PEDEVCO CORP
10-Ks and 10-Qs
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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
☑
Filed
by a Party other than the Registrant
☐
Check
the appropriate box:
[ ]
Preliminary Proxy Statement
☐
Confidential, For Use of the Commission Only
(As Permitted by Rule 14a-6(e)(2))
[X]
Definitive Proxy Statement
☐
Definitive Additional Materials
☐
Soliciting Material under Rule
14a-12
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PEDEVCO CORP.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
☑
No fee required
☐
Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
(1)
Title of each class of securities to which transaction
applies:
(2)
Aggregate number of securities to which transaction
applies:
(3) Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it
was determined):
(4)
Proposed maximum aggregate value of transaction:
(5)
Total fee paid:
☐
Fee paid previously with preliminary
materials.
☐
Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the form or
schedule and the date of its filing.
(1)
Amount Previously Paid:
(2)
Form, Schedule or Registration Statement No.:
(3)
Filing Party:
(4)
Date Filed:
PEDEVCO CORP.
1250
Wood Branch Park Dr., Suite 400
Houston,
Texas 77079
(855)
733-3826
July
10, 2019
Dear
Stockholder:
The
board of directors and officers of PEDEVCO Corp., a Texas
corporation, join me in extending to you a cordial invitation to
attend the 2019 annual meeting of our stockholders, which we refer
to as the annual meeting. This meeting will be held on
August 28, 2019
at 10:00 a.m. local
time at the Omni Houston Hotel at Westside, 13210 Katy Fwy.,
Houston, Texas 77079.
Details
regarding the business to be conducted are more fully described in
the accompanying Notice of Annual Meeting and Proxy
Statement.
As
permitted by the rules of the Securities and Exchange Commission
(the “
SEC
” or the
“
Commission
”), we have
provided access to our proxy materials over the Internet.
Accordingly, we are sending a Notice of Internet Availability of
Proxy Materials, or E-proxy notice, on or about July 10, 2019 to
our stockholders of record as of the close of business on July 1,
2019. The E-proxy notice contains instructions for your use of this
process, including how to access our proxy statement and annual
report and how to authorize your proxy to vote online. In addition,
the E-proxy notice contains instructions on how you may receive a
paper copy of the proxy statement and annual report or elect to
receive your proxy statement and annual report over the
Internet. We believe these rules allow us to provide you with
the information you need while lowering the costs of delivery and
reducing the environmental impact of the annual
meeting.
If you
are unable to attend the annual meeting in person, it is very
important that your shares be represented and voted at the meeting.
You may authorize your proxy to vote your shares over the Internet
as described in the E-proxy notice. Alternatively, if you received
a paper copy of the proxy card by mail, please complete, date, sign
and promptly return the proxy card. You may also authorize your
proxy to vote your shares by telephone or fax as described in your
proxy card.
If you authorize
your proxy to vote your shares over the Internet, return your proxy
card by mail or vote by telephone prior to the annual meeting, you
may nevertheless revoke your proxy and cast your vote personally at
the meeting.
We look
forward to seeing you on August 28, 2019. Your vote and
participation in our governance is very important to
us.
Sincerely,
/s/ John J. Scelfo
John J.
Scelfo, Chairman
Important Notice Regarding the Availability of Proxy Materials for
the Annual Meeting of Stockholders to Be Held on August 28,
2019.
Our
proxy statement and annual report on Form 10-K for the year ended
December 31, 2018 are available at the following cookies-free
website that can be accessed anonymously:
https://www.iproxydirect.com/PED
.
i
PEDEVCO CORP.
1250 Wood Branch Park Dr., Suite 400
Houston, Texas 77079
(855) 733-3826
___________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 28, 2019
___________________________
To the
Stockholders of PEDEVCO Corp.:
We are
pleased to provide you notice of, and to invite you to attend, the
2019 annual meeting of the stockholders of PEDEVCO Corp., a Texas
corporation, which will be held on August 28, 2019 at 10:00 a.m.,
local time, at The Omni Houston Hotel at Westside, 13210 Katy Fwy.,
Houston, Texas 77079, for the following purposes:
1. To
consider and vote upon a proposal to elect four directors to the
board of directors, each to serve a term of one year and until
their respective successors have been elected and qualified, or
until their earlier resignation or removal, as named in, and set
forth in greater detail in this proxy statement.
2. To
consider and vote upon a proposal to approve an amendment to our
2012 Equity Incentive Plan, as amended, to increase by 2 million
the number of shares of common stock reserved for issuance under
the plan.
3. To
consider and vote upon a proposal to ratify the appointment of
Marcum LLP, as our independent auditors for the fiscal year ending
December 31, 2019.
4. To
consider and vote upon a proposal to consider and vote on any
proposal to authorize our board of directors, in its discretion, to
adjourn the annual meeting to another place, or a later date or
dates, if necessary or appropriate, to solicit additional proxies
in favor of the proposals listed above at the time of the annual
meeting.
5. To
transact such other business as may properly come before the annual
meeting or any adjournment or postponement thereof.
THE BOARD, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT YOU VOTE “
FOR
”
EACH OF PROPOSALS ONE THROUGH FIVE.
We do
not expect to transact any other business at the annual meeting.
Our board of directors has fixed the close of business on July
1, 2019 as the record date for determining those stockholders
entitled to vote at the annual meeting and any adjournment or
postponement thereof. Accordingly, only stockholders of record at
the close of business on that date are entitled to notice of, and
to vote at, the annual meeting. A complete list of our stockholders
will be available for examination at our offices in Houston, Texas,
during ordinary business hours for a period of 10 days prior
to the annual meeting.
ii
We
cordially invite you to attend the annual meeting in person.
However, to ensure your representation at the annual meeting,
please authorize the individuals named on your proxy card to vote
your shares by calling the toll-free telephone number, faxing your
proxy card or by using the Internet as described in the
instructions included with your proxy card or voting instruction
card. Alternatively, if you received a paper copy of the proxy card
by mail, please complete, date, sign and promptly return the proxy
card. This will not prevent you from voting in person, but will
help to secure a quorum and avoid added solicitation costs. If your
shares are held in “
street name
” by your
broker or other nominee, only that holder can vote your shares and
the vote cannot be cast unless you provide instructions to your
broker. You should follow the directions provided by your broker
regarding how to instruct your broker to vote your shares. Your
proxy may be revoked at any time before it is voted. Please review
the proxy statement accompanying this notice for more complete
information regarding the matters to be voted on at the
meeting.
The
enclosed proxy statement, which is first being mailed to
stockholders on July 10, 2019, is also available
at
https://www.iproxydirect.com/PED
.
This website also includes copies of the form of proxy and our
Annual Report on Form 10-K for the year ended December 31, 2018,
which we refer to as the annual report. Stockholders may also
request a copy of the proxy statement and our annual report by
contacting our main office at (855) 733-3826.
Even
if you plan to attend the annual meeting in person, we request
that you submit a proxy by following the instructions on your proxy
card as soon as possible and thus ensure that your shares will be
represented at the annual meeting if you are unable to
attend.
By
Order of the Board of Directors
/s/ John J. Scelfo
John J.
Scelfo
Chairman
Houston,
Texas
July
10, 2019
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IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, WE
ASK YOU TO VOTE BY TELEPHONE, MAIL, FAX OR ON THE INTERNET USING
THE INSTRUCTIONS ON THE PROXY CARD.
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iii
TABLE OF CONTENTS
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Page
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GENERAL INFORMATION
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1
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Information
Contained In This Proxy Statement
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1
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Important
Notice Regarding the Availability of Proxy Materials
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1
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Record
Date and Shares Entitled to Vote
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1
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Voting
Process
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2
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Revocability
of Proxies
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2
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Attendance
at the Annual Meeting
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3
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Conduct
at the Meeting
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3
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Quorum
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3
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Votes
Required to Approve Each Proposal
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3
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Broker
Non-Votes and Abstentions
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4
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Board of Directors Voting Recommendations
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4
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Mailing
Costs and Solicitation of Proxies
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5
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Inspector
of Voting
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5
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Stockholders
Entitled to Vote at the Meeting
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5
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Voting
Instructions
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5
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Confidential
Voting
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5
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Stockholder
of Record and Shares Held in Brokerage Accounts
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5
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Multiple
Stockholders Sharing the Same Address
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5
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Voting
Results
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6
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Company
Mailing Address
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6
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Reverse
Stock Split
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6
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VOTING RIGHTS AND PRINCIPAL STOCKHOLDERS
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6
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Security
Ownership of Certain Beneficial Owners and Management
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6
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Changes
in Control
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9
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CORPORATE GOVERNANCE
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9
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Board
Leadership Structure
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9
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Risk
Oversight
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9
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Family
Relationships
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10
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Arrangements
Between Officers and Directors
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10
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Other
Directorships
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10
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Involvement
in Legal Proceedings
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10
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Board
of Directors Meetings
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10
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COMMITTEES OF THE BOARD
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11
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Board
Committee Membership
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11
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Audit Committee
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11
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Compensation Committee
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11
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Nominating and Governance Committee
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11
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Stockholder
Communications with the Board
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12
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Executive
Sessions of the Board of Directors
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12
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Director
Independence
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13
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Code
of Ethics
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13
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Report
of the Audit Committee
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13
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iv
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AUDIT COMMITTEE REPORT
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14
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EXECUTIVE OFFICERS
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15
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EXECUTIVE COMPENSATION
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16
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Summary Compensation Table
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16
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Outstanding Equity Awards at December 31,
2018
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Issuances of Equity to Executive Officers and
Directors
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Compensation of Directors
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Securities Authorized for Issuance under Equity
Compensation Plans
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21
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Equity Compensation Plan
Information
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22
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2017 Say on Pay Vote
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25
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Agreements with Current Named Executive
Officers
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25
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
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30
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
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36
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PROPOSAL 1 - ELECTION OF DIRECTORS
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36
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PROPOSAL 2 - AMENDMENT TO THE PEDEVCO CORP. 2012 EQUITY INCENTIVE
PLAN
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41
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PROPOSAL 3 – RATIFICATION OF APPOINTMENT OF
AUDITORS
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48
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PROPOSAL 4 - ADJOURNMENT OF THE ANNUAL MEETING
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49
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Stockholder
Proposals for 2020 Annual Meeting of Stockholders and 2020 Proxy
Materials
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50
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Additional
Filings
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51
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Other
Matters
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51
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Interest
of Certain Persons in or Opposition to Matters to Be Acted
Upon
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51
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Company
Contact Information
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52
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TABLE OF APPENDIXES
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Appendix A
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Amended
and Restated PEDEVCO Corp. 2012 Equity Incentive Plan (see proposal
2)
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v
PEDEVCO CORP.
PROXY STATEMENT
FOR AN ANNUAL MEETING OF STOCKHOLDERS
GENERAL INFORMATION
PEDEVCO
Corp. (“
PEDEVCO,
”
“
we,
”
“
us
”,
“
our
”
or the “
Company
”) has made these
materials available to you on the Internet or, upon your request,
has delivered printed versions of these materials to you by mail,
in connection with the Company’s solicitation of proxies for
use at our 2019 annual meeting of stockholders, which we refer to
as our annual meeting, to be held on August 28, 2019 at 10:00 a.m.,
local time at the Omni Houston Hotel at Westside, 13210 Katy
Fwy., Houston, Texas 77079, and at any postponement(s) or
adjournment(s) thereof. These materials were first sent or given to
stockholders on July 10, 2019. You are invited to attend the annual
meeting and are requested to vote on the proposals described in
this Proxy Statement.
Information Contained In This Proxy Statement
The
information in this proxy statement relates to the proposals to be
voted on at the annual meeting, the voting process, the
compensation of our directors and executive officers, corporate
governance, and certain other required information. Included with
this proxy statement is a copy of the Company’s Annual Report
on Form 10-K for the year ended December 31, 2018, as filed with
the SEC on April 1, 2019, which we refer to as the 2018 annual
report. If you requested printed versions of these materials by
mail, these materials also include the proxy card or vote
instruction form for the annual meeting.
Important Notice Regarding the Availability of Proxy
Materials
Pursuant to rules
adopted by the SEC, the Company uses the Internet as the primary
means of furnishing proxy materials to stockholders. Accordingly,
the Company is sending a Notice of Internet Availability of Proxy
Materials, which we refer to as the notice, to the Company’s
stockholders. All stockholders will have the ability to access the
proxy materials (including the Company’s Form 10-K, which
does not constitute a part of, and shall not be deemed incorporated
by reference into, this proxy statement or the enclosed form of
proxy) via the Internet at
https://www.iproxydirect.com/PED
or
request a printed set of the proxy materials. Instructions on how
to access the proxy materials over the Internet or to request a
printed copy may be found in the notice. The notice contains a
control number that you will need to vote your shares. Please keep
the notice for your reference through the meeting date. In
addition, stockholders may request to receive proxy materials in
printed form by mail or electronically by email on an ongoing
basis. The Company encourages stockholders to take advantage of the
availability of the proxy materials on the Internet to help reduce
the environmental impact of its annual meetings.
Record Date and Shares Entitled to Vote
Our
board of directors has fixed the close of business on July 1, 2019
as the record date for determining the holders of shares of our
voting stock entitled to receive notice of and to vote at our
annual meeting and any adjournments or postponements thereof. Only
holders of record of shares of common stock at the close of
business on that date will be entitled to vote at our annual
meeting and at any adjournment or postponement of that meeting. As
of the record date, there were 53,827,065 shares of common stock
outstanding and entitled to vote at our annual meeting, held by
approximately 760
holders of record.
1
Each
share of common stock is entitled to one vote on each proposal
presented at our annual meeting and at any adjournment or
postponement thereof, for 53,827,065 total voting shares.
Stockholders do not have the right to cumulate their votes in the
election of directors.
In
order for us to satisfy our quorum requirements, the holders of at
least 33 1/3% of our total number of outstanding voting shares
entitled to vote at the meeting must be present. You will be deemed
to be present if you attend the meeting or if you submit a proxy
(including through the mail, by fax or by telephone or the
Internet) that is received at or prior to the meeting (and not
revoked).
If your
proxy is properly executed and received by us in time to be voted
at our annual meeting, the shares represented by your proxy
(including those given through the mail, by fax or by telephone or
the Internet) will be voted in accordance with your instructions.
If you execute your proxy but do not provide us with any
instructions, your shares will be voted “
FOR
” the proposals set
forth in the notice of annual meeting.
The
only matters that we expect to be presented at our annual meeting
are set forth in the notice of annual meeting. If any other matters
properly come before our annual meeting, the persons named in the
proxy card will vote the shares represented by all properly
executed proxies on such matters in their best
judgment.
Voting Process
If you
are a stockholder of record, there are five ways to
vote:
●
In person
. You may vote in person at the annual meeting.
The Company will give you a ballot when you arrive.
●
Via the Internet
. You may vote by proxy via the Internet by
following the instructions provided in the notice.
●
By Telephone
. If you request printed copies of the proxy
materials by mail, you may vote by proxy by calling the toll-free
number found on the proxy card.
●
By Fax
. If you request printed copies of the proxy
materials by mail, you may vote by proxy by faxing your proxy to
the number found on the proxy card.
●
By Mail
. If you request printed copies of the proxy
materials by mail, you may vote by proxy by filling out the proxy
card and returning it in the envelope provided.
Revocability of Proxies
The
presence of a stockholder at our annual meeting will not
automatically revoke that stockholder’s proxy. However, a
stockholder may revoke a proxy at any time prior to its exercise
by:
●
submitting
a written revocation prior to the annual meeting to the Corporate
Secretary, PEDEVCO Corp., 1250 Wood Branch Park Dr., Suite 400,
Houston, Texas 77079;
●
submitting
another signed and later dated proxy card and returning it by mail
in time to be received before our annual meeting or by submitting a
later dated proxy by the Internet or telephone prior to the annual
meeting; or
●
attending
our annual meeting and voting in person.
2
Attendance at the Annual Meeting
Attendance at the
annual meeting is limited to holders of record of our common stock
at the close of business on the record date, July 1, 2019 and our
guests. Admission will be on a first-come, first-served basis. You
will be asked to present valid government-issued picture
identification, such as a driver’s license or passport, in
order to be admitted into the annual meeting. If your shares are
held in the name of a bank, broker or other nominee and you plan to
attend the annual meeting, you must present proof of your ownership
of common stock, such as a bank or brokerage account statement
indicating that you owned shares of common stock at the close of
business on the record date, in order to be admitted. For safety
and security reasons, no cameras, recording equipment or other
electronic devices will be permitted in the annual
meeting.
Conduct at the Meeting
The
Chairman of the meeting has broad responsibility and legal
authority to conduct the annual meeting in an orderly and timely
manner. This authority includes establishing rules for stockholders
who wish to address the meeting. Only stockholders or their valid
proxy holders may address the meeting. The Chairman may exercise
broad discretion in recognizing stockholders who wish to speak and
in determining the extent of discussion on each item of business.
In light of the number of business items on this year’s
agenda and the need to conclude the meeting within a reasonable
period of time, we cannot ensure you that every stockholder who
wishes to speak on an item of business will be able to do
so.
Quorum
If you
vote in person or by proxy at our annual meeting, you will be
counted for purposes of determining whether there is a quorum at
the meeting. Shares of our capital stock present in person or by
proxy at our annual meeting that are entitled to vote will be
counted for the purpose of determining whether there is a quorum
for the transaction of business at our annual meeting. Our bylaws,
as amended, provide that 33 1/3% of the outstanding shares of our
capital stock entitled to vote at the meeting, represented in
person or by proxy, constitutes a quorum at a meeting of our
stockholders.
Votes Required To Approve Each Proposal
Appointment of
directors
. With respect to the election of directors
(proposal 1), under plurality voting, the four nominees receiving
the highest number of affirmative votes of our common stock will be
elected as directors to serve until the next annual meeting of
stockholders and until their successors are duly elected and
qualified.
Amendment of 2012 Equity
Incentive Plan
. The approval of the amendment to our 2012
Equity Incentive Plan to increase by 2 million shares the total
number of shares available for awards under such plan (proposal 2),
requires the affirmative vote of a majority of the shares
present in person or represented by proxy at the annual meeting and
entitled to vote on, and who voted for, against, or expressly
abstained with respect to, the proposal, assuming a quorum is
present at the annual meeting.
Ratification of independent
auditor
. For the approval of the proposal to ratify the
appointment of Marcum LLP as our independent auditors for the
fiscal year ended December 31, 2019 (proposal 3), a majority of the
shares present in person or represented by proxy at the annual
meeting and entitled to vote on, and who voted for, against, or
expressly abstained with respect to, the proposal, must be voted
“
FOR
”
approval and adoption of such proposal in order for such proposal
to be approved and adopted, assuming a quorum is present at the
annual meeting.
Approval to adjourn the
annual meeting
. Authority to adjourn the annual meeting
(proposal 4) to another place, or a later date or dates, if deemed
necessary or appropriate, in the discretion of the board of
directors, to solicit additional proxies in favor of the proposals
listed above at the time of the annual meeting, requires the vote
of a majority of the shares of stock entitled to vote which are
present, in person or by proxy at the annual meeting.
3
Broker Non-Votes and Abstentions
A
broker “
non-vote
” occurs when a
nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary
voting power with respect to that item, and the broker has not
received voting instructions from the beneficial owner. If a broker
indicates on the proxy that it does not have discretionary
authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote
with respect to that matter or proposal.
A
broker is entitled to vote shares held for a beneficial owner on
“
routine
” matters, such as
the ratification of the appointment of Marcum LLP as our
independent registered public accounting firm (proposal 3) and the
authority to adjourn the meeting (proposal 4), without instructions
from the beneficial owner of those shares. On the other hand,
absent instructions from the beneficial owner of such shares, a
broker is not entitled to vote shares held for a beneficial owner
on certain “
non-routine
” matters,
which include all of the other proposals up for vote at the annual
meeting.
With
respect to the election of directors (proposal 1), under plurality
voting, broker non-votes and abstentions have no effect on
determining the nominees elected, except to the extent that they
affect the total votes received by any particular candidate. If you
hold your shares in street name and you do not instruct your broker
how to vote in the election of directors, the broker will not vote
your shares in the director election.
With
respect to the proposal to effect an amendment to our 2012 Equity
Incentive Plan (proposal 2) and the proposal to authorize our board
of directors, in its discretion, to adjourn the annual meeting to
another place, or a later date or dates, if necessary or
appropriate, to solicit additional proxies in favor of the
proposals listed above (proposal 4), broker non-votes and
abstentions could prevent the proposals from receiving the required
affirmative vote of a majority of the shares present in person or
represented by proxy at the annual meeting and entitled to vote on,
and who voted for, against, or expressly abstained with respect to,
each proposal.
Abstaining shares
will be considered present at the annual meeting and
“
entitled to
vote
” on the applicable provisions so that the effect
of abstentions will be the equivalent of a vote “
AGAINST
” each applicable
proposal. With respect to broker non-votes, the shares subject to a
broker non-vote will not be considered present at the annual
meeting for each proposal, since they are not “
entitled to vote
” on such
proposals, so broker non-votes will have the practical effect of
reducing the number of affirmative votes required to achieve a
majority vote of the shares present in person or represented by
proxy at the annual meeting and entitled to vote on such applicable
proposals, by reducing the total number of shares from which the
majority is calculated.
Board of Directors Voting Recommendations
Our
board of directors recommends that you vote your
shares:
●
“
FOR
”
election of all four director nominees to the board of directors,
each to serve a term of one year and until their respective
successors have been elected and qualified, or until their earlier
resignation or removal (proposal 1);
●
“
FOR
”
approval of an amendment to our 2012 Equity Incentive Plan, to
increase by 2 million shares the number of shares of common stock
reserved for issuance under the plan (proposal 2);
●
“
FOR
”
ratification of the appointment of Marcum LLP, as our independent
auditors for the fiscal year ending December 31, 2019 (proposal 3);
and
●
“
FOR
”
authorization of our board of directors, in its discretion, to
adjourn the annual meeting to another place, or a later date or
dates, if necessary or appropriate, to solicit additional proxies
in favor of the proposals listed above at the time of the annual
meeting (proposal 4).
4
Mailing Costs and Solicitation of Proxies
In
addition to solicitation by use of the mails, certain of our
officers and employees may solicit the return of proxies personally
or by telephone, electronic mail or facsimile. We have not and do
not anticipate retaining a third-party proxy solicitation firm to
solicit proxies on behalf of the board of directors. The cost of
any solicitation of proxies will be borne by us. Arrangements may
also be made with brokerage firms and other custodians, nominees
and fiduciaries for the forwarding of material to, and solicitation
of proxies from, the beneficial owners of our securities held of
record at the close of business on the record date by such persons.
We will reimburse such brokerage firms, custodians, nominees and
fiduciaries for the reasonable out-of-pocket expenses incurred by
them in connection with any such activities.
Inspector of Voting
It is
anticipated that representatives of Issuer Direct Corporation will
tabulate the votes and act as inspector of election at the Annual
Meeting.
Stockholders Entitled to Vote at the Meeting
A
complete list of stockholders entitled to vote at the annual
meeting will be available to view during the annual meeting. You
may also access this list at our principal executive offices, for
any purpose germane to the annual meeting, during ordinary business
hours, for a period of ten days prior to the annual
meeting.
Voting Instructions
Your
vote is very important. Whether or not you plan to attend the
annual meeting, we encourage you to read this proxy statement and
submit your proxy or voting instructions as soon as possible. For
specific instructions on how to vote your shares, please refer to
the instructions on the Notice of Internet Availability of Proxy
Materials you received in the mail, or, if you requested to receive
printed proxy materials, your enclosed proxy card.
Confidential Voting
Independent
inspectors count the votes. Your individual vote is kept
confidential from us unless special circumstances exist. For
example, a copy of your proxy card will be sent to us if you write
comments on the card, as necessary to meet applicable legal
requirements, or to assert or defend claims for or against the
Company.
Stockholder of Record and Shares Held in Brokerage
Accounts
If on
the record date your shares were registered in your name with our
transfer agent, then you are a stockholder of record and you may
vote in person at the meeting, by proxy or by any other means
supported by us. If on the record date your shares were held in an
account at a brokerage firm, bank, dealer, or other similar
organization, then you are the beneficial owner of shares held in
“
street
name
” and the proxy statement is required to be
forwarded to you by that organization. The organization holding
your account is considered the stockholder of record for purposes
of voting at the annual meeting. As a beneficial owner, you have
the right to direct your broker or other agent on how to vote the
shares in your account. You are also invited to attend the annual
meeting. However, since you are not the stockholder of record, you
may not vote your shares in person at the meeting unless you
request and obtain a valid proxy from your broker or other
agent.
Multiple Stockholders Sharing the Same Address
In some
cases, one copy of this proxy statement and the accompanying notice
of annual meeting of stockholders, and 2018 annual report, is being
delivered to multiple stockholders sharing an address, at the
request of such stockholders. We will deliver promptly, upon
written or oral request, a separate copy of this proxy statement or
the accompanying notice of annual meeting of stockholders, and 2018
annual report, to such a stockholder at a shared address to which a
single copy of the document was delivered. Stockholders sharing an
address may also submit requests for delivery of a single copy of
this proxy statement or the accompanying notice of annual meeting
of stockholders, and 2018 annual report, but in such event will
still receive separate forms of proxy for each account. To request
separate or single delivery of these materials now or in the
future, a stockholder may submit a written request to our Corporate
Secretary, Clark R. Moore, at our principal executive offices at
1250 Wood Branch Park Dr., Suite 400, Houston, Texas 77079, or a
stockholder may make a request by calling our Corporate Secretary,
Clark R. Moore at (855) 733-3826.
5
If you
receive more than one notice, it means that your shares are
registered differently and are held in more than one account. To
ensure that all shares are voted, please either vote each account
as discussed above under “
Voting Process
”, or sign
and return by mail all proxy cards or voting instruction
forms.
Voting Results
The
final voting results will be tallied by the inspector of voting and
published in our Current Report on Form 8-K, which we are required
to file with the SEC within four business days following the annual
meeting.
Company Mailing Address
The
mailing address of our principal executive offices is 1250 Wood
Branch Park Dr., Suite 400, Houston, Texas 77079.
Reverse Stock Split
The
Company completed a 1-for-10 reverse split of its outstanding
common stock, which took effect as of market close on April 7,
2017. All outstanding shares, options, warrants, preferred stock
and other securities convertible into the Company’s common
stock disclosed herein have been retrospectively adjusted to
reflect the reverse stock split as required by the terms of such
securities with a proportional increase in the related share or
exercise price.
VOTING RIGHTS AND PRINCIPAL STOCKHOLDERS
Holders
of record of our common stock at the close of business on the
record date, July 1, 2019, will be entitled to one vote per share
on all matters properly presented at the annual meeting and at any
adjournment or postponement thereof. As of the record date, there
were 53,827,065 shares of common stock outstanding and entitled to
vote at the annual meeting and at any adjournment or postponement
thereof, held by approximately 760 holders of record. Each
share of common stock is entitled to one vote on each proposal
presented at our annual meeting, for 53,827,065 total voting
shares.
Our
stockholders do not have dissenters’ rights or similar rights
of appraisal with respect to the proposals described herein and,
moreover, do not have cumulative voting rights with respect to the
election of directors.
Security Ownership of Management and Certain Beneficial Owners and
Management
The
following table sets forth, as of the record date, July 1, 2019,
the number and percentage of outstanding shares of our common stock
beneficially owned by: (a) each person who is known by us to be the
beneficial owner of more than 5% of our outstanding shares of
common stock; (b) each of our directors; (c) our executive officers
(including former executive officers who are “Named Executive
Officers” in our 2018 annual report); and (d) all current
directors, our director nominees and executive officers, as a
group. As of the record date, there were 53,827,065 shares of
common stock issued and outstanding.
