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))
☑
Definitive Proxy Statement
☐
Definitive Additional Materials
☐
Soliciting Material under Rule 14a-12
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)
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(5)
Total fee paid:
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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.
4125
Blackhawk Plaza Circle, Suite 201
Danville,
California 94506
(855)
733-3826
November
8, 2017
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 2017 annual meeting of our stockholders, which we refer
to as the annual meeting. This meeting will be held on December 28,
2017 at 10:00 a.m. local time at PEDEVCO Corp.’s
corporate office located at 4125 Blackhawk Plaza Circle, Suite 201,
Danville, California 94506.
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 November 8, 2017 to
our stockholders of record as of the close of business on October
30, 2017. 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 December 28, 2017. Your vote and
participation in our governance is very important to
us.
Sincerely,
Frank
C. Ingriselli
Chairman
Important Notice Regarding the Availability of Proxy Materials for
the Annual Meeting of Stockholders to Be Held on December 28,
2017.
Our
proxy statement and annual report on Form 10-K for the year ended
December 31, 2016 are available at the following cookies-free
website that can be accessed anonymously:
https://www.iproxydirect.com/PED
.
PEDEVCO CORP.
4125 Blackhawk Plaza Circle, Suite 201
Danville, California 94506
(855) 733-3826
___________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 28, 2017
___________________________
To the
Stockholders of PEDEVCO Corp.:
We are
pleased to provide you notice of, and to invite you to attend, the
2017 annual meeting of the stockholders of PEDEVCO Corp., a Texas
corporation, which will be held on December 28, 2017 at 10:00 a.m.,
local time, at PEDEVCO Corp.’s corporate office located at
4125 Blackhawk Plaza Circle, Suite 201, Danville, California 94506,
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 1.5 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 GBH
CPAs, PC, as our independent auditors for the fiscal year ending
December 31, 2017.
4. To
consider a non-binding advisory vote on compensation of our named
executive officers.
5. To
consider a non-binding advisory vote on the frequency of the
advisory vote on compensation of our named executive
officers.
6.
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.
7. 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 FOUR, AND SIX, AND FOR
“
THREE
YEARS
” FOR
PROPOSAL 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 October 30, 2017 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 Danville, California, during ordinary business hours for a
period of 10 days prior to the annual meeting.
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 November 8, 2017, is also available
at
https://www.iproxydirect.com/PED
.
This website also includes copies of the form of proxy, our Annual
Report on Form 10-K for the year ended December 31, 2016, 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
Frank
C. Ingriselli
Chairman
Danville,
California
November
8, 2017
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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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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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5
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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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6
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Voting
Instructions
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6
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Confidential
Voting
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6
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Stockholder
of Record and Shares Held in Brokerage Accounts
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6
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Multiple
Stockholders Sharing the Same Address
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6
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Voting
Results
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7
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Company
Mailing Address
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7
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Reverse
Stock Split
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7
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VOTING RIGHTS AND PRINCIPAL STOCKHOLDERS
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7
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Security
Ownership of Certain Beneficial Owners and Management
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7
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Changes
in Control
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11
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CORPORATE GOVERNANCE
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11
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Board
Leadership Structure
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12
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Risk
Oversight
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12
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Family
Relationships
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12
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Arrangements
Between Officers and Directors
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12
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Series
A Preferred Stock Appointment Rights
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13
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Other
Directorships
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13
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Involvement
in Legal Proceedings
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13
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Board
of Directors Meetings
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14
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COMMITTEES OF THE BOARD
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14
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Board
Committee Membership
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14
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Audit Committee
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14
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Compensation Committee
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15
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Nominating and Governance Committee
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15
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Stockholder
Communications with the Board
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16
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Executive
Sessions of the Board of Directors
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16
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Director
Independence
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16
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Code
of Ethics
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16
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Report
of the Audit Committee
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16
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AUDIT COMMITTEE REPORT
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17
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EXECUTIVE OFFICERS
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18
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EXECUTIVE COMPENSATION
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19
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Summary Compensation Table
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19
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Outstanding Equity Awards at December 31,
2016
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20
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Issuances of Equity to Executive Officers and
Directors
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22
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Compensation of Directors
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23
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Securities Authorized for Issuance under Equity
Compensation Plans
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24
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Equity Compensation Plan
Information
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24
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2014 Say on Pay Vote
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28
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Executive Employment Agreements
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28
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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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42
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PROPOSAL 1 - ELECTION OF DIRECTORS
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43
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PROPOSAL 2 - AMENDMENT TO THE PEDEVCO CORP. 2012 EQUITY INCENTIVE
PLAN
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47
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PROPOSAL 3 - RATIFICATION OF APPOINTMENT OF AUDITORS
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54
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PROPOSAL 4 – NON-BINDING ADVISORY VOTE ON EXECUTIVE
COMPENSATION
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56
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PROPOSAL 5 - NON-BINDING ADVISORY VOTE ON THE FREQUENCY OF HOLDING
ADVISORY VOTES ON EXECUTIVE COMPENSATION
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58
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PROPOSAL 6 - ADJOURNMENT OF THE ANNUAL MEETING
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59
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Stockholder
Proposals for 2018 Annual Meeting of Stockholders and 2018 Proxy
Materials
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60
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Additional
Filings
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60
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Other
Matters
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61
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Interest
of Certain Persons in or Opposition to Matters to Be Acted
Upon
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61
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Company
Contact Information
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61
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TABLE OF APPENDIXES
Appendix A
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Amended
and Restated PEDEVCO Corp. 2012 Equity Incentive Plan (see proposal
2)
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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 2017 annual meeting of stockholders, which we refer to
as our annual meeting, to be held on December 28, 2017 at 10:00
a.m., local time at PEDEVCO Corp.’s corporate office
located at 4125 Blackhawk Plaza Circle, Suite 201, Danville,
California 94506, and at any postponement(s) or adjournment(s)
thereof. These materials were first sent or given to stockholders
on November 8, 2017. 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, 2016, as filed with
the SEC on March 27, 2017, which we refer to as the 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 October 30,
2017 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 and Series A Preferred
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 6,084,729 shares
of common stock outstanding and entitled to vote at our annual
meeting, held by approximately 738 holders of record and 66,625
shares of Series A Preferred Stock outstanding and entitled to vote
at our annual meeting, held by one holder of record.
Each
share of common stock and each share of Series A Preferred Stock is
entitled to one vote on each proposal presented at our annual
meeting and at any adjournment or postponement thereof, for
6,151,354 total voting shares, provided that the Series A Preferred
Stock holder is the only stockholder who has a right to appoint the
Series A Nominee, as defined and described in greater detail under
“
Proposal 1 -
Election of Directors
”, beginning on page 43.
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:
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In person
. You may vote in person at the annual meeting. The
Company will give you a ballot when you arrive.
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Via the Internet
. You may vote by proxy via the Internet by
following the instructions provided in the notice.
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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.
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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.
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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.
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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:
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submitting
a written revocation prior to the annual meeting to the Corporate
Secretary, PEDEVCO Corp., 4125 Blackhawk Plaza Circle, Suite 201,
Danville, California 94506;
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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
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attending
our annual meeting and voting in person.
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Attendance at the Annual Meeting
Attendance at the
annual meeting is limited to holders of record of our common stock
and Series A Preferred Stock at the close of business on the record
date, October 30, 2017 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 or preferred stock, such
as a bank or brokerage account statement indicating that you owned
shares of common or preferred 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 three non-Series A
Nominees (defined below under “
Proposal 1 - Election of
Directors
”, beginning on page 43) receiving the
highest number of affirmative votes of our common stock and the one
Series A Nominee (defined below under “
Proposal 1 - Election of
Directors
”, beginning on page 43), receiving the
highest number of affirmative votes of our Series A Preferred
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 1.5 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 GBH CPAs, PC as our independent auditors for the
fiscal year ended December 31, 2017 (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 on a non-binding
basis of executive compensation
. For the approval of
executive compensation (proposal 4), 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, provided that the vote is non-binding.
Approval on a non-binding
basis of the frequency of holding future advisory votes on
executive compensation
. For the approval of the frequency of
holding future advisory votes on executive compensation (proposal
5), the final vote will not be binding on us and is advisory in
nature, and no minimum level of votes is required to be obtained on
any voting option. Instead, the option (1 year, 2 years or 3
years), if any, that receives the greatest number of affirmative
votes of the shares (i.e., a plurality of the votes cast) present
in person or represented by proxy at the meeting and entitled to
vote will be determined to be approved by the Company’s
stockholders, provided that the final vote will not be binding on
us and is advisory in nature. The Board will carefully consider the
voting results in their entirety in determining the frequency of
holding future advisory votes on the compensation of our named
executive officers moving forward.
Approval to adjoin the
annual meeting
. Authority to adjourn the annual meeting
(proposal 6) 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.
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 GBH CPAs, PC as our
independent registered public accounting firm (proposal 3), 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), the proposal to approve executive
compensation (proposal 4) 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 6), 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.
With
respect to the advisory vote on the frequency of holding future
advisory votes on the compensation of our named executive officers
(Proposal 5), stockholders have four voting options
(“
1
year
”, “
2 years
”,
“
3
years
” or “
abstain
”), provided that
the final vote will not be binding on us and is advisory in nature,
and no minimum level of votes is required to be obtained on any
voting option. Instead, the option (1 year, 2 years or 3 years), if
any, that receives the greatest number of affirmative votes of the
shares (i.e., a plurality of the votes cast) present in person or
represented by proxy at the meeting and entitled to vote will be
determined to be approved by the Company’s stockholders,
provided that the final vote will not be binding on us and is
advisory in nature. The Board will carefully consider the voting
results in their entirety in determining the frequency of holding
future advisory votes on the compensation of our named executive
officers moving forward.
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 1.5 million shares the number of shares of common stock
reserved for issuance under the plan (proposal 2);
|
|
|
|
|
●
|
“
FOR
”
ratification of the appointment of GBH CPAs, PC, as our independent
auditors for the fiscal year ending December 31, 2017 (proposal
3);
|
|
|
|
|
●
|
“
FOR
”
the approval of the non-binding advisory resolution approving the
Company’s executive compensation (proposal 4);
|
|
|
|
|
●
|
“
3
YEARS
” for the proposal regarding an advisory vote on
the frequency of the advisory vote on executive compensation
(proposal 5); 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 6).
|
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 2016 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 2016
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 2016 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
4125 Blackhawk Plaza Circle, Suite 201, Danville, California 94506,
or a stockholder may make a request by calling our Corporate
Secretary, Clark R. Moore at (855) 733-3826.
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 4125
Blackhawk Plaza Circle, Suite 201, Danville, California
94506.
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 and Series A Preferred Stock at the
close of business on the record date, October 30, 2017, will be
entitled to one vote per share on all matters properly presented at
the annual meeting and at any adjournment or postponement thereof
(provided that the Series A Preferred Stock holder is the only
stockholder who has a right to appoint the Series A Nominee, as
defined and described in greater detail under “
Proposal 1 - Election of
Directors
”, beginning on page 43). As of the record
date, there were 6,084,729 shares of common stock outstanding and
entitled to vote at the annual meeting and at any adjournment or
postponement thereof, held by approximately 738 holders of record
and 66,625 shares of Series A Preferred Stock outstanding and
entitled to vote at our annual meeting, held by one holder of
record. Each share of common stock and each share of Series A
Preferred Stock is entitled to one vote on each proposal presented
at our annual meeting, for 6,151,354 total voting shares, provided
that the Series A Preferred Stock holder is the only stockholder
who has a right to appoint the Series A Nominee.
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, October 30,
2017, 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; and (d) all current directors, our director nominee and
executive officers, as a group. As of the record date, there were
6,084,729 shares of common stock and 66,625 shares of
Series A Convertible Preferred 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.
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.
|
Number of Common Stock
Shares
(1)
|
|
Number of Series
A Convertible Preferred Stock Shares
(2)
|
Percent of
Series A Convertible Preferred Stock
|
|
Percent of Total
Voting Shares
(3)
|
|
|
|
|
|
|
|
Name
and Address of Beneficial Owner
|
|
|
|
|
|
|
Named
Executive Officers and Directors
|
|
|
|
|
|
|
Michael L.
Peterson
|
284,363
(4)
|
4.6
%
|
--
|
--
|
284,363
(4)
|
4.5
%
|
Frank C.
Ingriselli
|
274,351
(5)
|
4.5
%
|
--
|
--
|
274,351
(5)
|
4.4
%
|
Clark R.
Moore
|
150,585
(6)
|
2.4
%
|
--
|
--
|
150,585
(6)
|
2.4
%
|
Elizabeth P.
Smith
|
93,654
(7)
|
1.5
%
|
--
|
--
|
93,654
(7)
|
1.5
%
|
Gregory
Overholtzer
|
88,309
(8)
|
1.4
%
|
--
|
--
|
88,309
(8)
|
1.4
%
|
David Z.
Steinberg
|
75,975
(9)
|
1.2
%
|
--
|
--
|
75,975
(9)
|
1.2
%
|
Adam
McAfee
|
54,578
(10)
|
0.9
%
|
--
|
--
|
54,578
(10)
|
0.9
%
|
|
|
|
|
|
|
|
All
Named Executive Officers and Directors as a group (seven
persons)
|
1,021,815
|
15.9
%
|
--
|
--
|
12,370,863
|
21.4
%
|
Greater
than 5% Stockholders
|
|
|
|
|
|
|
MIE Holdings
Corporation (11)
|
2,267,501
(12)
|
27.4
%
|
--
|
--
|
2,267,501
(12)
|
27.4
%
|
Golden Globe Energy
(US), LLC (13)
|
573,745
(14)
|
9.1
%
|
66,625
(15)
|
100
%
|
638,042
(16)
|
9.9
%
|
B Asset Manager, LP
(17)
|
596,280
(18)
|
8.9
%
|
--
|
--
|
596,280
(18)
|
8.8
%
|
Yao Hang Finance
(Hong Kong) Limited (19)
|
333,334
(20)
|
5.5
%
|
--
|
--
|
333,334
(20)
|
5.4
%
|
Unless otherwise stated, the address of each stockholder is c/o
PEDEVCO Corp., 4125 Blackhawk Plaza Circle, Suite 201, Danville, CA
94506
(1)
Ownership voting
percentages are based on 6,084,729 total shares of common stock
which were outstanding as of the record date, October 30, 2017.
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.
Additionally, shares of common stock subject to options, warrants
or other convertible securities that are currently exercisable or
convertible, or exercisable or convertible within 60 days of the
applicable date below, 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.
(2)
Ownership voting
percentages are based on 66,625 total shares of Series A preferred
stock which were outstanding as of the record date. Beneficial
ownership is determined in accordance with the rules of the SEC and
includes voting and/or investing power with respect to securities.
The holders of our Series A preferred stock vote together with the
holders of our common stock, with one (1) vote per share of Series
A preferred stock.
(3)
Ownership voting
percentages are based on 6,151,354 total voting shares, including
(i) 6,084,729 total shares of common stock outstanding as of
October 30, 2017, and (ii) 66,625 total shares of Series A
preferred stock which vote on a one-for-one basis on all
stockholder matters, provided that shares of common stock subject
to options, warrants or other convertible securities (including the
Series A preferred stock) 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.
(4)
Consisting of the
following: (a) 1,834 fully-vested shares of common stock held by
Mr. Peterson’s minor children; (b)143,352 fully-vested shares
of common stock (including shares held by a family trust which Mr.
Peterson is deemed to beneficially own); (c) 33,000 unvested shares
of common stock held by Mr. Peterson, which vest on various dates
through June 28, 2018, provided that Mr. Peterson remains employed
by us, or is a consultant to us, on such vesting dates; (d) options
to purchase 10,000 shares of common stock exercisable by Mr.
Peterson at an exercise price of $2.40 per share; (e) options to
purchase 33,334 shares of common stock exercisable by Mr. Peterson
at an exercise price of $5.10 per share; (f) 343 shares of common
stock underlying currently exercisable options, of which options to
purchase 298 shares are exercisable at $32.40 per share and options
to purchase 45 shares are exercisable at $672.00 per share; (g)
options to purchase 32,500 shares of common stock exercisable by
Mr. Peterson at an exercise price of $3.70 per share; and (h)
options to purchase 30,000 shares of common stock at $2.20 per
share. Mr. Peterson has voting control over his unvested shares of
common stock.
(5)
Representing: (a)
91,439 fully-vested shares of common stock held by Mr. Ingriselli;
(b) 13,371 fully-vested shares of common stock held by Mr.
Ingriselli’s spouse; (c) 89,650 fully-vested shares of common
stock held by Global Venture Investments Inc., a company owned and
controlled by Mr. Ingriselli (“
GVEST
”); (d) options to
purchase 39,081 shares of common stock exercisable by Mr.
Ingriselli at an exercise price of $5.10 per share; (e) options to
purchase 37,000 shares of common stock exercisable by Mr.
