Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Effective August 27, 2018 (the “Effective Date”), Basic entered into an employment agreement with Mr. Schorlemer. A description of the material terms and conditions of Mr. Schorlemer’s arrangement is set forth below. Mr. Schorlemer is the Senior Vice President, Chief Financial Officer, Treasurer and Secretary of Basic.
Mr. Schorlemer’s employment agreement is effective through December 31, 2018 and will automatically renew for subsequent one year periods unless notice of termination is properly given by Basic or Mr. Schorlemer. Pursuant to the employment agreement, Mr. Schorlemer is entitled to an initial base salary of $400,000. Mr. Schorlemer will also be entitled to an annual performance bonus if certain performance criteria are met. Under the employment agreement, Mr. Schorlemer is eligible from time to time to receive awards of long-term equity incentive compensation under Basic’s equity compensation plans. Pursuant to his offer letter, Mr. Schorlemer will also receive guaranteed cash payments of $200,000 on each of March 15, 2019, March 15, 2020 and March 15, 2021. In addition, effective August 29, 2018, Mr. Schorlemer was granted 66,000 performance-based Restricted Stock Units under the Basic Energy Services, Inc. Management Incentive Plan based on a two-year performance period and followed by a two-year vesting period.
If Mr. Schorlemer’s employment is terminated for certain reasons, he would be entitled to a lump sum severance payment equal to 1.5 times the sum of his base salary plus his current annual incentive target bonus for the full year in which the termination of employment occurred. Additionally, if Mr. Schorlemer’s employment is terminated for certain reasons within the six months preceding or the twelve months following a change of control of Basic, he would be entitled to a lump sum severance payment equal to two times the sum of his base salary plus the higher of (i) his current annual incentive target bonus for the full year in which the termination of employment occurred or (ii) the highest annual incentive bonus received by him for any of the last three completed fiscal years. In the event that within the six months preceding or the twelve months following a change of control of Basic, Mr. Schorlemer’s employment agreement is not renewed by Basic and a new employment agreement has not been entered into, Mr. Schorlemer will be entitled to the same severance benefits described above, subject to certain conditions.
As consideration for Basic entering into the employment agreement, Mr. Schorlemer has agreed in his employment agreement that, for a period of six months following the termination of his employment by Basic without cause or by him for good reason, and for a period of two years following the termination of his employment for retirement or any other reason, he will not, among other things, engage in any business competitive with Basic’s, render services to any entity who is competitive with Basic or solicit business from certain of Basic’s customers or potential customers. These non-competition restrictions shall not apply in the event that such termination is within twelve months of a change of control of Basic. Additionally, Mr. Schorlemer has agreed not to solicit any of Basic’s employees to terminate, reduce or adversely affect their employment with Basic for a period of two years from his date of termination, for whatever reason.
The above summary of each of the employment agreement and the offer letter is qualified in its entirety by reference to the full text of such agreement, which is filed as Exhibit 10.1 and Exhibit 10.2 hereto, respectively, and incorporated herein by reference.