Board of Directors (“the Committee”) to grant non-qualified or incentive stock options, stock appreciation rights, stock awards (including restricted stock and restricted stock unit awards), cash awards, and performance awards to our employees. No more than 10 million shares of MUSA common stock may be delivered under the MUSA 2013 Plan and no more than 1 million shares of common stock may be awarded to any one employee, subject to adjustment for changes in capitalization. The maximum cash amount payable pursuant to any “performance-based” award to any participant in any calendar year is $5 million.

In connection with the separation and distribution, stock compensation awards granted under the 2007 Plan and the 2012 Plan by Murphy Oil were adjusted or substituted as follows:

·	Vested stock options were equitably adjusted so that the grantee holds more options to purchase Murphy Oil common stock at a lower strike price.

·	Unvested stock options and stock appreciation rights held by MUSA employees were replaced with substitute awards of options to purchase shares of MUSA common stock.

·	Unvested restricted stock units will be replaced with adjusted, substitute awards for restricted stock units of MUSA common stock. The new awards of restricted stock are intended to generally preserve the intrinsic value of the original award determined as of the separation and distribution date.

·	Vesting periods of awards were unaffected by the adjustment and substitution, except that for vested Murphy Oil stock options the MUSA employees have until the earlier of two years from the date of the separation or the stated expiration date of the option to exercise the award.

Awards granted in connection with the adjustment and substitution of awards originally issued under the 2007 Plan and the 2012 Plan are a part of the MUSA 2013 Plan and reduce the maximum number of shares of common stock available for delivery under the MUSA 2013 Plan.

The adjustment and substitution of awards did not cause us to recognize incremental compensation expense during the period ended September 30, 2013 for the stock options and stock appreciation rights awards that had been replaced. The restricted stock units were replaced subsequent to September 30, 2013 and any incremental compensation cost will be recorded in the fourth quarter.

Outstanding Awards

Awards outstanding under the MUSA 2013 Plan as a result of the adjustment and substitution of the 2007 Plan and the 2012 Plan awards were as follows:


	Stock Options		Restricted Stock Units
	Number of Shares	Weighted Average Exercise Price	Awards	Weighted-Average Grant Date Fair Value
Outstanding at September 30, 2013	625,101	$ 35.12	28,413	$ 39.60

The adjustment and substitution of the stock compensation awards occurred in conjunction with the distribution of MUSA common stock to Murphy Oil stockholders in the September 30, 2013 after-market distribution. As a result, no grant, exercise, or cancellation activity occurred on MUSA stock compensation awards during the nine months ended September 30, 2012.

2013 Stock Plan for Non-employee Directors

Effective August 8, 2013, Murphy USA adopted the 2013 Murphy USA Stock Plan for Non-employee Directors (the “Directors Plan”). The directors for Murphy USA are compensated with a mixture of cash payments and equity-based awards. Awards under the Directors Plan may be in the form of restricted stock, restricted stock units, stock options, or a combination thereof. An aggregate of 500,000 shares of common stock shall be available for issuance of grants under the Directors Plan.

For the three months ended September 30, 2013, the Company issued 53,881 restricted stock units to its non-employee directors at a weighted average grant date fair value of $39.60 per share. These shares vest in three years from the grant date.

For the nine months ended September 30, 2013 and 2012, share based compensation allocated to the Company from Murphy Oil through intercompany charges was $6.5 million and $7.7 million, respectively. For the nine months ended September 30, 2013 and 2012, share based compensation from the MUSA 2013 Plan and the Directors Plan combined charged against income before income tax benefit was $460,000 and $0, respectively. The related income tax benefit for this share based compensation cost was $161,000 and $0 for the nine month period ended September 30, 2013 and 2012, respectively.

As of September 30, 2013, unrecognized compensation cost related to stock option awards was $3.6 million, which is expected to be recognized over a weighted average period of 1.9 years. Unrecognized compensation cost related to restricted stock awards was $12.1 million, which is expected to be recognized over a weighted average period of 2.9 years.