Beneficial
ownership has been determined in accordance with Rule 13d-3 under
the Exchange Act of 1934, as amended, which we refer to as the
Exchange Act. Under this rule, certain shares may be deemed to be
beneficially owned by more than one person (if, for example,
persons share the power to vote or the power to dispose of the
shares). In addition, shares are deemed to be beneficially owned by
a person if the person has the right to acquire shares (for
example, upon exercise of an option or warrant or upon conversion
of a convertible security) within 60 days of the date as of which
the information is provided. In computing the percentage ownership
of any person, the amount of shares is deemed to include the amount
of shares beneficially owned by such person by reason of such
acquisition rights. As a result, the percentage of outstanding
shares of any person as shown in the following table does not
necessarily reflect the person’s actual voting power at any
particular date.
6
To
our knowledge, except as indicated in the footnotes to this table
and pursuant to applicable community property laws, the persons
named in the table have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned
by them.
|
Common
Stock
|
Number of Common Stock Shares Beneficially Owned (1)
|
Percent of Common Stock (1)
|
|
Named Executive Officers and Directors
|
|
|
|
Simon
G. Kukes (2)
|
44,200,425
|
82.1
%
|
|
Frank
C. Ingriselli (3)
|
351,081
|
*
|
|
Clark
R. Moore (4)
|
330,144
|
*
|
|
Michael
Peterson (5)
|
312,966
|
*
|
|
Gregory
Overholtzer (6)
|
182,326
|
*
|
|
Ivar
Siem (7)
|
180,000
|
*
|
|
John
J. Scelfo (8)
|
140,000
|
*
|
|
J.
Douglas Schick (9)
|
112,000
|
*
|
|
Paul
A. Pinkston (10)
|
30,000
|
*
|
|
H.
Douglas Evans (11)
|
20,000
|
*
|
|
|
|
|
|
All Named Executive Officers and Directors as a group (seven
persons)
|
45,858,942
|
83.6
%
|
|
|
|
|
|
Greater than 5% Shareholders
|
|
|
|
SK
Energy, LLC (12)
|
43,858,942
|
81.0
%
|
|
5100
Westheimer, Suite 200
|
|
|
|
Houston,
Texas 77056
|
|
|
*Less than 1%.
Unless otherwise stated, the address of each stockholder is c/o
PEDEVCO Corp., 1250 Wood Branch Park Dr., Suite 400, Houston, Texas
77079.
(1)
Ownership voting percentages are based on
53,827,065
total shares of common
stock which were outstanding as of July 1, 2019, provided that
shares of common stock subject to options, warrants or other
convertible securities (including the common stock issuable upon
exercise of convertible promissory notes) that are currently
exercisable or convertible, or exercisable or convertible within 60
days of the applicable date of determination, are deemed to be
outstanding and to be beneficially owned by the person or group
holding such options, warrants or other convertible securities for
the purpose of computing the percentage ownership of such person or
group, but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person or group.
Beneficial ownership is determined in accordance with the rules of
the SEC and includes voting and/or investing power with respect to
securities. We believe that, except as otherwise noted and subject
to applicable community property laws, each person named in the
following table has sole investment and voting power with respect
to the securities shown as beneficially owned by such
person.
(2)
Consisting
of the following: (a) 43,586,844 shares of common stock held by SK
Energy LLC, an entity which Dr. Simon G. Kukes is deemed to
beneficially own; (b) 310,581 shares of fully-vested common stock
held by Dr. Kukes; (c) 300,000 shares of restricted common stock
held by Dr. Kukes, 1/3 of which vest on each of December 12, 2019,
December 12, 2020 and December 12, 2021, provided that Dr. Kukes
remains a director, employee of, or consultant to the Company on
such vesting dates; and (d) 3,000 shares of restricted common stock
held by the spouse of Dr. Kukes, 1/3 of which vest on each of
December 12, 2019, December 12, 2020 and December 12, 2021,
provided that his spouse remains an employee of, or consultant to,
the Company on such vesting dates. Dr. Kukes has voting control
over his unvested shares of common stock.
7
(3)
Consisting
of the following: (a) 275,000 fully-vested shares of common stock;
(b) options to purchase 39,081 shares of common stock exercisable
by Mr. Ingriselli at an exercise price of $5.10 per share; and (c)
options to purchase 37,000 shares of common stock exercisable by
Mr. Ingriselli at an exercise price of $3.70 per share. The
information presented with respect to the holder’s beneficial
ownership is based solely on the Company’s record shareholder
list and securities actually known to the Company as being held by
the holder, is only to the best of the Company’s knowledge
and has not be independently verified or confirmed.
(4)
Consisting
of the following: (a) 195,076 fully-vested shares of common stock;
(b) 2,867 fully-vested shares of common stock held by each of Mr.
Moore’s two children, which he is deemed to beneficially own;
(c) 51,000 unvested shares of common stock held by Mr. Moore,
17,000 of which vest on each of December 12, 2019, December 12,
2020 and December 12, 2021, provided that Mr. Moore remains
employed by us, or is a consultant to us, on such vesting dates;
(d) options to purchase 23,334 shares of common stock exercisable
by Mr. Moore at an exercise price of $5.10 per share; (e) options
to purchase 27,000 shares of common stock exercisable by Mr. Moore
at an exercise price of $3.70 per share; and (f) options to
purchase 28,000 shares of common stock exercisable by Mr. Moore at
an exercise price of $2.20 per share. Mr. Moore has voting control
over his unvested shares of common stock.
(5)
Consisting
of the following: (a) 205,000 fully-vested shares of common stock
(including shares held by a family trust which Mr. Peterson is
deemed to beneficially own); (b) options to purchase 10,000 shares
of common stock exercisable by Mr. Peterson at an exercise price of
$2.40 per share; (c) options to purchase 33,334 shares of common
stock exercisable by Mr. Peterson at an exercise price of $5.10 per
share; (d) options to purchase 298 shares of common stock
exercisable by Mr. Peterson at $302.40 per share; (e) options to
purchase 32,500 shares of common stock exercisable by Mr. Peterson
at an exercise price of $3.70 per share; and (f) options to
purchase 30,000 shares of common stock exercisable by Mr. Peterson
at $2.20 per share. The information presented with respect to the
holder’s beneficial ownership is based solely on the
Company’s record shareholder list and securities actually
known to the Company as being held by the holder, is only to the
best of the Company’s knowledge and has not be independently
verified or confirmed.
(6)
Consisting
of the following: (a) 14,559 fully-vested shares of common stock;
(b) options to purchase 11,667 shares of common stock exercisable
by Mr. Overholtzer at an exercise price of $5.10 per share; (c)
options to purchase 5,000 shares of common stock exercisable by Mr.
Overholtzer at an exercise price of $3.70 per share; (d) options to
purchase 15,000 shares of common stock exercisable by Mr.
Overholtzer at an exercise price of $2.20 per share; (e) options to
purchase 1,100 shares of common stock exercisable by Mr.
Overholtzer at an exercise price of $3.00 per share; (f) options to
purchase 60,000 shares of common stock exercisable by Mr.
Overholtzer at an exercise price of $1.10 per share; and (g)
options to purchase 75,000 shares of common stock exercisable by
Mr. Overholtzer at an exercise price of $0.3088 per share. The
information presented with respect to the holder’s beneficial
ownership is based solely on the Company’s record shareholder
list and securities actually known to the Company as being held by
the holder, is only to the best of the Company’s knowledge
and has not be independently verified or confirmed.
(7)
Consisting
of 180,000 shares of common stock held by American Resources
Offshore Inc., which shares Mr. Siem is deemed to beneficially own.
Mr. Siem disclaims beneficial ownership of the securities held by
American Resources Offshore Inc., except to the extent of his
pecuniary interest therein.
(8)
Consisting
of the following: (a) 20,000 unvested shares of common stock held
by Mr. Scelfo, all of which vest on July 12, 2019, provided that
Mr. Scelfo remains a director, employee of, or consultant to the
Company on such vesting date; and (b) options to purchase 120,000
shares of common stock at an exercise price of $2.19 per share,
which vest within 60 days of this filing. Mr. Scelfo has voting
control over his unvested shares of common
stock.
(9)
Consisting
of 112,000 unvested shares of common stock held by Mr. Schick, 1/3
of which vest on each of December 12, 2019, December 12, 2020 and
December 12, 2021, provided that Mr. Schick remains employed by us,
or is a consultant to us, on such vesting dates. Mr. Schick has
voting control over his unvested shares of common
stock.
8
(10)
Consisting of 30,000 unvested shares of common stock held by
Mr. Pinkston, 1/2 of which vest on each of December 12, 2019 and
December 12, 2020, provided that Mr. Pinkston remains employed by
us, or is a consultant to us, on such vesting dates. Mr. Pinkston
has voting control over his unvested shares of common
stock.
(11)
Consisting
of 20,000 unvested shares of common stock held by Mr. Evans, all of
which vest on September 27, 2019, provided that Mr. Evans remains a
director, employee of, or consultant to the Company on such vesting
date. Mr. Evans has voting control over his unvested shares of
common stock. Does not include options to purchase 100,000 shares
of common stock at an exercise price of $2.19 per share, which have
not vested as of the date of this filing and do not vest within 60
days of this filing.
(12)
Consisting
of 43,586,844 shares of common stock held by SK Energy LLC, an
entity which Dr. Simon G. Kukes is deemed to beneficially own due
to his position as the Chief Executive Officer and 100% owner of SK
Energy LLC.
Changes in Control
The
Company is not currently aware of any arrangements which may at a
subsequent date result in a change of control of the
Company.
CORPORATE GOVERNANCE
We
promote accountability for adherence to honest and ethical conduct;
endeavor to provide full, fair, accurate, timely and understandable
disclosure in reports and documents that we file with the SEC and
in other public communications made by us; and strive to be
compliant with applicable governmental laws, rules and
regulations.
Information
regarding the members of and biographical information of our board
of directors is provided below under “
Proposal 1- Election of
Directors
”, beginning on page 36.
Board Leadership Structure
Our
board of directors has the responsibility for selecting our
appropriate leadership structure. In making leadership structure
determinations, the board of directors considers many factors,
including the specific needs of our business and what is in the
best interests of our stockholders. Our current leadership
structure is comprised of a separate Chairman of the board of
directors and Chief Executive Officer (“
CEO
”). Mr. John J. Scelfo
serves as Chairman and Dr. Simon Kukes serves as CEO. The board of
directors does not have a policy as to whether the Chairman should
be an independent director, an affiliated director, or a member of
management. Our board of directors believes that the
Company’s current leadership structure is appropriate because
it effectively allocates authority, responsibility, and oversight
between management (the Company’s CEO, Dr. Kukes) and the
members of our board of directors. It does this by giving primary
responsibility for the operational leadership and strategic
direction of the Company to its CEO, while enabling our Chairman to
facilitate our board of directors’ oversight of management,
promote communication between management and our board of
directors, and support our board of directors’ consideration
of key governance matters. The board of directors believes that its
programs for overseeing risk, as described below, would be
effective under a variety of leadership frameworks and therefore do
not materially affect its choice of structure.
Risk Oversight
Effective risk
oversight is an important priority of the board of directors.
Because risks are considered in virtually every business decision,
the board of directors discusses risk throughout the year generally
or in connection with specific proposed actions. The board of
directors’ approach to risk oversight includes understanding
the critical risks in the Company’s business and strategy,
evaluating the Company’s risk management processes,
allocating responsibilities for risk oversight among the full board
of directors, and fostering an appropriate culture of integrity and
compliance with legal responsibilities.
9
The
board of directors exercises direct oversight of strategic risks to
us. Our Audit Committee reviews and assesses our processes to
manage business and financial risk and financial reporting risk. It
also reviews our policies for risk assessment and assesses steps
management has taken to control significant risks. Our Compensation
Committee oversees risks relating to compensation programs and
policies. In each case management periodically reports to our board
of directors or the relevant committee, which provides the relevant
oversight on risk assessment and mitigation (the Company’s
committees are described in greater detail below (beginning on page
11)).
Family Relationships
None of
our directors are related by blood, marriage, or adoption to any
other director, executive officer, or other key
employees.
Arrangements Between Officers and Directors
There
is no arrangement or understanding between our directors and
executive officers and any other person pursuant to which any
director or officer was or is to be selected as a director or
officer, and there is no arrangement, plan or understanding as to
whether non-management stockholders will exercise their voting
rights to continue to elect the current board of directors. There
are also no arrangements, agreements or understandings to our
knowledge between non-management stockholders that may directly or
indirectly participate in or influence the management of our
affairs.
Involvement in Certain Legal Proceedings
To the
best of our knowledge, during the past ten years, none of our
directors or executive officers were involved in any of the
following: (1) any bankruptcy petition filed by or against any
business of which such person was a general partner or executive
officer either at the time of the bankruptcy or within two years
prior to that time; (2) any conviction in a criminal proceeding or
being a named subject to a pending criminal proceeding (excluding
traffic violations and other minor offenses); (3) being subject to
any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or
otherwise limiting his involvement in any type of business,
securities or banking activities; (4) being found by a court of
competent jurisdiction (in a civil action), the SEC or the
Commodities Futures Trading Commission to have violated a federal
or state securities or commodities law; (5) being the subject of,
or a party to, any Federal or State judicial or administrative
order, judgment, decree, or finding, not subsequently reversed,
suspended or vacated, relating to an alleged violation of (i) any
Federal or State securities or commodities law or regulation; (ii)
any law or regulation respecting financial institutions or
insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil
money penalty or temporary or permanent cease-and-desist order, or
removal or prohibition order; or (iii) any law or regulation
prohibiting mail or wire fraud or fraud in connection with any
business entity; or (6) being the subject of, or a party to, any
sanction or order, not subsequently reversed, suspended or vacated,
of any self-regulatory organization (as defined in Section 3(a)(26)
of the Exchange Act), any registered entity (as defined in Section
1(a)(29) of the Commodity Exchange Act), or any equivalent
exchange, association, entity or organization that has disciplinary
authority over its members or persons associated with a
member.
Board of Directors Meetings
During the fiscal year that ended on
December 31, 2018, the Board held nine meetings and took various
other actions via the unanimous written consent of the board of
directors and the various committees described above. All directors
attended all of the board of directors meetings and committee
meetings relating to the committees on which each director served
during fiscal year 2018. The Company held annual shareholders
meetings on June 26, 2014, October 7, 2015, December 28, 2016,
December 28, 2017 and September 27, 2018, at which meetings all
directors were present in person or via teleconference. Each
director of the Company is expected to be present at annual
meetings of shareholders, absent exigent circumstances that prevent
their attendance. Where a director is unable to attend an annual
meeting in person but is able to do so by electronic conferencing,
the Company will arrange for the director’s participation by
means where the director can hear, and be heard, by those present
at the meeting.
10
COMMITTEES OF THE BOARD
We
currently maintain a Nominating and Corporate Governance Committee,
Compensation Committee and Audit Committee which have the following
committee members:
The committees of
the Board of Directors consist of the following members as of the
date of this filing:
|
Director
|
|
Audit Committee
|
|
Compensation Committee
|
|
Nominating and Corporate Governance Committee
|
|
Independent
|
|
Dr. Simon Kukes
|
|
|
|
|
|
|
|
|
|
Ivar Siem
|
|
|
|
|
|
|
|
|
|
John J. Scelfo (1)
|
|
C
|
|
C
|
|
M
|
|
X
|
|
H. Douglas Evans
|
|
M
|
|
M
|
|
C
|
|
X
|
C - Chairman of Committee.
M – Member.
(1) – Chairman of the board of directors.
Each of
these committees has the duties described below and operates under
a charter that has been approved by our board of directors and is
posted on our website. Our website address is
http://www.pacificenergydevelopment.com. Information contained on
our website is expressly not incorporated by reference into this
proxy statement.
Audit Committee
The audit committee selects, on behalf of our
board of directors, an independent public accounting firm to audit
our financial statements, discusses with the independent auditors
their independence, reviews and discusses the audited financial
statements with the independent auditors and management, and
recommends to the board of directors whether the audited financial
statements should be included in our annual reports to be filed
with the SEC. Mr.
John J. Scelfo
serves as Chair of the Audit Committee and our
board of directors has determined that Mr. Scelfo is an
“
audit committee
financial expert
” as
defined under Item 407(d)(5) of Regulation S-K of the Exchange
Act.
During
the year ended December 31, 2018 the audit committee held four
meetings.
Compensation Committee
The
compensation committee reviews and approves (a) the annual salaries
and other compensation of our executive officers, and (b)
individual stock and stock option grants. The compensation
committee also provides assistance and recommendations with respect
to our compensation policies and practices and assists with the
administration of our compensation plans.
Mr. Scelfo serves as Chair of the
compensation committee.
During
the year ended December 31, 2018, the compensation committee held
three meetings.
Nominating and Corporate Governance Committee
The
nominating and corporate governance committee assists our board of
directors in fulfilling its responsibilities by: identifying and
approving individuals qualified to serve as members of our board of
directors, selecting director nominees for our annual meetings of
stockholders, evaluating the performance of our board of directors,
and developing and recommending to our board of directors corporate
governance guidelines and oversight procedures with respect to
corporate governance and ethical conduct.
Mr. Evans serves as Chair of the nominating and
corporate governance committee.
11
The
nominating and governance committee of the board of directors
considers nominees for director based upon a number of
qualifications, including their personal and professional
integrity, ability, judgment, and effectiveness in serving the
long-term interests of our stockholders. There are no specific,
minimum or absolute criteria for membership on the board of
directors. The committee makes every effort to ensure that the
board of directors and its committees include at least the required
number of independent directors, as that term is defined by
applicable standards promulgated by the NYSE American and/or the
SEC.
The
Company does not have a formal diversity policy. The Company
believes its Board of Directors represents a collection of
individuals with a variety of complementary skills which, as a
group, possess the appropriate skills and experience to oversee the
Company’s business. The Board of Directors considers a wide
variety of qualifications, attributes and other factors and
recognizes that a diversity of viewpoints and practical experiences
can enhance the effectiveness of the Company’s Board of
Directors.
The
nominating and governance committee may use its network of contacts
to compile a list of potential candidates. The nominating and
governance committee has not in the past relied upon professional
search firms to identify director nominees, but may engage such
firms if so desired. The nominating and governance committee may
meet to discuss and consider candidates’ qualifications and
then choose a candidate by majority vote.
The
nominating and governance committee will consider qualified
director candidates recommended in good faith by stockholders,
provided those nominees meet the requirements of NYSE American and
applicable federal securities law. The nominating and governance
committee’s evaluation of candidates recommended by
stockholders does not differ materially from its evaluation of
candidates recommended from other sources. The Committee will
consider candidates recommended by stockholders if the information
relating to such candidates are properly submitted in writing to
the Secretary of the Company in accordance with the manner
described for stockholder proposals under “
Stockholder Proposals for 2020 Annual
Meeting of Stockholders and 2020 Proxy Materials
” on
page 50 below. Individuals recommended by stockholders in
accordance with these procedures will receive the same
consideration received by individuals identified to the Committee
through other means.
During
the year ended December 31, 2018 the nominating and corporate
governance committee held one meeting.
Stockholder Communications with the Board of Directors
Our
stockholders and other interested parties may communicate with
members of the board of directors by submitting such communications
in writing to our Corporate Secretary, 1250 Wood Branch Park Dr.,
Suite 400, Houston, Texas 77079, who, upon receipt of any
communication other than one that is clearly marked
“
Confidential,
” will note
the date the communication was received, open the communication,
make a copy of it for our files and promptly forward the
communication to the director(s) to whom it is addressed. Upon
receipt of any communication that is clearly marked
“
Confidential,
” our
Corporate Secretary will not open the communication, but will note
the date the communication was received and promptly forward the
communication to the director(s) to whom it is addressed. If the
correspondence is not addressed to any particular board member or
members, the communication will be forwarded to a board member to
bring to the attention of the board of directors.
Executive Sessions of the Board of Directors
The
independent members of our board of directors meet in executive
session (with no management directors or management present) from
time to time. The executive sessions include whatever topics the
independent directors deem appropriate.
12
Director Independence
Our
board of directors has determined that Mr. Scelfo and Mr. Evans are
independent directors as defined in the NYSE American rules
governing members of boards of directors and as defined under Rule
10A-3 of the Exchange Act. Accordingly, 50% of the members of our
board of directors are independent as defined in the NYSE American
rules governing members of boards of directors and as defined under
Rule 10A-3 of the Exchange Act.
Insider Trading/Anti-Hedging Policies
All
employees, officers and directors of, and consultants and
contractors to, us or any of our subsidiaries are subject to our
Insider Trading Policy. The policy prohibits the unauthorized
disclosure of any nonpublic information acquired in the workplace
and the misuse of material nonpublic information in securities
trading. The policy also includes specific anti-hedging
provisions.
To
ensure compliance with the policy and applicable federal and state
securities laws, all individuals subject to the policy must refrain
from the purchase or sale of our securities except in designated
trading windows or pursuant to preapproved 10b5-1 trading plans.
Even during a trading window period, certain identified insiders,
which include the named executive officers and directors, must
comply with our designated pre-clearance policy prior to trading in
our securities. The anti-hedging provisions prohibit all employees,
officers and directors from engaging in “short sales”
of our securities or from trading in options with maturities less
than 9 months on our stock.
Code of Ethics
In
2012, in accordance with SEC rules, our board of directors adopted
a Code of Business Conduct and Ethics for our directors, officers
and employees. Our board of directors believes that these
individuals must set an exemplary standard of conduct. This code
sets forth ethical standards to which these persons must adhere and
other aspects of accounting, auditing and financial compliance, as
applicable. The Code of Business Conduct and Ethics is available on
our website at www.pacificenergydevelopment.com. Please note that
the information contained on our website is not incorporated by
reference in, or considered to be a part of, this proxy
statement.
Additionally, the
Code of
Business Conduct and Ethics
was filed as an exhibit to our Form
8-K/A filed with the SEC on
August 8, 2012
as Exhibit 14.1
thereto
.
We
intend to disclose any amendments to our Code of Business Conduct
and Ethics and any waivers with respect to our Code of Business
Conduct and Ethics granted to our principal executive officer, our
principal financial officer, or any of our other employees
performing similar functions on our website
at www.pacificenergydevelopment.com, within four business days
after the amendment or waiver. In such case, the disclosure
regarding the amendment or waiver will remain available on our
website for at least 12 months after the initial disclosure.
There have been no waivers granted with respect to our Code of
Business Conduct and Ethics to any such officers or employees to
date.
Report of Audit Committee
The following report of the Audit Committee does not constitute
soliciting materials and should not be deemed filed or incorporated
by reference into any other Company filing under the Securities Act
of 1933, as amended, or the Exchange Act, except to the extent we
specifically incorporate such report by reference
therein.
13
AUDIT COMMITTEE REPORT
The
Audit Committee represents and assists the board of directors in
fulfilling its responsibilities for general oversight of the
integrity of the Company’s financial statements, the
Company’s compliance with legal and regulatory requirements,
the independent registered public accounting firm’s
qualifications and independence, the performance of the
Company’s internal audit function and independent registered
public accounting firm, and risk assessment and risk management.
The Audit Committee manages the Company’s relationship with
its independent registered public accounting firm (which reports
directly to the Audit Committee). The Audit Committee has the
authority to obtain advice and assistance from outside legal,
accounting or other advisors as the Audit Committee deems necessary
to carry out its duties and receives appropriate funding, as
determined by the Audit Committee, from the Company for such advice
and assistance.
In
connection with the audited financial statements of the Company for
the year ended December 31, 2018, the Audit Committee of the board
of directors of the Company (1) reviewed and discussed the audited
financial statements with the Company’s management; (2)
discussed with the Company’s independent auditors the matters
required to be discussed by the Statement on Auditing Standards No.
61, as amended (Codification of Statements on Auditing Standards,
AU 380), as adopted by the Public Company Accounting Oversight
Board (“
PCAOB
”) in Rule 3200T and
Exchange Act Regulation S-X, Rule 2-07; (3) received the written
disclosures and the letter from the independent auditors required
by the applicable requirements of the PCAOB regarding the
independent auditors’ communications with the Audit Committee
concerning independence; (4) discussed with the independent
auditors the independent auditors’ independence; and (5)
considered whether the provision of non-audit services by the
Company’s principal auditors is compatible with maintaining
auditor independence.
Based
upon these reviews and discussions, the Audit Committee recommended
to the board of directors, and the board of directors approved,
that the audited financial statements for the year ended December
31, 2018 be included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2018 for filing with the
Securities and Exchange Commission.
The
undersigned members of the Audit Committee have submitted this
Report to the board of directors.
Audit Committee
/s John J. Scelfo (Chairman)
/s/ H. Douglas Evans
14
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to
our executive officers (ages are as of the record
date).
|
Name
|
|
Age
|
|
Executive Position
|
|
Dr.
Simon Kukes
|
|
73
|
|
Chief
Executive Officer and Director
|
|
J.
Douglas Schick
|
|
44
|
|
President
|
|
Paul
Pinkston
|
|
51
|
|
Chief
Accounting Officer
|
|
Clark
R. Moore
|
|
46
|
|
Executive
Vice President, General Counsel and Secretary
|
Dr. Simon Kukes, Chief Executive Officer and Director
Dr. Kukes’s biographical information is presented below in
Proposal 1, beginning on page 38.
J. Douglas Schick, President
Mr.
Schick has over twenty years of experience in the oil and gas
industry. Prior to joining the Company as President on August 1,
2018, Mr. Schick was employed by American Resources, Inc., a
Houston, Texas-based privately-held independent oil and gas company
which he co-founded and continues to serve as Chief Executive
Officer (from August 2017 to the present) and formerly as Chief
Financial Officer and Vice President of Business Development (from
August 2013 to August 2017) provided that Mr. Schick’s
service to American Resources requires only minimal time commitment
from Mr. Schick that does not conflict with his duties and
responsibilities to the Company. Prior to starting American
Resources, Mr. Schick served as the founder, owner and principal of
J. Douglas Enterprises, a Houston, Texas-based exploration &
production (E&P) mergers and acquisitions (M&A), business
development and financial consulting firm (from June 2011 until he
co-founded American Resources), as Vice President of Finance (from
January 2011 until its sale in June 2011) for Highland Oil and Gas,
a private equity-backed E&P company headquartered in Houston,
Texas, as Manager of Planning and then Director of Planning at
Houston, Texas-based Mariner Energy, Inc. (from December 2006 until
its merger with Apache Corp. in December 2010), and in various
roles of increasing responsibility in finance, planning, M&A,
treasury and accounting at The Houston Exploration Company,
ConocoPhillips and Shell Oil Company (from 1998 to 2006). Mr.
Schick currently serves on the Board of Directors of Rockdale
Marcellus, LLC, a Houston, Texas-based subsidiary of Rockdale
Energy, LLC engaged in oil and gas development.
Mr.
Schick holds a BBA in Finance from New Mexico State University and
an MBA with a specialization in Finance from Tulane
University.
Paul A. Pinkston, Chief Accounting Officer
Mr.
Pinkston brings over 20 years of accounting, compliance, and
financial reporting expertise to the Company, with extensive
experience in handling and managing corporate compliance, financial
reporting and audits, and other regulatory functions for companies
engaged in the oil and gas industry in the U.S. Prior to
joining the Company on December 1, 2018, from August 2017 to
February 2018, Mr. Pinkston served as Corporate Controller and
Secretary for Trecora Resources (NYSE: TREC), a Sugar Land,
Texas-based petrochemical manufacturing and customer processing
service company. Prior to joining Trecora Resources, from May
2013 to June 2017, Mr. Pinkston served in various roles of
increasing authority and responsibility at Camber Energy, Inc.
(NYSE American: CEI), a Houston, Texas-based oil and gas
exploration and production company, including as Camber
Energy’s Chief Accounting Officer, Secretary and Treasurer
(August 2016 to June 2017), and as its Director of Financial
Reporting (May 2013 to August 2016). Before joining Camber
Energy, Mr. Pinkston served as a Senior Consultant with Sirius
Solutions LLLP, where he performed accounting, audit and finance
consulting services (January 2006 to May 2013), as a Corporate
Auditor performing internal audits for Baker Hughes, Inc. (January
2002 to November 2005), and as a Senior Auditor, conducting public
and private audits, at Arthur Andersen LLP (from September 1998 to
November 2001).
15
Mr.