Ingriselli at an exercise price of $3.70 per share; and (f)
warrants exercisable for 3,810 shares of common stock at $23.40 per
share held by Global Venture Investments, LLC, a company owned and
controlled by Mr. Ingriselli (“
GVEST LLC
”), which expire
on December 16, 2017, and which securities Mr. Ingriselli is deemed
to beneficially own.
(6)
Representing: (a)
45,326 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) 21,000
unvested shares of common stock held by Mr. Moore, which vest on
various dates through June 28, 2018, 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; (f) options
to purchase 28,000 shares of common stock exercisable by Mr. Moore
at an exercise price of $2.20 per share; and (g) warrants
exercisable for 191 shares of common stock at $23.40 per share held
by Mr. Moore which expire on December 16, 2017. Mr. Moore has
voting control over his unvested shares of common
stock.
(7)
Representing: (i)
6,667 shares of common stock held by Ms. Smith (issued upon the
January 27, 2013 automatic conversion of 6,667 shares of Series A
preferred stock held by Ms. Smith); (ii) 1,334 shares of restricted
stock held by Ms. Smith which vested in full on September 10, 2014;
(iii) 9,678 shares of restricted stock held by Ms. Smith which
vested in full on September 10, 2015; (iv) 21,429 shares of
restricted stock held by Ms. Smith which vested in full on
September 10, 2016; and (v) 54,546 shares of restricted stock held
by Ms. Smith which vested in full on September 10,
2017.
(8)
Representing: (a)
7,542 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; and (f) options to purchase
48,000 shares of common stock exercisable by Mr. Overholtzer at an
exercise price of $1.10 per share. Does not include options to
purchase 12,000 shares of common stock at an exercise price of
$1.10 per share, which have not vested as of the date of this
filing and do not vest within 60 days of this filing.
(9)
Representing 75,975
shares of restricted stock held by Mr. Steinberg which vested in
full on July 15, 2017.
(10)
Representing: (i)
30 shares of common stock held jointly by Mr. McAfee and his
spouse; (ii) 2 shares of common stock held by Park Capital
Management LLC, an entity owned and controlled by Mr. McAfee; and
(iii) 54,546 shares of restricted stock held by Mr. McAfee which
vest in full on December 28, 2017, provided that Mr. McAfee remains
a director, an employee of, or consultant to the Company on such
vesting date. Mr. McAfee has voting control over his unvested
shares of common stock.
(11)
Address: c/o MIE
Holdings Corporation, Suite 1501, Block C, Grand Palace, 5 Huizhong
Road, Chaoyong District, Beijing, China 100101. To the best of our
knowledge, the beneficial owners of MIE Holdings Corporation are
Zhang Ruilin, its Executive Director, Chairman and Chief Executive
Officer, and Zhao Jiangwei, its Executive Director, Vice Chairman
and Senior Vice President.
(12)
Representing: (i)
133,334 shares of common stock issued upon the January 27, 2013
automatic conversion of 133,334 shares of Series A Preferred Stock
held by MIE Holdings Corporation; and (ii) 2,134,167 shares of
common stock issuable upon conversion of the New MIEJ Note,
assuming conversion of all principal and accrued interest
outstanding thereunder as of December 31, 2017 at the
“
floor
price
” of $3.00/share. The New MIEJ Note is
convertible into common stock as described in greater detail below
under “
Certain
Relationships and Related Party Transactions
” –
“
Amendment to
PEDCO-MIEJ Note and Condor-MIEJ Note
”.
(13)
Address: c/o
Platinum Partners, 250 West 55th Street, 14th Floor, New York, New
York 10019. Includes beneficial holdings of Golden Globe Energy
(US), LLC, a Delaware limited liability company
(“
GGE
”),
Platinum Partners Value Arbitrage Fund L.P., a Cayman Islands
exempted limited partnership (“
PPVA
”), Platinum
Management (NY) LLC, a Delaware limited liability company
(“
Platinum
Management
”), Platinum Partners Credit Opportunities
Fund LLC, a Delaware limited liability company (“
PPCO
”), Platinum Credit
Holdings LLC, a Delaware limited liability company
(“
Credit
Holdings
”), and Mark Nordlicht (collectively, the
“
GGE
Parties
”). GGE is a wholly-owned subsidiary of PPVA.
Platinum Management is the investment manager and general partner
of PPVA. Credit Holdings is the managing member of PPCO. Mark
Nordlicht is the Chief Investment Officer of each of Platinum
Management and Credit Holdings. By virtue of these relationships,
each of PPVA, Platinum Management and Mark Nordlicht may be deemed
to beneficially own the shares owned directly and beneficially by
GGE. By virtue of these relationships, each of Credit Holdings and
Mark Nordlicht may be deemed to beneficially own the shares owned
directly by PPCO. The information set forth in this footnote and
footnotes 15 and 16 below is based solely on information filed with
the SEC on Schedule 13D by the GGE Parties on March 6, 2015. The
GGE Parties reported in the Schedule 13D that GGE, PPVA and
Platinum Management, share voting and dispositive power of 337,500
shares of common stock and 66,625 shares of Series A Preferred, and
PPCO and Credit Holdings share voting and dispositive power over
34,445 shares of common stock, and Mr. Nordlicht shares voting
power over 340,945 shares of common stock and 66,625 shares of
Series A Preferred.
(14)
Representing: (i)
337,500 shares of common stock held by GGE; (ii) 3,445 shares of
common stock held by Platinum Partners Credit Opportunities Fund
LLC; and (iii) 232,800 shares of common stock which could be
issuable upon conversion of 2,328 shares of Series A preferred
stock, conversion of which shares, together with GGE’s
current holdings of common stock, would give GGE ownership of 9.1%
of our outstanding common stock and, together with 64,297 shares of
unconverted Series A preferred stock which votes together with our
common stock, 9.9% of our voting stock on an as-converted to common
stock basis. See footnotes 13 and 16.
(15)
Representing 66,625
shares of Series A preferred stock held by GGE. See footnote 13
above. The Series A preferred stock is convertible into common
stock on a 100:1 basis.
(16)
Representing: (i)
337,500 shares of common stock held by GGE; (ii) 3,445 shares of
common stock held by Platinum Partners Credit Opportunities Fund
LLC; (iii) 232,800 shares of common stock which could be issuable
upon conversion of 2,328 shares of Series A preferred stock,
conversion of which shares, together with GGE’s current
holdings of common stock and , would give GGE ownership of 9.1% of
our outstanding common stock and, together with 64,297 shares of
unconverted Series A preferred stock which votes together with our
common stock, 9.9% of our voting stock on an as-converted to common
stock basis; and (iv) 64,297 shares of Series A preferred stock
remaining outstanding following conversion of 2,328 shares of
Series A preferred stock into 232,800 shares of common stock. See
footnotes 13 and 15 above. Each share of Series A preferred stock
is currently convertible into shares of common stock on a 100:1
basis, provided that no conversion is allowed in the event the
holder thereof would beneficially own more than 9.9% of our
outstanding common stock or voting stock (the “
Beneficial Ownership
Limitation
”). Accordingly, based on GGE’s
current beneficial holdings of common stock (excluding shares
issuable upon conversion of Series A preferred stock), GGE is
deemed to beneficially own an additional approximately 232,800
shares of common stock which could be issuable upon conversion of
2,328 shares of Series A preferred stock, subject to the Beneficial
Ownership Limitation.
(17)
Address: 1370
Avenue of the Americas, 32
nd
Floor, New York, New York 10019.
Includes beneficial holdings of BBLN-PEDCO Corp., BHLN-PEDCO Corp.,
and B Asset Manager, LP (the “
BAM Parties
”), 1370
Avenue of the Americas, 32
nd
Floor, New York, New York 10019. B
Asset Manager, LP (“
BAM
”) is the investment
manager, directly or indirectly, of the securities owned by the BAM
Parties. To the Company’s knowledge, Mark Feuer and Dhruv
Narain, through other entities, are the controlling principals of
BAM, and share sole voting and investment power over such
securities. Each of BAM, Mark Feuer and Dhruv Narain disclaims
beneficial ownership of the securities held by the BAM Parties. The
information set forth in this footnote is based solely on
information jointly filed with the SEC on Schedule 13G/A by Senior
Health Insurance Company of Pennsylvania (“
SHIP
”) and the BAM
Parties on February 14, 2017. However, subsequent to such filing,
the Company has become aware that SHIP’s holdings are no
longer managed by BAM, with SHIP’s holdings excluded from the
BAM Parties’ holdings by the Company herein. We make no
representation as to the accuracy or completeness of the
information reported.
(18)
Representing shares
of common stock issuable upon the exercise of warrants to purchase
common stock of the Company held by the BAM Parties. The BAM
Parties hold warrants exercisable for an aggregate of 596,280
shares of common stock at $2.50 per share, expiring on May 12,
2019. The warrants held by the BAM Parties contain an issuance
limitation prohibiting each holder from exercising or converting
those securities to the extent that such exercise would result in
beneficial ownership by such holder and its affiliates of more than
9.99% of the Company’s shares then issued and outstanding
(the “
Issuance
Limitation
”). The Issuance Limitation for the warrants
may be revoked by the holder upon at least 61 days prior written
notice to the Company which notice shall only be effective if
delivered at a time when no indebtedness of the Company is
outstanding, of which the holder or any of its affiliates was, at
any time, the owner, directly or indirectly. The
“
Number of Voting
Shares Beneficially Owned
” figure presented assumes
exercise of approximately such number of warrants which would
provide the BAM Parties with shares of common stock under the
Issuance Limitation.
(19)
Address: Room 5,
27/F, Richmond Comm. Bldg., 109 Argyle Street, Mongkok, Kowloon
Hong Kong. Beneficial ownership information has not been provided
to the Company despite multiple requests and the Company is not
aware of the beneficial owners of the shares held by Yao Hang
Finance (Hong Kong) Limited.
(20)
Representing
333,334 shares of common stock.
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 43.
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. Frank C. Ingriselli serves as Chairman and Mr.
Michael L. Peterson serves as Chief Executive Officer. 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 Chief Executive Officer,
Mr. Peterson) 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 Chief
Executive Officer, 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.
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
14)).
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, except as described below under “
Series A Preferred Stock Appointment
Rights
”, 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.
Series A Preferred Stock Appointment Rights
Golden Globe Energy (US), LLC, which we refer to
as GGE, the sole holder of our Series A Preferred stock, has the
right pursuant to the purchase agreement with GGE and the
certificate of designation designating the Series A
Preferred
(each described in greater detail below under
“
Certain
Relationships and Related Party Transactions
” -
“
Agreements with
Related Persons
” - “
Golden Globe Energy (US),
LLC
”, beginning on page 30)
, upon notice to us, voting separately as a single
class, to appoint designees to fill two (2) seats on our board of
directors, one of which must be an independent director as defined
by applicable rules and the exclusive right, voting the Series A
Preferred Stock as sole stockholder thereof, separately as a single
class, to elect such two (2) nominees to the board of directors. On
July 15, 2015, at the request of GGE the board of directors of the
Company increased the number of members of the board of directors
from three to four, pursuant to the power provided to the board of
directors in the Company’s Bylaws, and appointed David Z.
Steinberg as a member of the board of directors to fill the newly
created vacancy, also pursuant to the power provided to the board
of directors in the Company’s Bylaws. At the time of
appointment, the board of directors made the affirmative
determination that Mr. Steinberg was independent pursuant to
applicable NYSE American (formerly NYSE MKT) and SEC rules and
regulations. Mr. Steinberg serves as one of GGE’s
representatives on the Company’s board of directors. The
board of directors appointment rights continue until GGE no longer
holds any of the Tranche One Shares (defined and described in
greater detail below under “
Certain Relationships
and Related
Party
Transactions
”
-
“
Agreements with
Related Persons
”
-
“
Golden Globe Energy
(US), LLC
”, beginning on page 30).
To date, GGE has not provided notice to PEDEVCO
regarding the appointment of the second member to the board of
directors, other than Mr. Steinberg.
As
described below under “
Proposal 1 - Election of
Directors
” beginning on page 43, Mr. Steinberg is the
Series A Preferred Stock holder’s nominee for appointment on
the board of directors at the annual meeting and GGE has the sole
right to appoint Mr. Steinberg to the board of directors at the
annual meeting.
All
Series A Preferred Stock nominee members on our board of directors
are required to immediately resign at the option of the other
members of our board of directors upon such time as the rights of
the Series A Preferred Stock holder to appoint members to our board
of directors expires. For so long as the board appointment rights
remain in effect, if for any reason a Series A Preferred Stock
nominee on our board of directors resigns or is otherwise removed
from the board of directors, then his or her replacement shall be a
person elected by the remaining Series A Preferred Stock nominee or
the holder of the Series A Preferred Stock.
Other Directorships
No
directors of the Company are also directors of issuers with a class
of securities registered under Section 12 of the Exchange Act (or
which otherwise are required to file periodic reports under the
Exchange Act).
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, 2016, the Board
held three 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 2016,
except for one meeting of the board of directors which Mr.
Steinberg was unable to attend. The Company held annual
stockholders meetings on June 26, 2014, October 7, 2015, and
December 28, 2016, 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 stockholders, 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.
COMMITTEES OF THE BOARD
We
currently maintain a Nominating and Corporate Governance Committee,
Compensation Committee and Audit Committee which have the following
committee members:
Director
|
|
|
Nominating and
Corporate Governance Committee
|
|
Frank C. Ingriselli
(1)
|
|
|
|
|
Adam
McAfee
|
C
|
M
|
M
|
X
|
Elizabeth P.
Smith
|
M
|
C
|
C
|
X
|
David Z. Steinberg
(2)
|
|
|
|
X
|
C - Chairman of Committee.
M – Member.
(1) – Chairman of the board of directors.
(2) – Series A Preferred Stock holder nominee.
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. McAfee serves as Chair of the Audit Committee and
our board of directors has determined that Mr. McAfee 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, 2016 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. Ms. Smith serves as Chair
of the compensation committee.
During
the year ended December 31, 2016, the compensation committee held
five 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. Ms. Smith serves as Chair
of the nominating and corporate governance committee.
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
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 2018 Annual
Meeting of Stockholders and 2018 Proxy Materials
” on
page 60 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, 2016 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, 4125 Blackhawk Plaza Circle,
Suite 201, Danville, California 94506, 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.
Director Independence
Our
board of directors has determined that each of Ms. Smith, Mr.
McAfee and Mr. Steinberg is an independent director as defined in
the NYSE American rules governing members of boards of directors or
as defined under Rule 10A-3 of the Exchange Act. Accordingly, a
majority 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.
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.
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, 2016, 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, 2016 be included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2016 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/
Adam McAfee
(Chairman)
/s/
Elizabeth P.
Smith
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
|
Michael
L. Peterson
|
|
55
|
|
President
and Chief Executive Officer
|
Gregory
Overholtzer
|
|
61
|
|
Chief
Financial Officer, Vice President, Finance and
Controller
|
Clark
R. Moore
|
|
44
|
|
Executive
Vice President, General Counsel and Secretary
|
Michael L. Peterson, President and Chief Executive
Officer
Mr.
Peterson has served as our Chief Executive Officer since May 2016,
served as our Chief Financial Officer from our acquisition of
Pacific Energy Development in July 2012 to May 2016, served as our
Executive Vice President from our acquisition of Pacific Energy
Development in July 2012 to October 2014, and has served as our
President since October 2014. Mr. Peterson joined Pacific Energy
Development as its Executive Vice President in September 2011,
assumed the additional office of Chief Financial Officer in June
2012, and served as a member of our board of directors from July
2012 to September 2013. Mr. Peterson formerly served as Interim
President and CEO (from June 2009 to December 2011) and as director
(from May 2008 to December 2011) of us, as a director (from May
2006 to July 2012) of Aemetis, Inc. (formerly AE Biofuels Inc.), a
Cupertino, California-based global advanced biofuels and renewable
commodity chemicals company (AMTX), and as Chairman and Chief
Executive Officer of Nevo Energy, Inc. (NEVE) (formerly Solargen
Energy, Inc.), a Cupertino, California-based developer of
utility-scale solar farms which he helped form in December 2008
(from December 2008 to July 2012). In addition, since February
2006, Mr. Peterson has served as founder and managing partner of
California-based Pascal Management, a manager of hedge and private
equity investments, since August 2016, Mr. Peterson has served as
an independent director on the board of TrxAde Group, Inc. (OTCQB:
TRXD), a web-based pharmaceutical market platform headquartered in
Florida, and since April 2017, Mr. Peterson has served as sole
officer and director of Goodland Advanced Fuels, Inc., which is a
privately-held holding company whose sole asset is a dormant
biofuels plant located in Goodland, Kansas, each of which we
believe requires only an immaterial amount of Mr. Peterson’s
time and does not conflict with his roles or responsibilities
with us. From 2005 to 2006, Mr. Peterson co-founded and became
a managing partner of American Institutional Partners, a venture
investment fund based in Salt Lake City. From 2000 to 2004, he
served as a First Vice President at Merrill Lynch, where he helped
establish a new private client services division to work
exclusively with high net worth investors. From September 1989 to
January 2000, Mr. Peterson was employed by Goldman Sachs & Co.
in a variety of positions and roles, including as a Vice President
with the responsibility for a team of professionals that advised
and managed over $7 billion in assets. Mr. Peterson speaks Mandarin
Chinese.
