Item 5.02. Departure of Directors or Certain Officers;
Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers.
Employment Agreements
On April 20, 2017, the Compensation
Committee (the “
Committee
”)
of the Board of Directors (the “
Board
”) of Yuma Energy, Inc., a Delaware
corporation (the “
Company
”),
approved and the Company entered into amended and restated
employment agreements (the “
Employment
Agreements
”) with
Sam L. Banks, Chief Executive Officer of the Company, Paul D.
McKinney, President and Chief Operating Officer of the Company, and
James J. Jacobs, Executive Vice President and Chief Financial
Officer of the Company (collectively, the
“
named
executive officers
”).
Under the
terms of the Employment Agreements, Messrs. Banks, McKinney and
Jacobs will receive annual base salaries in the amount of $525,000,
$400,000, and $350,000, respectively, subject to any increase the
Committee may deem appropriate from time to time. In addition,
Messrs. Banks, McKinney and Jacobs will have the opportunity to
earn incentive compensation in the form of an annual cash bonus
with target amounts of 100%, 100% and 90%, respectively, of their
base salaries. Messrs. Banks, McKinney and Jacobs will be entitled
to receive long-term equity incentive awards on an annual basis
with a target value of no less than 400%, 300% and 250%,
respectively, of their base salaries and with vesting terms in the
sole discretion of the Board.
The Employment
Agreements include severance provisions that apply upon certain
terminations of employment. As a condition to the payment of any
severance benefit described below, the Company may require the
named executive officer to execute and not revoke a release of
claims in favor of the Company. The Employment Agreements also
contain certain restrictive covenants, including the obligation not
to compete against the Company and a confidentiality requirement.
In the event the named executive officer violates these restrictive
covenants, the Company may cease paying all severance benefits to
the named executive officer and may recover an amount equal to any
severance benefits previously paid to the named executive officer
under his Employment Agreement.
If the named executive officer’s
employment is terminated by the Company other than for cause or
termination by the named executive officer for good reason, the
Employment Agreements provide that (1) (i) Mr. Banks will receive
payment in a lump sum of accrued salary and bonus and a severance
payment of two (2) times the sum of his (a) base salary and (b)
target annual bonus for the year of termination and (ii) Messrs.
McKinney and Jacobs will receive payment in a lump sum of accrued
salary and bonus and a severance payment of one and one-half (1.5)
times the sum of his (a) base salary and (b) target annual bonus
for the year of termination; (2) the Company will pay its portion
of COBRA continuation coverage, as well as pay certain costs of
continuing medical coverage for the named executive officer for up
to twelve (12) months after the expiration of the maximum required
period under COBRA; and (3) all of the named executive
officer’s granted but unvested awards under the Yuma Energy,
Inc. 2014 Long-Term Incentive Plan, as amended (the
“
Plan
”), shall immediately vest and related
restrictions shall be waived.
If a change of control has occurred and the
named executive officer’s employment is terminated without
cause, or by the named executive officer with good reason during
the period beginning six months prior to and ending eighteen (18)
months following the change of control (the
“
change of control
period
”), the named
executive officers are entitled to the same severance benefits
described above, except that the severance amount will be three (3)
times for Mr. Banks and two (2) times for Messrs. McKinney and
Jacobs, the sum of the named executive officer’s (a) base
salary and (b) target annual bonus.
The Employment
Agreements provide that in the event of a termination of employment
by the Company for cause or by the named executive officer without
good reason, the named executive officer will be entitled to
accrued but unpaid base salary and benefits through the date of
termination but will forfeit any other compensation from the
Company.
The Employment
Agreements also contain customary confidentiality and
non-solicitation provisions. The non-solicitation provisions of the
Employment Agreements prohibit the named executive officers from
soliciting for employment any employee of the Company or any person
who was an employee of the Company. This prohibition applies during
the named executive officer’s employment with the Company and
for up to two years depending on the severance benefits received by
the named executive officer following the termination of his
employment and extends to offers of employment for his own account
or benefit or for the account or benefit of any other person, firm
or entity, directly or indirectly.
The preceding
is a summary of the material provisions of the Employment
Agreements and is qualified in its entirety by reference to the
complete text of the Employment Agreements filed as Exhibit 10.1,
Exhibit 10.2 and Exhibit 10.3 to this Current Report on Form 8-K
and incorporated by reference herein.