Pinkston received a Bachelor of Business Administration (Finance
and Marketing) degree from the University of Texas and earned a
Master of Business Administration (Accounting) degree from the
University of Houston. Mr. Pinkston is a Certified Public
Accountant registered in the State of Texas.
Clark R. Moore, Executive Vice President, General Counsel and
Secretary
Mr.
Moore has served as our Executive Vice President, General Counsel,
and Secretary since our acquisition of Pacific Energy Development
in July 2012 and has served as the Executive Vice President,
General Counsel, and Secretary of Pacific Energy Development since
its inception in February 2011. Mr. Moore began his career in 2000
as a corporate attorney at the law firm of Venture Law Group
located in Menlo Park, California, which later merged into Heller
Ehrman LLP in 2003. In 2004, Mr. Moore left Heller Ehrman LLP and
launched a legal consulting practice focused on representation of
private and public company clients in the energy and high-tech
industries. In September 2006, Mr. Moore joined Erin Energy
Corporation (OTCMKTS:ERN), an independent energy company
headquartered in Houston, Texas, as its acting General Counsel and
continued to serve in that role through February 2011. In addition,
since June 1, 2018, Mr. Moore has served as a partner at Foundation
Law Group, LLP.
Mr.
Moore received his J.D. with Distinction from Stanford Law School
and his B.A. with Honors from the University of
Washington.
EXECUTIVE COMPENSATION
The following table sets forth the compensation
for services paid in all capacities for the two fiscal years ended
December 31, 2018 and 2017 to (a) Frank C. Ingriselli, our former
Chairman, former President and former Chief Executive Officer, (b)
Michael L. Peterson, our former President and Chief Executive
Officer, (c) Clark R. Moore, our Executive Vice President, General
Counsel and Secretary, (d) Gregory Overholtzer, our former Chief
Financial Officer, (e) Dr. Simon Kukes, our current Chief Executive
Officer and Director, (f) J. Douglas Schick, our current President
and (g) Paul A Pinkston, our current Chief Accounting Officer
(collectively, the “
Named Executive
Officers
”). There were no
other executive officers who received compensation in excess of
$100,000 in either 2018 or 2017.
Summary Compensation Table
|
Name and Principal Position
|
|
Fiscal
Year
|
Salary ($)
|
Bonus ($)
|
Option Awards
($)(1)
|
Stock Awards
($)
|
All Other
Compensation($)
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
Frank C.
Ingriselli (2)
|
|
2018
|
66,346
|
-
|
-
|
116,000
(3)
|
350,000
(4)
|
532,346
|
|
Former
Chairman of the Board, Chief Executive Officer and
President
|
|
2017
|
-
|
-
|
-
|
46,320
(5)
|
25,000
(6)
|
71,320
|
|
|
|
|
|
|
|
|
|
|
|
Michael L.
Peterson (7)
|
|
2018
|
125,000
|
-
|
-
|
-
|
-
|
125,000
|
|
Former Chief
Executive Officer and President
|
|
2017
|
300,000
|
14,000
|
-
|
126,608
(8)
|
-
|
440,608
|
|
|
|
|
|
|
|
|
|
|
|
Clark R.
Moore
|
|
2018
|
250,000
|
-
|
-
|
141,830
(9)
|
-
|
391,830
|
|
Executive Vice
President, General Counsel and Secretary
|
|
2017
|
250,000
|
10,000
|
-
|
80,288
(10)
|
-
|
340,288
|
|
|
|
|
|
|
|
|
|
|
|
Gregory
Overholtzer
|
|
2018
|
190,000
|
-
|
-
|
26,600
(11)
|
-
|
216,600
|
|
Former Chief
Financial Officer
|
|
2017
|
190,000
|
6,000
|
29,141
(12)
|
-
|
-
|
225,141
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Simon
Kukes (13)
|
|
2018
|
-
|
-
|
-
|
399,000
(14)
|
-
|
399,000
|
|
Chief
Executive Officer and Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Douglas
Schick (15)
|
|
2018
|
104,167
|
-
|
-
|
148,960
(16)
|
-
|
253,127
|
|
President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul. A. Pinkston
(17)
Chief Accounting
Officer
|
|
2018
|
11,667
|
-
|
-
|
39,900
(18)
|
-
|
51,567
|
16
Does not include perquisites and other personal benefits or
property, unless the aggregate amount of such compensation is more
than $10,000. No executive officer earned any non-equity
incentive plan compensation or nonqualified deferred compensation
during the periods reported above.
(1)
Amounts in this column represent the aggregate
grant date fair value of awards computed in accordance with
Financial Accounting Standards Board Accounting Standard
Codification Topic 718. For additional information on the valuation
assumptions with respect to the option grants, refer to
“
Part
II
” -
“
Item 8. Financial
Statements and Supplementary Data
” - “
Note 11 –
Stockholders’ Equity – Common Stock
” of the 2018 annual report. These amounts
do not correspond to the actual value that will be recognized by
the named individuals from these awards.
(2)
Mr.
Ingriselli served as Chief Executive Officer of the Company until
his retirement effective May 1, 2016, after which date he continued
to serve as Chairman of the Company’s Board of Directors,
again served as our Chief Executive Officer from April 2018 to July
2018, and served as President from April 2018 to August 1,
2018.
(3)
Consists
of the value of 80,000 shares of restricted common stock granted in
May 2018 at $0.34 per share and the value of 60,000 shares of
restricted common stock granted in July 2018 at $1.48 per
share.
(4)
Consists
of cash severance amount paid to Mr. Ingriselli pursuant to the
Separation and General Release Agreement, dated September 6, 2018,
entered into by and between Mr. Ingriselli and the
Company.
(5)
Consists
of the fair value of options to purchase 150,000 shares of common
stock granted in December 2017 at an exercise price of $0.3088 per
share.
(6)
Consists
of amount paid to Mr. Ingriselli pursuant to the Company's board
compensation plan.
(7)
Mr.
Peterson resigned as Chief Executive Officer and President
effective May 31, 2018, and pursuant to a consulting agreement
entered into with him, he receives $5,000 per month through June
2019 for debt restructuring, strategic planning, and capital
markets consulting services.
(8)
Consists
of the value of 410,000 shares of restricted common stock granted
in December 2017 at $0.3088 per share.
(9)
Consists
of the value of 50,000 shares of restricted common stock granted in
July 2018 at $1.48 per share and the value of 51,000 shares of
restricted common stock granted in December 2018 at $1.33 per
share.
(10)
Consists
of the value of 260,000 shares of restricted common stock granted
in December 2017 at $0.3088 per share
(11)
Consists
of the value of 20,000 shares of restricted common stock granted in
December 2018 at $1.33 per share.
(12)
Consists
of the fair value of options to purchase 150,000 shares of common
stock granted in December 2017 at an exercise price of $0.3088 per
share.
(13)
Dr.
Kukes was appointed Chief Executive Officer and Director effective
July 12, 2018.
(14)
Consists
of the value of 300,000 shares of restricted common stock granted
in December 2018 at $1.33 per share.
(15)
Mr.
Schick was appointed President effective August 1,
2018.
17
(16)
Consists
of the value of 112,000 shares of restricted common stock granted
in December 2018 at $1.33 per share.
(17)
Mr.
Pinkston was appointed Chief Accounting Officer effective December
1, 2018.
(18)
Consists
of the value of 30,000 shares of restricted common stock granted in
December 2018 at $1.33 per share.
The
following table sets forth information as of December 31, 2018
concerning outstanding equity awards for the executive officers
named in the Summary Compensation Table.
Outstanding Equity Awards at Fiscal Year-End
|
|
Option
Awards
|
Stock
Awards
|
||||
|
Name
|
Number
of securities underlying unexercised options (#)
exercisable
|
Number
of securities underlying unexercised options (#)
unexercisable
|
Option Exercise price
($)
|
Option expiration
date
|
Number of shares or units of stock that have
not vested (#)
|
Market value of shares or units of stock that
have not vested ($)
|
|
Frank C.
Ingriselli
|
34,827
|
-
|
$
5.10
|
5/30/2021
|
-
|
-
|
|
|
4,254
|
-
|
$
5.10
|
5/30/2021
|
-
|
-
|
|
|
37,000
|
-
|
$
3.70
|
5/30/2021
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Michael L.
Peterson
|
298
|
-
|
$
302.40
|
2/2/2021
|
-
|
-
|
|
|
10,000
|
-
|
$
2.40
|
10/7/2021
|
-
|
-
|
|
|
26,954
|
-
|
$
5.10
|
6/18/2022
|
-
|
-
|
|
|
6,380
|
-
|
$
5.10
|
6/18/2022
|
-
|
-
|
|
|
32,500
|
-
|
$
3.70
|
1/7/2020
|
-
|
-
|
|
|
30,000
|
-
|
$
2.20
|
1/7/2021
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Gregory
Overholtzer
|
11,667
|
-
|
$
5.10
|
6/18/2022
|
20,000
(3)
|
$
26,600
|
|
|
5,000
|
-
|
$
3.70
|
1/7/2020
|
-
|
-
|
|
|
15,000
|
-
|
$
2.20
|
1/7/2021
|
-
|
-
|
|
|
1,100
|
-
|
$
3.00
|
2/8/2022
|
-
|
-
|
|
|
60,000
|
-
|
$
1.10
|
12/28/2021
|
-
|
-
|
|
|
75,000
|
30,000
|
$
0.3088
|
12/28/2022(4)
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Clark R.
Moore
|
18,887
|
-
|
$
5.10
|
6/18/2022
|
52,000
(1)
|
$
16,058
|
|
|
4,447
|
-
|
$
5.10
|
6/18/2022
|
50,000
(2)
|
$
74,000
|
|
|
27,000
|
-
|
$
3.70
|
1/7/2020
|
51,000
(3)
|
$
67,830
|
|
|
28,000
|
-
|
$
2.20
|
1/7/2021
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Dr. Simon
Kukes
|
-
|
-
|
-
|
-
|
300,000
(3)
|
$
399,000
|
|
|
|
|
|
|
|
|
|
J. Douglas
Schick
|
-
|
-
|
-
|
-
|
112,000
(3)
|
$
148,960
|
|
|
|
|
|
|
|
|
|
Paul A.
Pinkston
|
-
|
-
|
-
|
-
|
30,000
(5)
|
$
39,900
|
|
(1)
|
Stock
award vests on June 28, 2019, subject to the holder remaining an
employee of or consultant to the Company on such vesting
date.
|
|
(2)
|
Stock
award vests on January 11, 2019, subject to the holder remaining an
employee of or consultant to the Company on such vesting
date.
|
|
(3)
|
Stock
award vests 33.3% on December 12, 2019, 33.3% on December 12, 2020,
and 33.4% on December 12, 2021, subject to the holder remaining an
employee of or consultant to the Company on such vesting dates,
provided, however, the stock award to Mr. Overholtzer shall fully
vest on April 7, 2019, subject to the holder completing consulting
services to the Company through April 7, 2019 in accordance with
that certain Separation and General Release Agreement, dated
December 31, 2018, entered into by and between the Company and Mr.
Overholtzer.
|
|
(4)
|
Option
award fully vests on April 7, 2019, and all option awards held by
holder shall be exercisable until December 31, 2021, subject to the
holder completing consulting services to the Company through
April 7, 2019 in accordance with that certain Separation and
General Release Agreement, dated December 31, 2018, entered into by
and between the Company and Mr. Overholtzer.
|
|
(5)
|
Stock
award vests 50% on December 1, 2019, and 50% on December 1, 2020,
subject to the holder remaining an employee of or consultant to the
Company on such vesting dates.
|
18
Issuances of Equity to Executive Officers
During
the year ended December 31, 2018, 80,000 shares of restricted stock
were issued to our former CEO with a fair value of $27,000 based on
the market price on the date of issuance, and 30,848 shares were
issued to employees for the cashless exercise of options. The
80,000 shares of restricted stock were issued in consideration for
Mr. Ingriselli rejoining the Company as its President and Chief
Executive Officer in May 2018. Mr. Ingriselli subsequently resigned
as President and Chief Executive Officer on September 27, 2018 and
the shares of restricted stock fully vested on October 1, 2018
pursuant to a separation agreement entered into with
him.
Also,
restricted stock awards were granted to Messrs. Frank C. Ingriselli
(then President) and Clark R. Moore (Executive Vice President,
General Counsel and Secretary) of 60,000 and 50,000 shares,
respectively, under the Company’s Amended and Restated 2012
Equity Incentive Plan during the year ended December 31, 2018. The
restricted stock awards vest as follows: 100% on the six-month
anniversary of the grant date. These shares have a total fair value
of $164,000 based on the market price on the issuance date. Upon
Mr. Ingriselli’s resignation, noted above, the 60,000 shares
of restricted stock fully vested on October 1, 2018 pursuant to a
separation agreement entered into with him.
On
September 27, 2018, the Company granted 20,000 shares of restricted
Company common stock under the Amended and Restated 2012 Equity
Incentive Plan to Mr. John Scelfo and Mr. H. Douglas Evans (who was
appointed to the Board of Directors on the same date), each
non-employee directors, which shares vest on July 12, 2019 and
September 27, 2019, respectively, in each case subject to the
recipient of the shares being a member of the Company’s Board
of Directors on such vesting date, and subject to the terms and
conditions of a Restricted Shares Grant Agreement entered into by
and between the Company and each recipient.
In
addition, on September 27, 2018, the Company granted options to
purchase 120,000 shares of common stock to Mr. Scelfo and options
to purchase 100,000 shares of common stock to Mr. Evans, which
options have an exercise price of $2.19 per share, expire in five
(5) years from the date of grant and vest on July 12, 2019 and
September 27, 2019, respectively, in each case subject to the
recipient of the shares being a member of the Company’s Board
of Directors on such vesting date, and subject to the terms and
conditions of a Stock Option Agreement entered into by and between
the Company and each recipient.
The
restricted stock and options were issued and granted in
consideration for Mr. Scelfo and Mr. Evans serving as independent
non-employee directors of the Company.
On
December 12, 2018, the Company issued, after approval by the Board
of Directors and in connection with the Company’s annual
compensation review and new hire equity award grants, an aggregate
of 624,000 shares of restricted Company common stock under the
Company’s Amended and Restated 2012 Equity Incentive Plan, in
consideration for services rendered, and to be rendered, by various
officers and employees of the Company. Included as part of the
issuances was the issuance of:
(a) 30,000
shares to Mr. Paul Pinkston, the Company’s then recently
appointed Chief Accounting Officer, pursuant to terms of his offer
letter, as previously disclosed in the Current Report on Form 8-K
filed by the Company with the Securities and Exchange Commission on
December 3, 2018, 50% of which shares vest on Mr. Pinkston’s
one (1) year anniversary of his employment commencement date
(December 1, 2019), and 50% of which shares vest on Mr.
Pinkston’s two (2) year anniversary of his employment
commencement date (December 1, 2020), subject to Mr.
Pinkston’s continued service with the Company and the terms
of a Restricted Shares Grant Agreement entered into between the
Company and Mr. Pinkston;
(b) 20,000 shares to Mr. Gregory Overholtzer,
the then Chief Financial Officer of the Company, which shares vest
at the rate of (i) 1/3 of the shares on the one (1) year
anniversary of the December 12, 2018 grant date (the
“
Grant
Date
”); (ii) 1/3 on the
two (2) year anniversary of the Grant Date; and (iii) 1/3 on the
three (3) year anniversary of the Grant Date (collectively, the
“
Three Year Vesting
Terms
”), subject to Mr.
Overholtzer’s continued service to the Company on such
vesting dates, and subject to the terms and conditions of a
Restricted Shares Grant Agreement entered into between the Company
and Mr. Overholtzer;
19
(c) 300,000
shares to Dr. Simon G. Kukes, the Chief Executive Officer of the
Company, all of which are subject to the Three Year Vesting Terms,
subject to Dr. Kukes’ continued service to the Company on
such vesting dates, and subject to the terms and conditions of a
Restricted Shares Grant Agreement entered into between the Company
and Dr. Kukes;
(d) 3,000
shares to Dr. Simon G. Kukes’ wife, who serves as an employee
of the Company, all of which are subject to the Three Year Vesting
Terms, subject to Mrs. Kukes’ continued service to the
Company on such vesting dates, and subject to the terms and
conditions of a Restricted Shares Grant Agreement entered into
between the Company and Mrs. Kukes;
(e) 112,000
shares to Mr. J. Douglas Schick, the President of the Company, all
of which are subject to the Three Year Vesting Terms, subject to
Mr. Schick’s continued service to the Company on such vesting
dates, and subject to the terms and conditions of a Restricted
Shares Grant Agreement entered into between the Company and Mr.
Schick;
(f) 51,000
shares to Mr. Clark R. Moore, the Executive Vice President, General
Counsel and Secretary of the Company, all of which are subject to
the Three Year Vesting Terms, subject to Mr. Moore’s
continued service to the Company on such vesting dates, and subject
to the terms and conditions of a Restricted Shares Grant Agreement
entered into between the Company and Mr. Moore;
and
(g) 108,000
shares to other employees of the Company, all of which are subject
to the Three Year Vesting Terms, subject to such recipient’s
continued service to the Company on such vesting dates, and subject
to the terms and conditions of a Restricted Shares Grant Agreement
entered into between the Company and each such
recipient.
Compensation of Directors
The
following table sets forth compensation information with respect to
our non-executive directors during our fiscal year ended December
31, 2018.
|
Name
|
Fees Earned or Paid in Cash ($)*
|
Stock Awards ($) (2) (3) (4)
|
All Other Compensation ($)
|
Total ($)
|
|
John
J. Scelfo
|
$
-
|
$
248,329
|
$
-
|
$
248,329
|
|
Ivar
Siem
|
$
-
|
$
-
|
$
-
|
$
-
|
|
H.
Douglas Evans
|
$
-
|
$
201,141
|
$
-
|
$
201,141
|
|
Elizabeth
P. Smith (1)
|
$
10,000
|
$
46,320
|
$
-
|
$
56,320
|
|
David
Z. Steinberg (5)
|
$
10,000
|
$
46,320
|
$
-
|
$
56,320
|
|
Adam
McAfee (1)
|
$
10,000
|
$
46,320
|
$
-
|
$
56,320
|
* The table above does not include the amount of any expense
reimbursements paid to the above directors. No directors received
any Non-Equity Incentive Plan Compensation or Nonqualified Deferred
Compensation Earnings during the period presented. Ms. Smith, Mr.
Steinberg and Mr. McAfee were paid quarterly cash compensation in
the amount of $5,000 each quarter prior to their resignation from
the Board effective September 27, 2018, and thereafter no directors
have received any cash compensation for their service on the Board
or its committees. Does not include perquisites and other personal
benefits, or property, unless the aggregate amount of such
compensation is more than $10,000.
|
(1)
|
Resigned
as a director effective September 27, 2018.
|
|
(2)
|
Amounts
in this column represent the aggregate grant date fair value of
awards computed in accordance with Financial Accounting Standards
Board Accounting Standard Codification Topic 718. For additional
information on the valuation assumptions with respect to the
restricted stock grants, refer to “Part II” -
“Item 8. Financial Statements and Supplementary Data” -
“Note 11 – Stockholders’ Equity – Common
Stock” of the 2018 annual report. These amounts do not
correspond to the actual value that will be recognized by the named
individuals from these awards.
|
20
|
(3)
|
Mr.
Scelfo and Mr. Evans received grants of 120,000 and 100,000 options
to purchase shares of our common stock at a fair value of $227,689
and $189,741, respectively, on September 27, 2018. Mr. Scelfo and
Mr. Evans also received grants of 20,000 shares of restricted stock
on September 27, 2018, each with an aggregate grant date fair
value of $43,800, which will vest in full on July 12, 2019 and
September 27, 2019, respectively. For the year ended December 31,
2018, there was compensation of $20,640 and $11,400, respectively,
related to these grants.
|
|
(4)
|
Ms.
Smith, Mr. Steinberg and Mr. McAfee each received a grant of
150,000 shares of restricted stock on December 28, 2017, each with
an aggregate grant date fair value of approximately $46,320, which
vested in full in 2018.
|
|
(5)
|
Resigned
as a director effective July 11, 2018.
|
Our
board previously adopted a compensation program, as amended, that,
effective for periods after 2012, provides each of our directors in
good standing who are not employees or paid consultants of the
Company with compensation consisting of (a) a quarterly cash
payment of $5,000, and (b) an annual equity award consisting of
shares of restricted stock valued at $60,000, vesting on the date
that is one year following the director’s anniversary date on
the board; provided, however, for fiscal year 2017, the board
reduced the annual equity award component of the board compensation
program from shares of restricted stock valued at $60,000 vesting
on the date that is one year following the director’s
anniversary date on the board, instead to an annual equity award
consisting of 150,000 shares of restricted stock, vesting on the
date that is one year following the director’s anniversary
date on the board. Effective September 27, 2018, the Board no
longer has a formal compensation program; provided that the Board
of Directors and/or the Compensation Committee may authorize
compensation (including, but not limited to cash, options and
restricted stock) to the members of the Board of Directors from
time to time in their discretion.
Securities Authorized for Issuance Under Equity Compensation
Plans
The
following table sets forth information, as of December 31, 2018,
with respect to our compensation plans under which common stock is
authorized for issuance.
|
Plan
Category
|
Number of
securities to be issued upon exercise of outstanding options,
warrants and rights
(A)
|
Weighted-average
exercise price of outstanding options, warrants and
rights
(B)
|
Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in Column
A)
(C)
|
|
Equity compensation
plans approved by shareholders (1)
|
799,564
|
$
3.18
|
2,705,620
(2)
|
|
Equity compensation
plans not approved by shareholders (3)
|
1,307,354
|
$
6.25
|
-
|
|
Total
|
2,106,918
|
$
5.09
|
2,705,620
|
|
(1)
|
Consists
of (i) options to purchase 31,016 shares of common stock issued and
outstanding under the Pacific Energy Development Corp. 2012 Amended
and Restated Equity Incentive Plan, (ii) options to purchase 298
shares of common stock issued and outstanding under the Blast
Energy Services, Inc. 2009 Incentive Plan, and (iii) options to
purchase 768,250 shares of common stock issued and outstanding
under the PEDEVCO Corp. 2012 Amended and Restated Equity Incentive
Plan.
|
|
(2)
|
Consists
of 2,705,620 shares of common stock reserved and available for
issuance under the PEDEVCO Corp. 2012 Amended and Restated Equity
Incentive Plan.
|
|
(3)
|
Consists
of (i) options to purchase 90,668 shares of common stock granted by
Pacific Energy Development Corp. to employees and consultants of
the company in October 2011 and June 2012, and (ii) warrants to
purchase 1,216,685 shares of common stock granted by PEDEVCO Corp.
to placement agents, lenders, investors and consultants between
March 2013 and May 2016.
|
21
Equity Compensation Plan Information
2012 Plan
General.
On June 26, 2012, our board of directors
adopted the Blast Energy Services, Inc. 2012 Equity Incentive Plan,
which was approved by our stockholders on July 30, 2012 and
subsequently renamed to the PEDEVCO Corp. 2012 Equity Incentive
Plan in connection with our name change from Blast Energy Services,
Inc. to PEDEVCO Corp. The 2012 Equity Incentive Plan provides for
awards of incentive stock options, non-statutory stock options,
rights to acquire restricted stock, stock appreciation rights, or
SARs, and performance units and performance shares. Subject to the
provisions of the 2012 Equity Incentive Plan relating to
adjustments upon changes in our common stock, an aggregate
of 200,000 shares of common stock were reserved for
issuance under the 2012 Equity Incentive Plan. On April 23, 2014,
the board of directors adopted an amended and restated 2012 Equity
Incentive Plan, to increase by 500,000 shares, the number
of awards available for issuance under the plan, which was approved
by stockholders on June 27, 2014. On July 27, 2015, the board of
directors adopted an amended and restated 2012 Equity Incentive
Plan, to increase by 300,000 shares, the number of awards
available for issuance under the plan, which was approved by
stockholders on October 7, 2015. On October 21, 2016, the board of
directors adopted an amended and restated 2012 Equity Incentive
Plan, to increase by 500,000 shares, the number of awards
available for issuance under the plan, which was approved by
stockholders on December 28, 2016. On November 6, 2017, the board
of directors adopted an amended and restated 2012 Equity Incentive
Plan, to increase by 1,500,000 shares, the number of awards
available for issuance under the plan, which was approved by
stockholders on December 28, 2017. On August 10, 2018, the board of
directors adopted an amended and restated 2012 Equity Incentive
Plan, to increase by 3,000,000 shares, the number of awards
available for issuance under the plan, which was approved by
stockholders on September 27, 2018.
Pursuant to proposal 2,
beginning on page 41, we are seeking stockholder
approval at the annual meeting to increase by 2 million shares, the
number of awards available for issuance under the 2012
Plan.
We
refer to the 2012 Amended and Restated Incentive Plan as the 2012
Plan.
Purpose.
Our board of directors adopted the 2012 Plan to
provide a means by which our employees, directors and consultants
may be given an opportunity to benefit from increases in the value
of our common stock, to assist in attracting and retaining the
services of such persons, to bind the interests of eligible
recipients more closely to our interests by offering them
opportunities to acquire shares of our common stock and to afford
such persons stock-based compensation opportunities that are
competitive with those afforded by similar
businesses.
Administration.
Unless
it delegates administration to a committee, our board of directors
administers the 2012 Plan. Subject to the provisions of the 2012
Plan, our board of directors has the power to construe and
interpret the 2012 Plan, and to determine: (a) the fair value of
common stock subject to awards issued under the 2012 Plan; (b) the
persons to whom and the dates on which awards will be granted; (c)
what types or combinations of types of awards will be granted; (d)
the number of shares of common stock to be subject to each award;
(e) the time or times during the term of each award within which
all or a portion of such award may be exercised; (f) the exercise
price or purchase price of each award; and (g) the types of
consideration permitted to exercise or purchase each award and
other terms of the awards.
Eligibility.
Incentive
stock options may be granted under the 2012 Plan only to employees
of us and our affiliates. Employees, directors and consultants of
us and our affiliates are eligible to receive all other types of
awards under the 2012 Plan.
Terms of Options and
SARs.
The exercise price
of incentive stock options may not be less than the fair market
value of the common stock subject to the option on the date of the
grant and, in some cases, may not be less than 110% of such fair
market value. The exercise price of nonstatutory options also may
not be less than the fair market value of the common stock on the
date of grant.
22
Options granted under the 2012 Plan may be
exercisable in cumulative increments, or “
vest,
”
as determined by our board of directors. Our board of directors has
the power to accelerate the time as of which an option may vest or
be exercised. The maximum term of options, SARs and performance
shares and units under the 2012 Plan is ten years, except that in
certain cases, the maximum term is five years. Options, SARs
and performance shares and units awarded under the 2012 Plan
generally will terminate three months after termination of the
participant’s service, subject to certain
exceptions.
A
recipient may not transfer an incentive stock option otherwise than
by will or by the laws of descent and distribution. During the
lifetime of the recipient, only the recipient may exercise an
option, SAR or performance share or unit. Our board of directors
may grant nonstatutory stock options, SARs and performance shares
and units that are transferable to the extent provided in the
applicable written agreement.
Terms of Restricted Stock
Awards.
Our board of
directors may issue shares of restricted stock under the 2012 Plan
as a grant or for such consideration, including services, and,
subject to the Sarbanes-Oxley Act of 2002, promissory notes, as
determined in its sole discretion.
Shares
of restricted stock acquired under a restricted stock purchase or
grant agreement may, but need not, be subject to forfeiture to us
or other restrictions that will lapse in accordance with a vesting
schedule to be determined by our board of directors. In the event a
recipient’s employment or service with us terminates, any or
all of the shares of common stock held by such recipient that have
not vested as of the date of termination under the terms of the
restricted stock agreement may be forfeited to us in accordance
with such restricted stock agreement.
Rights
to acquire shares of common stock under the restricted stock
purchase or grant agreement shall be transferable by the recipient
only upon such terms and conditions as are set forth in the
restricted stock agreement, as our board of directors shall
determine in its discretion, so long as shares of common stock
awarded under the restricted stock agreement remain subject to the
terms of such agreement.
