Item 2.05. Costs Associated with Exit or Disposal Activities.
On April 8, 2019 (the "Effective Date"), Laredo Petroleum, Inc. ("Laredo" or the "Company") committed to a company-wide reorganization effort (the "Plan") that includes a workforce reduction of approximately 20 percent. The reduction in workforce was communicated to employees on the Effective Date and implemented immediately, subject to certain administrative procedures. The Company's Board of Directors (the "Board") approved the Plan in response to recent market conditions and to reduce costs and better position the Company for the future. In connection with the Plan, the Company estimates that it will incur an aggregate of approximately $12 million of one-time charges in the second quarter of 2019 comprising compensation, tax, professional, outplacement and insurance related expenses (the "Charges"). Included in the Charges are the severance payments described below in Item 5.02.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangement of Certain Officers.
On the Effective Date, in connection with the Plan, the Company announced the departure of Richard C. Buterbaugh, the Company's Executive Vice President and Chief Financial Officer, effective immediately. Mr. Buterbaugh's departure was not the result of any dispute or disagreement with the Company relating to the Company's accounting practices or financial statements.
Following the previously announced retirements of Dan C. Schooley and Kenneth E. Dornblaser on April 2, 2019, and the departure of Mr. Buterbaugh, the Company offered to enter into a form of severance and release agreement (the "Agreement") with each of Mr. Schooley, Mr. Dornblaser and Mr. Buterbaugh (the "Former Officers"). The Agreement provides for each of the Former Officers to receive certain payments and benefits, including (i) a cash severance payment in an amount equal to 1.5 times the applicable Former Officer's then current base salary plus 1.0 times the applicable Former Officer's target bonus for the 2019 fiscal year and (ii) an additional cash payment in an amount equal to (a) the approximate value that represents a portion of the applicable Former Officer's unvested restricted stock awards, all of which were forfeited and canceled, and (b) a pro rata value that represents a portion of the applicable Former Officer's unvested performance unit awards, all of which were forfeited and canceled, for a total lump sum cash payment to Mr. Buterbaugh, Mr. Schooley and Mr. Dornblaser of $1,603,400, $1,356,600 and $1,060,400, respectively.
In addition, the Agreement provides for payment by the Company of the premiums charged for COBRA coverage for the applicable Former Officer and his dependents for a period not to exceed 18 months, payment for accrued but unused vacation days and payment for outplacement services. In addition, any vested but unexercised stock options granted to the Former Officers may be exercised during the ninety-day period following the Effective Date. All unvested stock options will be forfeited.
Each of the Former Officers will receive the foregoing payments and benefits provided he signs and subsequently does not revoke the Agreement, including his release of claims in favor of the Company, and he complies with the provisions of the Agreement, including the customary non-disclosure covenants.
Also on the Effective Date, the Company announced that the Board has appointed Michael T. Beyer, age 43, as Senior Vice President—Chief Financial Officer, replacing Mr. Buterbaugh, effective as of the Effective Date. Mr. Beyer became Laredo's Chief Accounting Officer in April 2014 and will continue the duties of principal accounting officer. He joined Laredo in September 2007 and most recently served as Vice President—Controller & Chief Accounting Officer, which duties he will continue. Mr. Beyer has more than 18 years of experience in accounting, with the majority in the energy industry. Prior to joining Laredo, he worked in the tax field and spent five years at a private energy company. He received his Bachelor of Business Administration in Accounting from The University of Oklahoma and has been a Certified Public Accountant since 2002. In connection with the appointment to his new position, the Board approved, effective as of the Effective Date, a new annual base salary for Mr. Beyer of $400,000, with a short-term incentive cash target and long-term equity grant target (both as a percentage of base salary) of 75% and 375%, respectively. In addition, Mr. Beyer will continue to participate in the Company's compensation and benefits plans, as described in the Company's most recent proxy statement filed with the Securities and Exchange Commission.
On April 3, 2019, in connection with his previously announced retirement, the Company entered into a consulting arrangement with Mr. Schooley as an independent contractor. Mr. Schooley will provide consulting services to the Company, related to marketing production from its assets and other requested projects, for a daily fee up to four business days per week for a limited period of time.