Form of Equity Award Agreements
On April 20, 2017, the Committee approved
the form of stock appreciation right agreement (the
“
Employee SAR
Agreement
”) for
stock appreciation right awards granted to employees of the Company
from time to time under the Plan, which is included as Exhibit 10.4
hereto; and the form of stock option agreement (the
“
Employee Stock Option
Agreement
”) for
stock option awards granted to employees of the Company from time
to time under the Plan, which is included as Exhibit 10.5
hereto.
The
descriptions of the form of Employee SAR Agreement and the form of
Employee Stock Option Agreement contained in this Item 5.02 do not
purport to be complete and are qualified in their entirety by
reference to the form of Employee SAR Agreement included as Exhibit
10.4 and the form of Employee Stock Option Agreement included as
Exhibit 10.5 to this Current Report on Form 8-K and are
incorporated by reference herein.
Executive Officer Long-Term Equity Incentive
Awards
On April 20,
2017, the Committee approved long-term equity incentive awards
under the Plan for Messrs. Banks, McKinney and Jacobs. The table
below sets forth the stock appreciation right awards and stock
option awards for Messrs. Banks, McKinney and Jacobs, as
follows:
Executive
|
Number of Shares of Common Stock Underlying the Stock Appreciation
Rights
|
|
Sam L.
Banks
|
193,182
|
361,702
|
Paul D.
McKinney
|
159,091
|
297,872
|
James J.
Jacobs
|
125,000
|
234,043
|
The stock
appreciation right awards and the stock option awards will vest in
three equal annual installments beginning on February 6, 2018,
subject to acceleration under certain circumstances as provided in
the Plan or otherwise agreed to by the Company. The stock
appreciation right awards will be settled in cash. Each stock
appreciation right was granted with an exercise price of $4.40 per
stock appreciation right. Each stock option was granted with an
exercise price of $2.56 per share, which was the closing market
price for a share of the Company’s common stock on the date
of grant.
Founders’ Awards
On April 20, 2017, the Committee also
approved long-term equity incentive awards under the Plan for
Messrs. McKinney and Jacobs (the “
Founders’
Awards
”). The table
below sets forth the number of stock appreciation rights granted
under the Founders’ Awards for Messrs. McKinney and Jacobs,
as follows:
Executive
|
Number
of Shares of Common Stock Underlying the Stock Appreciation
Rights
|
Paul D.
McKinney
|
341,463
|
James J.
Jacobs
|
268,293
|
The
Founders’ Awards will vest in full on February 6, 2020,
subject to acceleration under certain circumstances as provided in
the Plan or otherwise agreed to by the Company. The Founders’
Awards will be settled in cash. Each stock appreciation right under
the Founders’ Awards was granted with an exercise price of
$4.40 per stock appreciation right.
Non-Employee Director Compensation Program
On April 20,
2017, the Committee established the following compensation program
for non-employee members of the Board: (i) an annual cash retainer
of $45,000 and (ii) an annual equity grant with a fair market value
of approximately $75,000 at the time of grant; however, the
Committee based the 2017 annual equity grant on a price of $4.40
per share. In addition, the audit committee chair will be entitled
to receive an additional $15,000 cash payment annually and the
Non-Executive Chairman of the Board will be entitled to receive an
additional $15,000 cash payment annually. Directors who are
employees of the Company receive no additional compensation for
serving on the Board. The Committee also ratified the following
compensation for non-employee members of the Board for the period
from November 1, 2016 through December 31, 2016: (a) a prorated
annual cash retainer of $40,000, (b) a prorated $15,000 annual cash
retainer for the audit committee chair, and (c) a prorated $8,000
annual cash retainer for the compensation committee
chair.
On April 20, 2017, the Committee approved
restricted stock awards (the “
Director
RSAs
”) to the
non-employee directors as follows:
Non-Employee
Director
|
|
James W.
Christmas
|
17,045
|
Frank A.
Lodzinski
|
17,045
|
Neeraj
Mital
|
17,045
|
Richard K.
Stoneburner
|
17,045
|
J. Christopher
Teets
|
17,045
|
The Director
RSAs vested as to 4,262 shares on the date of grant, and 4,261
shares will vest on each of June 30, 2017, September 30, 2017 and
December 31, 2017, subject to the director’s continued
service on the Board.