Adjustment
Provisions.
If any change is made to our outstanding shares of
common stock without our receipt of consideration (whether through
reorganization, stock dividend or stock split, or other specified
change in our capital structure), appropriate adjustments may be
made in the class and maximum number of shares of common stock
subject to the 2012 Plan and outstanding awards. In that event, the
2012 Plan will be appropriately adjusted in the class and maximum
number of shares of common stock subject to the 2012 Plan, and
outstanding awards may be adjusted in the class, number of shares
and price per share of common stock subject to such
awards.
Effect of Certain Corporate
Events.
In the event of (a) a liquidation or dissolution
of the Company; (b) a merger or consolidation of the Company with
or into another corporation or entity (other than a merger with a
wholly-owned subsidiary); (c) a sale of all or substantially all of
the assets of the Company; or (d) a purchase or other acquisition
of more than 50% of the outstanding stock of the Company by one
person or by more than one person acting in concert, any surviving
or acquiring corporation may assume awards outstanding under the
2012 Plan or may substitute similar awards. Unless the stock award
agreement otherwise provides, in the event any surviving or
acquiring corporation does not assume such awards or substitute
similar awards, then the awards will terminate if not exercised at
or prior to such event.
Duration, Amendment and
Termination.
Our board of
directors may suspend or terminate the 2012 Plan without
stockholder approval or ratification at any time or from time to
time. Unless sooner terminated, the 2012 Plan will terminate ten
years from the date of its adoption by our board of directors,
i.e., in June 2022.
Our
board of directors may also amend the 2012 Plan at any time, and
from time to time. However, except as it relates to adjustments
upon changes in common stock, no amendment will be effective unless
approved by our stockholders to the extent stockholder approval is
necessary to preserve incentive stock option treatment for federal
income tax purposes. Our board of directors may submit any other
amendment to the 2012 Plan for stockholder approval if it concludes
that stockholder approval is otherwise advisable.
23
As
of the Record Date, options to purchase 754,000 shares of
common stock 3,360,130 shares of restricted stock have been
issued under the 2012 Plan, with 1,885,870 shares of
common stock remaining available for issuance under the 2012 Plan.
The options have a weighted average exercise price of
$2.68 per share, and have expiration dates ranging from 2020
to 2023.
2012 Pacific Energy Development (Pre-Merger) Plan
On
February 9, 2012, prior to the Pacific Energy Development merger,
Pacific Energy Development adopted the Pacific Energy Development
2012 Equity Incentive Plan, which we refer to as the 2012
Pre-Merger Plan. We assumed the obligations of the 2012 Pre-Merger
Plan pursuant to the Pacific Energy Development merger, though the
2012 Pre-Merger Plan has been superseded by the 2012 Plan
(described above).
The
2012 Pre-Merger Plan provides for awards of incentive stock
options, non-statutory stock options, rights to acquire restricted
stock, stock appreciation rights, or SARs, and performance units
and performance shares. Subject to the provisions of the 2012
Pre-Merger Plan relating to adjustments upon changes in our common
stock, an aggregate of 100,000 shares of common stock have
been reserved for issuance under the 2012 Pre-Merger
Plan.
The
board of directors of Pacific Energy Development adopted the 2012
Pre-Merger Plan to provide a means by which its employees,
directors and consultants may be given an opportunity to benefit
from increases in the value of its common stock, to assist in
attracting and retaining the services of such persons, to bind the
interests of eligible recipients more closely to our interests by
offering them opportunities to acquire shares of our common stock
and to afford such persons stock-based compensation opportunities
that are competitive with those afforded by similar
businesses.
The exercise price of incentive stock options may
not be less than the fair market value of the common stock subject
to the option on the date of the grant and, in some cases, may not
be less than 110% of such fair market value. The exercise price of
nonstatutory options also may not be less than the fair market
value of the common stock on the date of grant. Options granted
under the 2012 Pre-Merger Plan may be exercisable in cumulative
increments, or “
vest,
”
as determined by the board of directors of Pacific Energy
Development at the time of grant.
Shares
of restricted stock could be issued under the 2012 Pre-Merger
Plan as a grant or for such consideration, including services, and,
subject to the Sarbanes-Oxley Act of 2002, promissory notes, as
determined in the sole discretion of the Pacific Energy Development
board of directors. Shares of restricted stock acquired under a
restricted stock purchase or grant agreement could, but need not,
be subject to forfeiture or other restrictions that will lapse in
accordance with a vesting schedule determined by the board of
directors of Pacific Energy Development at the time of grant. In
the event a recipient’s employment or service with the
Company terminates, any or all of the shares of common stock held
by such recipient that have not vested as of the date of
termination under the terms of the restricted stock agreement may
be forfeited to the Company in accordance with such restricted
stock agreement.
Appropriate
adjustments may be made to outstanding awards in the event of
changes in our outstanding shares of common stock, whether through
reorganization, stock dividend or stock split, or other specified
change in capital structure of the Company. In the event of
liquidation, merger or consolidation, sale of all or substantially
all of the assets of the Company, or other change in control, any
surviving or acquiring corporation may assume awards outstanding
under the 2012 Pre-Merger Plan or may substitute similar awards.
Unless the stock award agreement otherwise provides, in the event
any surviving or acquiring corporation does not assume such awards
or substitute similar awards, then the awards will terminate if not
exercised at or prior to such event.
As of the Record Date, 31,016 options
and
55,168 shares of restricted stock remain
outstanding under the 2012 Pre-Merger Plan. These options have a
weighted average exercise price of $4.92 per share, and have
expiration dates ranging from February 8, 2022 to June
18, 2022.
24
2009 Stock Incentive Plan
Effective
July 30, 2012, our 2009 Stock Incentive Plan, which we refer
to as the 2009 Plan was replaced by the 2012 Plan. The 2009 Plan
was intended to secure for us the benefits arising from ownership
of our common stock by the employees, officers, directors and
consultants of the Company. The 2009 Plan was designed to help
attract and retain for the Company and its affiliates
personnel of superior ability for positions of exceptional
responsibility, to reward employees, officers, directors and
consultants for their services and to motivate such individuals
through added incentives to further contribute to the success
of the Company and its affiliates.
Pursuant
to the 2009 Plan, our board of directors (or a committee thereof)
had the ability to award grants of incentive or non-qualified
options, restricted stock awards, performance shares and other
securities as described in greater detail in the 2009 Plan to our
employees, officers, directors and consultants. The number of
securities issuable pursuant to the 2009 Plan was
initially 1,482, provided that the number of shares available
for issuance under the 2009 Plan would be increased on the first
day of each fiscal year beginning with our 2011 fiscal year, in an
amount equal to the greater of (a) 596 shares; or (b)
three percent (3%) of the number of issued and outstanding shares
of the Company on the first day of such fiscal year. The 2009 Plan
was to expire in April 2019.
As
of the Record Date, 298 options remain outstanding under the 2009
Plan. These options have an exercise price of $302.40 per
share, and have an expiration date of February 2,
2021.
2003 Stock Option Plan
Effective
April 1, 2009, our 2003 Stock Option Plan was replaced by the 2009
Plan. The number of securities originally grantable pursuant to the
2003 Stock Option Plan were 2,381. Any options granted
pursuant to the 2003 Stock Option Plan remain in effect until they
otherwise expire or are terminated according to their terms. As of
the Record Date, no options remain outstanding under the 2003
Plan.
2017 Say on Pay Vote
At the
annual meeting of our stockowners held on December 28, 2017,
stockholders holding 24.2% of the total shares eligible to be voted
at the annual meeting, 59.7% of the shares voted at the annual
meeting and 62.4% of the total votes cast on the proposal, voted in
favor of our named executive officers’ 2017 compensation. The
board of directors and the Compensation Committee considered these
favorable results and did not make significant changes to our
executive compensation program because it believes this advisory
stockholder vote indicates strong support for our current
compensation policies. Stockholders will be asked to vote on
execution compensation again at our 2020 annual meeting of
stockholders.
Agreements with Current Named Executive Officers
Dr. Simon
Kukes
.
Dr. Kukes has agreed to receive an annual salary
of $1 as his compensation for serving as Chief Executive Officer of
the Company and as a member of the Board of Directors (provided
that the Company has not yet paid Dr. Kukes any compensation) and
to not charge the Company for any personal business expenses he
incurs in connection with such positions. We do not currently have
a formal written agreement in place with Dr. Kukes
though.
25
J. Douglas
Schick
. On August 1, 2018, in
connection with his appointment as President of the Company, we
entered into an offer letter with J. Douglas Schick (the
“
Offer
Letter
”). Pursuant to the
Offer Letter, Mr. Schick agreed to serve as President of the
Company on an at-will basis; the Company agreed to pay Mr. Schick
$20,833 per month and that Mr. Schick is eligible for an annual
bonus in the discretion of the Company totaling up to 40% of his
then current salary and may also receive grants of restricted stock
and options in the Board of Directors’ sole discretion. Mr.
Schick’s employment may be terminated by him or the Company
with 30 days prior written notice. In the event Mr.
Schick’s employment with the Company is terminated by the
Company without “
Cause
,”
the Company will (a) pay Mr. Schick an amount equal to twelve (12)
months of his then-current annual base salary, and (b) immediately
accelerate by twelve (12) months the vesting of all outstanding
Company restricted stock and options exercisable for Company
capital stock held by Mr. Schick. For purposes of the Offer Letter,
“
Cause
”
means Mr. Schick’s (1) conviction of, or plea of nolo
contendere to, a felony or any other crime involving moral
turpitude; (2) fraud on or misappropriation of any funds or
property of the Company or any of its affiliates, customers or
vendors; (3) act of material dishonesty, willful misconduct,
willful violation of any law, rule or regulation, or breach of
fiduciary duty involving personal profit, in each case made in
connection with his responsibilities as an employee, officer or
director of the Company and which has, or could reasonably be
deemed to result in, a material adverse effect upon the Company;
(4) illegal use or distribution of drugs; (5) willful material
violation of any policy or code of conduct of the Company; or (6)
material breach of any provision of the Offer Letter or any other
employment, non-disclosure, non-competition, non-solicitation or
other similar agreement executed by him for the benefit of the
Company or any of its affiliates, all as reasonably determined in
good faith by the Board of Directors of the Company. However, an
event that is or would constitute “
Cause
”
shall cease to be “
Cause
”
if he reverses the action or cures the default that constitutes
“
Cause
”
within 10 days after the Company notifies him in writing that Cause
exists.
The
Offer Letter contains standard confidentiality provisions; a
standard non-compete restriction prohibiting Mr. Schick from
competing against the Company during the term of his employment and
for one year thereafter in connection with any directly competitive
enterprise, commercial venture, or project involving petroleum
exploration, development, or production activities in the same
geographic areas as the Company’s activities or doing
business with the Company during the six-month period before the
termination of his employment, with certain exceptions; and a
non-solicitation provision prohibiting him from inducing or
attempting to induce any employee of the company from leaving their
employment with the Company and/or attempting to induce any
consultant, service provider, customer or business relation of the
Company from terminating their relationship with the Company during
the term of his employment and for one year
thereafter.
Clark R.
Moore.
Pacific Energy
Development, our wholly-owned subsidiary, has entered into an
employment agreement, dated June 10, 2011, as amended January 11,
2013, with Clark R. Moore, its Executive Vice President, Secretary
and General Counsel (the “
Moore Employment
Agreement
”), pursuant to
which, effective June 1, 2011, Mr. Moore has been employed by
Pacific Energy Development, with a current annual base salary
of $250,000, and a target annual cash bonus of between 20% and
40% of his base salary, awardable by the board of directors in its
discretion. In addition, Mr. Moore’s employment agreement
includes, among other things, severance payment provisions that
would require the Company to make lump sum payments equal to 18
months’ salary and target bonus to Mr. Moore in the event his
employment is terminated due to his death or disability, terminated
without “
Cause
”
or if he voluntarily resigns for “
Good
Reason
” (36 months in
connection with a “
Change of
Control
”), and
continuation of benefits for up to 36 months (48 months in
connection with a “
Change of
Control
”), as such terms
are defined in the employment agreement. The employment agreement
also prohibits Mr. Moore from engaging in competitive activities
during and following termination of his employment that would
result in disclosure of our confidential information, but does not
contain a general restriction on engaging in competitive
activities.
26
For purposes of the Moore Employment Agreement,
the term “
Cause
”
means his (1) conviction of, or plea of nolo contendere to, a
felony or any other crime involving moral turpitude; (2) fraud on
or misappropriation of any funds or property of our company or any
of its affiliates, customers or vendors; (3) act of material
dishonesty, willful misconduct, willful violation of any law, rule
or regulation, or breach of fiduciary duty involving personal
profit, in each case made in connection with his responsibilities
as an employee, officer or director of our company and which has,
or could reasonably be deemed to result in, a Material Adverse
Effect upon our company; (4) illegal use or distribution of drugs;
(5) material violation of any policy or code of conduct of our
company; or (6) material breach of any provision of the employment
agreement or any other employment, non-disclosure, non-competition,
non-solicitation or other similar agreement executed by him for the
benefit of our company or any of its affiliates, all as reasonably
determined in good faith by the board of directors of our company.
However, an event that is or would constitute
“
Cause
”
shall cease to be “
Cause
”
if he reverses the action or cures the default that constitutes
“
Cause
”
within 10 days after our company notifies him in writing that Cause
exists. No act or failure to act on Mr. Moore’s part will be
considered “
willful
”
unless it is done, or omitted to be done, by him in bad faith or
without reasonable belief that such action or omission was in the
best interests of our company. Any act or failure to act that is
based on authority given pursuant to a resolution duly passed by
the board of directors, or the advice of counsel to our company,
shall be conclusively presumed to be done, or omitted to be done,
in good faith and in the best interests of the
Company.
For purposes of the Moore Employment Agreement,
“
Material Adverse
Effect
” means any event,
change or effect that is materially adverse to the condition
(financial or otherwise), properties, assets, liabilities,
business, operations or results of operations of our company or its
subsidiaries, taken as a whole.
For purposes of the Moore Employment Agreement,
“
Good
Reason
” means the
occurrence of any of the following without his written consent: (a)
the assignment to him of duties substantially inconsistent with
this employment agreement or a material adverse change in his
titles or authority; (b) any failure by our company to comply with
the compensation provisions of the agreement in any material way;
(c) any material breach of the employment agreement by our company;
or (d) the relocation of him by more than fifty (50) miles from the
location of our company’s office located in Danville,
California. However, an event that is or would constitute
“
Good
Reason
” shall cease to be
“
Good
Reason
” if: (i) he does
not terminate employment within 45 days after the event occurs;
(ii) before he terminates employment, we reverse the action or cure
the default that constitutes “
Good
Reason
” within 10 days
after he notifies us in writing that Good Reason exists; or (iii)
he was a primary instigator of the “
Good
Reason
” event and the
circumstances make it inappropriate for him to receive
“
Good
Reason
” termination
benefits under the employment agreement (e.g., he agrees
temporarily to relinquish his position on the occurrence of a
merger transaction he assists in negotiating).
For purposes of the Moore Employment Agreement,
“
Change of
Control
” means: (i) a
merger, consolidation or sale of capital stock by existing holders
of capital stock of our company that results in more than 50% of
the combined voting power of the then outstanding capital stock of
our company or its successor changing ownership; (ii) the sale, or
exclusive license, of all or substantially all of our
company’s assets; or (iii) the individuals constituting our
company’s board of directors as of the date of the employment
agreement (the “
Incumbent Board of
Directors
”) cease for any
reason to constitute at least 1/2 of the members of the board of
directors; provided, however, that if the election, or nomination
for election by our stockholders, of any new director was approved
by a vote of the Incumbent Board of Directors, such new director
shall be considered a member of the Incumbent Board of Directors.
Notwithstanding the foregoing and for purposes of clarity, a
transaction shall not constitute a Change in Control if: (w) its
sole purpose is to change the state of our company’s
incorporation; (x) its sole purpose is to create a holding company
that will be owned in substantially the same proportions by the
persons who held our company’s securities immediately before
such transaction; or (y) it is a transaction effected primarily for
the purpose of financing our company with cash (as determined by
the board of directors in its discretion and without regard to
whether such transaction is effectuated by a merger, equity
financing or otherwise).
27
Paul A.
Pinkston.
On December 1,
2018, the Company appointed Mr. Pinkston as the Chief Accounting
Officer of the Company and Mr. Pinkston commenced employment with
the Company pursuant to the terms of an Offer Letter, dated October
16, 2018, and effective December 1, 2018, entered into by and
between the Company and Mr. Pinkston (the
“
Pinkston
Offer Letter
”). Also
effective on December 1, 2018, Mr. Pinkston commenced serving as
the Company’s Principal Financial and Accounting Officer of
the Company.
Pursuant
to the Pinkston Offer Letter, Mr. Pinkston agreed to serve as Chief
Accounting Officer of the Company on an at-will basis, the Company
agreed to pay Mr. Pinkston $11,666.67 per month, Mr. Pinkston is
eligible for an annual bonus in the discretion of the Board of
Directors of the Company totaling up to 30% of his then current
salary, Mr. Pinkston may also receive grants of restricted stock
and options in the Board of Directors’ sole discretion, and
Mr. Pinkston’s employment may be terminated by him or the
Company with 30 days prior written notice. In addition, Mr.
Pinkston was granted 30,000 shares of the Company’s common
stock under the Company’s employee equity incentive plan, 50%
of which shares vest on Mr. Pinkston’s one (1) year
anniversary of his employment commencement date, and 50% of which
shares vest on Mr. Pinkston’s two (2) year anniversary of his
employment commencement date, subject to Mr. Pinkston’s
continued service with the Company and the terms of a
Board-approved restricted stock purchase agreement entered into
between Mr. Pinkston and the Company.
The
Pinkston Offer Letter contains standard confidentiality provisions
and a standard a non-solicitation provision prohibiting him from
inducing or attempting to induce any employee of the Company from
leaving their employment with the Company and/or attempting to
induce any consultant, service provider, customer or business
relation of the Company from terminating their relationship with
the Company during the term of his employment and for one year
thereafter.
Agreements with Former Named Executive Officers
Frank C.
Ingriselli.
Mr.
Frank C. Ingriselli entered into an Employment Agreement with
Pacific Energy Development, our wholly-owned subsidiary on May 10,
2018 (the “
Ingriselli Employment
Agreement
”). Pursuant to
the Ingriselli Employment Agreement, which had an effective date of
June 1, 2018, Mr. Ingriselli served as our President at an annual
base salary of $250,000, and a target annual cash bonus of
between 20% and 40% of his base salary, awardable by the Board of
Directors in its discretion. The Company also agreed to pay Mr.
Ingriselli standard benefits as other executive officers of the
Company. In addition, the Ingriselli Employment Agreement included
certain termination and severance provisions which provided for,
among other things, severance payment provisions that would require
the Company to make lump sum payments equal to 18 months’
salary and target bonus (payable within thirty days after
termination) to Mr. Ingriselli in the event his employment was
terminated due to his death or disability, terminated without
“
Cause
”
or if he voluntarily resigned for “
Good
Reason
” (36 months in
connection with a “
Change of
Control
”), and
continuation of benefits for up to 36 months (48 months in
connection with a “
Change of
Control
”), as such terms
are defined in the Ingriselli Employment
Agreement.
The definitions of “
Cause
”
(including the applicable cure provisions associated therewith),
“
Material Adverse
Effect
”,
“
Good
Reason
” and
“
Change of
Control
” in Mr.
Ingriselli’s employment agreement were substantially the same
as in Mr. Moore’s employment agreement as discussed
above.
In
addition, as additional consideration for Mr. Ingriselli rejoining
the Company as its President (which position he held until August
2018) and Chief Executive Officer (which position he held until
July 2018), on May 10, 2018, the Company granted Mr. Ingriselli
80,000 shares of restricted Company common stock under the
Company’s Amended and Restated 2012 Equity Incentive Plan,
vesting with respect to 60,000 shares on the six (6) month
anniversary of June 1, 2018 and 20,000 of the shares on the nine
(9) month anniversary of June 1, 2018, subject to his continued
service as an employee of or consultant to the Company on such
vesting dates, and subject to the terms and conditions of a
Restricted Shares Grant Agreement entered into by and between the
Company and Mr. Ingriselli.
28
In an effort to reduce the general and
administrative expenses of the Company, Mr. Ingriselli, the
Company’s then-Chairman and former President and Chief
Executive Officer, agreed to retire from the Company as an
employee, effective September 6, 2018. Mr. Ingriselli
continued as the Non-Executive Chairman of the Company’s
Board of Directors until his resignation from the Board on
September 27, 2018, and continued to work with the Company in a
transitional consulting capacity until October 1, 2018 (the
“
Ingriselli Transition
Period
”) through his
wholly-owned consulting firm, Global Ventures Investments Inc.
(“
GVEST
”),
pursuant to an Agreement dated September 6, 2018, entered into by
and between the Company and GVEST (the “
Consulting
Agreement
”). Pursuant to the
Consulting Agreement, through GVEST Mr. Ingriselli agreed to
provide the Company with services in the areas of investor
relations, public relations, financing strategies, corporate
strategies and development of business opportunities through the
Ingriselli Transition Period in exchange for the acceleration of
vesting of an aggregate of 140,000 shares of restricted common
stock previously issued to Mr. Ingriselli by the Company (the
“
Unvested Ingriselli
Shares
”), which would
have otherwise vested in full on March 1, 2019, subject to Mr.
Ingriselli’s continued service to the Company, and would have
otherwise been forfeited by Mr. Ingriselli upon his resignation
prior to such vesting date. In addition, the Company and
Mr. Ingriselli entered into an Employee Separation and Release
dated September 6, 2018 (the “
Ingriselli Separation
Agreement
”), pursuant to
which Mr. Ingriselli agreed to (i) waive all severance benefits to
which he was entitled under his Executive Employment Agreement
dated May 10, 2018 (the “
Ingriselli Employment
Agreement
”), including,
but not limited to, waiver of any payments by the Company to Mr.
Ingriselli of a lump sum payment equal to up to eighteen (18)
months’ salary and 30% bonus, and continued medical benefits
for up to three (3) years, in the event of Mr. Ingriselli’s
termination under certain circumstances, pursuant to the terms of
the Ingriselli Employment Agreement, and (ii) fully-release the
Company from all claims, in exchange for the Company agreeing to
(x) allow Mr. Ingriselli to transfer the Unvested Ingriselli Shares
to GVEST, and (y) pay a lump sum cash payment of $350,000 to Mr.
Ingriselli after seven (7) days following the effectiveness of the
Separation Agreement, which the Company paid in
full.
Michael L.
Peterson
.
The Company and Mr. Peterson (who previously
served as the Company’s President and Chief Executive
Officer) entered into a customary Employee Separation and Release
on May 10, 2018 (the “
Separation
Agreement
”), pursuant to
which Mr. Peterson agreed to fully-release the Company from all
claims, in exchange for the Company agreeing to make a lump sum
payment of $20,000 upon effectiveness of the Separation Agreement.
In addition, in order to assist in the transition of his executive
duties to Mr. Ingriselli, and to continue to support the
Company’s ongoing efforts to restructure its debt prior to
its maturity in the second quarter of 2019, Mr. Peterson agreed to
continue to work with the Company in a consulting capacity for a
period of twelve (12) months commencing June 1, 2018 (the
“
Consulting
Term
”, which was
renewable thereafter for additional one month terms pursuant to the
terms of the agreement) pursuant to an Independent Contractor
Agreement dated May 10, 2018 entered into by and between the
Company and Mr. Peterson (the “
Peterson Consulting
Agreement
”). Pursuant to the
Peterson Consulting Agreement, Mr. Peterson provided the Company
with executive transition, debt restructuring, strategic planning
and capital markets support and services through the Consulting
Term in exchange for monthly fee of $5,000. The Peterson Consulting
Agreement is terminable by the Company at any time for
“
Cause
”,
as similarly defined under the Ingriselli Employment Agreement as
described above. The Company terminated the Peterson Consulting
Agreement effective June 30, 2019.
On
September 1, 2011, Pacific Energy Development, our wholly-owned
subsidiary, entered into a Consulting Agreement engaging Michael L.
Peterson to serve as Executive Vice President of Pacific Energy
Development. This Consulting Agreement was superseded by an
employment offer letter dated February 1, 2012, which employment
offer letter was later amended and restated in full on June 16,
2012 and further amended on April 25, 2016 in connection with his
promotion to the office of Chief Executive Officer of the Company.
Pursuant to Mr. Peterson’s employment offer letter, Mr.
Peterson served the Chief Executive Officer and President of the
Company (positions he held until May 31, 2018) at an annual base
salary of $300,000, and a target annual cash bonus of between
20% and 40% of his base salary, awardable by the board of directors
in its discretion. Mr. Peterson’s employment offer letter was
terminated on May 31, 2018.
29
Gregory
Overholtzer.
Mr.
Overholtzer served as the Chief Financial Officer of the Company
from May 2016 to December 31, 2018, and formerly as the
Company’s Corporate Controller from January 2012 to May 2016,
and as the Company’s Vice President, Finance and Corporate
Controller from June 2012 to May 2016.
Effective
May 1, 2016, in connection with Mr. Overholtzer’s appointment
as Chief Financial Officer of the Company, the Company entered into
an Amendment No. 1 to Employment Agreement on April 25, 2016 with
Mr. Overholtzer (the “
Amended Overholtzer
Employment Agreement
”),
which amended that certain Employment Letter Agreement dated June
16, 2012, entered into by and between the Company as
successor-in-interest to Pacific Energy Development Corp. and Mr.
Overholtzer in connection with his original employment with the
Company, and provided that the Company may terminate Mr.
Overholtzer’ s employment for any reason with thirty (30)
days prior written notice (the “
Overholtzer Employment
Agreement
”). Mr.
Overholtzer had an annual base salary of $190,000, and was eligible
for a discretionary cash performance bonus each year of up to 30%
of his then-current annual base salary.
In connection with the Company’s
consolidation of accounting operations to its new Houston, Texas
headquarters, on December 31, 2018, the Company and Mr.
Overholtzer entered into a Separation and General Release Agreement
(the “
Overholtzer Separation
Agreement
”) pursuant to
which, effective December 31, 2018 (the “
Overholtzer Separation
Date
”), Mr. Overholtzer
and the Company mutually agreed to discontinue Mr.
Overholtzer’s employment with the Company and Mr. Overholtzer
resigned from all positions held with the Company and its
subsidiaries. Mr. Overholtzer continued to work with the Company in
a transitional consulting capacity until April 7, 2019 (the
“
Transition
Period
”) pursuant to a
Consulting Agreement entered into by and between the Company and
Mr. Overholtzer on January 1, 2019 (the “
Overholtzer Consulting
Agreement
”). Pursuant to the
Overholtzer Consulting Agreement, Mr. Overholtzer agreed to provide
accounting and financial reporting services and support to the
Company for an average of up to six (6) hours per week during the
Overholtzer Transition Period in exchange for cash compensation of
$15,000 per month and continued COBRA insurance coverage for Mr.
Overholtzer and his dependents paid for by the Company during the
Overholtzer Transition Period. Upon the successful conclusion of
the Overholtzer Transition Period, (i) the Company agreed to
accelerate the vesting of an aggregate of 20,000 shares of
restricted common stock previously issued to Mr. Overholtzer by the
Company (the “
Unvested Overholtzer
Shares
”), which would
have otherwise vested ratably over three years through December 12,
2021, subject to Mr. Overholtzer’s continued service to the
Company, and which would have otherwise been forfeited by Mr.
Overholtzer upon his separation from the Company prior to such
vesting date, (ii) the Company agreed to accelerate the vesting of
options to purchase an aggregate of 30,000 shares of the
Company’s common stock at an exercise price of $0.3088 per
share previously issued to Mr. Overholtzer by the Company (the
“
Unvested Overholtzer
Options
”), which would
have otherwise vested in full on June 28, 2019, subject to Mr.
Overholtzer’s continued service to the Company, and which
would have otherwise been forfeited by Mr. Overholtzer upon his
separation from the Company prior to such vesting date, and (iii)
the Company agreed to extend the exercise period for all of Mr.
