Item 5.02 Departure of Directors
or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(a) Retirement of Chief Executive Officer and Director
On June 23, 2022, the
Company announced that Michael Raleigh will be retiring from his positions as Chief Executive Officer (“CEO”) and as a member
of the Board of Directors of the Company (the “Board”), effective as of June 30, 2022.
Mr. Raleigh’s
decision to retire did not result from a disagreement with the Company or any of its officers or other directors on any matter relating
to the operations, policies or practices of the Company.
In connection with Mr. Raleigh’s
retirement, Mr. Raleigh and the Company entered into a Retirement Agreement (“Raleigh Retirement Agreement”) effective
as of June 30, 2022. Pursuant to the terms of the Raleigh Retirement Agreement, Mr. Raleigh agreed to cooperate in the Company’s
efforts to effect an orderly, smooth, and efficient transition of his duties and responsibilities to his successor. In consideration
for Mr. Raleigh’s cooperation with the transition process, the Company agreed to continue to compensate Mr. Raleigh as
follows:
| • | The
Company will pay to Mr. Raleigh a total amount of $150,000 (i.e., base salary payments
for a period of twelve months at Mr. Raleigh’s current base salary rate), payable
in twelve equal monthly installments over the twelve months immediately following the effective
date of Mr. Raleigh’s retirement. |
| • | The
Company shall pay in a single lump sum an amount equal to twelve times the monthly employer
contribution that the Company would have made to provide health insurance to Mr. Raleigh
if he had remained employed until the 1st anniversary of the Retirement Date. |
| • | In
lieu of receiving an equity award for calendar year 2021, the Company will pay Mr. Raleigh
an amount equal to $330,000 (i.e., approximately two-times Mr. Raleigh’s current
annual base salary rate) in a lump sum payment within ten business days after the effective
date of Mr. Raleigh’s retirement. |
| • | In
lieu of receiving an equity award for calendar year 2022, the Company will pay Mr. Raleigh
an amount equal to $150,000 (i.e., two-times Mr. Raleigh’s current annual base
salary rate pro-rated for the months worked during calendar year 2022) in a lump sum payment
within ten business days after the date on which the termination of Mr. Raleigh’s
employment becomes legally irrevocable. |
| • | All
unvested equity awards previously granted to Mr. Raleigh by the Company under the Epsilon
Energy LTD Share Compensation Plan (the “Equity Plan”) that are outstanding as
of the Retirement Date, including both performance-based restricted stock awards and restricted
stock award (“Outstanding Equity Awards”), shall immediately accelerate and vest
as of the date on which the termination of Mr. Raleigh’s employment becomes legally
irrevocable, with any performance vesting conditions or criteria being deemed met at target
levels. |
Payment of these additional
benefits is subject to compliance with confidentiality and non-disparagement covenants and signing a general release of claims that becomes
binding. A copy of the Raleigh Retirement Agreement is filed herewith as Exhibit 10.1 and the terms thereof are incorporated by
reference into this Item 5.02 of Form 8-K as if fully set forth herein.
(b) Appointment of new Chief Executive Officer and Director
The Board appointed Jason
Stabell to serve as CEO of the Company and as a member of the Board beginning on July 1, 2022 (the (“Stabell Effective Date”).
In connection with Mr. Stabell’s appointment, the Company entered into an Executive Employment Agreement with Mr. Stabell
(the “Stabell Employment Agreement”), effective July 1, 2022. Pursuant to the Stabell Employment Agreement, the Company
and Mr. Stabell have agreed that Mr. Stabell will serve as CEO on an “at-will” basis for an annual base salary
of $300,000. In addition to his base salary, Mr. Stabell will be eligible to receive an annual incentive bonus targeted at $200,000
for achieving performance goals established by the Compensation Committee of the Board in its sole discretion for the then current calendar
year. Additionally, Mr. Stabell will be eligible for equity awards in the form of Restricted Stock Units (“RSUs”) with
a grant date value of $600,000. The RSUs shall vest over a four-year period beginning on the Stabell Effective Date as follows: twenty-five
percent (25%) of the RSUs on the first anniversary of the Stabell Effective Date, and an additional 6.25% of the RSUs vesting on the
first day of each subsequent quarter, with full vesting on July 1, 2026, provided that Mr. Stabell is employed by the Company
on each such vesting date. All outstanding RSUs shall vest at target upon a “Change in Control,” as defined in the Equity
Plan, provided Mr. Stabell then remains employed by the Company. Mr. Stabell will be entitled to participate in all applicable
Company benefit plans, programs, or arrangements that the Company may offer to its executives generally, from time to time, and as may
be amended from time to time. Participation will be subject to the terms of the applicable plan documents and generally applicable Company
policies, as may be in effect from time to time, and any other restrictions or limitations imposed by law. If Mr. Stabell is terminated
by the Company without cause or resigns for Good Reason (as defined in the Stabell Employment Agreement), he will be entitled to a severance
payment equal to twenty-four (24) months’ salary and the pro-rated target bonus for the year in which the termination takes place.