Mr.
Peterson received his MBA at the Marriott School of Management and
a BS in statistics/computer science from Brigham Young
University.
Gregory Overholtzer, Chief Financial Officer
Mr.
Overholtzer has served as the Chief Financial Officer of the
Company since May 2016, as the Company’s Corporate Controller
from January 2012 to May 2016, and served as the Company’s
Vice President, Finance and Corporate Controller from June 2012 to
May 2016. Mr. Overholtzer began his career in 1982 as a senior
financial analyst at British Oxygen Corporation located in
Fairfield, California. In 1994, Mr. Overholtzer joined Giga-tronics
as their Chief Financial Officer. Between 1997 and 2011, Mr.
Overholtzer served as the Chief Financial Officer, Corporate
Controller or Senior Director for six different companies engaged
in various hi-tech and bio-tech industries, including Accretive
Solutions, Omni ID and Genitope Corp., all located in the San
Francisco Bay Area.
Mr.
Overholtzer received his MBA in Finance from the University of
California at Berkeley and his B.A. from UC Berkeley.
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 (NYSE: ERN) (formerly CAMAC Energy, Inc.), an
independent energy company headquartered in Houston, Texas, as its
acting General Counsel and continued to serve in that role through
June 2011.
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, 2016 and
2015 to (a) Frank C. Ingriselli, our Chairman and former Chief
Executive Officer, (b) Michael L. Peterson and Clark R. Moore, who
were the next two most highly compensated executive officers at
fiscal year-end 2015 and 2016, and (c) Gregory Overholtzer, who was
appointed as our Chief Financial Officer effective May 1, 2016
(collectively, the “
Named Executive
Officers
”). There were no other executive officers who
received compensation in excess of $100,000 in either 2015 or
2016.
Summary
Compensation Table
Name and
Principal Position
|
Fiscal Year
Ended
December,
31
|
Salary
($)
|
Bonus
($)
|
Option
Awards
($)(1)
|
Stock
Awards
($)
|
All
Other
Compensation
($)
|
Total
($)
|
Frank
C. Ingriselli (2)
|
2016
|
111,000
|
-
|
30,862(3)
|
60,000(4)
|
151,667(5)
|
353,529
|
Chairman
of the Board and Former Chief Executive Officer
|
2015
|
338,000
|
25,000
|
62,442(6)
|
136,900(7)
|
-
|
562,342
|
|
|
|
|
|
|
|
Michael
L. Peterson
|
2016
|
300,000
|
10,000
|
33,066(8)
|
313,500(9)
|
-
|
656,566
|
Chief
Executive Officer and President
|
2015
|
303,000
|
25,000
|
54,847(10)
|
120,250(11)
|
-
|
503,097
|
|
|
|
|
|
|
|
Clark
R. Moore
|
2016
|
250,000
|
8,000
|
30,862(12)
|
236,500(13)
|
-
|
525,362
|
Executive
Vice President, General Counsel and Secretary
|
2015
|
253,000
|
25,000
|
45,566(14)
|
99,900(15)
|
-
|
423,466
|
|
|
|
|
|
|
|
Gregory
Overholtzer
|
2016
|
190,000
|
6,000
|
56,663(17)
|
-
|
-
|
252,663
|
Chief
Financial Officer (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 Note 12 of our financial statements for
the year ended December 31, 2016, which are included in the 2016
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.
(3)
Consists of the
fair value of options to purchase 28,000 shares of common stock
granted in January 2016 at an exercise price of $2.20 per
share.
(4)
Consists of the
value of 54,546 shares of restricted common stock granted in
December 2016 at $1.10 per share received pursuant to the
Company’s board compensation plan.
(5)
Consists of (i)
$1,667 paid to Mr. Ingriselli pursuant to the Company’s board
compensation plan, and (ii) $150,000 paid to Global Venture
Investments Inc. (“
GVEST
”), an entity owned
and controlled by Mr. Ingriselli, pursuant to a transitional
consulting agreement entered into in connection with Mr.
Ingriselli’s retirement from the Company, which agreement
expired on July 31, 2016.
(6)
Consists of the
fair value of options to purchase 37,000 shares of common stock
granted in January 2015 at an exercise price of $3.70 per
share.
(7)
Consists of the
value of 37,000 shares of restricted common stock granted in
January 2015 at $3.70 per share.
(8)
Consists of the
fair value of options to purchase 30,000 shares of common stock
granted in January 2016 at an exercise price of $2.20 per
share.
(9)
Consists of the
value of (i) 60,000 shares of restricted common stock granted in
January 2016 at $2.20 per share, and (ii) 165,000 shares of
restricted common stock granted in December 2016 at $1.10 per
share.
(10)
Consists of the
fair value of options to purchase 32,500 shares of common stock
granted in January 2015 at an exercise price of $3.70 per
share.
(11)
Consists of the
value of 32,500 shares of restricted common stock granted in
January 2015 at $3.70 per share.
(12)
Consists of the
fair value of options to purchase 28,000 shares of common stock
granted in January 2016 at an exercise price of $2.20 per
share.
(13)
Consists of the
value of (i) 55,000 shares of restricted common stock granted in
January 2016 at $2.20 per share, and (ii) 105,000 shares of
restricted common stock granted in December 2016 at $1.10 per
share.
(14)
Consists of the
fair value of options to purchase 27,000 shares of common stock
granted in January 2015 at an exercise price of $3.70 per
share.
(15)
Consists of the
value of 27,000 shares of restricted common stock granted in
January 2015 at $3.70 per share.
(16)
Mr. Overholtzer was
appointed Chief Financial Officer of the Company effective May 1,
2016, prior to which date he served as Vice President, Finance and
Controller of the Company.
(17)
Consists of the
fair value of options to purchase (i) 15,000 shares of common stock
granted in January 2016 at an exercise price of $2.20 per share,
and (ii) 60,000 shares of common stock granted in December 2016 at
an exercise price of $1.10 per share.
Outstanding Equity Awards at Year Ended December 31,
2016
The
following table sets forth information as of December 31, 2016
concerning outstanding equity awards for the executive officers
named in the Summary Compensation Table.
Outstanding Equity Awards at Fiscal Year-End
|
|
|
Name
|
Number of
securities underlying unexercised options (#)
exercisable
|
Number of
securities underlying unexercised options (#)
unexercisable
|
Option
Exercise price
($)
|
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
|
45
|
-
|
$
672.00
|
5/28/2018
|
|
7,900
|
(1
)
|
$
8,690
|
|
298
|
-
|
$
302.40
|
2/2/2021
|
|
600
|
(2
)
|
$
6,600
|
|
10,000
|
-
|
$
2.40
|
10/7/2021
|
|
6,500
|
(3
)
|
$
7,150
|
|
26,954
|
-
|
$
5.10
|
6/18/2022
|
|
30,000
|
(4
)
|
$
33,000
|
|
6,380
|
-
|
$
5.10
|
6/18/2022
|
|
165,000
|
(5
)
|
$
181,500
|
|
29,250
|
3,250
|
$
3.70
|
1/7/2020
|
|
|
|
|
|
15,000
|
15,000
|
$
2.20
|
1/7/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory
Overholtzer
|
11,667
|
-
|
$
5.10
|
6/18/2022
|
|
2,550
|
(1
)
|
$
2,805
|
|
4,500
|
500
|
$
3.70
|
1/7/2020
|
|
|
|
|
|
7,500
|
7,500
|
$
2.20
|
1/7/2021
|
|
|
|
|
|
1,100
|
-
|
$
3.00
|
2/8/2022
|
|
|
|
|
|
-
|
60,000
|
$
1.10
|
12/28/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clark
Moore
|
18,887
|
-
|
$
5.10
|
6/18/2022
|
|
7,000
|
(1
)
|
$
7,700
|
|
4,447
|
-
|
$
5.10
|
6/18/2022
|
|
5,400
|
(3
)
|
$
5,940
|
|
24,300
|
2,700
|
$
3.70
|
1/7/2020
|
|
27,500
|
(4
)
|
$
30,250
|
|
14,000
|
14,000
|
$
2.20
|
1/7/2021
|
|
105,000
|
(5
)
|
$
115,500
|
(1)
|
Stock
award vests 50% on January 1, 2017 and 50% on July 1, 2017, subject
to the holder remaining an employee of or consultant to the Company
on such vesting date.
|
(2)
|
Stock
award vests 50% on April 8, 2017 and 50% on October 8, 2017,
subject to the holder remaining an employee of or consultant to the
Company on such vesting date.
|
(3)
|
Stock
award vests on January 7, 2017, subject to the holder remaining an
employee of or consultant to the Company on such vesting
date.
|
(4)
|
Stock
award vests 60% on January 7, 2017 and 40% on July 7, 2017, subject
to the holder remaining an employee of or consultant to the Company
on such vesting date.
|
(5)
|
Stock
award vests 50% on June 28, 2017, 30% on December 28, 2017, and 20%
on June 28, 2018, subject to the holder remaining an employee of or
consultant to the Company on such vesting date.
|
Issuances of Equity to Executive Officers
On
January 7, 2016, the Company granted options to purchase shares of
common stock to its executive officers at an exercise price of
$2.20 per share, pursuant to the Company’s 2012 Amended and
Restated Equity Incentive Plan and in connection with the
Company’s 2015 annual equity incentive compensation review
process, as follows: (i) an option to purchase 28,000 shares to
Chairman and then-Chief Executive Officer Frank C. Ingriselli; (ii)
an option to purchase 30,000 shares to President and Chief
Executive officer (then-Chief Financial Officer) Michael L.
Peterson; (iii) an option to purchase 28,000 shares to Executive
Vice President and General Counsel Clark R. Moore; and (iv) an
option to purchase 15,000 shares to Chief Financial Officer
(then-Vice President, Finance) Gregory Overholtzer. The options
have terms of five years and fully vest in July 2017. 50% vest six
months from the date of grant, 30% vest one year from the date of
grant, and 20% vest eighteen months from the date of
grant, all contingent upon the recipient’s continued
service with the Company.
On
January 7, 2016, the Company granted shares of its restricted
common stock to its executive officers pursuant to the
Company’s 2012 Amended and Restated Equity Incentive Plan and
in connection with the Company’s 2015 annual equity incentive
compensation review process as follows: (i) 60,000 shares to
Chairman and then-Chief Executive Officer Frank C. Ingriselli; (ii)
60,000 shares to President and Chief Executive Officer (then-Chief
Financial Officer) Michael L. Peterson; and (iii) 55,000 shares to
Executive Vice President and General Counsel Clark R. Moore. 50% of
the shares vest on the six-month anniversary of the grant date, 30%
vest on the twelve-month anniversary of the grant date, and 20%
vest on the eighteen-month anniversary of the grant date, all
contingent upon the recipient’s continued service with the
Company.
On July 5, 2016, the
Company issued 8,129 shares of common stock to Mr. Frank C.
Ingriselli, the Company’s former Chief Executive Officer and
President, and current Chairman and member of the Company’s
board of directors, in connection with the cashless net exercise of
options to purchase 28,000 shares of common stock issued under the
Company’s 2012 Equity Incentive Plan, as
amended.
On December 28, 2016, in connection with the
Company’s annual compensation review process, the Company
granted restricted stock awards to Messrs. Michael L. Peterson
(President and Chief Executive Officer) and Clark R. Moore
(Executive Vice President, General Counsel and Secretary), of
165,000 and 105,000 shares, respectively, and options to purchase
60,000 shares of common stock to Gregory Overholtzer (Chief
Financial Officer), which options have an exercise price of $1.10
per share and expire in five (5) years from the date of grant. The
restricted stock and option awards were granted under the
Company’s 2012 Equity Incentive Plan, as amended. The
restricted stock and option awards vest as follows: 50% of the
shares on the six (6) month anniversary of December 28, 2016 (the
“
Grant
Date
”); (ii) 30% on the
twelve (12) month anniversary of the Grant Date; and (iii) 20% on
the eighteen (18) month anniversary of the Grant Date, in each case
subject to the recipient of the shares or options being an employee
of or consultant to the Company on such vesting date, and subject
to the terms and conditions of a Restricted Shares Grant Agreement
or Stock Option Agreement, as applicable, entered into by and
between the Company and the recipient.
Compensation of Directors
The
following table sets forth compensation information with respect to
our non-executive directors during our fiscal year ended December
31, 2016.
Name
|
Fees Earned
or
Paid in
Cash
($)*
|
|
All
Other
Compensation
($)
|
|
David C.
Crikelair
|
$
25,000
|
$
40,714
|
$
-
|
$
65,714
|
Elizabeth P.
Smith
|
$
20,000
|
$
40,714
|
$
-
|
$
60,714
|
David Z.
Steinberg
|
$
20,000
|
$
-
|
$
-
|
$
20,000
|
Frank C. Ingriselli
(2)
|
$
1,667
|
$
-
|
$
150,000
|
$
151,667
|
Adam McAfee
(3)
|
$
-
|
$
-
|
$
-
|
$
-
|
* The
table above does not include the amount of any expense
reimbursements paid to the above directors, nor compensation paid
to Mr. Ingriselli as an executive officer and employee of the
Company through his retirement as an officer and employee effective
May 1, 2016. No directors received any Non-Equity Incentive Plan
Compensation or Nonqualified Deferred Compensation Earnings during
the period presented. Includes quarterly cash compensation paid in
the amount of $5,000 each, including $5,000 paid to Mr. Crikelair
and Ms. Smith with respect to quarterly cash compensation earned
for the fourth quarter of 2015 but not paid in 2015. Does not
include perquisites and other personal benefits, or property,
unless the aggregate amount of such compensation is more than
$10,000.
(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. This
column does not include the value of awards granted to, or whose
vesting was accelerated upon the retirement of, Mr. Ingriselli as
an executive officer and employee of the Company through his
retirement as an officer and employee effective May 1, 2016. For
additional information on the valuation assumptions with respect to
the restricted stock grants, refer to Note 12 of our
financial statements for the year ended December 31, 2016 as
included in the 2016 annual report. These amounts do not correspond
to the actual value that will be recognized by the named
individuals from these awards. Mr. Crikelair and Ms. Smith each
received a grant of 21,429 shares of restricted stock on October 7,
2015, which vested in full on September 10, 2016 (at a fair market
value of $1.90 per share for total value of $40,714). Mr. Steinberg
also received a grant of 21,429 shares of restricted stock on
October 7, 2015, but agreed with the Company to delay the vesting
of these shares until July 15, 2017. Ms. Smith, Mr. Steinberg, Mr.
Ingriselli and Mr. McAfee also each received a grant of 54,546
shares of restricted stock on December 28, 2016, each with an
aggregate grant date fair value as computed in accordance with
Financial Accounting Standards Board Accounting Standard
Codification Topic 718 of approximately $60,000, which will vest in
full on May 1, 2017, July 15, 2017, September 10, 2017, and
December 28, 2017, respectively. All shares vesting in 2017 have
not been included in the table above as there was no compensation
recognized in the year ended December 31, 2016.
(2)
Effective April 30, 2016, Mr. Ingriselli retired as Chief Executive
Officer and as an employee of the Company, continuing his role as
Chairman and member of the board of directors, and continuing to
provide transitional consulting services to the Company through
July 31, 2016. Effective August 1, 2016, Mr. Ingriselli was no
longer a paid consultant of the Company, and became entitled to
compensation under the Company’s board compensation program.
Mr. Ingriselli’s “
Stock Awards
” column does
not include stock awards granted and vesting during Mr.
Ingriselli’s term of employment as an executive officer of
the Company. Mr. Ingriselli’s “
All Other Compensation
”
column includes the cash compensation received by Global Venture
Investments Inc. (“
GVEST
”), an entity owned
and controlled by Mr. Ingriselli, pursuant to a transitional
consulting agreement entered into by and between the Company and
GVEST in connection with Mr. Ingriselli’s retirement as Chief
Executive Officer of the Company, which amount was paid to GVEST
following Mr. Ingriselli’s retirement as an executive officer
and employee of the Company.
(3)
Mr. McAfee joined the board on December 28, 2016, and did not
receive any board compensation during the fiscal year ended
December 31, 2016.
Our board has adopted a compensation program that,
effective for periods after 2012, provides each of our
“
independent
”
directors as defined in NYSE American rules or under Rule 10A-3 of
the Exchange Act 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 date of
grant.