Overholtzer’s options for a period of three (3) years
following the Overholtzer Separation Date (regardless of their
original terms). In addition, pursuant to the
Overholtzer Separation Agreement, Mr. Overholtzer agreed to
fully-release the Company from all claims in exchange for the
Company agreeing to pay a lump sum cash payment of $15,833.33 to
Mr. Overholtzer following the effectiveness of the Overholtzer
Separation Agreement.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Except
as discussed below, referenced below, or otherwise disclosed above
under “
Executive
Compensation
” and “
Agreements with Current Named
Executive Officers
”, beginning on pages 16 and 25,
respectively, there have been no transactions since January 1,
2016, and there is not currently any proposed transaction, in which
the Company was or is to be a participant, where the amount
involved exceeds $120,000, and in which any officer, director, or
any stockholder owning greater than five percent (5%) of our
outstanding voting shares, nor any member of the above referenced
individual’s immediate family, had or will have a direct or
indirect material interest.
30
Related Transactions
On September 20, 2018, SK Energy LLC
(“
SK
Energy
”), a company
wholly-owned by our Chief Executive Officer and director, Dr. Simon
Kukes, entered into an agreement with American Resources Inc.
(“
American
”),
whose principals are Ivar Siem, a member of the Board of Directors
of the Company, and J. Douglas Schick, the President of the
Company. Pursuant to the agreement, American agreed to assist Dr.
Kukes with his investments in the Company and SK Energy agreed to
pay American 25% of the profit realized by SK Energy, if any,
following the sale or disposal of the securities of the Company
which SK Energy holds and may acquire in the future (prior to such
sale/disposition). The profit is to be calculated based on (x) the
amount of consideration received by SK Energy in connection with
the sale of such securities, minus (y) the consideration paid by SK
Energy for the securities, increased by 10% each year that such
securities are held. The agreement has a term of four years, but
can be terminated at any time by SK Energy with written notice to
American.
SK Energy Note and Related Transactions
On June 26, 2018, the Company borrowed $7.7
million from SK Energy, which amount was evidenced by a Promissory
Note dated June 25, 2018, in the amount of $7.7 million (the
“
SK Energy
Note
”). SK Energy is 100%
owned and controlled by Dr. Simon Kukes, our Chief Executive
Officer and director. The SK Energy Note accrues interest monthly
at 8% per annum, payable quarterly (beginning October 15, 2018), in
either cash or shares of common stock (at the option of the
Company), or with the consent of SK Energy, such interest may be
accrued and capitalized. If interest on the SK Energy Note is paid
in common stock, SK Energy will be due that number of shares of
common stock as equals the amount due divided by the average of the
closing sales prices of the Company’s common stock for the
ten trading days immediately preceding the last day of the calendar
quarter prior to the applicable payment date, rounded up to the
nearest whole share of common stock (the “
Interest
Shares
”). The SK Energy
Note is due and payable on June 25, 2021, but may be prepaid at any
time, without penalty. Other than in connection with the Interest
Shares. The SK Energy Note contains standard and customary events
of default and upon the occurrence of an event of default, the
amount owed under the SK Energy Note accrues interest at 10% per
annum. As additional consideration for SK Energy agreeing to the
terms of the SK Energy Note, the Company issued SK Energy 600,000
shares of common stock (the “
Loan
Shares
”).
As part of the same transaction and as a required
condition to closing the sale of the SK Energy Note, SK Energy
entered into a Stock Purchase Agreement with Golden Globe Energy
(US), LLC (“
GGE
”), the then holder of our outstanding
66,625 shares of Series A Convertible Preferred Stock (convertible
pursuant to their terms into 6,662,500 shares of the
Company’s common stock – 47.6% of the Company’s
then outstanding shares post-conversion), pursuant to which on June
25, 2018, SK Energy purchased, for $100,000, all of the Series A
Convertible Preferred Stock).
Series A Convertible Preferred Stock Amendment and
Conversion
In connection with the Stock Purchase Agreement,
and immediately following the closing of the acquisition described
in the Stock Purchase Agreement (discussed above), the Company and
SK Energy, as the then holder of all of the then outstanding shares
of Series A Convertible Preferred Stock, agreed to the filing of an
Amendment to the Amended and Restated Certificate of Designations
of PEDEVCO Corp. Establishing the Designations, Preferences,
Limitations and Relative Rights of Its Series A Convertible
Preferred Stock (the “
Preferred
Amendment
”), which
amended the designation of our Series A Convertible Preferred Stock
(the “
Designation
”)
to remove the beneficial ownership restriction contained therein,
which prevented any holder of Series A Convertible Preferred Stock
from converting such Series A Convertible Preferred Stock into
shares of common stock of the Company if such conversion would
result in the holder thereof holding more than 9.9% of the
Company’s then outstanding common stock. The Company filed
the Preferred Amendment with the Secretary of State of Texas on
June 26, 2018.
31
On
July 3, 2018, SK Energy converted all of the Series A Convertible
Preferred Stock shares it acquired pursuant to the Stock Purchase
Agreement with GGE, pursuant to their terms, into 6,662,500 shares
of the Company’s common stock, representing 45.3% of the
Company’s then outstanding common stock, and resulting in
approximately 14,717,119 shares of the Company’s common stock
being issued and outstanding. The issuance was deemed a change of
control under applicable NYSE American rules and regulations,
provided that such issuance was previously approved at the 2015
annual meeting of shareholders of the Company held on October 7,
2015. The conversion transaction constituted a change in control of
the Company under applicable NYSE American rules and
regulations. The shares of common stock issued upon conversion
of the Series A Convertible Preferred Stock, together with the Loan
Shares (issued to SK Energy on June 26, 2018) totaled 49.9% of our
then outstanding shares of common stock, which shares are
beneficially owned by SK Energy and Dr. Kukes.
Convertible Note Sales
On August 1, 2018, we raised $23,600,000 through
the sale of $23,600,000 in Convertible Promissory Notes (the
“
Convertible
Notes
”). A total of
$22,000,000 in Convertible Notes was purchased by SK Energy;
$200,000 in Convertible Notes was purchased by an executive officer
of SK Energy; $500,000 in Convertible Notes was purchased by a
trust affiliated with John J. Scelfo, a director of the Company;
$500,000 in Convertible Notes was purchased by an entity affiliated
with Ivar Siem, our director, and J. Douglas Schick, who was
appointed as the President of the Company on August 1, 2018;
$200,000 in Convertible Notes was purchased by H. Douglas Evans,
who was appointed as a member of the Board of Directors on
September 27, 2018; and $200,000 in Convertible Notes were
purchased by an unaffiliated party.
The
Convertible Notes accrue interest monthly at 8.5% per annum, which
interest is payable on the maturity date unless otherwise converted
into our common stock as described below.
The Convertible Notes and all accrued interest
thereon are convertible into shares of our common stock, from time
to time after August 29, 2018, at the option of the holders
thereof, at a conversion price equal to the greater of (x) $0.10
above the greater of the book value of the Company’s common
stock and the closing sales price of the Company’s common
stock on the date the Convertible Notes were entered into (the
“
Book/Market
Price
”) (which
was $2.13 per share); (y) $1.63 per share; and (z) the
VWAP Price, defined as the volume weighted average price
(calculated by aggregate trading value on each trading day) of the
Company’s common stock for the 20 trading days ending August
29, 2018, which price was $2.08 per share, and which conversion
price is therefore $2.13 per share.
The conversion of the SK Energy Convertible Note
is subject to a 49.9% conversion limitation (for so long as SK
Energy or any of its affiliates holds such note), which prevents
the conversion of any portion thereof into common stock of the
Company if such conversion would result in SK Energy beneficially
owning (as such term is defined in the Exchange
Act)(“
Beneficially
Owning
”) more than 49.9%
of the Company’s outstanding shares of common
stock.
The conversion of the other Convertible Notes is
subject to a 4.99% conversion limitation, at any time such note is
Beneficially Owned by any party other than (i) SK Energy or any of
its affiliates (which is subject to the separate conversion
limitation described above); (ii) any officer of the Company; (iii)
any director of the Company; or (iv) any person which at the time
of first obtaining Beneficial Ownership of the Convertible Note
beneficially owns more than 9.99% of the Company’s
outstanding common stock or voting stock (collectively (ii) through
(iv), “
Borrower
Affiliates
”). The
Convertible Notes are not subject to a conversion limitation at any
time they are owned or held by Borrower
Affiliates.
The
Convertible Notes are due and payable on August 1, 2021, but may be
prepaid at any time, without penalty. The Convertible Notes contain
standard and customary events of default and upon the occurrence of
an event of default, the amount owed under the Convertible Notes
accrues interest at 10% per annum.
32
The
terms of the Convertible Notes may be amended or waived and such
amendment or waiver shall be applicable to all of the Convertible
Notes with the written consent of Convertible Note holders holding
at least a majority in interest of the then aggregate dollar value
of Convertible Notes outstanding.
Additional Convertible Note Sales
On October 25, 2018, the Company borrowed an
additional $7.0 million from SK Energy, through the issuance of a
convertible promissory note in the amount of $7.0 million (the
“
October 2018
Convertible Note
”). The October 2018 Convertible Note
accrues interest monthly at 8.5% per annum, which is payable on the
maturity date, unless otherwise converted into shares of the
Company’s common stock as described below. The October 2018
Convertible Note and all accrued interest thereon are convertible
into shares of the Company’s common stock, at the option of
the holder thereof, at a conversion price equal to $1.79 per share.
Further, the conversion of the October 2018 Convertible Note is
subject to a 49.9% conversion limitation which prevents the
conversion of any portion thereof into common stock of the Company
if such conversion would result in SK Energy or any of its
affiliates beneficially owning more than 49.9% of the
Company’s outstanding shares of common stock. The October
2018 Convertible Note is due and payable on October 25, 2021 but
may be prepaid at any time without penalty.
Also
on October 25, 2018, the Company and SK Energy agreed to convert an
aggregate of $164,000 of interest accrued under the SK Energy Note
from its effective date through September 30, 2018 into 75,118
shares of the Company’s common stock, based on a conversion
price equal to $2.18 per share, pursuant to the conversion terms of
the SK Energy Note.
January 2019 SK Energy Convertible Note
On January 11, 2019, the Company borrowed an
additional $15.0 million from SK Energy, through the issuance of a
convertible promissory note in the amount of $15.0 million (the
“
January 2019
Convertible Note
”). The January 2019 Convertible Note
accrues interest monthly at 8.5% per annum, which is payable on the
maturity date, unless otherwise converted into shares of the
Company’s common stock as described below. The January 2019
Convertible Note and all accrued interest thereon are convertible
into shares of the Company’s common stock, at the option of
the holder thereof, at a conversion price equal to $1.50 per share.
Further, the conversion of the January 2019 Convertible Note is
subject to a 49.9% conversion limitation which prevents the
conversion of any portion thereof into common stock of the Company
if such conversion would result in SK Energy or any of its
affiliates beneficially owning more than 49.9% of the
Company’s outstanding shares of common stock. The January
2019 Convertible Note Convertible Note is due and payable on
January 11, 2022, but may be prepaid at any time without
penalty.
Convertible Notes Amendment and Conversion
On
February 15, 2019, the Company and SK Energy agreed to amend the
Convertible Notes and October 2018 Convertible Note, as well as the
January 2019 Convertible Note, whereby each of the notes were
amended to remove the conversion limitation that previously
prevented SK Energy from converting any portion of the notes into
common stock of the Company if such conversion would have resulted
in SK Energy beneficially owning more than 49.9% of the
Company’s outstanding shares of common stock.
Immediately
following the entry into the Amendment, on February 15, 2019, SK
Energy elected to convert (i) all $15,000,000 of the outstanding
principal and all $125,729 of accrued interest under the January
2019 Note into common stock of the Company at a conversion price of
$1.50 per share as set forth in the January 2019 Note into
10,083,819 shares of restricted common stock of the Company, and
(ii) all $7,000,000 of the outstanding principal and all $186,776
of accrued interest under the October 2018 Note into common stock
of the Company at a conversion price of $1.79 per share as set
forth in the October 2018 Note into 4,014,959 shares of restricted
common stock of the Company, which shares in aggregate represented
approximately 47.1% of the Company’s then 29,907,223 shares
of issued and outstanding Company common stock after giving effect
to the conversions.
33
SK Energy Note Amendment; Note Purchases and
Conversion
On March 1, 2019, the Company and SK Energy
entered into a First SK Energy Note Amendment to Promissory Note
(the “
SK Energy Note
Amendment
”) which amended
the $7.7 million principal amount SK Energy Note, to provide SK
Energy the right, at any time, at its option, to convert the
principal and interest owed under such SK Energy Note, into shares
of the Company’s common stock, at a conversion price of $2.13
per share. The SK Energy Note previously only included a conversion
feature whereby the Company had the option to pay quarterly
interest payments on the SK Energy Note in shares of Company common
stock instead of cash, at a conversion price per share calculated
based on the average closing sales price of the Company’s
common stock on the NYSE American for the ten trading days
immediately preceding the last day of the calendar quarter
immediately prior to the quarterly payment
date.
In addition, on March 1, 2019, the holders of
$1,500,000 in aggregate principal amount of Convertible Promissory
Notes issued by the Company on August 1, 2018 (the
“
August 2018
Notes
”) sold their August
2018 Notes at face value plus accrued and unpaid interest through
March 1, 2019 to SK Energy (the “
August 2018 Note
Sale
”). Holders which
sold their August 2018 Notes pursuant to the August 2018 Note Sale
to SK Energy include an executive officer of SK Energy ($200,000 in
principal amount of August 2018 Notes); a trust affiliated with
John J. Scelfo, a director of the Company ($500,000 in principal
amount of August 2018 Notes); an entity affiliated with Ivar Siem,
a director of the Company, and J. Douglas Schick the President of
the Company ($500,000 in principal amount of August 2018 Notes);
and Harold Douglas Evans, a director of the Company ($200,000 in
principal amount of August 2018 Notes).
Following the August 2018 Note Sale, the
Company’s sole issued and outstanding debt was the (i)
$7,700,000 in principal, plus accrued interest, under the SK Energy
Note held by SK Energy, (ii) an aggregate of $23,500,000 in
principal, plus accrued interest, under the August 2018 Notes and
SK Energy $22 million Convertible Note held by SK Energy, and (iii)
$100,000 in principal, plus accrued interest, under an August 2018
Note held by an unaffiliated holder (the “
Unaffiliated
Holder
”).
Immediately following the effectiveness of the SK
Energy Note Amendment and August 2018 Note Sale, on March 1, 2019,
SK Energy and the Unaffiliated Holder elected to convert all
$31,300,000 of outstanding principal and an aggregate of $1,462,818
of accrued interest under the SK Energy Note, SK Energy $22 million
Convertible Note and August 2018 Notes into common stock of the
Company at a conversion price of $2.13 per share (the
“
Conversion
Price
” and the
“
Conversions
”)
as set forth in the SK Energy Note, as amended, and the August 2018
Notes and SK Energy $22 million Convertible Note (collectively, the
“
Notes
”),
into an aggregate of 15,381,605 shares of restricted common stock
of the Company (the “
Conversion
Shares
”).
Common Stock Issuance to SK Energy LLC
On May 21, 2019, we raised $14,999,998.20
through the sale of 6,818,181 shares of restricted Company common
stock at a price of $2.20 per share (the “
Purchase
Price
”) to SK Energy,
pursuant to a Common Stock Subscription Agreement, dated May 21,
2019, entered into by and between the Company and SK Energy (the
“
Subscription
Agreement
”). The Purchase
Price represents a premium to the closing price of the
Company’s common stock on the NYSE American Exchange as of
the closing date and was above the greater of the book/market price
of the Company’s common stock for the purposes of the NYSE
American Exchange.
Additional Miscellaneous Related Party Transactions
On February 19, 2015 (the
“
MIEJ Closing
Date
”), the Company
and Pacific Energy Development Corp., our wholly-owned
subsidiary (“
PEDCO
”) entered
into a Settlement Agreement (the “
MIEJ Settlement
Agreement
”) with MIE
Jurassic Energy Corporation (“
MIEJ
”),
which we refer to as MIEJ (a subsidiary of MIE Holdings). In
February 2015, MIEJ was PEDCO’s 80% partner in Condor Energy
Technology LLC (“
Condor
”),
and was the lender to PEDCO under that certain Amended and Restated
Secured Subordinated Promissory Note, dated March 25, 2013, in the
principal amount of $6,170,065, entered into by PEDCO and MIEJ (the
“
MIEJ
Note
”).
34
On
June 25, 2018, pursuant to a Debt Repayment Agreement, we paid the
New MIEJ Note in consideration for $320,125 in cash.
On August 1, 2018, Red Hawk Petroleum, LLC, our
wholly-owned subsidiary (“
Red
Hawk
”) entered into a
Membership Interest Purchase Agreement with MIEJ, pursuant to which
we, through Red Hawk, acquired 100% of the outstanding membership
interests of Condor from MIEJ in consideration for
$545,000.
On June 25, 2018, we entered into Debt Repayment
Agreements (the “
Repayment
Agreements
”) with the
holders of our outstanding Tranche A Secured Promissory Notes
(“
Tranche A
Notes
”) and Tranche B
Secured Promissory Notes (“
Tranche B
Notes
”), RJ Credit LLC,
and MIEJ, pursuant to which, on June 26, 2018, we retired all of
the then outstanding Tranche A Notes, in the aggregate amount of
approximately $5.7 million, for $3.8 million and all of the then
outstanding Tranche B Notes and notes held by RJ Credit LLC, in the
aggregate amount of approximately $67.7 million, for an aggregate
of $3,876,208.
Pursuant to the terms of the Repayment Agreement
relating to the Tranche B Notes, in addition to the cash
consideration due to the Tranche B Noteholders, as described above,
we agreed to grant to certain of the noteholders their pro rata
share of warrants to purchase an aggregate of 1,448,472 shares of
common stock of the Company (the “
Tranche B
Warrants
”). The Tranche B
Warrants have a term of three years and an exercise price equal to
$0.322, one (1) cent above the closing price of the Company’s
common stock on June 26, 2018 (“
Repurchase
Warrants
”).
On
August 10, 2018 the board of directors of the Company agreed to
accelerate the vesting of 150,000 shares of restricted stock held
by Mr. Adam McAfee, a then current member of the Company’s
board of directors, effective as of the 2018 Annual Meeting, in
consideration for Mr. McAfee’s service on the board and its
committees until the 2018 Annual Meeting, where he has not been
nominated for reelection. These shares would have otherwise vested
December 28, 2018 had Mr. McAfee remained on the board of directors
on such date.
Mr. David Steinberg (a former member of the Board
who resigned on July 11, 2018), entered into a Rescission Agreement
(the “
Rescission
Agreement
”) pursuant to
which the Company and Mr. Steinberg agreed to cancel and rescind an
aggregate of 75,975 shares of restricted Company Common Stock
originally granted to Mr. Steinberg pursuant to the Board
Compensation Program in 2015 and 2016.
On August 31, 2018, we entered into warrant
repurchase agreements with certain of the holders of Repurchase
Warrants, namely Senior Health Insurance Company of Pennsylvania,
Principal Growth Strategies, LLC, and RJ Credit LLC (collectively,
the “
Warrant
Holders
”). Pursuant to
the warrant repurchase agreements, the Company repurchased warrants
to purchase an aggregate of 1,105,935 shares of the Company’s
common stock (the shares of common stock issuable upon exercise of
which such Repurchase Warrants, the “
Warrant
Shares
”) held by the
Warrant Holders, which warrants had a term of three years (through
August 25, 2021) and an exercise price equal to $0.322 per share.
The Repurchase Warrants were repurchased for an aggregate of
$1,095,000 or $0.99 per Warrant Share, which amount the Company
paid to the Warrant Holders on September 17, 2018. Effective on the
date of payment of the warrant purchase amounts, the Repurchase
Warrants and the agreements evidencing such Repurchase Warrants
were deemed to have been repurchased by the Company and cancelled.
The Warrant Repurchase Agreements also included a release by which
the Warrant Holders released the Company from any liability or
claims associated with the Repurchase Warrants and certain of the
Warrant Repurchase Agreements included a release by which we
released the applicable Warrant Holders party thereto. The terms of
the Warrant Repurchase Agreements were individually negotiated with
each associated group of Warrant Holders.
35
Review and Approval of Related Party Transactions
We
have not adopted formal policies and procedures for the review,
approval or ratification of transactions, such as those described
above, with our executive officer(s), director(s) and significant
stockholders, provided that it is our policy that any and all such
transactions are presented and approved by the independent members
of the Board of Directors (typically through an ad hoc committee
formed solely for the purpose of approving each individual
transaction), or the Audit Committee, or a majority of the board
(with the interested parties abstaining) and future material
transactions between us and members of management or their
affiliates shall be on terms no less favorable than those available
from unaffiliated third parties.
In addition, our Code of Ethics (described above
under “
Code of
Ethics
” on page 13),
which is applicable to all of our employees,
officers and directors, requires that all employees, officers and
directors avoid any conflict, or the appearance of a conflict,
between an individual’s personal interests and our
interests.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section
16(a) of the Exchange Act requires our executive officers and
directors and persons who own more than 10% of a registered class
of our equity securities to file with the SEC initial statements of
beneficial ownership, reports of changes in ownership and annual
reports concerning their ownership in our common stock and other
equity securities, on Form 3, 4 and 5 respectively. Executive
officers, directors and greater than 10% shareholders are required
by the SEC regulations to furnish our company with copies of all
Section 16(a) reports they file.
Based
solely on our review of the copies of such reports received by us
and on written representation by our officers and directors
regarding their compliance with the applicable reporting
requirements under Section 16(a) of the Exchange Act, we believe
that all filings required to be made under Section 16(a) during
2018 were timely made, except that J. Douglas Schick inadvertently
failed to timely file a Form 3 relating to his appointment as
President of the Company; John J. Scelfo inadvertently failed to
timely file two Form 4s, and as a result three transactions were
not reported on a timely basis; Dr. Simon Kukes inadvertently
failed to timely file three Form 4s, and as a result four
transactions were not reported on a timely basis; Ivar Siem
inadvertently failed to timely file two Form 4s, and as a result
two transactions were not reported on a timely basis; H. Douglas
Evans inadvertently failed to timely file a Form 3 relating to his
appointment as a member of the Board of Directors of the Company;
H. Douglas Evans inadvertently failed to timely file one Form 4,
and as a result two transactions were not reported on a timely
basis; J. Douglas Schick inadvertently failed to timely file one
Form 4, and as a result one transaction was not reported on a
timely basis; Gregory L. Overholtzer inadvertently failed to timely
file one Form 4, and as a result one transaction was not reported
on a timely basis; Clark Moore inadvertently failed to timely file
one Form 4, and as a result one transaction was not reported on a
timely basis; and Paul Pinkston inadvertently failed to timely file
one Form 4, and as a result one transaction was not reported on a
timely basis.
PROPOSAL 1
ELECTION OF DIRECTORS
At the
annual meeting, four directors are to be elected to hold office
until the 2020 annual meeting of stockholders and until their
respective successors are duly elected and qualified. The
Nominating and Governance Committee has recommended, and the board
of directors has selected, the following nominees for election:
John J. Scelfo, Dr. Simon Kukes, Ivar Siem and H. Douglas Evans,
all of whom are current members of the board of directors of the
Company.
If any
nominee for any reason is unable to serve or for good cause will
not serve, the proxies may be voted for such substitute nominee as
the proxy holder may determine. We are not aware of any nominee who
will be unable to, or for good cause will not, serve as a
director.
36
The
Company’s Nominating Committee has reviewed the
qualifications of the director nominees and has recommended each of
the nominees for election to the Board.
We
believe that each of our directors possesses high standards of
personal and professional ethics, character, integrity and values;
an inquisitive and objective perspective; practical wisdom; mature
judgment; diversity in professional experience, skills and
background and a proven record of success in their respective
fields; and valuable knowledge of our business and industry.
Moreover, each of our directors is willing to devote sufficient
time to carrying out his or her duties and responsibilities
effectively and is committed to serving us and our stockholders.
Set forth below is a brief description of the specific experiences,
qualifications and skills attributable to each of our directors
that led the board of directors, as of the date of this proxy
statement, to its conclusion that such director should serve as a
director of the Company. Director nominee ages set forth below are
as of the record date.
THE BOARD OF DIRECTORS RECOMMENDS
VOTING “
FOR
” EACH OF THE NOMINEES
LISTED BELOW.
|
JOHN J. SCELFO (AGE
61)
DIRECTOR
CHAIRMAN OF THE AUDIT COMMITTEE
CHAIRMAN OF THE COMPENSATION COMMITTEE
MEMBER OF THE CORPORATE GOVERNANCE AND NOMINATING
COMMITTEE
Director since July 2018
|
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Mr.
Scelfo brings nearly 40 years of experience in oil and gas
management, finance and accounting to the Board. Mr. Scelfo
currently serves as principal and owner of JJS Capital Group, a
Fort Lauderdale, Florida-based investment company that he formed in
April 2014. Prior to forming JJS Capital, Mr. Scelfo served as
Senior Vice President, Finance and Corporate Development (from
February 2004 to March 2014), and Chief Financial Officer,
Worldwide Exploration & Producing (from April 2003 to January
2004) of New York, New York-based Hess Corporation, a large
integrated oil and gas company, where he served as one of eight
members of the company’s Executive Committee and was
responsible for the company’s corporate treasury, strategy
and upstream commercial activities. Prior to joining Hess
Corporation, Mr. Scelfo served as Executive Vice President and
Chief Financial Officer of Sirius Satellite Radio (from April 2001
to March 2003), as Vice President and Chief Financial Officer of
Asia Pacific & Japan for Dell Computer (November 1999 to March
2001), and in various roles of increasing responsibility with Mobil
Corporation (from June 1980 to October 1999).
Mr.
Scelfo holds a bachelor’s degree and an M.B.A. from Cornell
University. In 2011, he was awarded Cornell ILR School’s
Alpern Award given to those who “have been exceedingly
generous in their support of the ILR School in general and in
support of Off-Campus Credit Programs in
particular”.
The
board of directors believes that Mr. Scelfo’s over 30
years’ experience in management, finance and accounting in
the energy industry working at major oil and gas and other publicly
traded companies, and the insights he has gained from these
experiences, will provide crucial guidance for our future
operations, capital raising efforts, and financial accounting and
reporting functions.
|
37
|
SIMON KUKES (AGE
73
)
CHIEF EXECUTIVE OFFICER AND DIRECTOR
Director Since July 2018
|
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Since
May 2013, Dr. Kukes has served as the principal of SK Energy LLC, a
consulting company. Dr. Kukes was the CEO at Samara-Nafta, a
Russian oil company, partnering with Hess Corporation, a U.S.-based
international oil company, from June 2004 to April 2013. He was
President and Chief Executive of Tyumen Oil Company (TNK) from 1998
until its merger with British Petroleum (BP) in 2003. He then
joined Yukos Oil as chairman. He also served as chief executive of
Yukos from 2003 until June 2004. Dr. Kukes also served on the board
of directors of Parker Drilling Company (NYSE: PKD), a Houston,
Texas-based drilling services company (from 2001 to 2004), and
Amarin Corporation plc (NASDAQ: AMRN), a Bedminster, New
Jersey and Dublin-Ireland-based pharmaceutical company focused on
developing therapeutics to improve cardiovascular health (from 2000
to 2008). In 1999, he was voted one of the Top 10 Central
European Executives by the Wall Street Journal Europe and in 2003
he was named by The Financial Times and PricewaterhouseCoopers as
one of the 64 most respected business leaders in the
world.
Dr.
Kukes has a primary degree in Chemical Engineering from the
Institute for Chemical Technology, Moscow and a PhD in Physical
Chemistry from the Academy of Sciences, Moscow and was a
Post-Doctoral Fellow of Rice University in Houston, Texas. He is
the holder of more than 130 patents and has published more than 60
scientific papers.
Dr.