A copy of the Stabell Employment
Agreement is filed herewith as Exhibit 10.2 and the terms thereof are incorporated by reference into this Item 5.02 of Form 8-K
as if fully set forth herein.
(c) Retirement of Chief Financial
Officer
On June 23, 2022, the
Company announced that Lane Bond will be retiring from his position as Chief Financial Officer (“CFO”) of the Company, effective
as of June 30, 2022.
Mr. Bond’s decision
to retire did not result from a disagreement with the Company or any of its officers or other directors on any matter relating to the
operations, policies or practices of the Company.
In connection with Mr. Bond’s
retirement, Mr. Bond and the Company entered into a Retirement and Consulting Agreement (“Bond Retirement Agreement”)
effective as of June 30, 2022 (the “Bond Retirement Date”). Pursuant to the terms of the Bond Retirement Agreement,
Mr. Bond agreed to provide consulting services to facilitate an orderly, smooth, and efficient transition of his duties and responsibilities
to his successor until March 31, 2023.
In consideration for Mr. Bond’s
cooperation with the transition process, the Company agreed to compensate Mr. Bond as follows:
| • | All
unvested equity awards previously granted to Mr. Bond under the Equity Plan that are
outstanding as of the Bond Retirement Date, including both performance-based restricted stock
awards and restricted stock award shall immediately accelerate and vest as of the date on
which Mr. Bond’s employment becomes legally irrevocable (with any performance
vesting conditions or criteria being deemed met at target levels). |
| • | In
lieu of any right to receive an annual bonus, Mr. Bond shall receive a payment of $37,500. |
| • | The
Company shall make a monthly payment equal to the employer contribution that the Company
would have made to provide health insurance to Mr. Bond if he had remained employed
by the Company for twelve months, subject to earlier termination under certain circumstances. |
Payment of these additional
benefits is subject to compliance with confidentiality and non-disparagement covenants and signing a general release of claims that becomes
binding. A copy of the Bond Retirement Agreement is filed herewith as Exhibit 10.3 and the terms thereof are incorporated by reference
into this Item 5.02 of Form 8-K as if fully set forth herein.
(d) Appointment of new Chief Financial
Officer
The Board appointed Andrew
Williamson to serve as CFO of the Company beginning on July 1, 2022 (the “Williamson Effective Date”). In connection
with Mr. Williamson’s appointment, the Company entered into an Executive Employment Agreement with Mr. Williamson (the
“Williamson Employment Agreement”), effective July 1, 2022. Pursuant to the Williamson Employment Agreement, the Company
and Mr. Williamson have agreed that Mr. Williamson will serve as CFO on an “at-will” basis for an annual base salary
of $230,000. In addition to his base salary, Mr. Williamson will be eligible to receive an annual incentive bonus targeted at $150,000
for achieving performance goals established by the Compensation Committee of the Board in its sole discretion for the then current calendar
year. Additionally, Mr. Williamson will be eligible for equity awards with a grant date value of $250,000. The RSUs shall vest over
a four-year period beginning on the Williamson Effective Date as follows: twenty-five percent (25%) of the RSUs on the first anniversary
of the Williamson Effective Date, and an additional 6.25% of the RSUs vesting on the first day of each subsequent quarter, with full
vesting on July 1, 2026, provided that Mr. Williamson is employed by the Company on each such vesting date. All outstanding
RSUs shall vest at target upon a “Change in Control,” as defined in the Equity Plan, provided Mr. Williamson then remains
employed by the Company. Mr. Williamson will be entitled to participate in all applicable Company benefit plans, programs, or arrangements
that the Company may offer to its executives generally, from time to time, and as may be amended from time to time. Participation will
be subject to the terms of the applicable plan documents and generally applicable Company policies, as may be in effect from time to
time, and any other restrictions or limitations imposed by law. If Mr. Williamson is terminated by the Company without cause or
resigns for Good Reason (as defined in the Williamson Employment Agreement), he will be entitled to a severance payment equal to twenty-four
(24) months’ salary and the pro-rated target bonus for the year in which the termination takes place.
A copy of the Williamson
Employment Agreement is filed herewith as Exhibit 10.4 and the terms thereof are incorporated by reference into this Item 5.02 of
Form 8-K as if fully set forth herein.