Securities Authorized for Issuance Under Equity Compensation
Plans
The
following table sets forth information, as of December 31, 2016,
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 stockholders (1)
|
428,056
|
$
5.00
|
1,201
(2)
|
Equity compensation
plans not approved by stockholders (3)
|
1,347,275
|
$
7.70
|
-
|
Total
|
1,775,331
|
$
7.10
|
1,201
|
(1)
|
Consists
of (i) options to purchase 31,014 shares of common stock issued and
outstanding under the Pacific Energy Development Corp. 2012 Amended
and Restated Equity Incentive Plan, (ii) options to purchase 343
shares of common stock issued and outstanding under the Blast
Energy Services, Inc. 2009 Incentive Plan, and (iii) options to
purchase 396,700 shares of common stock issued and outstanding
under the PEDEVCO Corp. 2012 Amended and Restated Equity Incentive
Plan.
|
(2)
|
Consists
of 1,201 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 90,667 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 1,256,608 shares of common stock granted by PEDEVCO Corp.
to placement agents, investors and consultants between March 2013
and May 2016.
|
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. We refer to the 2012 Amended and Restated
Incentive Plan as the 2012 Plan. Pursuant to proposal 2, beginning
on page 47, we are seeking stockholder approval at the annual
meeting to increase by 1.5 million shares, the number of awards
available for issuance 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.
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.
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.
As of
the date of this proxy statement, options to purchase 396,700
shares of common stock and 1,102,105 shares of restricted stock
have been issued under the 2012 Plan, with 1,195 shares of common
stock remaining available for issuance under the 2012 Plan. The
options have a weighted average exercise price of $4.69 per share,
and have expiration dates ranging from 2018 to 2022.
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 date of this proxy statement, 31,016 options and
66,585 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.
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 date of this proxy statement, 343 options remain outstanding
under the 2009 Plan. These options have a weighted average exercise
price of $350.89 per share, and have an expiration date ranging
from May 28, 2018 to 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 date of this
proxy statement, no options remain outstanding under the 2003
Plan.
Securities Authorized for Issuance under Equity Compensation
Plans
The
following table sets forth information, as of December 31, 2016,
with respect to our compensation plans under which common stock is
authorized for issuance.
2014 Say on Pay Vote
At the
annual meeting of our stockowners held on June 27, 2014,
stockholders holding 39.7% of the total shares eligible to be voted
at the annual meeting, 67.3% of the shares voted at the annual
meeting and 85.4% of the total votes cast on the proposal, voted in
favor of our named executive officers’ 2013 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 are being asked to vote on
execution compensation again at our 2017 annual meeting of
stockholders.
Executive Employment Agreements
Michael L.
Peterson.
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 current employment offer letter, Mr. Peterson
serves as our company’s Chief Executive Officer and President
at a current 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
previously served as a member of the board of directors and as the
Interim President and Chief Executive Officer of Blast, and
formerly as the Executive Vice President of the Company until his
promotion to the office of President in October 2014. Prior to
April 30, 2016, Mr. Peterson served as the Chief Financial Officer
of the Company.
In addition, on January 11, 2013, Mr.
Peterson’s employment offer letter was amended to revise the
termination and severance provisions to parallel those of Mr. Clark
Moore, our Executive Vice President, Secretary and General Counsel,
as described below. Mr. Peterson’s employment offer letter
amendment provides 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 to Mr. Peterson
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 offer letter
amendment.
For purposes of Mr. Peterson’s 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. Peterson’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 our
company.
For purposes of the 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 Mr. Peterson’s 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 principal 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 Mr. Peterson’s 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).
Gregory
Overholtzer.
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 (the “
Overholtzer Employment
Agreement
”). Mr.
Overholtzer has a current annual base salary of $190,000, and is
eligible for a discretionary cash performance bonus each year of up
to 30% of his then-current annual base salary.
In
addition, the Company may terminate Mr. Overholtzer’ s
employment for any reason with thirty (30) days prior written
notice.
Clark
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 Moore, its Executive Vice President, Secretary and
General Counsel, 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.
The definitions of “
Cause
”
(including the applicable cure provisions associated therewith),
“
Material Adverse
Effect
”,
“
Good
Reason
” and
“
Change of
Control
” in Mr.
Moore’s employment agreement are substantially the same as in
Mr. Peterson’s employment agreement as discussed
above.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Except
as discussed below, referenced below, or otherwise disclosed above
under “
Executive
Compensation
” and “
Executive Employment
Agreements
”, beginning on pages 19 and 28,
respectively, there have been no transactions since January 1,
2014, 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.
Agreements with Related Persons
MIEJ Warrants
On June 30, 2014, we re-issued two warrants to MIE
Jurassic Energy Corporation (“
MIEJ
”),
which we refer to as MIEJ (a subsidiary of MIE Holdings), in order
to extend their exercise terms through June 30, 2015 (the
“
Warrants
”).
The Warrants were originally issued on May 23, 2012 to MIEJ and
expired unexercised pursuant to their terms on May 23, 2014. These
two re-issued Warrants had the same terms and conditions as the
originally issued warrants, including being exercisable on a
cash-only basis for 16,667 shares of common stock of the Company at
$37.50 per share and for 16,667 shares of common stock of the
Company at $45.00 per share. The Warrants were re-issued in
consideration of the Company’s continued relationship with,
and financial support from, MIEJ, and had no net effect on the
Company’s fully-diluted capital stock (after taking into
account the extension) as they simply extended the exercise term of
the previously issued warrants. These Warrants expired unexercised
on June 30, 2015.
Amendment to PEDCO-MIEJ Note and Condor-MIEJ Note
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 MIEJ.
MIEJ was PEDCO’s 80% partner in 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
”). Pursuant to the
MIEJ Settlement Agreement, among other things, (i) MIEJ and PEDCO
agreed to restructure the MIEJ Note through the entry into a new
Amended and Restated Secured Subordinated Promissory Note, dated
February 19, 2015 and with an effective date of January 1, 2015
(the “
New MIEJ
Note
”), (ii) PEDCO sold
its (x) full 20% interest in Condor to MIEJ (the
“
Condor
Interests
”), and (y)
interests in approximately 945 net acres and interests in three (3)
wells located in PEDCO’s legacy non-core Niobrara acreage
located in Weld County, Colorado, that were directly held by PEDCO
to Condor (the “
PEDCO Direct
Interests
”), effective
January 1, 2015, and (iii) Condor forgave approximately $1.8
million in previous working interest expenses related to the
drilling and completion of certain wells operated by Condor that
was due from PEDCO, which, in summary, had the net effect of
reducing approximately $9.4 million in aggregate liabilities due
from PEDCO to MIEJ and Condor to $4.925 million, which was the new
principal amount of the New MIEJ Note. In addition, pursuant to the
MIEJ Settlement Agreement, (a) in consideration for the Senior Loan
Investors (defined below under “
Golden Globe Energy
(US), LLC
”) releasing
their security interest on the Condor Interests and PEDCO Direct
Interests, MIEJ paid $500,000 to the Senior Loan Investors as a
principal reduction on the Senior Loan (defined below under
“
Golden Globe Energy
(US), LLC
”), which
directly benefits PEDEVCO, (b) PEDCO paid $100,000 as a principal
reduction under the MIEJ Note, (c) each of MIEJ, Condor and the
Company fully released each other, and their respective
predecessors and successors in interest, parents, subsidiaries,
affiliates and assigns, and their respective officers, directors,
managers, members, agents, representatives, servants, employees and
attorneys, from every claim, demand or cause of action arising on
or before the MIEJ Closing Date, and (d) MIEJ confirmed that the
MIEJ Note was paid in full and that PEDCO owed no amounts to MIEJ
or Condor other than the principal amount due as reflected in the
New MIEJ Note.
In
addition, effective January 1, 2015, PEDCO ceased to be a member of
Condor, Mr. Frank C. Ingriselli was removed as a manager and
officer of Condor, and all other employees of PEDCO who were
officers of Condor were removed as officers and employees of
Condor. PEDCO further agreed to provide assistance in the orderly
transfer of the operational management, finance and accounting
matters involving Condor to MIEJ, and upon the request of MIEJ,
PEDCO agreed for a period of up to six (6) months (terminable upon
fifteen (15) days’ prior written notice from MIEJ to PEDCO),
PEDCO shall continue to assist with Condor’s accounting and
audits and perform joint interest billing accounting on behalf of
Condor for a monthly fee of $55,000 for January 2015, $0 for
February 2015, $10,000 for March 2015 and $30,000 per month through
August of 2015.
The New MIEJ Note was effective January 1, 2015,
bears an interest rate of 10.0% per annum with no interest due
until Maturity (defined below) or except as detailed below, is
secured by all of our current and after-acquired assets, and is
subordinated in every way to the Senior Notes (defined below under
“
Golden Globe Energy
(US), LLC
”) as well as to
New Senior Lending (defined below); however, MIEJ has no control
over the cash flow of the Company, nor is MIEJ’s consent
required in connection with any disposition, sale, or use of any
assets of the Company or any of its subsidiaries at any time in the
future, provided that the requirements of the New MIEJ Note
requiring the prepayment of interest, where applicable, as
described below are followed. After the MIEJ Closing Date, the
Company may enter into a loan, or a series of new loans or any
other new non-equity investment or assumption of indebtedness (a
“
New Senior
Lending
”) which will be
senior to the New MIEJ Note, without the prior consent of MIEJ,
provided that, in addition to the approximately $35 million
principal balance of the Notes, the New Senior Lending is subject
to a cap of an additional $60 million in the aggregate, such that
the total lending, debt or similar investment under such cap shall
not exceed $95 million in the aggregate (the
“
Senior Debt
Cap
”), with any portion
of New Senior Lending in excess of the Senior Debt Cap advanced
first to MIEJ until the New MIEJ Note is paid in full. The New MIEJ
Note shall automatically, and without further consent from MIEJ, be
subordinated in every way to any such New Senior Lending. Should
the Company enter into any new financing transaction that results
in raising New Senior Lending of at least $20 million in excess of
the balance of the Notes, then MIEJ has a right to be paid all
interest and fees that have accrued on the New MIEJ Note each and
every time that a new financing transaction reaches or exceeds the
$20 million threshold.
The New MIEJ Note was originally due and payable
on March 8, 2017, but is now due and payable on March 8, 2019 due
to an automatic maturity date extension as a result of the May 2016
Senior Debt Restructuring (described below under
“
Senior Debt
Restructuring
”), and with
such date also subject to additional automatic extensions upon the
occurrence of a Long-Term Financing or additional Senior Lending
Restructuring (each as defined below) (the
“
Maturity
”).
On a one-time basis, the Senior Loan may be refinanced by a new
loan (“
Long-Term
Financing
”) by one or
more third party replacement lenders (“
Replacement
Lenders
”), and in such
event we are required to undertake commercially reasonable best
efforts to cause the Replacement Lenders to simultaneously
refinance both the Senior Loan and the New MIEJ Note as part of
such Long-Term Financing. Despite such efforts, should the
Replacement Lenders be unable or unwilling to include the New MIEJ
Note in such financing, then the Long-Term Financing may proceed
without including the New MIEJ Note, and the New MIEJ Note shall
remain in place and shall be automatically subordinated, without
further consent of MIEJ, to such Long-Term Financing. Furthermore,
upon the occurrence of a Long-Term Financing, the Maturity of the
New MIEJ Note is automatically extended, without further consent of
MIEJ, to the same maturity date of the Long-Term Financing (the
“
Extended Maturity
Date
”), provided that the
Extended Maturity Date may not exceed March 8, 2020. Additionally,
upon the closing of such Long-Term Financing: (a) the Long-Term
Financing is required to be subject to the Senior Debt Cap, (b) we
are required to make commercially reasonable best efforts for the
Long-Term Financing to include adequate reserves or other payment
provisions whereby MIEJ is paid all interest and fees accrued on
the New MIEJ Note commencing as of March 8, 2017 (and annually
thereafter, until such time as the New MIEJ Note is paid in full),
but in any event the Replacement Lenders are required to agree to
allow for quarterly interest payments (starting March 31, 2017) of
not less than 5% per annum on the outstanding balance of the New
MIEJ Note, plus a one-time payment of accrued interest (not to
exceed $500,000) as of March 31, 2017 (the
“
Subordinated Interest
Payments
”), and the
remaining 5% interest shall continue to accrue, and (c) MIEJ has
the Right of Conversion (defined below) commencing as of March 8,
2017, the original maturity date of the New MIEJ Note. If the
Senior Loan and/or New Senior Lending is not refinanced by
Replacement Lenders, but is instead refinanced, restructured or
extended by the existing Senior Loan Investors (a
“
Senior Lending
Restructuring
”), the
maturity of both the New MIEJ Note and the Senior Loan may be
extended to no later than March 8, 2019, without requiring the
consent of MIEJ, provided that (i) any such extension of the
maturity date of the New MIEJ Note past March 8, 2017 shall give
MIEJ the Right of Conversion (described below) commencing on March
8, 2017, and (ii) such extension agreement shall include payment
provisions whereby MIEJ shall be paid all interest and fees accrued
on the New MIEJ Note as of March 8, 2018. The May 2016 Senior Debt
Restructuring qualified as a Senior Lending Restructuring and the
issuance of the Tranche A Notes qualified as a New Senior Lending,
the result of which the Maturity of the New MIEJ Note has been
extended to March 8, 2019. The New MIEJ Note may be prepaid any
time without penalty.
The New MIEJ Note has a conversion feature that
provides, in the event that the final maturity of the New MIEJ Note
is extended beyond March 8, 2017 for whatever reason, MIEJ has the
right, at its discretion, to have the outstanding balance of the
New MIEJ Note plus any accrued and unpaid interest thereon
converted in whole or in part into our common stock at a price (the
“
Conversion
Price
”) equal to 80% of
the average closing price per share of our common stock over the
then previous 60 days from the date MIEJ exercises its conversion
right (subject to adjustment for stock splits, recapitalizations
and the like)(such event, a “
Right of
Conversion
”); provided,
however, that in no event shall the Conversion Price be less than
$3.00 per share (the “
Floor
Price
”). Additionally,
the New MIEJ Note contains a provision preventing the conversion of
the MIEJ Note to the extent that such conversion would result in
more than 19.9% of our outstanding common stock or voting stock
being issued in aggregate upon the conversion of such note, or
otherwise require shareholder approval under the NYSE American
rules. Notwithstanding that, we agreed to include a proposal in our
proxy statement for our 2016 annual meeting of our shareholders
(the “
2016 Annual
Meeting
”) for the
approval of the issuance of the maximum number of shares of common
stock issuable in connection with conversion of the New MIEJ Note,
assuming conversion at the Floor Price (the
“
Maximum Conversion
Shares
”). At the 2016
Annual Meeting held on December 28, 2016, the Company’s
stockholders approved the full conversion of the New MIEJ Note and
the New MIEJ Note is now fully convertible into our common stock in
accordance with its term
Golden Globe Energy (US), LLC
On
February 23, 2015, we entered into several transactions with Golden
Globe Energy (US), LLC, which we refer to as GGE, which
beneficially owns more than 5% of our outstanding voting stock due
to its beneficial ownership of 340,945 shares of our common stock
and 66,625 shares of our Series A Convertible Preferred Stock, as
described below.
On
March 7, 2014, in connection with our acquisition of certain oil
and gas interests in the Wattenberg and Wattenberg Extension in the
Denver-Julesberg Basin
(“
D-J
Basin
”),
which we
acquired from Continental Resources, Inc., which we refer to as
Continental and the Continental Acquisition,
we entered into a $50 million 3-year term debt
facility with and issued those certain promissory notes in favor of
BRe BcLIC Primary, Bre BCLIC Sub, BRe WINIC 2013 LTC Primary, BRe
WNIC 2013 LTC Sub, and RJC, as investors (the
“
Senior Loan
Investors
”), and BAM
Administrative Services LLC, as agent for the investors (the
“
Agent
”),
and any related collateral documents (collectively, the
“
Senior
Loan
”). On March 19,
2015, BRe WNIC 2013 LTC Primary transferred a portion of its Senior
Loan to HEARTLAND Bank, and effective April 1, 2015, BRe BCLIC
Primary transferred its Senior Loan to Senior Health Insurance
Company of Pennsylvania (“
SHIP
”),
with each of HEARTLAND Bank and SHIP becoming a
“
Senior Loan
Investor
” upon such
dates. As part of the transaction, GGE (formerly Golden Globe
Energy Corp.)
(an affiliate of RJ Credit LLC) acquired an
equal 13,995 net acre position in the assets the Company acquired
from Continental (the “
GGE Assets
”), thereby
making GGE an equal working interest partner with us in the
development of these newly acquired assets, and allowing us to
undertake a more aggressive drilling and development program.
On February 23, 2015, we completed the
acquisition of the GGE Assets from GGE pursuant to the GGE
Acquisition, thereby reunifying the assets we originally acquired
in the Continental Acquisition, and we assumed approximately $8.35
million of junior subordinated debt from GGE that GGE incurred to
develop the GGE Assets subsequent to GGE’s acquisition of
them from us in March 2014 and owed to RJ Credit
LLC
.