Kukes brings to the board of directors decades of leadership and
experience in the global energy industry. The board of directors
believes that Dr. Kukes’ experience and strategic leadership
and vision will provide crucial guidance for our management and
operations, and provide key insights and guidance in the evaluation
of oil and gas acquisition and development
opportunities.
|
38
|
IVAR SIEM (AGE
73)
DIRECTOR
Director since July 2018
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Mr. Siem has broad experience from both the
upstream and the service segments of the oil and gas industry, has
been the founder of several companies, and has been involved in
several roll-ups and restructuring processes throughout his career.
He currently serves as the Chairman of American Resources, Inc.,
and as a Managing Partner of its affiliated investment vehicle,
Norexas, LLC, both privately-held Houston, Texas-based companies
active in oil and gas investment, acquisition and development, and
has served in that capacity since 2013. Previously, Mr. Siem served
as Chairman and Chief Executive Officer of American Resources, Inc.
(from 2013 through July 2017) and Chairman of Blue Dolphin Energy
Company (OTCQX: BDCO)(“BDCO”), from 1990 to June 2014,
and President and CEO from 1990 until 2012. BDCO is currently a
Houston, Texas-based independent refiner and marketer of petroleum
products and was involved in exploration and gathering of oil and
gas in the shallow waters of the Gulf of Mexico prior to 2012. From
January 2007 to present, Mr. Siem served as President of Drillmar
Oil and Gas, Inc. (“Drillmar Oil”), a subsidiary of
Drillmar Energy, Inc. Drillmar Oil filed a voluntary Chapter 11
bankruptcy proceeding in November 2009 from which it emerged in
October 2010. In 1999, Mr. Siem
acquired a small distressed public company,
American Resources Offshore, Inc. and worked with creditors and
existing management to achieve a voluntary reorganization. From
1995 to 2000, Mr. Siem served as Chairman and interim CEO of DI
Industries/Grey Wolf Drilling while restructuring the company
financially and operationally. Through several mergers and
acquisitions, the company emerged as one of the leading land
drilling contractors. The company was subsequently acquired by
Precision Drilling in 2008. From 1996 to 1997 Mr. Siem served as
Chairman and CEO of Seateam Technology ASA. Mr. Siem started his
career at Amoco working as an engineer in various segments of
upstream operations.
Mr.
Siem is currently on the Board of Directors at Siem Industries,
Inc., the Drillmar Energy Group, and Petrolia Energy Corporation
(OTCQB: BBLS), and has served on the board of several privately
held and publicly traded companies including Frupor SA, Avenir,
ASA, and DSND ASA. Siem Industries is a holding company which
invests in shipping and offshore oil and gas construction services.
Frupor SA, is a Portuguese agricultural business, which Mr. Siem
cofounded with his brother O. M. Siem in 1988.
Mr.
Siem holds a Bachelor of Science in Mechanical Engineering with a
minor in Petroleum from the University of California, Berkeley and
an Executive MBA from the Amos Tuck School of Business, Dartmouth
University.
The
board of directors believes that Mr. Siem’s broad experience
from both the upstream and the service segments of the oil and gas
industry, and executive management, technical and operating
experience at publicly-traded oil and gas companies, and the
insights he has gained from these experiences, will provide crucial
guidance for our future management and operations, and provide key
insights and guidance in the evaluation of oil and gas acquisition
and development opportunities.
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39
|
H. DOUGLAS EVANS (AGE
71)
DIRECTOR
CHAIRMAN OF THE
CORPORATE GOVERNANCE AND
NOMINATING COMMITTEE
MEMBER OF THE AUDIT COMMITTEE
MEMBER OF THE COMPENSATION COMMITTEE
Director since September 2018
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Mr. Evans has more than 45 years of oil and gas
industry experience, 40 years of which have been spent in various
executive management positions with Gulf Interstate Engineering
Company (“
GIE
”), a privately-held
Houston, Texas-based firm specializing in the engineering of oil,
gas and liquid pipeline systems, where he currently serves as
Chairman since November 2017, and previously as President and Chief
Executive Officer (July 2004-November 2017), President (February
2003-November 2017), Senior Vice President (September 1994-July
2004), and in various other roles since he joined the company in
1978. During Mr. Evans’ tenure as an executive at GIE, he has
successfully overseen the company’s organic growth from $25
million in sales in 1996 to over $250 million in sales in recent
years, with GIE involved in almost every major onshore oil and gas
pipeline in the world over the last 20 years.
Mr.
Evans holds a B.S. Civil Engineering and Master of Business
Administration from Queen’s University at Kingston, Ontario,
and is a registered Professional Engineer in Ontario and Alberta,
Canada. Mr. Evans currently serves as a member of the Board of
Directors and Chairman of GIE (since November 2017), a member of
the Board of Directors of Gulf Interstate Field Services, a GIE
affiliate engaged in providing oil and gas pipeline construction
inspection services (since February 2013), the Board of Directors
and Chairman of the Strategy Committee for the International Pipe
Line and Offshore Contractors Association (IPLOCA) (since September
2010), a member of the Board of Houston, Texas-based Crossroads
School, Inc. (since 2004), and a former member of the Board of the
Cystic Fibrosis Foundation – Texas Gulf Coast
Chapter.
The
board of directors believes that Mr. Evans’ over 45
years’ experience in management and operations in the energy
industry, and the insights he has gained from his experiences, will
provide crucial guidance for our management and
operations.
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Director Qualifications
The
board of directors believes that each of our director nominees is
highly qualified to serve as a member of the board of directors.
Each of the director nominees has contributed to the mix of skills,
core competencies and qualifications of the board of directors.
When evaluating candidates for election to the board of directors,
the board of directors seeks candidates with certain qualities that
it believes are important, including integrity, an objective
perspective, good judgment, and leadership skills. Our director
nominees are highly educated and have diverse backgrounds and
talents and extensive track records of success in what we believe
are highly relevant positions.
40
Vote Required to Elect the Director Nominees
A
plurality of the votes cast in person or by proxy by the holders of
our common stock entitled to vote at the annual meeting are
required to elect the nominees. A plurality of the votes cast means
(1) the director nominee with the most votes for a particular seat
is elected for that seat; and (2) votes cast shall include
votes to “
withhold
authority
” (shown as “
AGAINST
” on the enclosed
form of proxy) and exclude abstentions and broker non-votes with
respect to that director’s election. Therefore, abstentions
and broker non-votes (which occur if a broker or other nominee does
not have discretionary authority and has not received instructions
with respect to a particular director nominee within ten days of
the annual meeting) will not be counted in determining the number
of votes cast with respect to that director’s
election.
Properly executed
proxies will be voted at the annual meeting in accordance with the
instructions specified on the proxy; if no such instructions are
given, the persons named as agents and proxies in the enclosed form
of proxy will vote such proxy “
FOR
” the election of the
nominees named herein. Should any nominee become unavailable for
election, discretionary authority is conferred to the persons named
as agents and proxies in the enclosed form of proxy to vote for a
substitute.
Pursuant to the
power provided to the board of directors in our Bylaws, the board
of directors has set the number of directors that shall constitute
the board of directors at four. Proxies cannot be voted for a
greater number of persons than the number of nominees named on the
enclosed form of proxy, and stockholders may not cumulate their
votes in the election of directors.
THE
BOARD OF DIRECTORS RECOMMENDS
VOTING “
FOR
” EACH OF THE NOMINEES
LISTED ABOVE.
PROPOSAL 2
AMENDMENT TO THE PEDEVCO CORP. 2012 EQUITY INCENTIVE
PLAN
At the
annual meeting, stockholders are requested to approve an amendment
to the Amended and Restated 2012 Equity Incentive Plan, which we
refer to as the 2012 Plan, to increase by 2 million, the number of
shares reserved for issuance under such plan. The amendment to the
2012 Plan has previously been approved by the board of
directors
. If this proposal
2 is not approved by our stockholders, we will continue to operate
the 2012 Plan pursuant to its current
provisions.
As of
the date of this proxy statement filing, options to purchase
754,000 shares of restricted stock and 3,360,130 shares of
restricted stock have been issued under the 2012 Plan, with
1,885,870 shares of common stock remaining available for issuance
under the 2012 Plan. In the event proposal 2 is approved at the
annual meeting, the 2012 Plan will have 3,885,870 shares available
for future issuance.
The
following is a summary of the principal features of the 2012 Plan.
This summary does not purport to be a complete description of all
of the provisions of the 2012 Plan. It is qualified in its entirety
by reference to the full text of the 2012 Plan, as proposed to be
amended, which has been filed with the SEC with this proxy
statement as
Appendix
A
.
41
General
On June 26, 2012, our board of directors adopted
the Blast Energy Services, Inc. 2012 Equity Incentive Plan, which
was approved by our stockholders on July 30, 2012 and subsequently
renamed to the PEDEVCO Corp. 2012 Equity Incentive Plan in
connection with our name change from Blast Energy Services, Inc. to
PEDEVCO Corp. The 2012 Equity Incentive Plan provides for awards of
incentive stock options, non-statutory stock options, rights to
acquire restricted stock, stock appreciation rights, or SARs, and
performance units and performance shares. Subject to the provisions
of the 2012 Equity Incentive Plan relating to adjustments upon
changes in our common stock, an aggregate
of 200,000 shares of common stock were reserved for
issuance under the 2012 Equity Incentive Plan. On April 23, 2014,
the board of directors adopted an amended and restated 2012 Equity
Incentive Plan, to increase by 500,000 shares, the number
of awards available for issuance under the plan, which was approved
by stockholders on June 27, 2014. On July 27, 2015, the board of
directors adopted an amended and restated 2012 Equity Incentive
Plan, to increase by 300,000 shares, the number of awards
available for issuance under the plan, which was approved by
stockholders on October 7, 2015. On October 21, 2016, the board of
directors adopted an amended and restated 2012 Equity Incentive
Plan, to increase by 500,000 shares, the number of awards
available for issuance under the plan, which was approved by
stockholders on December 28, 2016. On November 6, 2017, the board
of directors adopted an amended and restated 2012 Equity Incentive
Plan, to increase by 1,500,000 shares, the number of awards
available for issuance under the plan, which was approved by
stockholders on December 28, 2017. On August 10, 2018, the board of
directors adopted an amended and restated 2012 Equity Incentive
Plan, to increase by 3,000,000 shares, the number of awards
available for issuance under the plan, which was approved by
stockholders on September 27, 2018.
Pursuant to proposal 2,
beginning on page 41, we are seeking stockholder approval at the
annual meeting to increase by 2,000,000 shares, the number of
awards available for issuance under the 2012
Plan.
The
2012 Plan provides for awards of incentive stock options,
non-statutory stock options, rights to acquire restricted stock,
stock appreciation rights, or SARs, and performance units and
performance shares. Incentive stock options granted under the 2012
Plan are intended to qualify as “
incentive stock options
”
within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the “
Code
”). Non-statutory
stock options granted under the 2012 Plan are not intended to
qualify as incentive stock options under the Code. See
“
Federal Income Tax
Consequences
” below beginning on page 45, for a
discussion of the principal federal income tax consequences of
awards under the 2012 Plan.
Purpose
Our
board of directors adopted the 2012 Plan to provide a means by
which our employees, directors and consultants may be given an
opportunity to benefit from increases in the value of our common
stock, to assist in attracting and retaining the services of such
persons, to bind the interests of eligible recipients more closely
to our interests by offering them opportunities to acquire shares
of our common stock and to afford such persons stock-based
compensation opportunities that are competitive with those afforded
by similar businesses. All of our employees, directors and
consultants are eligible to participate in the 2012
Plan.
Administration
Unless
it delegates administration to a committee as described below, our
board of directors will administer the 2012 Plan. Subject to the
provisions of the 2012 Plan, our board of directors has the power
to construe and interpret the 2012 Plan, and to determine: (i) the
fair value of common stock subject to awards issued under the 2012
Plan; (ii) the persons to whom and the dates on which awards will
be granted; (iii) what types or combinations of types of awards
will be granted; (iv) the number of shares of common stock to be
subject to each award; (v) the time or times during the term of
each award within which all or a portion of such award may be
exercised; (vi) the exercise price or purchase price of each award;
and (vii) the types of consideration permitted to exercise or
purchase each award and other terms of the awards.
42
Our
board of directors has the power to delegate administration of the
2012 Plan to a committee composed of one or more directors. In the
discretion of our board of directors, a committee may consist
solely of two or more “
independent directors
” or
two or more “
non-employee directors
”
(as such terms are defined in the 2012 Plan).
Stock Subject to the 2012 Plan
Subject
to the provisions of the 2012 Plan relating to adjustments upon
changes in our common stock, an aggregate of 6 million shares of
common stock are currently reserved for issuance under the 2012
Plan (provided we are seeking stockholder approval for the increase
in such number of shares of common stock by 2 million shares
pursuant to this proposal 2), with 1,885,870 shares of common stock
remaining available for issuance under the 2012 Plan as of the date
of this proxy statement.
If
shares of common stock subject to an option, SAR or performance
share or unit granted under the 2012 Plan expire or otherwise
terminate without being exercised (or exercised in full), such
shares shall become available again for grants under the 2012 Plan.
If shares of restricted stock awarded under the 2012 Plan are
forfeited to us or repurchased by us, the number of shares
forfeited or repurchased shall again be available under the 2012
Plan. Where the exercise price of an option granted under the 2012
Plan is paid by means of the optionee’s surrender of
previously owned shares of common stock, or our withholding of
shares otherwise issuable upon exercise of the option as may be
permitted under the 2012 Plan, only the net number of shares issued
and which remain outstanding in connection with such exercise shall
be deemed “
issued
” and no longer
available for issuance under the 2012 Plan.
Eligibility
Incentive stock
options may be granted under the 2012 Plan only to employees of our
company and its affiliates. Employees, directors and consultants of
our company and its affiliates are eligible to receive all other
types of awards under the 2012 Plan.
No
incentive stock option may be granted under the 2012 Plan to any
person who, at the time of the grant, owns (or is deemed to own)
stock possessing more than 10% of the total combined voting power
of our company or any affiliate of our company, unless the exercise
price is at least 110% of the fair market value of the stock
subject to the option on the date of grant and the term of the
option does not exceed five years from the date of grant. In
addition, no employee may be granted options under the 2012 Plan
exercisable for more than 6.0 million shares of common stock during
any twelve-month period.
Terms of Options and SARs
Options, SARs and
performance shares and units may be granted under the 2012 Plan
pursuant to stock option agreements, stock appreciation rights
agreements and performance award agreements, respectively. The
following is a description of the permissible terms of options,
SARs and performance units under the 2012 Plan. Individual grants
of options, SARs and performance shares and units may be more
restrictive as to any or all of the permissible terms described
below.
Exercise Price; Payment
The
exercise price of incentive stock options may not be less than the
fair market value of the common stock subject to the option on the
date of the grant and, in some cases (see “
Eligibility
” above), may
not be less than 110% of such fair market value. The exercise price
of nonstatutory options also may not be less than the fair market
value of the common stock on the date of grant. The base value of
an SAR or performance share or unit may not be less than the fair
market value of the common stock on the date of grant. The exercise
price of options granted under the 2012 Plan must be paid either in
cash at the time the option is exercised or, at the discretion of
our board of directors, (i) by delivery of already-owned
shares of our common stock, (ii) pursuant to a deferred
payment arrangement, (iii) pursuant to a net exercise
arrangement, or (iv) pursuant to a cashless exercise as permitted
under applicable rules and regulations of the SEC.
43
In
addition, the holder of an SAR is entitled to receive upon exercise
of such SAR only shares of our common stock at a fair market value
equal to the benefit to be received by the exercise.
Vesting
Options
granted under the 2012 Plan may be exercisable in cumulative
increments, or “
vest,
” as determined by
our board of directors. Our board of directors has the power to
accelerate the time as of which an option may vest or be
exercised.
Tax Withholding
To the
extent provided by the terms of an option, SAR or performance share
or unit, a participant may satisfy any federal, state or local tax
withholding obligation relating to the exercise of such option, SAR
or performance share or unit by a cash payment upon exercise, or in
the discretion of our board of directors, by authorizing us to
withhold a portion of the stock otherwise issuable to the
participant, by delivering already-owned shares of our common stock
or by a combination of these means.
Term
The
maximum term of options, SARs and performance shares and units
under the 2012 Plan is ten years, except that in certain cases (see
“
Eligibility
” above) the
maximum term is five years. Options, SARs and performance shares
and units awarded under the 2012 Plan generally will terminate
three months after termination of the participant’s service;
however, pursuant to the terms of the 2012 Plan, a grantee’s
employment shall not be deemed to terminate by reason of such
grantee’s transfer from us to an affiliate of us, or vice
versa, or sick leave, military leave or other leave of absence
approved by our board of directors, if the period of any such leave
does not exceed ninety (90) days or, if longer, if the
grantee’s right to reemployment by us or any of our
affiliates is guaranteed either contractually or by
statute.
Restrictions on Transfer
A
recipient may not transfer an incentive stock option otherwise than
by will or by the laws of descent and distribution. During the
lifetime of the recipient, only the recipient may exercise an
option, SAR or performance share or unit. Our board of directors
may grant nonstatutory stock options, SARs and performance shares
and units that are transferable to the extent provided in the
applicable written agreement.
Terms of Restricted Stock Awards
Restricted stock
awards may be granted under the 2012 Plan pursuant to restricted
stock purchase or grant agreements. No awards of restricted stock
may be granted under the 2012 Plan after ten (10) years from our
board of directors’ adoption of the 2012 Plan (March
2022).
Payment
Our
board of directors may issue shares of restricted stock under the
2012 Plan as a grant or for such consideration, including services,
and, subject to the Sarbanes-Oxley Act of 2002, promissory notes,
as determined in its sole discretion. If restricted stock under the
2012 Plan is issued pursuant to a purchase agreement, the purchase
price must be paid either in cash at the time of purchase or, at
the discretion of our board of directors, pursuant to any other
form of legal consideration acceptable to our board of
directors.
Vesting
Shares
of restricted stock acquired under a restricted stock purchase or
grant agreement may, but need not, be subject to forfeiture to us
or other restrictions that will lapse in accordance with a vesting
schedule to be determined by our board of directors. In the event a
recipient’s employment or service with us terminates, any or
all of the shares of common stock held by such recipient that have
not vested as of the date of termination under the terms of the
restricted stock agreement may be forfeited to us in accordance
with such restricted stock agreement.
44
Tax Withholding
Our
board of directors may require any recipient of restricted stock to
pay to us in cash upon demand amounts necessary to satisfy any
applicable federal, state or local tax withholding requirements. If
the recipient fails to pay the amount demanded, our board of
directors may withhold that amount from other amounts payable by us
to the recipient, including salary, subject to applicable law. With
the consent of our board of directors in its sole discretion, a
recipient may deliver shares of our common stock to us to satisfy
this withholding obligation.
Restrictions on Transfer
Rights
to acquire shares of common stock under the restricted stock
purchase or grant agreement shall be transferable by the recipient
only upon such terms and conditions as are set forth in the
restricted stock agreement, as our board of directors shall
determine in its discretion, so long as shares of common stock
awarded under the restricted stock agreement remain subject to the
terms of such agreement.
Adjustment Provisions
If any
change is made to our outstanding shares of common stock without
our receipt of consideration (whether through reorganization, stock
dividend or stock split, or other specified change in our capital
structure), appropriate adjustments may be made in the class and
maximum number of shares of common stock subject to the 2012 Plan
and outstanding awards. In that event, the 2012 Plan will be
appropriately adjusted in the class and maximum number of shares of
common stock subject to the 2012 Plan, and outstanding awards may
be adjusted in the class, number of shares and price per share of
common stock subject to such awards.
Effect of Certain Corporate Events
In the
event of (i) a liquidation or dissolution of the Company; (ii) a
merger or consolidation of the Company with or into another
corporation or entity (other than a merger with a wholly-owned
subsidiary); (iii) a sale of all or substantially all of the assets
of the Company; or (iv) a purchase or other acquisition of more
than 50% of the outstanding stock of the Company by one person or
by more than one person acting in concert, any surviving or
acquiring corporation may assume awards outstanding under the 2012
Plan or may substitute similar awards. Unless the stock award
agreement otherwise provides, in the event any surviving or
acquiring corporation does not assume such awards or substitute
similar awards, then the awards will terminate if not exercised at
or prior to such event.
Duration, Amendment and Termination
Our
board of directors may suspend or terminate the 2012 Plan without
stockholder approval or ratification at any time or from time to
time. Unless sooner terminated, the 2012 Plan will terminate ten
years from the date of its adoption by our board of directors,
i.e., in June 2022.
Our
board of directors may also amend the 2012 Plan at any time, and
from time to time. However, except as it relates to adjustments
upon changes in common stock, no amendment will be effective unless
approved by our stockholders to the extent stockholder approval is
necessary to preserve incentive stock option treatment for federal
income tax purposes. Our board of directors may submit any other
amendment to the 2012 Plan for stockholder approval if it concludes
that stockholder approval is otherwise advisable.
Federal Income Tax Consequences
The
following is a summary of the principal United States federal
income tax consequences to the recipient and us with respect to
participation in the 2012 Plan. This summary is not intended to be
exhaustive, and does not discuss the income tax laws of any city,
state or foreign jurisdiction in which a participant may
reside.
45
Incentive Stock Options
There
will be no federal income tax consequences to either us or the
recipient upon the grant of an incentive stock option. Upon
exercise of the option, the excess of the fair market value of the
stock over the exercise price, or the “
spread,
” will be added to
the alternative minimum tax base of the recipient unless a
disqualifying disposition is made in the year of exercise. A
disqualifying disposition is the sale of the stock prior to the
expiration of two years from the date of grant and one year from
the date of exercise. If the shares of common stock are disposed of
in a disqualifying disposition, the recipient will realize taxable
ordinary income in an amount equal to the spread at the time of
exercise, and we will be entitled (subject to the requirement of
reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation) to a federal
income tax deduction equal to such amount. If the recipient sells
the shares of common stock after the specified periods, the gain or
loss on the sale of the shares will be long-term capital gain or
loss and we will not be entitled to a federal income tax
deduction.
Non-statutory Stock Options and Restricted Stock
Awards
Non-statutory stock
options and restricted stock awards granted under the 2012 Plan
generally have the following federal income tax
consequences.
There
are no tax consequences to the participant or us by reason of the
grant. Upon acquisition of the stock, the recipient will recognize
taxable ordinary income equal to the excess, if any, of the
stock’s fair market value on the acquisition date over the
purchase price. However, to the extent the stock is subject to
“
a substantial risk
of forfeiture
” (as defined in Section 83 of the Code),
the taxable event will be delayed until the forfeiture provision
lapses unless the recipient elects to be taxed on receipt of the
stock by making a Section 83(b) election within 30 days of receipt
of the stock. If such election is not made, the recipient generally
will recognize income as and when the forfeiture provision lapses,
and the income recognized will be based on the fair market value of
the stock on such future date. On that date, the recipient’s
holding period for purposes of determining the long-term or
short-term nature of any capital gain or loss recognized on a
subsequent disposition of the stock will begin. If a recipient
makes a Section 83(b) election, the recipient will
recognize ordinary income equal to the difference between the
stock’s fair market value and the purchase price, if any, as
of the date of receipt and the holding period for purposes of
characterizing as long-term or short-term any subsequent gain or
loss will begin at the date of receipt.
With
respect to employees, we are generally required to withhold from
regular wages or supplemental wage payments an amount based on the
ordinary income recognized. Subject to the requirement of
reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation, we will
generally be entitled to a business expense deduction equal to the
taxable ordinary income realized by the participant.
Upon
disposition of the stock, the recipient will recognize a capital
gain or loss equal to the difference between the selling price and
the sum of the amount paid for such stock plus any amount
recognized as ordinary income with respect to the stock. Such gain
or loss will be long-term or short-term depending on whether the
stock has been held for more than one year.
Stock Appreciation Rights or SARs
A
recipient receiving a stock appreciation right will not recognize
income, and we will not be allowed a tax deduction, at the time the
award is granted. When a recipient exercises the stock appreciation
right, the fair market value of any shares of common stock received
will be ordinary income to the recipient and will be allowed as a
deduction to us for federal income tax purposes.
Potential Limitation on Company Deductions
Section 162(m)
of the Code denies a deduction to any publicly held corporation for
compensation paid to certain senior executives of the Company (a
“
covered
employee
”) in a taxable year to the extent that
compensation to such employees exceeds $1,000,000. It is possible
that compensation attributable to awards, when combined with all
other types of compensation received by a covered employee from the
Company, may cause this limitation to be exceeded in any particular
year.
46
Historically, there had been an exception to this annual $1,000,000
tax deduction limit for qualifying performance-based compensation,
which may include stock options and stock appreciation rights, or
SARs, granted pursuant to a plan with a shareholder approved
individual participant award limit. However, as a result of the Tax
Cuts and Jobs Act of 2017, effective January 1, 2018, this
exception has been eliminated for taxable years beginning after
December 31, 2017 (other than with respect to certain compensation
payable under a written binding contract that was in effect on
November 2, 2017). As a result, there is no longer an exemption
under Section 162(m) of the Code for qualified performance-based
compensation awarded under the 2012 Plan after November 2, 2017,
unless made under a written binding contract that was in effect on
or prior to such date.
Securities Issued and Granted Under 2012 Plan
As of
the date of this proxy filing, options to purchase 754,000 shares
of restricted stock and 3,360,130 shares of restricted stock have
been issued under the 2012 Plan, with 1,885,870 shares of common
stock remaining available for issuance under the 2012 Plan.
Information regarding all of our equity compensation plans can be
found above under “
Equity Compensation Plan
Information
”, on page 22.
Reasons for and Purpose of the Amendment to the 2012
Plan
The
reason for the amendment is solely to increase the shares available
for issuances under the 2012 Plan in order for us to be able to
issue additional equity incentive compensation awards under the
2012 Plan for the purpose of attracting and retaining the best
available personnel for positions of substantial responsibility,
providing additional incentive to employees, directors and
consultants, and promoting the success of our
business.
The
amendment would increase the number of shares that may be granted
during the life of the 2012 Plan from 6 million to 8 million
shares.
We are
asking stockholders to increase the number of shares available for
grants under the 2012 Plan to a level that we believe will, on the
basis of current assumptions, ensure that enough shares remain
available for anticipated issuances under the 2012 Plan through
2020.
Amendment of the 2012 Plan
Specifically, under
this proposal 2, our stockholders are being asked to approve an
amendment to clause (a) of Section 3 of the 2012 Plan
such that the paragraph would provide in its entirety as
follows:
“Stock
Subject to the Plan. Subject to the provisions
of Section 13, the maximum aggregate number of Shares
that may be issued under the Plan is eight million
(8,000,000) Shares. The Shares may be authorized but unissued,
or reacquired Common Stock.”
The
other paragraphs of Section 3 and all other sections of the
2012 Plan would remain unchanged, other than (a) Section 15(a)(i),
which relates to the maximum number of incentive stock options
which may be issued under the 2012 Plan, (b) Section 15(b)(ii)(1),
which relates to the maximum number of shares issuable to any
participant under the 2012 Plan in any one fiscal year, (c) Section
15(b)(ii)(2), which relates to the maximum fair market value of
shares relating to awards denominated in shares and satisfied in
cash under the 2012 Plan in any one fiscal year, and (d) Section
15(b)(ii)(3), which relates to the maximum fair market value of
shares relating to cash awards, payable in any one fiscal year
under the 2012 Plan, which will each be increased to eight million
(8,000,000) shares after the amendment of the 2012 Plan, compared
to six million (6,000,000) shares prior to such amendment, to
reflect the corresponding increase in the maximum aggregate number
of shares which may be issued under the 2012 Plan as described
above.
47
Vote Required
Although
Section 710 of the NYSE American Company Guide, requires the
affirmative vote of the holders of voting stock representing a
majority of the votes cast at a stockholders meeting held by a NYSE
American listed company on a proposal to approve a stock plan or
amendment thereto such as the amendment to our 2012 Plan, our
bylaws and the Texas Business Organizations Code, which supersede
the NYSE American Company Guide requirements, require the
affirmative vote by our stockholders of a majority of the shares
present in person or represented by proxy at the annual meeting and
entitled to vote on, and who voted for, against, or expressly
abstained with respect to, this proposal 2, in order to approve the
proposal relating to the amendment of the 2012 Plan as set forth in
this proposal 2, assuming a quorum is present at the annual
meeting.
