Item 5.02 Departure of Directors or Certain
Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On May 23, 2017, U.S. Energy Corp. (“U.S.
Energy” or the “Company”) announced the appointment of Ryan Smith as the Company’s Chief Financial Officer
(“CFO”), effective as of May 18, 2017. Prior to the appointment, Mr. Smith had been consulting for the Company since
January 2017. Mr. Smith previously served as Emerald Oil Inc.’s Chief Financial Officer from September 2014 to January 2017
and Vice President of Capital Markets and Strategy from July 2013 to September 2014. Prior to joining Emerald, Mr. Smith was a
Vice President in Canaccord Genuity’s Investment Banking Group focused solely on the energy sector. Mr. Smith joined Canaccord
Genuity in 2008 and was responsible for the execution of public and private financing engagements along with mergers and acquisitions
advisory services. Prior to joining Canaccord Genuity, Mr. Smith was an Analyst in the Wells Fargo Energy Group, working solely
with upstream and midstream oil and gas companies. None of the entities at which Mr. Smith was previously employed is a parent,
subsidiary or other affiliate of the Company.
Mr. Smith holds a Bachelor of Business
Administration degree in Finance from Texas A&M University.
Simultaneously with the commencement of
employment of Mr. Smith on May 18, 2017, the duties of principal financial officer of the Company were reassigned from David A
Veltri, the Company’s Chief Executive Officer, who had been acting as the Company’s principal financial officer, to
Mr. Smith.
In connection with Mr. Smith’s appointment,
on May 18, 2017 (the “Effective Date”), the Company entered into an employment agreement with Mr. Smith (the “Employment
Agreement”), with a term commencing on the Effective Date and continuing until January 1, 2019. After January 1, 2019, Mr.
Smith shall continue to be employed by the Company on an at-will basis. Under the Employment Agreement, Mr. Smith will receive
an annual base salary of $240,000 and will be eligible to receive annual cash bonuses between 0.5 and 2.5 times annual salary and
annual equity bonus grants between 1.0 and 3.0 times annual salary. The amount of any cash bonus payment and equity bonus grant
will be subject to certain predetermined performance criteria established by the Compensation Committee. A minimum threshold level
of performance must be achieved or no cash or equity bonus will be paid. Mr. Smith will also participate in the Company’s
other benefits commensurate with the executive level.
In the event that Mr. Smith’s employment
is terminated by the Company due to death or disability, Mr. Smith, or his estate or beneficiaries, shall be entitled to (i) any
accrued obligation (as defined in the Employment Agreement); (ii) any unpaid annual bonus for any completed fiscal
year that has ended prior to termination with such amount to be determined by actual performance during the completed fiscal year;
(iii) any annual bonus that would have been payable based on actual performance, pro-rated for the period Mr. Smith worked prior
to death or disability; and (iv) immediate vesting of any and all equity awards granted to Mr. Smith during his employment with
the Company.
In the event that the
Company terminates Mr. Smith’s employment without cause (as that term is defined in the Employment Agreement), Mr.
Smith shall be entitled to receive (i) any accrued obligation (as defined in the Employment Agreement); (ii) any unpaid
annual bonus for any completed fiscal year that has ended prior to termination with such amount to be determined by actual
performance during the completed fiscal year; (iii) a payment equal to his annual base salary; (iv) a payment equal to twelve
(12) times a percentage of the monthly COBRA premium cost applicable to Mr. Smith; and (v) immediate vesting of any and all
equity awards granted to Mr. Smith during his employment.
In the event that Mr. Smith terminates
his employment for good reason (as defined in the Employment Agreement), Mr. Smith shall be entitled to receive (i)
any accrued obligation (as defined in the Employment Agreement); (ii) any unpaid annual bonus for any completed fiscal
year that has ended prior to termination with such amount to be determined by actual performance during the completed fiscal year;
and (iii) a payment equal to twelve (12) times a percentage of the monthly COBRA premium costs applicable to Mr. Smith.
In the event that the Company terminates
the Employment Agreement without cause, or Mr. Smith terminates the Employment Agreement for good reason in connection with a change
of control (as defined in the Employment Agreement), then, Mr. Smith shall be entitled to receive (i) any accrued obligation (as
defined in the Employment Agreement); (ii) any unpaid annual bonus for any completed fiscal year that has ended prior
to termination with such amount to be determined by actual performance during the completed fiscal year (i) a payment equal to
his annual base salary; (ii) a payment equal to twelve (12) times a percentage of the monthly COBRA premium costs applicable to
Mr. Smith; (iii) immediate vesting of any and all equity awards granted to Mr. Smith during his employment; and (iv) a payment
equal to one (1) times the total of Mr. Smith’s annual salary plus an amount equal to the total value of the annual bonus
paid during the preceding fiscal year.
In addition, the Employment Agreement has
customary non-competition, non-solicitation and confidentiality provisions.
This summary description is qualified in
its entirety by reference to the Employment Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is
incorporated herein by reference.