On
February 23, 2015
,
we entered
into and closed the transactions contemplated by a Purchase and
Sale Agreement (the “
Purchase Agreement
”) with
GGE, pursuant to which the Company, through Red Hawk, acquired from
GGE all of its rights, title and interest in approximately 12,977
net acres in the
D-J
Basin
located almost entirely within Weld County, Colorado, including
acreage located in the prolific Wattenberg core area, and interests
in 53 gross (7.8 net) wells with an estimated current net daily
production of approximately 500 barrels of oil equivalent per day
as of February 7, 2015, which we refer to as the GGE Assets, and
which acquisition we refer to as the GGE Acquisition. All of
GGE’s leases and related rights, oil and gas and other wells,
equipment, easements, contract rights, and production are included
in the purchase, the majority of which assets were originally
conveyed to GGE’s predecessor-in-interest, RJ Resources
Corp., by us in March 2014 in connection with the Continental
Acquisition.
As
consideration for the acquisition of the GGE Assets, the Company
(i) issued to GGE 337,500 restricted shares of common stock and
66,625 restricted shares of the Company’s then
newly-designated Amended and Restated Series A Convertible
Preferred Stock (the “
Series A Preferred
”),
(ii) assumed approximately $8.35 million of junior subordinated
debt from GGE (the “
Junior Debt
”) pursuant to
an Assumption and Consent Agreement and an Amendment to Note and
Security Agreement, and (iii) provided GGE with a one-year option
to acquire the Company’s interest in its Kazakhstan
opportunity for $100,000 pursuant to a Call Option Agreement, which
expired unexercised.
The
Purchase Agreement contained customary representations, warranties,
covenants and indemnities by the parties thereto. In addition, the
Company provided GGE, as the sole stockholder of our Series A
Preferred Stock, the right pursuant to the Purchase Agreement and
the certificate of designation designating the Series A Preferred,
upon notice to the Company, to appoint designees to fill two (2)
seats on the board of directors, one of which must be an
independent director as defined by applicable rules, and the
exclusive right, voting the Series A Preferred Stock as sole
stockholder thereof, separately as a single class, to elect such
two (2) nominees to the board of directors. On July 15, 2015, at
the request of GGE the board of directors of the Company increased
the number of members of the board of directors from three to four,
pursuant to the power provided to the board of directors in the
Company’s Bylaws, and appointed David Z. Steinberg as a
member of the board of directors to fill the newly created vacancy,
also pursuant to the power provided to the board of directors in
the Company’s Bylaws. At the time of appointment, the board
of directors made the affirmative determination that Mr. Steinberg
was ‘independent’ pursuant to applicable NYSE American
and SEC rules and regulations. The board of directors appointment
rights continue until GGE no longer holds any of the Tranche One
Shares (defined below).
The
Series A Preferred stock can be converted into shares of the
Company’s common stock on a 100:1 basis, subject to a 9.9%
ownership blocker. GGE, as the sole holder of the Company’s
Series A Preferred, has the right to appoint two designees to the
Company’s board of directors for as long as GGE continues to
hold 15,000 shares of Series A Preferred designated as
“
Tranche One
Shares
” under the Company’s Amended and Restated
Certificate of Designations of PEDEVCO Corp. Establishing the
Designations, Preferences, Limitations, and Relative Rights of its
Series A Convertible Preferred Stock. Mr. Steinberg is one of the
Series A Preferred stockholder designees to the board of directors
in connection with such right, provided that GGE has not designated
any further members of the board of directors at this
time.
The
Assumption and Consent Agreement provides that, as of the effective
date of the acquisition, the Company assumed all of GGE’s
rights, obligations and liabilities under that certain Note and
Security Agreement, dated April 10, 2014 (the “
GGE Note
”), as amended by
that certain Amendment to Note and Security Agreement, dated as of
the Effective Date (the GGE Note, as amended, the
“
Amended GGE
Note
”). The lender under the Amended GGE Note is RJ
Credit LLC (“
RJC
”), and the Amended
GGE Note has an aggregate principal balance of $8,353,000. The
Amended GGE Note is due and payable on December 31, 2017, and bears
interest at the per annum rate of twelve percent (12%) (24% upon an
event of default), which interest is payable monthly in cash by the
Company. The Amended GGE Note is subordinate and subject to the
terms and conditions of the Senior Loan, as well as any future
secured indebtedness of the Company from a lender with an aggregate
principal amount of at least $20,000,000 (“
Future PEDEVCO Loan
”).
Should the Company repay the Senior Loan and replace such
indebtedness with a Future PEDEVCO Loan, then, upon the reasonable
request of such senior lender, RJC agreed to further amend the
Amended GGE Note to adjust the frequency of interest payments or to
eliminate such payments and replace the same with the accrued
interest to be paid at maturity.
The GGE
Note contains customary representations, warranties, covenants and
requirements for the Company to indemnify RJC and its affiliates,
related parties and assigns. The GGE Note also includes various
covenants (positive and negative) binding the Company, including
requiring that the Company provide RJC with quarterly (unaudited)
and annual (audited) financial statements, restricting the
Company’s creation of liens and encumbrances, or sell or
otherwise disposing, the Collateral (as defined therein). RJC is
one of the lenders under the Senior Loan, and is an affiliate of
GGE.
On
April 24, 2015, certain of our Senior Loan Investors (including
RJC) agreed to allow us to defer the mandatory principal repayments
and interest payments due under the Notes (defined below) for the
months of May and June 2015, with such deferred amounts to be used
to renew, extend, re-lease or otherwise acquire leases, which then
became additional collateral under the Notes. The aggregate
principal and interest that was deferred was approximately
$524,000, which amount has been capitalized and added to the
principal due under the Notes and is due upon maturity. The Company
was also charged a one-time deferral fee of $354,000, the amount of
the principal and interest deferred under this agreement, of which
$320,000 was expensed as additional interest and the balance was
added to the principal and due upon maturity. As additional
consideration for the deferral, on September 10, 2015, we
issued warrants exercisable for an aggregate of 34,912 shares of
our common stock to the Senior Loan Investors participating in the
deferral. Each warrant had a 3 year term and was exercisable
on a cashless basis at an exercise price of $15.00 per
share.
On
August 28, 2015, we entered into agreements with the Senior Loan
Investors to (i) defer until the maturity date of the Notes the
mandatory principal payments that would otherwise be due and
payable by us on payment dates occurring during the six month
period of August 1, 2015 through January 31, 2016, (ii) HEARTLAND
Bank agreed to change the frequency of payment of accrued interest
and mandatory principal repayments from monthly to semi-annually,
with the next interest payment due February 1, 2016 and the next
mandatory principal repayment due August 3, 2016, and with us
agreeing to place an amount equal to 1/6th of the semi-annual
principal and interest payments due into a sinking fund starting in
February 2016 which we shall pay to HEARTLAND Bank every six months
when due and owing, (iii) RJC agreed to defer all interest payments
otherwise due and payable by us to RJC during the period commencing
on August 1, 2015 through January 31, 2016 (the “
Waiver Period
”), which
deferred interest is added to principal each month during the
Waiver Period, (iv) certain other holders agreed to (a) defer until
the maturity date of their Notes 12/17ths of the interest
payments that would otherwise be due and payable by us to them on
payment dates occurring during the six month period of August 1,
2015 through January 31, 2016, and (b) have us pay in cash
5/17ths of such interest payments per month, with all deferred
interest being added to principal each month until the maturity
date of the Notes, and (v) SHIP, BRe BCLIC Sub, BRe WINIC 2013 LTC
Primary, BRe WNIC 2013 LTC Sub and RJC agreed to increase the
interest rate under their Senior Notes from 15% to 17% per annum on
all outstanding principal under their Notes during the Waiver
Period. These deferrals agreed upon with our Senior Loan Investors
(the “
August-January
Deferrals
”) reduced our monthly cash interest payments
and mandatory principal repayments from approximately $600,000 per
month prior to these agreements, to approximately $100,000 per
month during the Waiver Period after giving effect to the changes
agreed upon under these agreements, thereby providing us with an
estimated $500,000 per month in reduced cash flow requirements
during the Waiver Period.
As
additional consideration for these agreements and related note
amendments and deferrals, on September 10, 2015, we issued warrants
exercisable on a cash-only basis for an aggregate of 120,101 shares
to the lenders, proportionately based on their individual
principal, which grants were subject to NYSE American additional
listing approval, which has been received. The warrants had a three
year term and were exercisable on a cash-only basis at a price of
$7.50 per share. In addition, in the event the aggregate total of
principal and interest deferred in connection with the
August-January deferrals exceeded $900,000 over the Waiver Period,
within thirty days of February 1, 2016, and subject to NYSE
American additional listing approval, we were required to
proportionately grant additional warrants such that the total
aggregate number of shares of our common stock exercisable under
all warrants granted will equal the total principal and interest
deferred by such Senior Loan Investors divided by $7.50. As of
December 31, 2015, the amount of deferred interest and deferred
principal was $2,527,000 and $519,000, respectively.
In
addition, we agreed to prepare and deliver to RJC a monthly budget
in form and substance reasonably satisfactory to RJC, and such
financial statements as RJC may reasonably request. The monthly
budget is required to include a cash flow forecast and detail of
all anticipated non-recurring expenses and non-cash budget items,
and we are required to comply with the budgeted expenses set forth
therein in all material respects, provided, however, that a
variance of less than 10% with respect to the expenses, on an
aggregate basis, is permitted.
On
January 29, 2016, we entered into a Letter Agreement (the
“
Letter
Agreement
”) with the Senior Loan Investors and the
Agent. The Letter Agreement extended by one (1) month, through
February 29, 2016, the deferral of the payment of interest and
principal due under the Notes (the “
Deferral Extension
”). The
purpose of the Deferral Extension was to provide the Company with
the financial resources and runway it believed it needed to
fully-focus upon and consummate the merger with GOM (defined below
under “
GOM Holdings
Reorganization Agreement
”). Specifically, pursuant to
the Letter Agreement, (i) all Senior Loan Investors agreed to
further defer until the maturity date of their Notes the mandatory
principal payments that would otherwise be due and payable by the
Company to them on payment dates occurring through February 29,
2016, (ii) HEARTLAND Bank agreed to change the next scheduled
semi-annual interest payment due from February 1, 2016 to March 1,
2016 (with interest due and payable thereafter on a semi-annual
basis) and to change the next mandatory principal repayment due
date to September 3, 2016, and the Company agreed to place an
amount equal to 1/6th of the semi-annual principal and interest
payments due into a sinking fund which the Company shall pay to
HEARTLAND Bank every six months when due and owing, and (iii)
Senior Health Insurance Company of Pennsylvania
(“
SHIP
”)
(as successor-in-interest to BRe BCLIC Primary), BRe BCLIC Sub, BRe
WINIC 2013 LTC Primary, BRe WNIC 2013 LTC Sub, and RJC agreed to
(a) defer until the maturity date of their Notes and the junior
note held by RJC (the “
RJC Junior Note
”) all of
the interest payments that would otherwise be due and payable by
the Company to them in February 2016; (b) return the interest rate
under each of their Notes to 15% per annum, and the interest rate
under the RJC Junior Note to 12% cash pay per annum, effective
January 31, 2016; and (c) delay the issuance of any
“
Subsequent
Warrants
” issuable pursuant thereto to within 30 days
of March 1, 2016, subject to NYSE American additional listing
approval.
On
March 7, 2016, the Company entered into a Letter Agreement, dated
March 1, 2016 (the “
March Letter Agreement
”),
with SHIP, BRe BCLIC Sub, BRe WINIC 2013 LTC Primary, BRe WNIC 2013
LTC Sub, and RJC (collectively, the “
Original Lenders
”), and
the Agent, which extended the Deferral Extension by one (1) month,
through March 31, 2016. Pursuant to the March Letter Agreement, the
Original Lenders agreed to (i) further defer until the maturity
date of their Senior Notes the mandatory principal payments that
would otherwise be due and payable by the Company to them on
payment dates occurring through March 31, 2016, (ii) defer until
the maturity date of their Senior Notes and the RJC Junior Note all
of the interest payments that would otherwise be due and payable by
the Company to them in March 2016, with all interest amounts
deferred being added to principal on the first business day of the
month following the month in which such deferred interest is
accrued; and (iii) delay the issuance of any “
Subsequent Warrants
”
issuable pursuant thereto to within 30 days of April 1, 2016,
subject to NYSE American additional listing approval.
On April 7, 2016, we entered into a Letter
Agreement, dated April 1, 2016 (the “
Letter
Agreement
”), with the
Senior Loan Investors. The Letter Agreement extended by one (1)
month, through April 30, 2016, the deferral of the payment of
interest and principal due under the Senior Notes and the
RJC Junior
Note
(the RJC Junior Note,
together with the Senior Notes, the “
Notes
”)(the
“
Deferral
Extension
”), entered into
with the Lenders on August 28, 2015, as amended on January 29, 2016
and March 7, 2016 (the “
Original Deferral
Agreements
”).
Specifically, pursuant to the Letter Agreement, all the Lenders
agreed to: (i) further defer until the maturity date of their
Senior Notes the mandatory principal payments that would otherwise
be due and payable by the Company to them on payment dates
occurring through April 30, 2016; (ii) defer until the maturity
date of their Senior Notes and the RJC Junior Note all of the
interest payments that would otherwise be due and payable by the
Company to them in April 2016, with all interest amounts deferred
being added to principal on the first business day of the month
following the month in which such deferred interest is accrued; and
(iii) delay the issuance of any “
Subsequent
Warrants
” (as defined in
the Original Deferral Agreements) issuable pursuant thereto to
within 30 days of May 1, 2016, subject to NYSE American additional
listing approval.
On May 12, 2016, the Company entered into an
Amendment No. 2 to Note and Security Agreement with RJC (the
“
Second
Amendment
”), pursuant to
which the Company and RJC agreed to amend the RJC Junior Note to
(i) capitalize all accrued and unpaid interest under the RJC Junior
Note as of the date of the parties entry into the Second Amendment,
and add it to note principal, making the current outstanding
principal amount of the RJC Junior Note as of May 12, 2016 equal to
$9,379,432, (ii) extend the “
Termination
Date
” thereunder (i.e.,
the maturity date) from December 31, 2017 to July 11, 2019, (iii)
provide that all future interest accruing under the RJC Junior Note
is deferred, due and payable on the Termination Date, with all
future interest amounts deferred being added to principal on the
first business day of the month following the month in which such
deferred interest is accrued, and (iv) subordinate the RJC Junior
Note to the Senior Notes.
As additional consideration for RJC’s
agreement to enter into the Second Amendment, the Company entered
into a Call Option Agreement with GGE, an affiliate of RJC, dated
May 12, 2016 (the “
GGE Option
Agreement
”), pursuant to
which the Company provided GGE an option to purchase 23,182,880
common shares of Caspian Energy Inc., a British Columbia
corporation, held by the Company, upon payment of $100,000 by GGE
to the Company, which option expires on the
“
Termination
Date
” of the RJC Junior
Note, as amended, as described above, currently July 11, 2019. The
Company originally issued an option to GGE in February 2015 to
acquire the Company’s interest in these shares in connection
with the Company’s acquisition of certain producing oil and
gas assets from GGE, which option expired unexercised in February
2016.
Vesting Agreements with Management
In
connection with our entry into
a
reorganization agreement with Dome Energy
AB and a subsidiary thereto (together,
“
Dome
Energy
”), which
reorganization agreement and related transaction were terminated on
December 29,
2015, each of Mr. Ingriselli, Mr. Peterson, and
Mr. Moore, our
then
executive
officers, entered into Vesting Agreements on May 21, 2015 (the
“
2015 Vesting
Agreements
”) which delayed the vesting of all
of
our restricted common stock
they held which was subject to vesting prior to the Dome
Energy
reorganization being
consummated (the “
2015 Delayed Vesting
”)
until the earlier of (A) the 2nd business day following
either (x) the closing
of
the
transactions contemplated by the
reorganization
agreement
with Dome
, or (y) our public disclosure of
the termination of the reorganization, or, (B) if the Dome
Energy
reorganization did not
close on or before December 29, 2015, then January 7, 2016. Because
the contemplated merger with Dome Energy did not close on or before
December 29, 2015, the vesting of shares of restricted common stock
held by Messrs. Ingriselli, Peterson and Moore subject to the 2015
Delayed Vesting was scheduled to occur on January 7, 2016 in
accordance with the terms of such 2015 Vesting Agreements. However,
in connection with our entry into the GOM Merger Agreement
(defined below),
on December
29, 2015, as amended on January 6, 2016, each of Messrs.
