ITEM 2:
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THE SECOND AMENDED AND RESTATED 2017 EQUITY INCENTIVE PLAN
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The 2017 Equity Incentive Plan (the 2017
EIP) was originally adopted in connection with our IPO and was amended and restated and approved by our stockholders on June 11, 2020. On October 27, 2020, our Majority Stockholder, representing a majority of the votes cast to
approve the EIP Amendment, approved the EIP Amendment by Written Consent to increase the total number of shares of common stock that are reserved for issuance under the 2017 EIP by adding 5,000,000 shares of common stock. The EIP Amendment was also
approved by our Board on October 27, 2020. Unless otherwise stated, all share amounts reflected in this Item 2 reflect amounts on a pre-reverse stock split basis.
The following summary of the 2017 EIP, as amended by the EIP Amendment, is qualified in its entirety by reference to the full text of the 2017 EIP and the EIP
Amendment which is set forth in Annex B. All capitalized terms not defined in this Item 2 shall have the same meaning ascribed to them within the 2017 EIP.
General Information. The 2017 EIP is our active plan for granting equity awards to eligible employees and
non-employee directors. As of the Record Date, of the 6,032,523 shares authorized for issuance under the 2017 EIP, there were 942,501 shares remaining available for future grants under the 2017 EIP. The Board
believes that our 2017 EIP is in the best interest of stockholders and the Company, as equity awards granted under the plan help to attract, retain and motivate talented key personnel upon whose judgment, initiative and effort the successful conduct
of our business is largely dependent. In addition, the 2017 EIP helps further align the interests of eligible participants with those of our stockholders by providing long-term incentive compensation opportunities tied to the performance of the
business and our common stock.
The 2017 EIP authorizes us to grant several types of equity awards: stock options, stock appreciation rights, restricted
stock awards, restricted stock units (RSU), cash performance awards and stock awards. In practice, we have used the 2017 EIP to grant restricted stock units, restricted stock units designated as performance stock units (PSU)
and stock options.
Addition of 5,000,000 Shares of Common Stock. The EIP Amendment adds an additional 5,000,000 shares of Common Stock to the 2017
EIP. In determining the number of shares to request under the 2017 EIP, we evaluated the current market environment and our share price, share availability, recent share usage, our historic annual equity grant rate and estimated future rate and our
estimated number of shares needed to attract new hires. We carefully manage share usage under the 2017 EIP, however, in light of the sustained decline in oil and gas prices over the last year, and the subsequent significant negative impact of the
volatility in the oil and gas markets, we experienced a significant decline in the price of our common stock. The reduction in the value in the price of our common stock has resulted in the need to use a greater number of shares to compensate our
employees and non-employee directors. We expect that this additional share request will allow us to maintain our regular equity compensation programs without interruption.
SUMMARY OF THE 2017 EIP, AS AMENDED
Reservation of
Shares. The maximum aggregate number of shares of common stock that may be issued pursuant to awards granted under the 2017 EIP will be 11,032,523 on a pre-reverse stock split basis.
In the event of any recapitalization, reclassification, stock dividend, extraordinary dividend, stock split, reverse stock split, or other distribution with
respect to our common stock, or any merger, reorganization, consolidation, combination, spin-off or other similar corporate change, or any other change affecting our common stock, appropriate and equitable
adjustments will be made to the number and kind of shares of common stock available for grant, as well as to other maximum limitations under the 2017 EIP, and the number and kind of shares of common stock or other terms of the awards that are
affected by the event.
Share Counting. Awards that are required to be paid in cash pursuant to their terms will not reduce the share reserve. To
the extent that an award granted under the 2017 EIP is canceled, expired, forfeited, surrendered,
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