Our
board of directors has approved the amendment to the 2012 Plan
described in proposal 2.
If proposal 2 is not approved by our
stockholders at the annual meeting, we will continue to operate the
2012 Plan pursuant to its current provisions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
“
FOR
”
THE PROPOSAL TO APPROVE THE AMENDMENT TO THE 2012
PLAN.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF AUDITORS
The
board of directors has selected Marcum LLP (“
Marcum
”), as our
independent auditors for the fiscal year ended December 31, 2019,
and recommends that the stockholders vote to ratify such
appointment.
GBH CPAs, PC
(“
GBH
”)
served as our independent registered public accounting for the year
ended December 31, 2017 and the interim period through July 1,
2018, when GBH merged with Marcum.
We do
not anticipate a representative from Marcum to be present at the
annual stockholders meeting. In the event that a representative of
Marcum is present at the annual meeting, the representative will
have the opportunity to make a statement if he/she desires to do so
and we will allow such representative to be available to respond to
appropriate questions.
AUDIT FEES
The
following table presents fees for professional audit services
performed by GBH, which combined its practice with Marcum, LLP
effective July 1, 2018, and Marcum LLP for the audit of our annual
financial statements for the years ended December 31, 2018 and 2017
(in thousands).
|
|
2018
|
2017
|
|
Audit Fees
(1)
|
$
122
|
$
124
|
|
Audit-Related Fees
(2)
|
-
|
-
|
|
Tax Fees
(3)
|
27
|
16
|
|
All Other Fees
(4)
|
18
|
17
|
|
Total
|
$
167
|
$
157
|
(1)
Audit
fees include professional services rendered for (1) the audit of
our annual financial statements for the fiscal years ended December
31, 2018 and 2017 and (ii) the reviews of the financial statements
included in our quarterly reports on Form 10-Q for such
years.
(2)
Audit-related
fees consist of fees billed for professional services that are
reasonably related to the performance of the audit or review of our
consolidated financial statements but are not reported under
“Audit fees.”
(3)
Tax
fees include professional services relating to preparation of the
annual tax return.
(4)
Other
fees include professional services for review of various filings
and issuance of consents.
48
Pre-Approval Policies
It
is the policy of our board of directors that all services to be
provided by our independent registered public accounting firm,
including audit services and permitted audit-related and non-audit
services, must be pre-approved by our board of directors. Our board
of directors pre-approved all services, audit and non-audit,
provided to us by Marcum and GBH for 2018 and 2017.
In
order to assure continuing auditor independence, the Audit
Committee periodically considers the independent auditor’s
qualifications, performance and independence and whether there
should be a regular rotation of our independent external audit
firm. We believe the continued retention of Marcum to serve as our
independent auditor is in the best interests of the Company and its
stockholders, and we are asking our stockholders to ratify the
appointment of Marcum as our independent auditor for the year ended
December 31, 2019. While the Audit Committee is responsible for the
appointment, compensation, retention, termination and oversight of
the independent registered public accounting firm, the Audit
Committee and our board of directors are requesting, as a matter of
policy, that the stockholders ratify the appointment of Marcum as
our independent registered public accounting firm.
Ratification of
this appointment shall be effective upon the affirmative vote of a
majority of the shares present in person or represented by proxy at
the annual meeting and entitled to vote on, and who voted for,
against, or expressly abstained with respect to, this proposal,
provided that a quorum exists at the annual meeting. Abstentions
with respect to the ratification of this appointment will have the
effect of a vote “
AGAINST
” ratification of
this appointment. Properly executed proxies will be voted at the
annual meeting in accordance with the instructions specified on the
proxy; if no such instructions are given, the persons named as
agents and proxies in the enclosed form of proxy will vote such
proxy “
FOR
” the ratification of
the appointment of Marcum.
The
Audit Committee is not required to take any action as a result of
the outcome of the vote on this proposal. In the event stockholders
fail to ratify the appointment, the Audit Committee may reconsider
this appointment. Even if the appointment is ratified, the Audit
Committee, in its discretion, may direct the appointment of a
different independent accounting firm at any time during the year
if the committee determines that such a change would be in our and
the stockholders’ best interests.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “
FOR
”
THE APPOINTMENT OF MARCUM LLP AS OUR INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDED DECEMBER 31, 2019.
PROPOSAL 4
ADJOURNMENT OF THE ANNUAL MEETING
Our
stockholders may be asked to consider and act upon one or more
adjournments of the annual meeting, if necessary or appropriate, to
solicit additional proxies in favor of any or all of the other
proposals set forth in this proxy statement.
If a
quorum is not present at the annual meeting, our stockholders may
be asked to vote on the proposal to adjourn the annual meeting to
solicit additional proxies. If a quorum is present at the annual
meeting, but there are not sufficient votes at the time of the
annual meeting to approve one or more of the proposals, our
stockholders may also be asked to vote on the proposal to approve
the adjournment of the annual meeting to permit further
solicitation of proxies in favor of the other proposals. However, a
stockholder vote may be taken on one of the proposals in this proxy
statement prior to any such adjournment if there are sufficient
votes for approval on such proposal.
If the
adjournment proposal is submitted for a vote at the annual meeting,
and if our stockholders vote to approve the adjournment proposal,
the meeting will be adjourned to enable the board of directors to
solicit additional proxies in favor of one or more proposals. If
the adjournment proposal is approved, and the annual meeting is
adjourned, the board of directors will use the additional time to
solicit additional proxies in favor of any of the proposals to be
presented at the annual meeting, including the solicitation of
proxies from stockholders that have previously voted against the
relevant proposal.
49
The
board of directors believes that, if the number of shares of our
common stock voting in favor of any of the proposals presented at
the annual meeting is insufficient to approve a proposal, it is in
the best interests of our stockholders to enable the board of
directors, for a limited period of time, to continue to seek to
obtain a sufficient number of additional votes in favor of the
proposal. Any signed proxies received by us in which no voting
instructions are provided on such matter will be voted in favor of
an adjournment in these circumstances. The time and place of the
adjourned meeting will be announced at the time the adjournment is
taken. Any adjournment of the annual meeting for the purpose of
soliciting additional proxies will allow our stockholders who have
already sent in their proxies to revoke them at any time prior to
their use at the annual meeting as adjourned or
postponed.
Vote Required
Authority to
adjourn the annual meeting pursuant to this proposal 4, to another
place, date or time, if deemed necessary or appropriate, in the
discretion of the board of directors, requires the vote of a
majority of the shares of stock entitled to vote which are present,
in person or by proxy at the annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “
FOR
”
THE ADJOURNMENT OF THE ANNUAL MEETING,
IF NECESSARY OR APPROPRIATE, TO SOLICIT ADDITIONAL
PROXIES.
Stockholder Proposals for 2020 Annual Meeting of Stockholders and
2020 Proxy Materials
Proposals of
holders of our voting securities intended to be presented at our
2020 annual meeting of stockholders and included in our proxy
statement and form of proxy relating to such meeting pursuant to
Rule 14a-8 of Regulation 14A must be received by us, addressed to
our Corporate Secretary, at our principal executive offices at 1250
Wood Branch Park Dr., Suite 400, Houston, Texas 77079, not earlier
than the close of business on April 30, 2020, and not later than
the close of business on May 30, 2020, together with written notice
of the stockholder’s intention to present a proposal for
action at the fiscal 2020 annual meeting of stockholders, unless
our annual meeting date occurs more than 30 days before or 30 days
after August 28, 2020. In that case, we must receive proposals not
earlier than the close of business on the 120th day prior to the
date of the fiscal 2020 annual meeting and not later than the close
of business on the later of the 90th day prior to the date of the
annual meeting or, if the first public announcement of the date of
the annual meeting is less than 100 days prior to the date of the
meeting, the 10th day following the day on which we first make a
public announcement of the date of the meeting.
Stockholder
proposals must be in writing and must include (a) the name and
record address of the stockholder who intends to propose the
business and the class or series and number of shares of capital
stock of us which are owned beneficially or of record by such
stockholder; (b) a representation that the stockholder is a holder
of record of stock of us entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to introduce
the business specified in the notice; (c) a brief description of
the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting; (d)
any material interest of the stockholder in such business; and (e)
any other information that is required to be provided by the
stockholder pursuant to Regulation 14A under the Exchange Act. The
board of directors reserves the right to refuse to submit any
proposal to stockholders at an annual meeting if, in its judgment,
the information provided in the notice is inaccurate or incomplete,
or does not comply with the requirements for stockholder proposals
set forth in our Bylaws.
50
Additionally, the
Nominating and Governance Committee will consider director
candidates recommended by stockholders, provided stockholders
include (a) as to each person whom the stockholder proposes for the
Nominating and Governance Committee to consider for nomination for
election as a director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or
employment of the person, (iii) the class or series and number of
shares of capital stock of us which are owned beneficially or of
record by the person and (iv) any other information relating to the
person that would be required to be disclosed in a proxy statement
or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act, and the rules and regulations
promulgated thereunder; and (b) as to the stockholder giving the
notice (i) the name and record address of such stockholder, (ii)
the class or series and number of shares of capital stock of us
which are owned beneficially or of record by such stockholder,
(iii) a description of all arrangements or understandings between
such stockholder and each proposed nominee and any other person or
persons (including their names) pursuant to which the nomination(s)
are to be made by such stockholder, (iv) a representation that such
stockholder intends to appear in person or by proxy at the meeting
to nominate the persons named in its notice and (v) any other
information relating to such stockholder that would be required to
be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the rules
and regulations promulgated thereunder. Such notice must be
accompanied by a written consent of each proposed nominee to being
named as a nominee and to serve as a director if elected.
Individuals recommended by stockholders in accordance with these
procedures will receive the same consideration received by
individuals identified to the Nominating and Governance Committee
through other means.
Additional Filings
Our Forms 10-K, 10-Q, 8-K and
all amendments to those reports are available without charge
through our website (
www.pacificenergydevelopment.com
)
as soon as reasonably practicable after they are electronically
filed with, or furnished to, the SEC. Information on our website
does not constitute part of this proxy statement.
We will
provide, without charge, to each person to whom a proxy statement
is delivered, upon written or oral request of such person and by
first class mail or other equally prompt means within one business
day of receipt of such request, a copy of any of the filings
described above. Individuals may request a copy of such information
by sending a request to us, Attn: Corporate Secretary, PEDEVCO
Corp., 1250 Wood Branch Park Dr., Suite 400, Houston, Texas
77079.
Other Matters
As of
the date of this proxy statement, our management has no knowledge
of any business to be presented for consideration at the annual
meeting other than that described above. If any other business
should properly come before the annual meeting or any adjournment
thereof, it is intended that the shares represented by properly
executed proxies will be voted with respect thereto in accordance
with the judgment of the persons named as agents and proxies in the
enclosed form of proxy.
The
board of directors does not intend to bring any other matters
before the annual meeting of stockholders and has not been informed
that any other matters are to be presented by others.
Interest of Certain Persons in or Opposition to Matters to Be Acted
Upon:
|
(a)
|
No
officer or director of us has any substantial interest in the
matters to be acted upon, other than his or her role as an officer
or director of us, or as a stockholder of us.
|
|
(b)
|
No
director of us has informed us that he or she intends to oppose the
action taken by us set forth in this proxy statement.
|
51
Company Contact Information
All
inquiries regarding our Company should be addressed to our
Company’s principal executive office:
PEDEVCO Corp.
1250 Wood Branch Park Dr., Suite 400
Houston, Texas 77079
|
|
By
Order of the Board of Directors,
|
|
|
|
|
|
/s/ John J. Scelfo
John J.
Scelfo
Chairman
|
52
APPENDIX A
PEDEVCO CORP.
2012 EQUITY INCENTIVE PLAN
(As Amended)
1.
Purposes
of the Plan
.
PEDEVCO Corp., a Texas
corporation (the “
Company
”) hereby
establishes the PEDEVCO CORP. 2012 EQUITY INCENTIVE PLAN (the
“
Plan
”). The purposes of
this Plan are to attract and retain the best available personnel
for positions of substantial responsibility, to provide additional
incentive to Employees, Directors and Consultants, and to promote
the long-term growth and profitability of the Company. The Plan
permits the grant of Incentive Stock Options, Nonstatutory Stock
Options, Restricted Stock, Restricted Stock Units, Stock
Appreciation Rights, Performance Units and Performance Shares as
the Administrator may determine.
2.
Definitions
.
The
following definitions will apply to the terms in the
Plan:
“
Administrator
” means the
Board or any of its Committees as will be administering the Plan,
in accordance with Section 4.
“
Applicable Laws
” means
the requirements relating to the administration of equity-based
awards under U.S. state corporate laws, U.S. federal and state
securities laws, the Code, any stock exchange or quotation system
on which the Common Stock is listed or quoted and the applicable
laws of any foreign country or jurisdiction where Awards are, or
will be, granted under the Plan.
“
Award
” means,
individually or collectively, a grant under the Plan of Options,
SARs, Restricted Stock, Restricted Stock Units, Performance Units
or Performance Shares.
“
Award Agreement
” means
the written or electronic agreement setting forth the terms and
provisions applicable to each Award granted under the Plan. The
Award Agreement is subject to the terms and conditions of the
Plan.
“
Board
” means the Board of
Directors of the Company.
“
Change in Control
” means
the occurrence of any of the following events:
(i) Any
“
person
” (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) becomes the
“
beneficial
owner
” (as defined in Rule 13d-3 of the Exchange Act),
directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the total voting power represented
by the Company’s then outstanding voting securities; provided
however, that for purposes of this subsection (i) any acquisition
of securities directly from the Company shall not constitute a
Change in Control;
(ii) The
consummation of the sale or disposition by the Company of all or
substantially all of the Company’s assets;
(iii) A change
in the composition of the Board occurring within a two-year period,
as a result of which fewer than a majority of the directors are
Incumbent Directors. “
Incumbent Directors
”
means directors who either (A) are Directors as of the effective
date of the Plan, or (B) are elected, or nominated for election, to
the Board with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but
will not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to
the election of directors to the Company); or
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(iv) The
consummation of a merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities
of the surviving entity or its parent) at least fifty percent (50%)
of the total voting power represented by the voting securities of
the Company or such surviving entity or its parent outstanding
immediately after such merger or consolidation.
For
avoidance of doubt, a transaction will not constitute a Change in
Control if: (i) its sole purpose is to change the state of the
Company’s incorporation, or (ii) its sole purpose is to
create a holding company that will be owned in substantially the
same proportions by the persons who held the Company’s
securities immediately before such transaction.
“
Code
” means the Internal
Revenue Code of 1986, as amended. Any reference in the Plan to a
section of the Code will be a reference to any successor or amended
section of the Code.
“
Committee
” means a
committee of Directors or of other individuals satisfying
Applicable Laws appointed by the Board in accordance with Section 4
hereof.
“
Common Stock
” means the
common stock of the Company.
“
Company
” means PEDEVCO
Corp., a Texas corporation, or any successor thereto.
“
Consultant
” means any
person, including an advisor, engaged by the Company or a Parent or
Subsidiary to render services to such entity.
“
Director
” means a member
of the Board.
“
Disability
” means a
medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a
continuous period of not less than 12 months, and that either (1)
renders a Participant unable to engage in any substantial gainful
activity or (2) results in a Participant receiving income
replacement benefits for a period of not less than three months
under an employee accident and health plan covering the
Participant.
“
Employee
” means any
person, including Officers and Directors, employed by the Company
or any Parent or Subsidiary of the Company. Neither service as a
Director nor payment of a director’s fee by the Company will
be sufficient to constitute “
employment
” by the
Company.
“
Exchange Act
” means the
Securities Exchange Act of 1934, as amended.
“
Fair Market Value
” means,
as of any date, the value of Common Stock determined as
follows:
(i) If the
Common Stock is listed on any established stock exchange or a
national market system, including without limitation any division
or subdivision of the Nasdaq Stock Market, its Fair Market Value
will be the closing sales price for such stock (or the closing bid,
if no sales were reported) as quoted on such exchange or system on
the day of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
(ii) If the
Common Stock is regularly quoted by a recognized securities dealer
but selling prices are not reported, including without limitation
quotation through the over the counter bulletin board
(“
OTCQB®
”) quotation
service administered by the Financial Industry Regulatory Authority
(“
FINRA
”), the Fair Market
Value of a Share will be the closing price for the Common Stock on
the day of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
or
A-2
(iii) In the
absence of an established market for the Common Stock, the Fair
Market Value will be determined in good faith by the Administrator,
and to the extent
Section 15
applies (a)
with respect to ISOs, the Fair Market Value shall be determined in
a manner consistent with Code section 422 or (b) with respect to
NSOs or SARs, the Fair Market Value shall be determined in a manner
consistent with Code section 409A.
“
Fiscal Year
” means the
fiscal year of the Company.
“
Grant Date
” means, for
all purposes, the date on which the Administrator determines to
grant an Award, or such other later date as is determined by the
Administrator, provided that the Administrator cannot grant an
Award prior to the date the material terms of the Award are
established. Notice of the Administrator’s determination to
grant an Award will be provided to each Participant within a
reasonable time after the Grant Date.
“
Incentive Stock Option
”
or “
ISO
” means an Option that
by its terms qualifies and is otherwise intended to qualify as an
incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
“
Nonstatutory Stock
Option
” or “
NSO
” means an Option that
by its terms does not qualify or is not intended to qualify as an
ISO.
“
Officer
” means a person
who is an officer of the Company within the meaning of Section 16
of the Exchange Act and the rules and regulations promulgated
thereunder.
“
Option
” means a stock
option granted pursuant to the Plan.
“
Optioned Shares
” means
the Common Stock subject to an Option.
“
Optionee
” means the
holder of an outstanding Option.
“
Parent
” means a
“
parent
corporation,
” whether now or hereafter existing, as
defined in Section 424(e) of the Code.
“
Participant
” means the
holder of an outstanding Award.
“
Performance Share
” means
an Award denominated in Shares which may vest in whole or in part
upon attainment of performance goals or other vesting criteria as
the Administrator may determine pursuant to Section
10.
“
Performance Unit
” means
an Award which may vest in whole or in part upon attainment of
performance goals or other vesting criteria as the Administrator
may determine and which may be settled for cash, Shares or other
securities or a combination of the foregoing pursuant to Section
10.
“
Period of Restriction
”
means the period during which Shares of Restricted Stock are
subject to forfeiture or restrictions on transfer pursuant to
Section 7.
“
Plan
” means this 2012
Equity Incentive Plan.
“
Restricted Stock
” means
Shares awarded to a Participant which are subject to forfeiture and
restrictions on transferability in accordance with Section
7.
“
Restricted Stock Unit
”
means the right to receive one Share at the end of a specified
period of time, which right is subject to forfeiture in accordance
with Section 8 of the Plan.
“
Rule 16b-3
” means Rule
16b-3 of the Exchange Act or any successor to Rule
16b-3.
A-3
“
Section
” means a
paragraph or section of this Plan.
“
Section 16(b)
” means
Section 16(b) of the Exchange Act.
“
Service Provider
” means
an Employee, Director or Consultant.
“
Share
” means a share of
the Common Stock, as adjusted in accordance with Section
13.
“
Stock Appreciation Right
”
or “
SAR
” means the right to
receive payment from the Company in an amount no greater than the
excess of the Fair Market Value of a Share at the date the SAR is
exercised over a specified price fixed by the Administrator in the
Award Agreement, which shall not be less than the Fair Market Value
of a Share on the Grant Date. In the case of a SAR which is granted
in connection with an Option, the specified price shall be the
Option exercise price.
“
Subsidiary
” means a
“
subsidiary
corporation,
” whether now or hereafter existing, as
defined in Section 424(f) of the Code.
“
Ten Percent Owner
” means
any Service Provider who is, on the grant date of an ISO, the owner
of Shares (determined with application of ownership attribution
rules of Code Section 424(d)) possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any
of its Subsidiaries.
3.
Stock
Subject to the Plan
.
(a)
Stock
Subject to the Plan
. Subject to the provisions of Section
13, the maximum aggregate number of Shares that may be issued under
the Plan is eight million (8,000,000) Shares. The Shares may be
authorized but unissued, or reacquired Common Stock.
(b)
Lapsed
Awards
. If an Award expires or becomes unexercisable without
having been exercised in full or, with respect to Restricted Stock,
Restricted Stock Units, Performance Shares or Performance Units, is
forfeited in whole or in part to the Company, the unpurchased
Shares (or for Awards other than Options and SARs, the forfeited or
unissued Shares) which were subject to the Award will become
available for future grant or sale under the Plan (unless the Plan
has terminated). With respect to SARs, only Shares actually issued
pursuant to a SAR will cease to be available under the Plan; all
remaining Shares subject to the SARs will remain available for
future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan
under any Award will not be returned to the Plan and will not
become available for future distribution under the Plan; provided,
however, that if Shares issued pursuant to Awards of Restricted
Stock, Restricted Stock Units, Performance Shares or Performance
Units are forfeited to the Company, such Shares will become
available for future grant under the Plan. Shares withheld by the
Company to pay the exercise price of an Award or to satisfy tax
withholding obligations with respect to an Award will become
available for future grant or sale under the Plan. To the extent an
Award under the Plan is paid out in cash rather than Shares, such
cash payment will not result in reducing the number of Shares
available for issuance under the Plan.
(c)
Share
Reserve
. The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as will
be sufficient to satisfy the requirements of the Plan.
4.
Administration
of the Plan
.
(a)
Procedure
.
The Plan shall be administered by the Board or a Committee (or
Committees) appointed by the Board, which Committee shall be
constituted to comply with Applicable Laws. If and so long as the
Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act, the Board shall consider in selecting the
Administrator and the membership of any committee acting as
Administrator the requirements regarding: (i) “
nonemployee directors
”
within the meaning of Rule 16b-3 under the Exchange Act; (ii)
“
independent
directors
” as described in the listing requirements
for any stock exchange on which Shares are listed; and
(iii)
Section
15(b)(i)
of the Plan, if the Company pays salaries for
which it claims deductions that are subject to the Code section
162(m) limitation on its U.S. tax returns. The Board may delegate
the responsibility for administering the Plan with respect to
designated classes of eligible Participants to different committees
consisting of two or more members of the Board, subject to such
limitations as the Board or the Administrator deems appropriate.
Committee members shall serve for such term as the Board may
determine, subject to removal by the Board at any
time.
A-4
(b)
Powers
of the Administrator
. Subject to the provisions of the Plan
and the approval of any relevant authorities, and in the case of a
Committee, subject to the specific duties delegated by the Board to
such Committee, the Administrator will have the authority, in its
discretion:
(i) to
determine the Fair Market Value;
(ii) to select
the Service Providers to whom Awards may be granted
hereunder;
(iii) to
determine the number of Shares to be covered by each Award granted
hereunder;
(iv) to
approve forms of agreement for use under the Plan;
(v) to
determine the terms and conditions, not inconsistent with the terms
of the Plan, of any Award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the
time or times when Awards may be exercised (which may be based on
continued employment, continued service or performance criteria),
any vesting acceleration (whether by reason of a Change of Control
or otherwise) or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Award or the Shares
relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, will determine;
(vi) to
construe and interpret the terms of the Plan and Awards granted
pursuant to the Plan, including the right to construe disputed or
doubtful Plan and Award provisions;
(vii) to
prescribe, amend and rescind rules and regulations relating to the
Plan;
(viii) to
modify or amend each Award (subject to Section 19(c)) to the extent
any modification or amendment is consistent with the terms of the
Plan. The Administrator shall have the discretion to extend the
exercise period of Options generally provided the exercise period
is not extended beyond the earlier of the original term of the
Option or 10 years from the original grant date, or specifically
(1) if the exercise period of an Option is extended (but to no more
than 10 years from the original grant date) at a time when the
exercise price equals or exceeds the fair market value of the
Optioned Shares or (2) an Option cannot be exercised because such
exercise would violate Applicable Laws, provided that the exercise
period is not extended more than 30 days after the exercise of the
Option would no longer violate Applicable Laws.
(ix) to allow
Participants to satisfy withholding tax obligations in such manner
as prescribed in Section 14;
(x) to
authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Award previously
granted by the Administrator;
(xi) to delay
issuance of Shares or suspend Participant’s right to exercise
an Award as deemed necessary to comply with Applicable Laws;
and
(xii) to make
all other determinations deemed necessary or advisable for
administering the Plan.
(c)
Effect
of Administrator’s Decision
. The Administrator’s
decisions, determinations and interpretations will be final and
binding on all Participants and any other holders of Awards. Any
decision or action taken or to be taken by the Administrator,
arising out of or in connection with the construction,
administration, interpretation and effect of the Plan and of its
rules and regulations, shall, to the maximum extent permitted by
Applicable Laws, be within its absolute discretion (except as
otherwise specifically provided in the Plan) and shall be final,
binding and conclusive upon the Company, all Participants and any
person claiming under or through any Participant.
A-5
5.
Eligibility
.
NSOs, Restricted Stock, Restricted Stock Units, SARs, Performance
Units and Performance Shares may be granted to Service Providers.
ISOs may be granted as specified in
Section 15(a)
.
6.
Stock
Options
.
(a)
Grant
of Options
. Subject to the terms and conditions of the Plan,
the Administrator, at any time and from time to time, may grant
Options to Service Providers in such amounts as the Administrator
will determine in its sole discretion. For purposes of the
foregoing sentence, Service Providers shall include prospective
employees or consultants to whom Options are granted in connection
with written offers of employment or engagement of services,
respectively, with the Company; provided that no Option granted to
a prospective employee or consultant may be exercised prior to the
commencement of employment or services with the Company. The
Administrator may grant NSOs, ISOs, or any combination of the two.
ISOs shall be granted in accordance with
Section 15(a)
of the
Plan.
(b)
Option
Award Agreement
. Each Option shall be evidenced by an Award
Agreement that shall specify the type of Option granted, the Option
price, the exercise date, the term of the Option, the number of
Shares to which the Option pertains, and such other terms and
conditions (which need not be identical among Participants) as the
Administrator shall determine in its sole discretion. If the Award
Agreement does not specify that the Option is to be treated as an
ISO, the Option shall be deemed a NSO.
(c)
Exercise
Price
. The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option will be no less than the
Fair Market Value per Share on the Grant Date.
(d)
Term
of Options
. The term of each Option will be stated in the
Award Agreement. Unless terminated sooner in accordance with the
remaining provisions of this Section 6, each Option shall expire
either ten (10) years after the Grant Date, or after a shorter term
as may be fixed by the Board.
(e)
Time
and Form of Payment
.
(i)
Exercise
Date
. Each Award Agreement shall specify how and when Shares
covered by an Option may be purchased. The Award Agreement may
specify waiting periods, the dates on which Options become
exercisable or “
vested
” and, subject to
the termination provisions of this section, exercise periods. The
Administrator may accelerate the exercisability of any Option or
portion thereof.
(ii)
Exercise
of Option
. Any Option granted hereunder will be exercisable
according to the terms of the Plan and at such times and under such
conditions as determined by the Administrator and set forth in the
Award Agreement. An Option may not be exercised for a fraction of a
Share. An Option will be deemed exercised when the Company
receives: (1) notice of exercise (in such form as the Administrator
shall specify from time to time) from the person entitled to
exercise the Option, and (2) full payment for the Shares with
respect to which the Option is exercised (together with all
applicable withholding taxes). Full payment may consist of any
consideration and method of payment authorized by the Administrator
and permitted by the Award Agreement and the Plan (together with
all applicable withholding taxes). Shares issued upon exercise of
an Option will be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or
her spouse. Until the Shares are issued (as evidenced by the
appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or
receive dividends or any other rights as a stockholder will exist
with respect to the Optioned Shares, notwithstanding the exercise
of the Option. The Company will issue (or cause to be issued) such
Shares promptly after the Option is exercised. No adjustment will
be made for a dividend or other right for which the record date is
prior to the date the Shares are issued, except as provided in
Section 13.