Ingriselli, Peterson and Moore entered into new Vesting Agreements
with the Company (as amended, the “
Vesting Agreements
”),
pursuant to which they each individually agreed that the future
vesting of restricted common stock held by such officers from
January 1, 2016 through June 1, 2016 (the “
Delay Period
”), including
all restricted common stock that was subject to vesting on January
7, 2016 pursuant to the terms of Prior Vesting Agreements, shall be
delayed until the 2nd trading day following the Company’s
public announcement of the “
Vesting Event,
” defined
as the later to occur of the receipt of (x) stockholder approval
for the issuance of the securities issuable to Dome Energy pursuant
to the Dome Energy reorganization and (y) the approval by the NYSE
American of the listing of our common stock on the NYSE American
following the closing of the Dome Energy reorganization, upon which
Vesting Event all vesting with respect to such shares shall be
accelerated and all such shares shall be fully vested (the
“
Acceleration
”) (each as
defined in the Vesting Agreements). The aggregate number of shares
of restricted common stock which were subject to the Delay Period
was 135,400 shares, 51,900 of which are held by Mr. Ingriselli,
48,100 of which are held by Mr. Peterson, and 35,400 of which are
held by Mr. Moore (collectively, the “
Subject Shares
”). The
Acceleration would occur even if the executives were not then
employees or directors of the Company on such date. Notwithstanding
the above, in the event the GOM Merger Agreement was terminated or
the GOM Merger was not consummated by June 1, 2016 (unless
otherwise agreed upon in writing by the parties to the GOM Merger
Agreement), all the Subject Shares were to vest on the 2nd
trading day following the Company’s public disclosure of the
termination of the GOM Merger (in the event the GOM Merger
Agreement was terminated prior to June 1, 2016), or, in the event
the GOM Merger was not terminated by, or consummated by, June 1,
2016, on June 1, 2016, and the original vesting terms for all
future unvested stock were to be reinstated to the terms in effect
prior to the parties’ entry into the Vesting Agreements.
Notwithstanding the above, nothing in the Vesting Agreements
amended or waived any acceleration of vesting of unvested
restricted stock or options provided under any executive
officer’s current employment agreement with the Company,
which provide for acceleration upon termination of such
executive’s employment under certain circumstances detailed
therein.
On April 25, 2016, the
Company and each of Mr. Peterson and Mr. Moore, entered into
Amended and Restated Vesting Agreements (the
“
Amended
Vesting Agreements
”), which amend
and restated in their entirety those certain Vesting Agreements
entered into by the Company and each of Messrs. Peterson and Moore
on December 29, 2015, as amended January 6, 2016 (the
“
December
Vesting Agreements
”). Pursuant to
the Amended Vesting Agreements, the Company agreed, effective April
28, 2016, to fully accelerate the vesting of all unvested
restricted Company common stock which each of Messrs. Peterson and
Moore had delayed pursuant to the December Vesting Agreements,
which vesting had been voluntarily delayed for the benefit of the
Company by each executive since May 2015, and reinstate the
original remaining vesting schedules with respect to all other
stock grants received by the Company going forward. As a result of
the Amended Vesting Agreements, on April 28, 2016, Mr. Peterson
vested an aggregate of 48,100 shares of restricted Company common
stock, and Mr. Moore vested an aggregate of 35,400 shares of
restricted Company common stock, the vesting of which had
previously been voluntarily delayed pursuant to the December
Vesting Agreements.
On August 9, 2016, the Company entered into a Vesting Agreement
with David Z. Steinberg, a member of the Company’s board of
directors, pursuant to which, effective July 15, 2016, the Company
and Mr. Steinberg agreed to delay the vesting with respect to
21,429 shares of unvested Company restricted common stock held by
Mr. Steinberg for a period of one year, with the new vesting date
being July 15, 2017.
Consulting Agreement and Separation Agreement
In connection with the Company’s then
pending merger with GOM as described below under
“
GOM Holdings
Reorganization Agreement
”, and the Company’s efforts to reduce
its general and administrative expenses, the Company’s
Chairman and Chief Executive Officer, Frank C. Ingriselli, agreed
to retire from the Company and step down from the offices of Chief
Executive Officer and Executive Chairman of the Company and all of
its subsidiaries, effective April 30, 2016. Mr. Ingriselli
continued as the non-executive Chairman of the Company’s
board of directors, and continued to work with the Company in a
transitional consulting capacity for a period of three (3) months
commencing May 1, 2016 (the “
Transition
Period
”) through his
wholly-owned consulting firm,
GVEST
,
pursuant to a Consulting Agreement dated April 25, 2016, entered
into by and between the Company and GVEST. Pursuant to the
Consulting Agreement, through GVEST Mr. Ingriselli provided the
Company with oil and gas development and strategic consulting
services through the Transition Period in exchange for a lump sum
payment of $150,000. In addition, the Company and Mr. Ingriselli
entered into an Employee Separation and Release dated April 25,
2016, pursuant to which Mr. Ingriselli agreed to (i) waive all
severance benefits to which he is entitled under his Executive
Employment Agreement dated June 10, 2011, as amended to date (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 four (4)
years’ salary and 30% bonus, and continued medical benefits
for up to four (4) years, in the event of Mr. Ingriselli’s
termination under certain circumstances, (ii) waive any and all
accrued and unpaid vacation time, sick time and paid time off,
equal in value to approximately $58,000, and (iii) fully-release
the Company from all claims, in exchange for the Company agreeing
to (x) fully accelerate the vesting of all of Mr.
Ingriselli’s unvested options exercisable for 39,100 shares
of Company common stock, (y) allow Mr. Ingriselli to transfer all
149,650 shares of his unvested restricted Company common stock to
GVEST and then fully accelerate the vesting of the same, and (z)
extend the exercise period for all of Mr. Ingriselli’s
options to purchase Company common stock for a period of five (5)
years from the date of Mr. Ingriselli’s termination of
employment with the Company.
GOM Holdings Reorganization Agreement
On December 29, 2015, the Company entered into an
Agreement and Plan of Reorganization (as amended to date, the
“
GOM Merger
Agreement
”) with White
Hawk Energy, LLC (“
White
Hawk
”) and GOM Holdings,
LLC (“
GOM
”), a Delaware limited liability company.
The GOM Merger Agreement provided for the
Company’s
acquisition of GOM
through an exchange of certain of the shares of the Company’s
common and preferred stock (the “
Consideration
Shares
”), for 100% of
the limited liability company membership units of GOM (the
“
GOM
Units
”), with the GOM
Units being received by White Hawk and GOM receiving the
Consideration Shares from the Company (the
“
GOM
Merger
” or
“
Merger
”).
The Merger was subject
to various closing conditions. At the closing of the Merger, (i)
GOM was to transfer the GOM Units to White Hawk, solely in exchange
for the Consideration Shares, and (ii) White Hawk was to continue
as a wholly-owned subsidiary of the Company and to continue to
carry on the business of GOM. In exchange for the transfer of GOM
Units to White Hawk, the Company was to issue to the members of
GOM, the Consideration Shares as follows: (x) an aggregate of
155,156 shares of the Company’s restricted common stock (the
“
Common
Stock
”) and 698,448
restricted shares of the Company’s to-be-designated Series B
Convertible Preferred Stock (the “
Series
B Preferred
” (described in
greater detail below)), and (y) was to assume approximately $125
million of subordinated debt from GOM’s existing lenders and
a $30 million undrawn letter of credit backing certain offshore
asset retirement obligations (the “
GOM
Debt
”), which GOM
Debt was anticipated to be restructured on terms and conditions
mutually acceptable to the Company and GOM prior to the closing of
the Merger.
GOM is
an investment owned by Platinum Partners Value Arbitrage Fund, LP,
a New York based investment firm (“
PPVAF
”). PPVAF also owns
RJC, which entity originally loaned the Company approximately $5.9
million in principal in connection with the Company’s March
2014 senior note funding and $8.9 million in principal in
connection with the Company’s February 2015 acquisition of
certain working interests from GGE, each as restructured in May
2016, and PPVAF also owns GGE, which entity is the holder of the
Company’s Series A Preferred stock. Each of GOM, RJC and GGE
were formerly advised by Platinum Management (NY), LLC
(“
PM
LLC
”). PPVAF, and, by virtue of being owned by PPVAF,
GGE, RJC, and GOM, are currently in the process of winding down and
liquidating their assets through the oversight and control of a
court-appointed liquidator in the Cayman Islands and are no longer
advised by PM LLC or any of its affiliates. Additionally, the
Company is aware that the former manager of PPVAF, PM LLC, is
currently under investigation by the SEC and the Justice Department
and that certain former executives have been indicted by the
Justice Department, however, PM LLC and those certain executives no
longer have any control over PPVAF, GOM, RJC or GGE, which entities
are currently solely under the control of the Cayman Islands
court-appointed liquidators.
PM LLC is also an advisor to the entity that
owns GGE, a greater than 5% stockholder of the Company, from
whom the Company acquired approximately 12,977 net acres of oil and
gas properties and interests in 53 gross wells located in the
Denver-Julesburg Basin, Colorado in February 2015, in connection
with which the Company assumed approximately $8.35 million of
subordinated notes payable owed by GGE to RJC, issued to GGE
337,500 restricted shares of the Company’s common stock
(representing approximately 9.9% of our then outstanding shares of
common stock), and issued to GGE 66,625 restricted shares of the
Company’s then newly-designated Amended and Restated Series A
Convertible Preferred Stock (the “
Series A
Preferred
”), which can be
converted into shares of the Company’s common stock on a
100:1 basis, subject to a 9.99% ownership blocker. GGE, as the sole
holder of the Company’s Series A Preferred, has the right to
appoint two designees to the Company’s board of directors for
as long as GGE continues to hold 15,000 shares of Series A
Preferred designated as “
Tranche One
Shares
” under the
Company’s Amended and Restated Certificate of Designations of
PEDEVCO Corp. Establishing the Designations, Preferences,
Limitations, and Relative Rights of its Series A Convertible
Preferred Stock. Mr. Steinberg is one of the Series A
Preferred’s designees to the board of directors in connection
with such right, provided that GGE has not designated any further
members of the board of directors at this time.
On February 29, 2016, the parties entered into an
amendment to the GOM Merger Agreement, which amended the merger
agreement in order to provide GOM additional time to meet certain
closing conditions contemplated by the GOM Merger Agreement. The
parties entered into the Amendment to extend the deadline for
closing the merger and the date after which either party could
terminate the GOM Merger Agreement if the merger had not yet been
consummated, from February 29, 2016 to no later than April 15,
2016. On April 25, 2016, the parties further amended the GOM Merger
Agreement to eliminate the April 15, 2016, closing
deadline.
On June
22, 2017, the Company terminated its then pending merger with GOM,
in order to pursue an alternative transaction with a Hong
Kong-based investor group as contemplated pursuant to a non-binding
term sheet entered into by the Company and the investor group,
which transaction was similarly terminated on September 29,
2017.
Senior Debt Restructuring
On May 12, 2016 (the “
Closing
Date
”), the Company
entered into an Amended and Restated Note Purchase Agreement (the
“
Amended
NPA
”), with the Original
Lenders, Heartland Bank, BHLN-Pedco Corp.
(“
BHLN
”),
BBLN-Pedco Corp. (“
BBLN
”),
and RJC (the “
Tranche A
Investors
” and the
“
Lenders
”),
and the Agent, as agent for the Lenders. The Amended NPA amended
and restated the notes evidencing the March 2014 Senior Loan (the
“
March 2014
Notes
”), and the Company
issued new Senior Secured Promissory Notes to each of the Lenders
(collectively, the “
Tranche B
Notes
”) in a transaction
that qualified as a troubled debt restructuring. RJC is also a
party to the RJC Junior Note (discussed above)(the
“
Senior Debt
Restructuring
”).
The
Amended NPA amended the Senior Notes as follows:
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Created new
“
Tranche A
Notes,
” in substantially the same form and with
similar terms as the Tranche B Notes, except as discussed below,
consisting of a term loan issuable in tranches with a maximum
aggregate principal amount of $25,960,000, with borrowed funds
accruing interest at 15% per annum, and maturing on May 11, 2019
(the “
Tranche A
Maturity Date
”) (the “
Tranche A Notes,
” and
together with the Tranche B Notes, the “
New Senior
Notes
”);
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The
Company capitalized all accrued and unpaid interest under the
Senior Notes, renaming them “
Tranche B Notes,
” as a
term loan with an aggregate outstanding principal balance as of May
12, 2016 equal to $39,065,000. The Tranche B Notes mature on June
11, 2019 except for the Tranche B Note issued to RJC which matures
on July 11, 2019;
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Amended the
provisions of the Senior Notes which required mandatory
prepayments from our revenues, replacing them with a Net Revenue
Sweep as described below; and
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Provides that
interest on the Tranche B Notes will continue to accrue at the rate
of 15% per annum, but all accrued interest through December 31,
2017 shall be deferred until due and payable on the maturity date,
with all interest amounts deferred being added to the principal of
the Tranche B Notes on a monthly basis and that following December
31, 2017, all interest will accrue and be paid monthly in arrears
in cash to the Tranche B Note holders, provided, however, no
payment may be made on the Tranche B Notes unless and until the
Tranche A Notes are repaid in full.
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The
Tranche A Notes are substantially similar to the Tranche B Notes,
except that such notes are senior to the Tranche B Notes, accrue
interest until maturity and have priority to the payment of Monthly
Net Revenues as discussed below.
On the Closing Date, the Tranche A Investors
loaned the Company their pro rata share of an aggregate of
$6,422,000 (the “
Initial Tranche A
Funding
”). The Initial
Tranche A Funding net proceeds (also amounting to $6,422,000 less
legal fees of $127,000) were used by the Company to (i) fund
approximately $5.1 million due to a third party operator for
drilling and completion expenses related to the acquired working
interests in eight wells from Dome Energy, Inc.
(“
Dome
Energy
”), (ii) pay
$750,000 of the Company’s past due payables to Liberty
Oilfield Services, LLC (“
Liberty
”),
(iii) pay $445,000 of unpaid interest payments due to Heartland
Bank under its Tranche B Note through February 29, 2016, and (iv)
pay fees and expenses of $127,000 incurred in connection with the
transactions contemplated by the Amended NPA and related
documents.
Subject to the terms and conditions of the Amended
NPA, the Company may request each Tranche A Investor, from time to
time, to advance to the Company additional amounts of funding
(each, a “
Subsequent Tranche A
Funding
”), provided that:
(i) the Company may not request a Subsequent Tranche A Funding more
than one time in any calendar month; (ii) Agent shall have received
a written request from the Company at least 15 business days prior
to the requested date of such advance (the
“
Advance
Request
”); (iii) no Event
of Default or event that with the passage of time or the giving of
notice, or both, would become an Event of Default (a
“
Default
”)
shall have occurred and be continuing or would result therefrom;
and (iv) the Company shall provide to the Agent such documents,
instruments, certificates and other writings as the Agent shall
reasonably require in its sole and absolute discretion. The
advancement of all or any portion of the Subsequent Tranche A
Funding is in the sole and absolute discretion of the Agent and the
Investors and no Investor is obligated to fund all or any part of
the Subsequent Tranche A Funding. Each Subsequent Tranche A Funding
is required to be in a minimum amount of $500,000 and multiples of
$100,000 in excess thereof. The aggregate amount of Subsequent
Tranche A Fundings that may be made by the Investors under the
Amended NPA shall not exceed $18,577,876 and any Subsequent Tranche
A Funding repaid may not be re-borrowed.
In addition, subject to the terms and conditions
of the Amended NPA, RJC agreed to loan to the Company $240,000,
within 30 days of the Closing Date and within 30 days of each of
July 1, 2016, October 1, 2016 and January 1, 2017 (collectively,
the “
RJC
Fundings
” and
collectively with the Investor Tranche A Fundings, the
“
Fundings
”),
provided that no Event of Default or Default shall have occurred
and be continuing or would result therefrom. The aggregate amount
of the RJC Fundings made by RJC under the Amended NPA shall not
exceed $960,000 and any Funding repaid may not be
re-borrowed.
To guarantee RJC’s obligation in connection
with the RJC Fundings as required under the Amended NPA, GGE
entered into a Share Pledge Agreement with the Company, dated May
12, 2016 (the “
GGE Pledge
Agreement
”), pursuant to
which GGE agreed to pledge an aggregate of 10,000 shares of the
Company’s Series A Convertible Preferred Stock held by GGE
(convertible into 1,000,000 shares of Company common stock), which
pledged shares are subject to automatic cancellation and forfeiture
based on a schedule set forth in the GGE Share Pledge Agreement, in
the event RJC fails to meet each of its RJC Funding obligations
pursuant to the Amended NPA. To date, RJC has not met its RJC
Funding obligations under the Amended NPA and the Company is
entitled to cancel and forfeit 10,000 shares of the Company’s
Series A Convertible Preferred Stock held by GGE (convertible into
1,000,000 shares of Company common stock) pursuant to the terms of
the GGE Pledge Agreement, which determination to cancel shares has
not been made, and which shares have not been cancelled, as of the
date of this proxy statement.
