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Item 5.02.
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers
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Appointment of Directors
Beginning on the Effective Date, pursuant to the Plan, the Company’s Board consists of seven members: Christopher Hamm,
P. Michael Highum, Evan Lederman, David Proman, William J. Scarff, Drew Scoggins and Alex Shayevsky.
Management Incentive Plan and
Emergence Awards
In connection with the Plan, the Court approved the Company’s Management Incentive Plan
(the “MIP”) and the MIP became effective as of the Effective Date. An aggregate of 2,322,404 shares of the Company’s common stock, par value $0.0001 per share, are available for grant to selected employees of the Company or its
subsidiaries pursuant to awards under the MIP in the form of nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance awards, stock awards and other incentive
awards. Any shares of common stock related to awards which terminate by expiration, forfeiture, cancellation or otherwise without the issuance of shares of common stock shall be available again for grant under the MIP and shall not be counted
against the shares authorized under the MIP.
The Company’s Board or the Compensation Committee of the Board will
administer the MIP and has broad authority under the MIP to, among other things: (i) select participants; (ii) prescribe the restrictions, terms and conditions of all awards; (iii) determine the types of awards that participants are
to receive and the number of shares that are to be subject to such awards; and (iv) establish the terms and conditions of awards, including the price (if any) to be paid for the shares or the award. All awards are subject to the terms of the
MIP and individual award agreements entered into with eligible employees thereunder.
On the Effective Date, the Board
approved grants of (1) restricted stock unit awards (“RSUs”) and (2) stock option awards (the “Options” and together with the RSUs, the “Emergence Awards”) to certain of the Company’s employees, including
the Company’s executive officers, under the MIP. The exercise price of the Options is $21.58. In connection with the grant of Emergence Awards, the executive officers will execute restrictive covenant agreements, which generally provide for
confidentiality, non-solicitation of employees and consultants for twelve months post-termination and non-competition and non-solicitation of customers for six months post-termination if such executives are terminated by the Company without
“Cause” or by the executive for “Good Reason.”
The Emergence Awards will generally vest annually in
three equal installments on each of the first three anniversaries of the Effective Date, subject to the grantee’s continued employment through each such vesting date. However, upon the grantee’s (i) termination of employment without
“Cause,” or due to death or “Disability,” or (i) resignation for “Good Reason,” in each case, (A) any unvested RSUs at such time shall fully vest and (B) the portion of the then unvested Options that
would have vested had the grantee remained employed with the Company or its subsidiaries during the 12 months following such termination or resignation date shall vest. In addition, if the grantee is terminated by the Company without Cause or the
grantee resigns for Good Reason, in each case, following a “Change of Control,” all unvested Options at such time shall fully vest. Subject to the foregoing, any unvested Emergence Awards will be forfeited upon the grantee’s
termination of employment.
In the event that the shares of common stock are not traded on any national
securities exchange at the time the Emergence Awards are settled or exercised, subject to any applicable restrictions under the Credit Agreement, the grantees shall have a put right to require the Company to purchase the shares of Common Stock
underlying such settled or exercised Emergence Awards upon the grantee’s termination of employment without Cause, or due to death or Disability, or upon a resignation by the grantee for Good Reason
The number of RSUs and Options issuable to each of the Company’s executive officers under the applicable award agreements
are set forth below:
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Executive Officers
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RSUs
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Options
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William J. Scarff
President and Chief Executive Officer
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125,854
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125,854
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Christopher S. Cooper
Senior Vice President and Chief Operating Officer
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88,000
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88,000
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Robert L. Stillwell, Jr.
Senior Vice President and Chief Financial Officer
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66,000
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66,000
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Jason M. Childress
Senior Vice President, General Counsel and Corporate Secretary
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82,190
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82,190
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Matthew J. Hoss
Vice President, Accounting
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17,500
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17,500
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The foregoing descriptions of the Emergence Awards in this Item 5.02 are qualified in
their entirety to the full text of the MIP, the Form of Stock Option Award Agreement and the Form of Restricted Stock Unit Award Agreement, which are filed as Exhibits 99.1, 99.2 and 99.3, respectively, to the Company’s Form S-8 Registration
Statement, filed on May 4, 2017, and are incorporated herein by reference.
Change of Control Agreement Amendments
Each executive officer of the Company is party to a change of control agreement, dated May 4, 2016, with the
Company’s predecessor, Memorial Production Partners GP LLC, which were all assumed pursuant to the Plan. The change of control agreements generally provide for certain compensation and benefits if the executive is terminated on account of a
qualifying termination within six months prior to, or twenty-four months following, a change of control, and are described in greater detail in MEMP’s Form 10-K filed on March 10, 2017. In connection with the Restructuring Transactions,
each executive officer executed an amendment to their change of control agreement which provides that (i) the consummation of the Restructuring Transactions will not constitute a “Change of Control” for purposes of their change of
control agreement and (ii) the definition of Change of Control will have the meaning ascribed in the MIP as of the Effective Date. A copy of the form of amendment to the change of control agreement is filed as Exhibit 10.5 to this Current
Report on Form 8-K, and is incorporated herein by reference.
MIP Severance Agreement
In connection with the grant of the Emergence Awards, each executive officer of the Company executed a management incentive
plan severance agreement which generally provides that, if the executive is terminated by the Company without “Cause” or the executive resigns his employment for “Good Reason,” in each case, within two years following the
Effective Date (the “Severance Agreement Termination”), such executive will receive a cash amount equal to the greater of such executive’s compensation and benefits under his change of control agreement or the value of his Emergence
Awards on such termination or resignation date. Notwithstanding the foregoing, if the Severance Agreement Termination occurs within six months prior to, or twenty-four months following, a change of control of the Company, the executive’s change
of control agreement shall control in such event. A copy of the form of the management incentive plan severance agreement is filed as Exhibit 10.6 to this Current Report on Form 8-K, and is incorporated herein by reference.
Amended and Restated Key Employee Incentive Plan
Certain employees of the Company, including the executive officers of the Company, are participants to that certain key
employee incentive plan, which generally provide participants the opportunity to earn quarterly cash incentives for the achievements of certain performance goals. The key employee incentive plan is
described in greater detail in MEMP’s Form 10-K filed on March 10, 2017. Pursuant to the Plan, as of the Effective Date, the key employee incentive plan was amended and restated to
convert it to an annual cash bonus plan (with performance measured on an annual basis) starting on the third fiscal quarter of 2017, with annual bonus opportunity for 2017 pro-rated; provided, however, that the plan will continue on its terms prior
to the amendment for the remainder of the second fiscal quarter. The employee officers will remain participants of the key employee incentive plan with bonuses for the second half of the 2017 fiscal year potentially payable to William J. Scarff,
Christopher S. Cooper, Robert L. Stillwell, Jr., Jason M. Childress and Matthew J. Hoss, measured at the target level of performance, of $700,000, $400,000, $400,000, $400,000 and $150,000, respectively. The actual amount payable may be more or less
than the target amount, depending upon performance. A copy of the amended and restated key employee incentive plan is filed as Exhibit 10.7 to this Current Report on Form 8K, and is incorporated herein by reference.