(iii)
Payment
.
The Administrator will determine the acceptable form of
consideration for exercising an Option, including the method of
payment. Such consideration may consist entirely of:
A-6
(1) cash;
(2) check;
(3) to the
extent not prohibited by Section 402 of the Sarbanes-Oxley Act of
2002, a promissory note;
(4) other
Shares, provided Shares have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to
which said Option will be exercised;
(5) to the
extent not prohibited by Section 402 of the Sarbanes-Oxley Act of
2002, in accordance with any broker-assisted cashless exercise
procedures approved by the Company and as in effect from time to
time;
(6) by asking
the Company to withhold Shares from the total Shares to be
delivered upon exercise equal to the number of Shares having a
value equal to the aggregate Exercise Price of the Shares being
acquired;
(7) any
combination of the foregoing methods of payment; or
(8) such other
consideration and method of payment for the issuance of Shares to
the extent permitted by Applicable Laws.
(f)
Forfeiture
of Options
. All unexercised Options shall be forfeited to
the Company in accordance with the terms and conditions set forth
in the Award Agreement and again will become available for grant
under the Plan.
7.
Restricted
Stock
.
(a)
Grant
of Restricted Stock
. Subject to the terms and conditions of
the Plan, the Administrator, at any time and from time to time, may
grant Shares of Restricted Stock to Service Providers in such
amounts as the Administrator will determine in its sole
discretion.
(b)
Restricted
Stock Award Agreement
. Each Award of Restricted Stock will
be evidenced by an Award Agreement that will specify the Period of
Restriction, the number of Shares granted, and such other terms and
conditions (which need not be identical among Participants) as the
Administrator will determine in its sole discretion. Unless the
Administrator determines otherwise, the Company as escrow agent
will hold Shares of Restricted Stock until the restrictions on such
Shares have lapsed.
(c)
Vesting
Conditions and Other Terms
.
(i)
Vesting
Conditions
. The Administrator, in its sole discretion, may
impose such conditions on the vesting of Shares of Restricted Stock
as it may deem advisable or appropriate, including but not limited
to, achievement of Company-wide, business unit, or individual goals
(including, but not limited to, continued employment or service),
or any other basis determined by the Administrator in its
discretion. The Administrator, in its discretion, may accelerate
the time at which any restrictions will lapse or be removed. The
Administrator may, in its discretion, also provide for such
complete or partial exceptions to an employment or service
restriction as it deems equitable.
(ii)
Voting
Rights
. During the Period of Restriction, Service Providers
holding Shares of Restricted Stock granted hereunder may exercise
full voting rights with respect to those Shares, unless the
Administrator determines otherwise.
(iii)
Dividends
and Other Distributions
. During the Period of Restriction,
Service Providers holding Shares of Restricted Stock will be
entitled to receive all dividends and other distributions paid with
respect to such Shares, unless the Administrator determines
otherwise. If any such dividends or distributions are paid in
Shares, the Shares will be subject to the same restrictions on
transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid.
A-7
(iv)
Transferability
.
Except as provided in this Section, Shares of Restricted Stock may
not be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated until the end of the applicable Period of
Restriction.
(d)
Removal
of Restrictions
. All restrictions imposed on Shares of
Restricted Stock shall lapse and the Period of Restriction shall
end upon the satisfaction of the vesting conditions imposed by the
Administrator. Vested Shares of Restricted Stock will be released
from escrow as soon as practicable after the last day of the Period
of Restriction or at such other time as the Administrator may
determine, but in no event later than the 30th day following the
date on which vesting occurred.
(e)
Forfeiture
of Restricted Stock
. On the date set forth in the Award
Agreement, the Shares of Restricted Stock for which restrictions
have not lapsed will be forfeited and revert to the Company and
again will become available for grant under the Plan.
8.
Restricted
Stock Units
.
(a)
Grant
of Restricted Stock Units
. Subject to the terms and
conditions of the Plan, the Administrator, at any time and from
time to time, may grant Restricted Stock Units to Service Providers
in such amounts as the Administrator will determine in its sole
discretion.
(b)
Restricted
Stock Units Award Agreement
. Each Award of Restricted Stock
Units will be evidenced by an Award Agreement that will specify the
number of Restricted Stock Units granted, vesting criteria, form of
payout, and such other terms and conditions (which need not be
identical among Participants) as the Administrator will determine
in its sole discretion.
(c)
Vesting
Conditions
. The Administrator shall set vesting criteria in
its discretion, which, depending on the extent to which the
criteria are met, will determine the number of Restricted Stock
Units that will be paid out to the Participant. The Administrator
may set vesting criteria based upon the achievement of
Company-wide, business unit, or individual goals (including, but
not limited to, continued employment or service), or any other
basis determined by the Administrator in its discretion. At any
time after the grant of Restricted Stock Units, the Administrator,
in its sole discretion, may reduce or waive any vesting criteria
that must be met to receive a payout.
(d)
Time
and Form of Payment
. Upon satisfaction of the applicable
vesting conditions, payment of vested Restricted Stock Units shall
occur in the manner and at the time provided in the Award
Agreement, but in no event later than the 15th day of the third
month following the end of the year in which vesting occurred.
Except as otherwise provided in the Award Agreement, Restricted
Stock Units may be paid in cash, Shares, or a combination thereof
at the sole discretion of the Administrator. Restricted Stock Units
that are fully paid in cash will not reduce the number of Shares
available for issuance under the Plan.
(e)
Forfeiture
of Restricted Stock Units
. All unvested Restricted Stock
Units shall be forfeited to the Company on the date set forth in
the Award Agreement and again will become available for grant under
the Plan.
9.
Stock
Appreciation Rights
.
(a)
Grant
of SARs
. Subject to the terms and conditions of the Plan,
the Administrator, at any time and from time to time, may grant
SARs to Service Providers in such amounts as the Administrator will
determine in its sole discretion.
(b)
Award
Agreement
. Each SAR grant will be evidenced by an Award
Agreement that will specify the exercise price, the number of
Shares underlying the SAR grant, the term of the SAR, the
conditions of exercise, and such other terms and conditions (which
need not be identical among Participants) as the Administrator will
determine in its sole discretion.
A-8
(c)
Exercise
Price and Other Terms
. The per Share exercise price for the
exercise of an SAR will be no less than the Fair Market Value per
Share on the Grant Date.
(d)
Time
and Form of Payment of SAR Amount
. Upon exercise of a SAR, a
Participant will be entitled to receive payment from the Company in
an amount no greater than: (i) the difference between the Fair
Market Value of a Share on the date of exercise over the exercise
price; times (ii) the number of Shares with respect to which the
SAR is exercised. An Award Agreement may provide for a SAR to be
paid in cash, Shares of equivalent value, or a combination
thereof.
(e)
Forfeiture
of SARs
. All unexercised SARs shall be forfeited to the
Company in accordance with the terms and conditions set forth in
the Award Agreement and again will become available for grant under
the Plan.
10.
Performance
Units and Performance Shares
.
(a)
Grant
of Performance Units and Performance Shares
. Performance
Units or Performance Shares may be granted to Service Providers at
any time and from time to time, as will be determined by the
Administrator, in its sole discretion. The Administrator will have
complete discretion in determining the number of Performance Units
and Performance Shares granted to each Participant.
(b)
Award
Agreement
. Each Award of Performance Units and Shares will
be evidenced by an Award Agreement that will specify the initial
value, the Performance Period, the number of Performance Units or
Performance Shares granted, and such other terms and conditions
(which need not be identical among Participants) as the
Administrator will determine in its sole discretion.
(c)
Value
of Performance Units and Performance Shares
. Each
Performance Unit will have an initial value that is established by
the Administrator on or before the Grant Date. Each Performance
Share will have an initial value equal to the Fair Market Value of
a Share on the Grant Date.
(d)
Vesting
Conditions and Performance Period
. The Administrator will
set performance objectives or other vesting provisions (including,
without limitation, continued status as a Service Provider) in its
discretion which, depending on the extent to which they are met,
will determine the number or value of Performance Units or
Performance Shares that will be paid out to the Service Providers.
The time period during which the performance objectives or other
vesting provisions must be met will be called the
“
Performance
Period.
” The Administrator may set performance
objectives based upon the achievement of Company-wide, divisional,
or individual goals or any other basis determined by the
Administrator in its discretion.
(e)
Time
and Form of Payment
. After the applicable Performance Period
has ended, the holder of Performance Units or Performance Shares
will be entitled to receive a payout of the number of vested
Performance Units or Performance Shares by the Participant over the
Performance Period, to be determined as a function of the extent to
which the corresponding performance objectives or other vesting
provisions have been achieved. Vested Performance Units or
Performance Shares will be paid as soon as practicable after the
expiration of the applicable Performance Period, but in no event
later than the 15th day of the third month following the end of the
year the applicable Performance Period expired. An Award Agreement
may provide for the satisfaction of Performance Unit or Performance
Share Awards in cash or Shares (which have an aggregate Fair Market
Value equal to the value of the vested Performance Units or
Performance Shares at the close of the applicable Performance
Period) or in a combination thereof.
(f)
Forfeiture
of Performance Units and Performance Shares
. All unvested
Performance Units or Performance Shares will be forfeited to the
Company on the date set forth in the Award Agreement, and again
will become available for grant under the Plan.
11.
Leaves
of Absence/Transfer Between Locations
. Unless the
Administrator provides otherwise or as required by Applicable Laws,
vesting of Awards will be suspended during any unpaid leave of
absence. An Employee will not cease to be an Employee in the case
of (i) any leave of absence approved by the Company or (ii)
transfers between locations of the Company or between the Company,
its Parent, or any Subsidiary.
A-9
12.
Transferability
of Awards
. Unless determined otherwise by the Administrator,
an Award may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised, during
the lifetime of the Participant, only by the Participant. If the
Administrator makes an Award transferable, such Award will contain
such additional terms and conditions as the Administrator deems
appropriate.
13.
Adjustments;
Dissolution or Liquidation; Merger or Change in
Control
.
(a)
Adjustments
.
In the event that any dividend or other distribution (whether in
the form of cash, Shares, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase,
or exchange of Shares or other securities of the Company, or other
change in the corporate structure of the Company affecting the
Shares occurs, the Administrator, in order to prevent diminution or
enlargement of the benefits or potential benefits intended to be
made available under the Plan, shall appropriately adjust the
number and class of Shares that may be delivered under the Plan
and/or the number, class, and price of Shares covered by each
outstanding Award.
(b)
Dissolution
or Liquidation
. In the event of the proposed dissolution or
liquidation of the Company, the Administrator will notify each
Participant as soon as practicable prior to the effective date of
such proposed transaction. To the extent it has not been previously
exercised, an Award will terminate immediately prior to the
consummation of such proposed action.
(c)
Change
in Control
. In the event of a merger or Change in Control,
any or all outstanding Awards may be assumed by the successor
corporation, which assumption shall be binding on all Participants.
In the alternative, the successor corporation may substitute
equivalent Awards (after taking into account the existing
provisions of the Awards). The successor corporation may also
issue, in place of outstanding Shares of the Company held by the
Participant, substantially similar shares or other property subject
to vesting requirements and repurchase restrictions no less
favorable to the Participant than those in effect prior to the
merger or Change in Control.
In the
event that the successor corporation does not assume or substitute
for the Award, unless the Administrator provides otherwise, the
Participant will fully vest in and have the right to exercise all
of his or her outstanding Options and SARs, including Shares as to
which such Awards would not otherwise be vested or exercisable, all
restrictions on Restricted Stock and Restricted Stock Units will
lapse, and, with respect to Performance Shares and Performance
Units, all Performance Goals or other vesting criteria will be
deemed achieved at target levels and all other terms and conditions
met. In addition, if an Option or SAR is not assumed or substituted
in the event of a Change in Control, the Administrator will notify
the Participant in writing or electronically that the Option or SAR
will be exercisable for a period of time determined by the
Administrator in its sole discretion, and the Option or SAR will
terminate upon the expiration of such period.
For the
purposes of this Section 13(c), an Award will be considered assumed
if, following the Change in Control, the Award confers the right to
purchase or receive, for each Share subject to the Award
immediately prior to the Change in Control, the consideration
(whether stock, cash, or other securities or property) or, in the
case of a SAR upon the exercise of which the Administrator
determines to pay cash or a Performance Share or Performance Unit
which the Administrator can determine to pay in cash, the fair
market value of the consideration received in the merger or Change
in Control by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the Change in
Control is not solely common stock of the successor corporation or
its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received
upon the exercise of an Option or SAR or upon the payout of a
Restricted Stock Unit, Performance Share or Performance Unit, for
each Share subject to such Award (or in the case of Restricted
Stock Units and Performance Units, the number of implied shares
determined by dividing the value of the Restricted Stock Units and
Performance Units, as applicable, by the per share consideration
received by holders of Common Stock in the Change in Control), to
be solely common stock of the successor corporation or its Parent
equal in fair market value to the per share consideration received
by holders of Common Stock in the Change in Control.
A-10
Notwithstanding
anything in this Section 13(c) to the contrary, an Award that
vests, is earned or paid-out upon the satisfaction of one or more
performance goals will not be considered assumed if the Company or
its successor modifies any of such performance goals without the
Participant’s consent; provided, however, a modification to
such performance goals only to reflect the successor
corporation’s post-Change in Control corporate structure will
not be deemed to invalidate an otherwise valid Award
assumption.
14.
Tax
Withholding
.
(a)
Withholding
Requirements
. Prior to the delivery of any Shares or cash
pursuant to an Award (or exercise thereof), the Company will have
the power and the right to deduct or withhold, or require a
Participant to remit to the Company, an amount sufficient to
satisfy federal, state, local, foreign or other taxes required by
Applicable Laws to be withheld with respect to such Award (or
exercise thereof).
(b)
Withholding
Arrangements
. The Administrator, in its sole discretion and
pursuant to such procedures as it may specify from time to time,
may permit a Participant to satisfy such tax withholding
obligation, in whole or in part by (without limitation) (i) paying
cash, (ii) electing to have the Company withhold otherwise
deliverable Shares having a Fair Market Value equal to the amount
required to be withheld, or (iii) delivering to the Company
already-owned Shares having a Fair Market Value equal to the amount
required to be withheld. The amount of the withholding requirement
will be deemed to include any amount which the Administrator agrees
may be withheld at the time the election is made. The Fair Market
Value of the Shares to be withheld or delivered will be determined
as of the date that the taxes are required to be
withheld.
15.
Provisions
Applicable In the Event the Company or the Service Provider is
Subject to U.S. Taxation
.
(a)
Grant
of Incentive Stock Options
. If the Administrator grants
Options to Employees subject to U.S. taxation, the Administrator
may grant such Employee an ISO and the following terms shall also
apply:
(i)
Maximum
Amount
. Subject to the provisions of Section 13, to the
extent consistent with Section 422 of the Code, not more than an
aggregate of eight million (8,000,000) Shares may be issued as ISOs
under the Plan.
(ii)
General
Rule
. Only Employees shall be eligible for the grant of
ISOs.
(iii)
Continuous
Employment
. The Optionee must remain in the continuous
employ of the Company or its Subsidiaries from the date the ISO is
granted until not more than three months before the date on which
it is exercised. A leave of absence approved by the Company may
exceed ninety (90) days if reemployment upon expiration of such
leave is guaranteed by statute or contract. If reemployment upon
expiration of a leave of absence approved by the Company is not so
guaranteed, then three (3) months following the ninety-first (91st)
day of such leave any ISO held by the Optionee will cease to be
treated as an ISO.
(iv)
Award
Agreement
.
(1) The
Administrator shall designate Options granted as ISOs in the Award
Agreement. Notwithstanding such designation, to the extent that the
aggregate Fair Market Value of the Shares with respect to which
ISOs are exercisable for the first time by the Optionee during any
calendar year (under all plans of the Company and any Parent or
Subsidiary) exceeds one hundred thousand dollars ($100,000),
Options will not qualify as an ISO. For purposes of this section,
ISOs will be taken into account in the order in which they were
granted. The Fair Market Value of the Shares will be determined as
of the time the Option with respect to such Shares is
granted.
A-11
(2) The Award
Agreement shall specify the term of the ISO. The term shall not
exceed ten (10) years from the Grant Date or five (5) years from
the Grant Date for Ten Percent Owners.
(3) The Award
Agreement shall specify an exercise price of not less than the Fair
Market Value per Share on the Grant Date or one hundred ten percent
(110%) of the Fair Market Value per Share on the Grant Date for Ten
Percent Owners.
(4) The Award
Agreement shall specify that an ISO is not transferable except by
will, beneficiary designation or the laws of descent and
distribution.
(v)
Form
of Payment
. The consideration to be paid for the Shares to
be issued upon exercise of an ISO, including the method of payment,
shall be determined by the Administrator at the time of grant in
accordance with Section 6(e)(iii).
(vi) “
Disability,
”
for purposes of an ISO, means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(vii)
Notice
.
In the event of any disposition of the Shares acquired pursuant to
the exercise of an ISO within two years from the Grant Date or one
year from the exercise date, the Optionee will notify the Company
thereof in writing within thirty (30) days after such disposition.
In addition, the Optionee shall provide the Company with such
information as the Company shall reasonably request in connection
with determining the amount and character of Optionee’s
income, the Company’s deduction, and the Company’s
obligation to withhold taxes or other amounts incurred by reason of
a disqualifying disposition, including the amount
thereof.
(b)
Performance-based
Compensation
. If the Company pays salaries for which it
claims deductions that are subject to the Code section 162(m)
limitation on its U.S. tax returns, then the following terms shall
be applied in a manner consistent with the requirements of, and
only to the extent required for compliance with, the exclusion from
the limitation on deductibility of compensation under Code Section
162(m):
(i)
Outside
Directors
. The Board shall consider in selecting the
Administrator and the membership of any committee acting as
Administrator the provisions regarding “
outside directors
” within
the meaning of Code Section 162(m).
(ii)
Maximum
Amount
.
(1) Subject to
the provisions of Section 13, the maximum number of Shares that can
be awarded to any individual Participant in the aggregate in any
one fiscal year of the Company is eight million (8,000,000)
Shares;
(2) For Awards
denominated in Shares and satisfied in cash, the maximum Award to
any individual Participant in the aggregate in any one fiscal year
of the Company is the Fair Market Value of eight million
(8,000,000) Shares on the Grant Date; and
(3) The
maximum amount payable pursuant to any cash Awards to any
individual Participant in the aggregate in any one fiscal year of
the Company is the Fair Market Value of eight million (8,000,000)
Shares on the Grant Date.
(iii)
Performance
Criteria
. All performance criteria must be objective and be
established in writing prior to the beginning of the performance
period or at later time as permitted by Code Section 162(m).
Performance criteria may include alternative and multiple
performance goals and may be based on one or more business and/or
financial criteria. In establishing the performance goals, the
Committee in its discretion may include one or any combination of
the following criteria in either absolute or relative terms, for
the Company or any Subsidiary:
A-12
(1) Increased
revenue;
(2) Net income
measures (including but not limited to income after capital costs
and income before or after taxes);
(3) Stock
price measures (including but not limited to growth measures and
total stockholder return);
(4) Market
share;
(5) Earnings
per Share (actual or targeted growth);
(6) Earnings
before interest, taxes, depreciation, and amortization
(“
EBITDA
”);
(7) Cash flow
measures (including but not limited to net cash flow and net cash
flow before financing activities);
(8) Return
measures (including but not limited to return on equity, return on
average assets, return on capital, risk-adjusted return on capital,
return on investors’ capital and return on average
equity);
(9) Operating
measures (including operating income, funds from operations, cash
from operations, after-tax operating income, sales volumes,
production volumes, and production efficiency);
(10) Expense
measures (including but not limited to overhead cost and general
and administrative expense);
(11) Margins;
(12) Stockholder
value;
(13) Total
stockholder return;
(14) Proceeds
from dispositions;
(15) Production
volumes;
(16) Total
market value; and
(17) Corporate
values measures (including but not limited to ethics compliance,
environmental, and safety).
(c)
Stock
Options and SARs Exempt from Code section 409A
. If the
Administrator grants Options or SARs to Employees subject to U.S.
taxation the Administrator may not modify or amend the Options or
SARs to the extent that the modification or amendment adds a
feature allowing for additional deferral within the meaning of Code
section 409A.
16.
No
Effect on Employment or Service
. Neither the Plan nor any
Award will confer upon any Participant any right with respect to
continuing the Participant’s relationship as a Service
Provider with the Company or any Parent or Subsidiary of the
Company, nor will they interfere in any way with the
Participant’s right or the Company’s or its
Parent’s or Subsidiary’s right to terminate such
relationship at any time, with or without cause, to the extent
permitted by Applicable Laws.
17.
Effective
Date
. The Plan’s effective date is the date on which
it is adopted by the Board, so long as it is approved by the
Company’s stockholders at any time within twelve (12) months
of such adoption. Upon approval of the Plan by the stockholders of
the Company, all Awards issued pursuant to the Plan on or after the
Effective Date shall be fully effective as if the stockholders of
the Company had approved the Plan on the Effective Date. If the
stockholders fail to approve the Plan within one year after the
Effective Date, any Awards made hereunder shall be null and void
and of no effect.
A-13
18.
Term
of Plan
. The Plan will terminate 10 years following the
earlier of (i) the date it was adopted by the Board or (ii) the
date it became effective upon approval by stockholders of the
Company, unless sooner terminated by the Board pursuant to Section
19.
19.
Amendment
and Termination of the Plan
.
(a)
Amendment
and Termination
. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b)
Stockholder
Approval
. The Company will obtain stockholder approval of
any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c)
Effect
of Amendment or Termination
. No amendment, alteration,
suspension or termination of the Plan will impair the rights of any
Participant, unless mutually agreed otherwise between the
Participant and the Administrator, which agreement must be in
writing and signed by the Participant and the Company. Termination
of the Plan will not affect the Administrator’s ability to
exercise the powers granted to it hereunder with respect to Awards
granted under the Plan prior to the date of such
termination.
20.
Conditions
Upon Issuance of Shares
.
(a)
Legal
Compliance
. The Administrator may delay or suspend the
issuance and delivery of Shares, suspend the exercise of Options or
SARs, or suspend the Plan as necessary to comply with Applicable
Laws. Shares will not be issued pursuant to the exercise of an
Award unless the exercise of such Award and the issuance and
delivery of such Shares will comply with Applicable Laws and will
be further subject to the approval of counsel for the Company with
respect to such compliance.
(b)
Investment
Representations
. As a condition to the exercise of an Award,
the Company may require the person exercising such Award to
represent and warrant at the time of any such exercise that the
Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is
required.
21.
Inability
to Obtain Authority
. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which
authority is deemed by the Company’s counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, will
relieve the Company of any liability in respect of the failure to
issue or sell such Shares as to which such requisite authority will
not have been obtained.
22.
Repricing
Prohibited; Exchange And Buyout of Awards
. The
repricing of Options or SARs is prohibited without prior
stockholder approval. The Administrator may authorize the Company,
with prior stockholder approval and the consent of the respective
Participants, to issue new Option or SAR Awards in exchange for the
surrender and cancellation of any or all outstanding Awards. The
Administrator may at any time repurchase Options with payment in
cash, Shares or other consideration, based on such terms and
conditions as the Administrator and the Participant shall
agree.
23.
Substitution
and Assumption of Awards
. The Administrator may make Awards
under the Plan by assumption, substitution or replacement of
performance shares, phantom shares, stock awards, stock options,
stock appreciation rights or similar awards granted by another
entity (including a Parent or Subsidiary), if such assumption,
substitution or replacement is in connection with an asset
acquisition, stock acquisition, merger, consolidation or similar
transaction involving the Company (and/or its Parent or Subsidiary)
and such other entity (and/or its affiliate). The Administrator may
also make Awards under the Plan by assumption, substitution or
replacement of a similar type of award granted by the Company prior
to the adoption and approval of the Plan. Notwithstanding any
provision of the Plan (other than the maximum number of shares of
Common Stock that may be issued under the Plan), the terms of such
assumed, substituted or replaced Awards shall be as the
Administrator, in its discretion, determines is
appropriate.
24.
Governing
Law
. The Plan and all Agreements shall be construed in
accordance with and governed by the laws of the State of
Texas.
A-14
Adopted
by the Board of Directors on June 26, 2012.
Amended
by the stockholders of the Company on June 27, 2014, October 7,
2015, December 28, 2016, December 28, 2017, September 27, 2018 and
August __, 2019.
A-15
FORM OF PROXY
(SEE ATTACHED)
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PEDEVCO CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
ANNUAL
MEETING OF STOCKHOLDERS – August 28, 2019 AT 10:00
A.M.
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CONTROL ID:
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REQUEST ID:
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The undersigned stockholder of PEDEVCO CORP., a Texas corporation
(the “
Company
”), hereby
acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement of the Company, each dated on or
around July 10, 2019, and hereby appoints Dr. Simon Kukes and Clark
R. Moore (the “
Proxies
”) proxies and
attorneys-in-fact, each with full power of substitution, on behalf
and in the name of the undersigned, to represent the undersigned at
the 2019 annual meeting of Stockholders of the Company, to be held
on August 28, 2019, at 10:00 a.m. local time at the Omni Houston
Hotel at Westside, 13210 Katy Fwy
., Houston, Texas
77079
, and at any adjournment or
adjournments thereof, and to vote all shares of the Company that
the undersigned would be entitled to vote if then and there
personally present, on the matters set forth on the reverse side,
and all such other business as may properly come before the
meeting. You hereby revoke all proxies previously
given.
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(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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VOTING INSTRUCTIONS
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If you vote by phone, fax or internet, please DO NOT mail your
proxy card.
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MAIL:
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Please
mark, sign, date, and return this Proxy Card promptly using the
enclosed envelope.
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FAX:
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Complete
the reverse portion of this Proxy Card and Fax to
202-521-3464.
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INTERNET:
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https://www.iproxydirect.com/PED
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PHONE:
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Call
toll free
1-866-752-VOTE
(8683)
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ANNUAL MEETING OF THE STOCKHOLDERS OF PEDEVCO CORP.
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PLEASE COMPLETE, DATE, SIGN AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR
BLACK INK AS SHOWN HERE:
☒
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PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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Proposal 1
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FOR ALL
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AGAINST
ALL
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FOR
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AGAINST
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Election of Directors
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☐
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☐
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John J. Scelfo
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☐
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☐
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Simon Kukes
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☐
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☐
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Ivar Siem
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☐
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☐
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H. Douglas Evans
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☐
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☐
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Proposal 2
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FOR
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AGAINST
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ABSTAIN
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To approve an amendment to the company’s 2012 Equity
Incentive Plan, to increase by 2,000,000 the number of shares of
common stock reserved for issuance under the plan.
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☐
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☐
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☐
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CONTROL
ID:
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REQUEST
ID:
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Proposal 3
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FOR
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AGAINST
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ABSTAIN
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Ratification of the appointment of Marcum LLP, as the
company’s independent auditors for the fiscal year ending
December 31, 2019.
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☐
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☐
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☐
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Proposal 4
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FOR
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AGAINST
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ABSTAIN
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To approve the adjournment of the annual meeting, if necessary or
appropriate, to solicit additional proxies.
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☐
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☐
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☐
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MARK “X” HERE IF YOU PLAN
TO ATTEND THE MEETING:
☐
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This Proxy, when properly executed
will be voted as provided above, or if no contrary direction is
indicated, it will be voted “
For All
” In Proposal 1,
“
For
”
Proposals 2 Through 4, and for all such other business as may
properly come before the meeting in the sole determination of the
Proxies.
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MARK HERE FOR ADDRESS CHANGE
☐ New Address (if
applicable):
________________________
________________________
________________________
IMPORTANT:
Please sign
exactly as your name or names appear on this Proxy. When shares are
held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as
such. If signer is a partnership, please sign in partnership name
by authorized person.
Dated: ________________________, 2019
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(Print Name of Stockholder and/or Joint Tenant)
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(Signature of Stockholder)
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(Second Signature if held jointly)
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TABLE OF CONTENTS