As additional consideration for the entry into the
Amended NPA and transactions related thereto, the Company has
granted to BHLN and BBLN, warrants exercisable for an aggregate of
596,280 shares of common stock of the Company (the
“
Investor
Warrants
”). The warrants
have a 3-year term, are transferrable, and are exercisable on a
cashless basis at any time at $2.50 per share, subject to receipt
of additional listing approval of such underlying shares of common
stock from the NYSE American (which additional listing approval was
received from the NYSE American on June 1, 2016). The Investor
Warrants include a beneficial ownership limitation that prohibits
the exercise of the Investor Warrants to the extent such exercise
would result in the holder, together with its affiliates, holding
more than 9.99% of the Company’s outstanding voting stock
(the “
Blocker
Provision
”). The
estimated fair value of the Investor Warrants issued is
approximately $707,000 based on the Black-Scholes option pricing
model. The relative fair value allocated to the Tranche A Notes and
recorded as debt discount was $636,000.
Other than the Investor Warrants, no additional
warrants exercisable for common stock of the Company are due,
owing, or shall be granted to the Lenders pursuant to the Senior
Notes, as amended. In addition, warrants exercisable for an
aggregate of 34,912 shares of the Company’s common stock at
an exercise price of $15.00 per share and warrants exercisable for
an aggregate of 120,101 shares of the Company’s common stock
at an exercise price of $7.50 per share previously granted by the
Company to certain of the Lenders on September 10, 2015, in
connection with prior interest payment deferrals have been amended
and restated to provide that all such warrants are exercisable on a
cashless basis and include a Blocker Provision (the
“
Amended and Restated
Warrants
”).
Additionally, the Company also agreed to (a)
provide to the Agent and the Investors a monthly projected general
and administrative expense report (the “
Projected
G&A
”) and a monthly
comparison report of the Projected G&A provided for the
preceding month, with an explanation of any variances, provided
that in no event shall such variances exceed $150,000, and (B) pay
to the Agent within 2 business days following the end of each
calendar month all of the Company’s oil and gas revenue
received by the Company during such month (the
“
Net Revenue
Sweep
”), less (i) lease
operating expenses, (ii) interest payments due to Investors under
the New Senior Notes, (iii) general and administrative expenses not
to exceed $150,000 per month unless preapproved by the Agent (the
“
G&A
Cap
”), and (iv)
preapproved extraordinary expenses (together the
“
Monthly Net
Revenues
”). Amounts paid
to the Agent through the Net Revenue Sweep are applied first to the
repayment of principal and then interest due under the Tranche A
Notes until such notes are paid in full and then to the repayment
of principal and interest amounts due under the Tranche B
Notes.
The amounts outstanding under the New Senior Notes
are secured by a first priority security interest in all of the
Company’s and its subsidiaries’ assets, property, real
property, intellectual property, securities and proceeds therefrom,
granted in favor of the Agent for the benefit of the Lenders,
pursuant to a Security Agreement and a Patent Security Agreement,
each entered into as of March 7, 2014, as amended on May 12, 2016
(the “
Amended Security
Agreement
” and
“
Amended Patent
Agreement,
”
respectively). Additionally, the Agent, for the benefit of the
Lenders, was granted a mortgage and security interest in all of the
Company’s and its subsidiaries real property as located in
the State of Colorado and the State of Texas pursuant to (i) a
Leasehold Deed of Trust, Fixture Filing, Assignment of Rents and
Leases, and Security Agreements, dated March 7, 2014, as amended
May 12, 2016, filed in Weld County and Morgan County, Colorado; and
(ii) a Mortgage, Deed of Trust, Security Agreement, Financing
Statement and Assignment of Production to be filed in Matagorda
County, Texas (collectively, the “
Amended
Mortgages
”).
Additionally, the Company’s obligations
under the New Senior Notes, Amended NPA and related agreements were
guaranteed by the Company’s direct and indirect subsidiaries,
PEDCO, White Hawk, Pacific Energy & Rare Earth Limited,
Blackhawk Energy Limited, Pacific Energy Development MSL, LLC and
Red Hawk Petroleum, LLC pursuant to a Guaranty Agreement, entered
into on March 7, 2014, as amended on May 12, 2016 (the
“
Amended Guaranty
Agreement
”).
Other
than as described above, the terms of the Amended NPA (including
the covenants and obligations thereunder) are substantially the
same as the March 2014 Senior Loan Note Purchase Agreement, and the
terms of the Tranche A Notes and Tranche B Notes (including the
events of default, interest rates and conditions associated
therewith) are substantially the same as the original March 2014
Notes.
Junior Debt Restructuring
On May 12, 2016, the Company entered into an
Amendment No. 2 to Note and Security Agreement with RJC (the
“
Second
Amendment
”), pursuant to
which the Company and RJC agreed to amend the RJC Junior Note to
(i) capitalize all accrued and unpaid interest under the RJC Junior
Note as of the date of the parties’ entry into the Second
Amendment, and add it to note principal, making the then current
outstanding principal amount of the RJC Junior Note $9,379,432,
(ii) extend the “
Termination
Date
” thereunder (i.e.,
the maturity date) from December 31, 2017 to July 11, 2019, (iii)
provide that all future interest accruing under the RJC Junior Note
is deferred, due and payable on the Termination Date, with all
future interest amounts deferred being added to principal on the
first business day of the month following the month in which such
deferred interest is accrued, and (iv) subordinate the RJC Junior
Note to the Senior Notes.
As additional consideration for RJC’s
agreement to enter into the Second Amendment, the Company entered
into a Call Option Agreement with GGE, an affiliate of RJC, dated
May 12, 2016 (the “
GGE Option
Agreement
”), pursuant to
which the Company provided GGE an option to purchase 23,182,880
common shares of Caspian Energy Inc., a British Columbia
corporation, held by the Company, upon payment of $100,000 by GGE
to the Company, which option expires on the
“
Termination
Date
” of the RJC Junior
Note, as amended, as described above, currently May 12, 2019. The
Company originally issued an option to GGE in February 2015 to
acquire the Company’s interest in these shares in connection
with the Company’s acquisition of certain producing oil and
gas assets from GGE, which option expired unexercised in February
2016, as more fully described in the Company’s Current Report
on Form 8-K filed with the Securities and Exchange Commission on
February 24, 2015.
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 board 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 16), 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% stockholders 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 with respect to the fiscal year ended December 31, 2016, our
directors, executive officers and 10% stockholders complied with
all Section 16(a) filing requirements.
Pursuant to SEC
rules, we are not required to disclose in this proxy statement any
failure to timely file a Section 16(a) report that has been
disclosed by us in a prior proxy statement.
PROPOSAL 1
ELECTION OF DIRECTORS
At the
annual meeting, four directors are to be elected to hold office
until the 2017 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:
Frank C. Ingriselli, Adam McAfee and Elizabeth P. Smith,
collectively, the “
non-Series A Nominees
”
and David Z. Steinberg, who has been nominated by the holder of our
Series A Preferred Stock (the “
Series A Nominee
”), 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.
The Series A Nominee was nominated by GGE, as the sole stockholder
of our Series A Preferred Stock, who has the right pursuant to the
Purchase Agreement and the certificate of designation designating
the Series A Preferred Stock (as described in greater detail above
under “
Certain
Relationships and Related Party Transactions
” -
“
Agreements with
Related Persons
” – “
Golden Globe Energy (US),
LLC
”, beginning on page 30), upon notice to the
Company, to appoint designees to fill two (2) seats on the board of
directors, one of which must be an independent director as defined
by applicable rules, and the exclusive right, voting the Series A
Preferred Stock as sole stockholder thereof, separately as a single
class, to elect such two (2) nominees to the board of directors. To
date, GGE has nominated Mr. Steinberg as its sole nominee on the
board of directors.
The
Series A Nominee is required to immediately resign at the option of
the other members of our board of directors upon such time as the
rights of the Series A Preferred Stock holder to appoint members to
our board of directors expires. For so long as the Series A
Preferred Stock board appointment rights remain in effect, if for
any reason the Series A Nominee resigns or is otherwise removed
from the board of directors, then his or her replacement shall be a
person elected by any remaining Series A Preferred Stock nominee or
the holder of the Series A Preferred Stock.
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.
FRANK C. INGRISELLI (Age 63)
CHAIRMAN
Director since July 2012
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Mr.
Ingriselli has served as the Chairman of the board of directors
since our acquisition of Pacific Energy Development in July 2012,
served as our Chief Executive Officer from July 2012 to May 2016
and served as our President from July 2012 to October 2014. Mr.
Ingriselli also served as the President, Chief Executive Officer,
and Director of Pacific Energy Development since its inception in
February 2011 through its July 2012 acquisition by the Company. Mr.
Ingriselli began his career at Texaco, Inc. in 1979 and held
management positions in Texaco’s Producing-Eastern Hemisphere
Department, Middle East/Far East Division, and Texaco’s
International Exploration Company. While at Texaco, Mr. Ingriselli
negotiated a successful foreign oil development investment contract
in China in 1983. In 1992, Mr. Ingriselli was named President of
Texaco International Operations Inc. and over the next several
years directed Texaco’s global initiatives in exploration and
development. In 1996, he was appointed President and CEO of the
Timan Pechora Company, a Houston, Texas headquartered company owned
by affiliates of Texaco, Exxon, Amoco and Norsk Hydro, which was
developing an investment in Russia. In 1998, Mr. Ingriselli
returned to Texaco’s Executive Department with
responsibilities for Texaco’s power and natural gas
operations, merger and acquisition activities, pipeline operations
and corporate development. In August 2000, Mr. Ingriselli was
appointed President of Texaco Technology Ventures, which was
responsible for all of Texaco’s global technology initiatives
and investments. In 2001, Mr. Ingriselli retired from Texaco after
its merger with Chevron, and founded Global Venture Investments
LLC, which we refer to as GVEST, an energy consulting firm, for
which Mr. Ingriselli continues to serve as the President and Chief
Executive Officer. In February 2016, Mr. Ingriselli founded
Blackhawk Energy Ventures Inc., which we refer to as BEV, an energy
consulting firm wholly-owned by him for which Mr. Ingriselli
currently serves as President and Chief Executive Officer. We
believe Mr. Ingriselli’s positions with GVEST and
BEV require only an immaterial amount of Mr.
Ingriselli’s time and do not conflict with his roles or
responsibilities with our company. In 2005, Mr. Ingriselli
co-founded Erin Energy Corporation (NYSE: ERN) (formerly CAMAC
Energy, Inc.) an independent energy company headquartered in
Houston, Texas, and served as its President, Chief Executive
Officer and a member of its board of directors from 2005 to July
2010 and currently serves as Chairman of Erin Energy Corporation
after being re-appointed in May 2017.
From 2000 to 2006, Mr. Ingriselli sat on the board
of directors of the Electric Drive Transportation Association
(where he was also Treasurer) and the Angelino Group, and was an
officer of several subsidiaries of Energy Conversion Devices Inc.,
a U.S. public corporation engaged in the development and
commercialization of environmental energy technologies. From 2001
to 2006, he was a Director and Officer of General Energy
Technologies Inc., a “
technology facilitator
”
to Chinese industry serving the need for advanced energy technology
and the demand for low-cost high-quality components, and Eletra
Ltd, a Brazilian hybrid electric bus developer. Mr. Ingriselli
currently sits on the Advisory Board of Directors of the Eurasia
Foundation, a Washington D.C.-based non-profit that funds programs
that build democratic and free market institutions in the new
independent states of the former Soviet Union, and since May 2015,
as a non-executive director and Chairman of the Board of Caspian
Energy Inc., an oil and gas exploration company operating in
Kazakhstan.
Mr.
Ingriselli graduated from Boston University in 1975 with a Bachelor
of Science degree in Business Administration. He also earned a
Master of Business Administration degree from New York University
in both Finance and International Finance in 1977 and a Juris
Doctor degree from Fordham University School of Law in
1979.
Mr.
Ingriselli brings to the board of directors over 38 years of
experience in the energy industry. The board of directors believes
that Mr. Ingriselli’s experience with our acquired subsidiary
Pacific Energy Development and the insights he has gained from
these experiences will benefit our future plans to evaluate and
acquire additional oil producing properties and that they qualify
him to serve as our director.
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ELIZABETH P. SMITH (Age 68)
CHAIRWOMAN OF THE COMPENSATION COMMITTEE
CHAIRWOMAN OF THE NOMINATING AND CORPORATE GOVERNANCE
COMMITTEE
Director since September 2013
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Ms.
Smith joined our board of directors on September 10, 2013,
immediately prior to the listing of our common stock on the NYSE
American. Ms. Smith retired from Texaco Inc. as Vice
President-Investor Relations and Shareholder Services in late 2001
following its merger with Chevron Corp. Ms. Smith was also the
Corporate Compliance Officer for Texaco and was a member of the
Board of Directors of The Texaco Foundation. Ms. Smith joined
Texaco’s Legal Department in 1976. As an attorney in the
Legal Department, Ms. Smith handled administrative law matters and
litigation. She served as Chairman of the American Petroleum
Institute’s Subcommittee on Department of Energy Law for the
1983-1985 term. Ms. Smith was appointed Director of Investor
Relations for Texaco, Inc. in 1984, and was named Vice President of
the Corporate Communications division in 1989. In 1992, Ms. Smith
was elected a Vice President of Texaco Inc. and assumed additional
responsibilities as head of that company’s Shareholder
Services Group. In 1999, Ms. Smith was named Corporate Compliance
Officer for Texaco. Ms. Smith served as a Director of Pacific Asia
Petroleum, Inc. until its merger with Erin Energy Corporation
(formerly CAMAC Energy, Inc.) in April of 2010.
Ms.
Smith was elected to the Board of Finance of the Town of Darien,
Connecticut, in November 2007, and from November 2010, until
November 2015 when she elected not to seek reelection, served as
the Chairman. In June of 2012, Ms. Smith was elected a Trustee of
St. Luke’s School in New Canaan, Connecticut, and served
until June, 2017. In 2013, Ms. Smith was elected as Treasurer of
the Board of Directors of Trustees. Ms. Smith also served on the
Financial Affairs Committee and the Investment Committee until June
2017. From 2007 through 2010, Ms. Smith has also served as a Board
of Directors Member of the Community Fund of Darien, Connecticut,
and from 1996 through 2006, Ms. Smith served on the Board of
directors of INROADS/Fairfield Westchester Counties, Inc. From 2002
through 2005, Ms. Smith served as a member of the Board of
Directors of Families With Children From China-Greater New York,
and from 2004 through 2005, she served as a member of the Board of
Directors of The Chinese Language School of Connecticut. While at
Texaco, Ms. Smith was an active member in NIRI (National Investor
Relations Institute) and the NIRI Senior Roundtable. She has been a
member and past President of both the Investor Relations
Association and the Petroleum Investor Relations Association. Ms.
Smith was a member of the Board of Directors of Trustees of
Marymount College Tarrytown from 1993 until 2001. She was also a
member of the Board of Directors of The Education and Learning
Foundation of Westchester and Putnam Counties from 1993 to
2002.
Ms.
Smith graduated from Bucknell University in 1971 with a Bachelor of
Arts degree, cum laude, and received a Doctor of Jurisprudence
degree from Georgetown University Law Center in 1976.
The
board of directors believes that Ms. Smith’s over 30
years’ experience in corporate compliance, investor
relations, and law in the energy industry working at a major U.S.
oil and gas company, and the insights she has gained from these
experiences, will provide crucial guidance for our future
operations and compliance efforts.
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DAVID Z. STEINBERG (Age
35)
Director since July
2015
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Mr. Steinberg joined our board of directors on
July 15, 2015.
Mr. Steinberg has been employed by
Platinum Credit Management, LLC as an investment professional since
November 2016, and was previously employed by Platinum Management
(NY) LLC, a New York based investment management firm, from May
2009 to November 2016, where he served as a portfolio manager and
headed its structured products credit group.
Mr. Steinberg received his Masters of Business
Administration degree, with a concentration in finance, cum laude,
from The New York Institute of Technology in
2009.
Mr.
Steinberg serves on the board of directors as a designee appointed
by GGE. The board of directors believes that Mr. Steinberg’s
extensive knowledge and experience in corporate debt finance and
banking in the energy industry, and the insights he has gained from
these experiences, will provide crucial guidance for our future
corporate finance efforts.
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ADAM MCAFEE (Age 53)
Director since
December 2016
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Mr.
McAfee joined our board of directors on December 28, 2016. Mr.
McAfee has over 30 years of experience as an entrepreneur,
financial analyst, controller and executive with leadership roles
in mergers and acquisitions, financial planning and analysis,
project finance, operations, audit and enterprise system
implementations. Since August 2012, Mr. McAfee has served as Chief
Executive Officer of Nevo Energy, Inc., and Chief Financial Officer
between December 2008 and July 2012, a solar utility and
development company. Since October 2013, Mr. McAfee has served as
the Vice President of Finance of Aemetis, Inc. (NASDAQ: AMTX), and
between August 2011 and October 2013 served as Controller of, a
renewable fuels production company. Since September 2005, he has
served as Chief Executive Officer and Director of Navitas
Corporation, an energy company, which merged with publicly traded
Pacific Asia Petroleum (PAP) in July 2008 and then as Managing
Director of Navitas Capital LLC, a spin-off company from Navitas
Corporation, managing debt and equity investments in public and
private companies. In 2003 Mr. McAfee founded Park Capital
Management, LLC, a fund that manages assets acquired through PIPE
and private equity investments in technology and renewable energy
companies, where he has served as Managing Director since November
2003. Mr. McAfee serves as the Managing General Partner of Orchard
Yield Funds, which manages investments in organic almonds in the
Central Valley of California, since March 2016 and as the Managing
Member of Organic Pastures Dairy Company, an organic raw milk dairy
and creamery since 2002 and various Central Valley California
farming entities since June 1983.
Mr.
McAfee spent more than eleven years in significant corporate
finance roles at Apple Computer in the Worldwide Financial Planning
and Analysis, Sales, Research and Development and Operations
divisions. Mr. McAfee currently serves as the President and
Chairman of McAfee Charitable Ventures, a private non-profit
charitable organization, a position he has held since August 2006.
Mr. McAfee is also the Managing Member of a California Registered
Investment Advisory Firm, Tilted Funds Group LLC, a position he has
held since 2007.
Mr.
McAfee is a Certified Management Accountant. He graduated with
honors from California State University, Fresno with a
Bachelor’s of Science in business administration and finance,
and earned a Masters of Business Administration from the University
of California, Irvine. He also completed the Harvard Business
School Private Equity and Venture Capital Program. Mr. McAfee has
been a Registered Investment Advisor in California since May 2007
and passed his Series 7 exam in March 1989, Series 63 exam in May
1991, and his Series 65 exam in May 2007.
|
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.
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 three non-Series A 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. A
plurality of the votes cast by the holder of our Series A Preferred
Stock, in person or by proxy is required to elect the Series A
Nominee. Votes cast by our common stock holders on the appointment
of the Series A Nominee will be disregarded for purposes of
determining whether such Series A Nominee has received the
affirmative vote of a plurality of the Series A Preferred Stock
shares outstanding as of the record date.
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, with three non-Series A Nominees
and one Series A Nominee, as described above. 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 1.5 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
396,700 shares of restricted stock and 1,105,105 shares of
restricted stock have been issued under the 2012 Plan, with 1,195
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 1,501,195 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
B
.
General
On June
26, 2012, our board of directors adopted the 2012
Plan, and recommended that the
adoption of the 2012 Plan be submitted for approval by our
stockholders, who approved the adoption of the 2012 Plan on July
27, 2012. Our board of directors adopted the 2012 Plan because
there were a limited number of shares available for grants of
awards under our prior stock option plan, the 2009 Stock Incentive
Plan (the “
Prior
Plan
”). In addition, the Prior Plan was to expire in
April 2019. Our
board
of directors adopted the 2012 Plan to continue to provide a means
by which employees, directors and consultants of us may be given an
opportunity to benefit from increases in the value of our common
stock, and to attract and retain the services of
such
persons. All of our employees, directors and
consultants are eligible to participate in the 2012 Plan. On April
23, 2014, the board adopted an amended and restated 2012 Equity
Incentive Plan, to increase by 500,000 shares (i.e., to 700,000
shares from 200,000 shares pursuant to the terms of the original
plan), 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
(i.e., to 1,000,000
shares from 700,000 shares pursuant to the terms of the plan as
amended prior thereto)
.
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. Pursuant to
proposal 2, stockholders are being asked to approve an increase in
the number of awards available for issuance under the plan from 1.5
million shares, i.e., from 1.5 million to 3.0 million.
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 51, 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.
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 1.5 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 1.5 million shares
pursuant to this proposal 2), with 1,195 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 3.0 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.
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.
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 March 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.
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.
Certain
kinds of compensation, including qualified “
performance-based
compensation,
” are disregarded for purposes of the
deduction limitation. In accordance with Treasury Regulations
issued under Section 162(m), compensation attributable to
stock options will qualify as performance-based compensation if the
award is granted by a committee
solely comprising
“
outside
directors
” (as defined in the 2012 Plan) and, among
other things, the plan contains a per-employee limitation on the
number of shares for which such awards may be granted during a
specified period, the per-employee limitation is approved by the
stockholders, and the exercise price of the award is no less than
the fair market value of the stock on the date of grant. Awards to
purchase restricted stock under the 2012 Plan will not qualify as
performance-based compensation under the Treasury Regulations
issued under Section 162(m).
Securities Issued and Granted Under 2012 Plan
As of
the date of this proxy filing, options to purchase 369,700 shares
of restricted stock and 1,102,105 shares of restricted stock have
been issued under the 2012 Plan, with 1,195 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
24.
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 1.5 million to 3 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
2018.
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 three million
(3,000,000) 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 three million
(3,000,000) shares after the amendment of the 2012 Plan, compared
to one and one half million (1,500,000) 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.
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 GBH CPAs, PC (“
GBH
”), as our independent
auditors for the fiscal year ended December 31, 2017, and
recommends that the stockholders vote to ratify such
appointment.
We do
not anticipate a representative from GBH to be present at the
annual stockholders meeting. In the event that a representative of
GBH 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
We
previously appointed GBH as our independent auditors to audit the
consolidated financial statements of the Company for the fiscal
years ended December 31, 2016 and December 31, 2015.
The
following table presents fees for professional audit services
performed by GBH CPAs, PC for the audit of our annual financial
statements for the fiscal years ended December 31, 2016 and 2015
(in thousands).
|
|
|
GBH CPAs,
PC:
|
|
|
Audit
Fees(1)
|
$
185
|
$
235
|
Audit-Related
Fees(2)
|
-
|
20
|
Tax
Fees(3)
|
33
|
26
|
All Other
Fees(4)
|
36
|
37
|
Total
|
$
254
|
$
318
|
(1)
Audit fees include professional services rendered for (1) the audit
of our annual financial statements for the fiscal years ended
December 31, 2016 and 2015 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.
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 GBH CPAs, PC for 2016 and 2015.
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 GBH 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 GBH as our independent auditor for the year ended
December 31, 2017. 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 GBH 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 GBH.
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 GBH CPAS, PC AS OUR INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDED DECEMBER 31, 2017.
PROPOSAL 4
NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION
In accordance with the requirements of
Section 14A of the Exchange Act and the related rules of the
SEC, we are including in this proxy statement a separate proposal,
which gives our stockholders the opportunity to approve or not
approve the compensation of our named executive officers (as
disclosed in this proxy statement) by voting
“
FOR
” or “
AGAINST
”
the resolution below (commonly referred to
as “
Say-on-Pay
”). While
our Board and Compensation Committee intend to carefully consider
the stockholder vote resulting from the proposal, the final vote
will not be binding on us and is advisory in
nature.
In considering their vote, stockholders are
encouraged to review with care the information regarding our
executive compensation program as discussed under
“
Executive
Compensation
” (beginning
on page 19) and the accompanying compensation tables and narratives
(beginning on page 19).
As described under “
Committees of the
Board
”, beginning on page
14, our Compensation Committee, which is comprised of two
independent directors, oversees all aspects of our executive
compensation program, annually reviews each component of our
executive compensation program and seeks to ensure that the
compensation program for our executive officers is aligned with the
interests of our stockholders and the compensation practices of our
peer companies (with whom we compete for executive management
personnel). Our executive compensation program is also designed to
attract, motivate and retain a highly qualified executive
management team and to appropriately reward our executive officers
for their contribution to the achievement of our short-term and
long-term business goals and the creation and enhancement of
stockholder value. The Compensation Committee is guided by the
following key principles in determining the compensation of our
executive officers:
|
●
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Competition Among
Peers
.
The Compensation
Committee believes that our compensation program should reflect the
competitive recruiting and retention conditions in the
Company’s industry, so that we can attract, motivate and
retain top industry talent.
|
|
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|
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●
|
Accountability
for Our Performance
.
The
Compensation Committee also believes that our compensation program
should be tied in part to our financial and operational
performance, so that our executive officers are held accountable
through their compensation for the performance of the Company based
on our achievement of certain pre-determined financial and
operational goals.
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●
|
Accountability
for Individual Performance
.
In
addition, the Compensation Committee believes that our compensation
program should be tied in part to the executive officer’s
achievement of pre-determined individual performance goals, to
encourage and promote individual contributions to the
Company’s overall performance.
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●
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Alignment with
Stockholder
Interests
.
Moreover, the
Compensation Committee believes that our compensation program
should be tied in part to our stock price performance through the
grant of stock options and stock awards, to further align our
executive officers’ interests with those of our
stockholders.
|
We
believe that our executive compensation program (1) has played
a significant role in our ability to attract, motivate and retain a
highly qualified executive team to manage our company, and
(2) is structured in the best manner possible to support the
achievement of our short-term and long-term business goals and the
creation and enhancement of stockholder value.
The
Board endorses our executive compensation program and recommends
that our stockholders vote in favor of the following
resolution:
“
RESOLVED
, that the compensation of the Company’s
named executive officers as disclosed in the Company’s proxy
statement for the Company’s 2017 Annual Meeting of
Stockholders, pursuant to Item 402(m) through (q)
of Regulation S-K, including the compensation tables
and narrative discussion, be, and hereby is,
APPROVED.”
The
Company’s policy (to be approved on a non-binding basis by
stockholders as discussed in Proposal 5 - Non-binding Advisory Vote
on the Frequency of Holding Advisory Votes on Executive
Compensation, below (page 58)) is to provide stockholders with an
opportunity to approve the compensation of the named executive
officers every three years at the annual meeting of stockholders.
It is expected that the next such vote will occur at the 2020
annual meeting of stockholders.
Vote Required
The approval of this proposal requires the
affirmative vote of a majority of the shares present in person or
represented by proxy at the meeting and entitled to vote provided
that a quorum exists at the Annual Meeting. Abstentions with
respect to this proposal will have the effect of a vote against
this proposal and broker non-votes (which will occur if a broker or
other nominee does not have discretionary authority and has not
received instructions with respect to this proposal within ten days
of the Annual Meeting) will not be counted in determining the
number of shares necessary for approval. 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
” this proposal.
As
noted above, the vote solicited by this proposal is advisory in
nature and its outcome will not be binding on the Board or the
Compensation Committee, nor will the outcome of the vote require
the Board or the Compensation Committee to take any action.
Moreover, the outcome of the vote will not be construed as
overruling any decision of the Board or the Compensation Committee,
or creating or implying any additional fiduciary duty of the Board
or the Compensation Committee. However, the Board and the
Compensation Committee will carefully consider the outcome of the
vote when considering future executive compensation
arrangements.
THE BOARD OF DIRECTORS RECOMMENDS
VOTING “
FOR
” THIS PROPOSAL.
PROPOSAL 5
NON-BINDING ADVISORY VOTE ON THE FREQUENCY OF
HOLDING ADVISORY VOTES ON EXECUTIVE COMPENSATION
In accordance with the requirements of
Section 14A of the Exchange Act and the related rules of the
SEC, we are including in this proxy statement an additional
separate proposal, which gives our stockholders the opportunity to
vote on how frequently future advisory votes on the compensation of
our named executive officers (i.e., “
Say-on-Pay
” votes)
will occur. Stockholders may vote on whether they prefer an
advisory vote to occur every one (an annual), two (a biennial) or
three years (a triennial vote), or they may abstain from voting.
While our Board and Compensation Committee intend to carefully
consider the stockholder vote resulting from this proposal, the
final vote will not be binding on us and is advisory in
nature.
After
careful consideration, the Board recommends that an advisory vote
on the compensation of our named executive officers be held every
three years. An advisory vote every three years will be the most
effective timeframe for the Company to respond to
stockholders’ feedback and provide the Company with
sufficient time to engage with stockholders to understand and
respond to the vote results. The Company also believes a triennial
vote would align more closely with the multi-year performance
measurement cycle the Company uses to reward long-term performance.
Our executive compensation programs are based on our long-term
business strategy, which is more appropriately reflected with a
three-year timeframe. However, the Board recognizes that our
stockholders may elect to hold advisory votes on executive
compensation more frequently than every three years (i.e., every
one year or every two years). Therefore, the Board seeks input from
our stockholders regarding the frequency of holding advisory votes
on executive compensation.
With respect to this advisory vote on the
frequency of holding future advisory votes on the compensation of
our named executive officers, stockholders have three voting
options (1 year, 2 years or 3 years), and the
option, if any, that receives the affirmative vote of a majority of
the shares present in person or represented by proxy at the meeting
and entitled to vote will be considered approved by the
Company’ stockholders, provided that the final vote will not
be binding on us and is advisory in nature. Abstentions with
respect to this proposal will have the effect of a vote against
each of the voting options. Broker non-votes (which will occur if a
broker or other nominee does not have discretionary authority and
has not received instructions with respect to this proposal within
ten days of the Annual Meeting) will not be counted in determining
the number of shares necessary for approval. 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 “
3 YEARS
”
as to the frequency of holding advisory votes on executive
compensation.
As
noted above, the vote solicited by this proposal is advisory and
its outcome will not be binding on the Board or the Compensation
Committee, whether or not it is approved by the aforementioned
voting standard. In evaluating the vote on this proposal, the Board
and the Compensation Committee will carefully consider the voting
results in their entirety in determining the frequency of holding
future advisory votes on the compensation of our named executive
officers. If one of the voting options is not adopted by the
required vote of our stockholders, the Board and Compensation
Committee will evaluate the votes cast for each of the voting
options and will deem the voting option receiving the greatest
number of votes to be the voting option approved by our
stockholders.
The Company currently plans to provide stockholders with an
opportunity to approve the frequency of holding future advisory
votes on executive compensation every three years at the annual
meeting of stockholders. It is expected that the next such vote
will occur at the 2020 annual meeting of stockholders.
THE BOARD OF DIRECTORS RECOMMENDS
VOTING FOR “
3 YEARS
”
AS TO THE FREQUENCY OF HOLDING ADVISORY VOTES ON EXECUTIVE
COMPENSATION.
PROPOSAL 6 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.
The
board of directors believes that, if the number of shares of our
common stock and Series A Preferred 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 6, 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 2018 Annual Meeting of Stockholders and
2018 Proxy Materials
Proposals of
holders of our voting securities intended to be presented at our
2018 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 4125
Blackhawk Plaza Circle, Suite 201, Danville, California 94506, not
earlier than the close of business on August 30, 2018, and not
later than the close of business on September 29, 2018, together
with written notice of the stockholder’s intention to present
a proposal for action at the fiscal 2018 annual meeting of
stockholders, unless our annual meeting date occurs more than 30
days before or 30 days after December 28, 2018. 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 2018 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.
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.,
4125 Blackhawk
Plaza Circle, Suite 201, Danville, California
94506
.
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.
|
Company Contact Information
All
inquiries regarding our Company should be addressed to our
Company’s principal executive office:
PEDEVCO Corp.
4125 Blackhawk Plaza Circle, Suite 201
Danville, California 94506
|
By
Order of the Board of Directors,
|
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Frank
C. Ingriselli, Chairman
|
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
(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
(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.
“
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 three million (3,000,000) 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.
(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.
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:
(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.
(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.
(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.
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.
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 three million (3,000,000) 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.
(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 three million (3,000,000)
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 three million
(3,000,000) 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 three million (3,000,000)
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:
(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.
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.
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 and ________, 2017.
FORM OF PROXY
(SEE ATTACHED)
PEDEVCO CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
ANNUAL
MEETING OF STOCKHOLDERS – December 28, 2017 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 November 8, 2017, and hereby
appoints Michael L. Peterson 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 2017 annual
Meeting of Stockholders of the Company, to be held on December 28,
2017, at 10:00 a.m. local time at PEDEVCO Corp.’s corporate
office located at 4125 Blackhawk Plaza Circle, Suite 201, Danville,
California 94506, 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 OFPEDEVCO 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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Frank
C. Ingriselli
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☐
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Adam
McAfee
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☐
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☐
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Elizabeth
P. Smith
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☐
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☐
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David Z. Steinberg
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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 1,500,00 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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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 GBH CPA’s, PC, as the
company’s independent auditors for the fiscal year ending
December 31, 2017.
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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, by non-binding vote, the compensation of the
company’s named executive officers.
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Proposal 5
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1 YEAR
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2 YEARS
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3 YEARS
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ABSTAIN
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To recommend, by non-binding vote, the frequency of holding
advisory votes on the compensation of the company’s named
executive officers.
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Proposal 6
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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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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 Proposal 6 And For
“
Three Years
”
In Proposal 5, 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: ________________________, 2017
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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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