Riley Exploration Permian, Inc. appointed Bobby D. Riley as new CEO

Item 5.02. 
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.


Directors


In accordance with the Merger Agreement, on February 26, 2021, immediately prior to and effective upon the closing of the Merger, Peter Salas, Richard M. Thon and Matthew K. Behrent resigned from the Company's board of directors and committees of the board of directors on which they respectively served, which resignations were not the result of any disagreements with the Company relating to the Company's operations, policies or practices.


The Merger Agreement provides that at or immediately after the closing of the Merger, the size of the Company's board of directors will be increased to five members, consisting of one director designated by the Company, who is Michael J. Rugen, two directors designated by REP LLC, who are Bobby D. Riley and Bryan H. Lawrence, and two independent director nominees, Brent Arriaga and E. Wayne Nordberg.


In addition, the Company appointed directors to serve on committees. Brent Arriaga and E. Wayne Nordberg were appointed to the Company's Audit Committee (with Mr. Arriaga serving as chair of the committee), and a copy of the Audit Committee Charter that was adopted on February 26, 2021 is attached hereto as Exhibit 99.1 and is incorporated herein by reference. Brent Arriaga and E. Wayne Nordberg were appointed to the Company's Compensation Committee (with Mr. Nordberg serving as chair of the committee), and a copy of the Compensation Committee Charter that was adopted on February 26, 2021 is attached hereto as Exhibit 99.2 and is incorporated herein by reference. Brent Arriaga and E. Wayne Nordberg were appointed to the Company's Nominating and Corporate Governance Committee (with Mr. Nordberg serving as chair of the committee), and a copy of the Nominating and Corporate Governance Committee Charter that was adopted on February 26, 2021 is attached hereto as Exhibit 99.3 and is incorporated herein by reference.


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Each of Messrs. Rugen, Riley, Lawrence, Arriaga and Nordberg entered into an indemnification agreement with the Company on February 26, 2021, immediately following the Merger. These agreements will require the Company to indemnify these individuals to the fullest extent permitted under Delaware law against liability that may arise by reason of their service to the Company, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified.


The foregoing description of the indemnification agreements contained herein does not purport to be complete and is qualified in its entirety by reference to the form of indemnification agreement, which is attached hereto as Exhibit 10.9 and is incorporated herein by reference.


Each of Messrs. Arriaga and Nordberg entered into independent director agreements with the Company on February 26, 2021, Pursuant to the form of independent director agreement each of Messrs. Arriaga and Nordberg will receive an annual cash retainer of $65,000, a cash payment of $1,500 for each board meeting attended and $10,000 for each committee meeting attended, and as soon as practicable following the effectiveness of the Merger, and on each anniversary thereafter during their term, an annual equity grant pursuant to the Company's LTIP of $50,000 that will vest on the one-year anniversary of the grant date. In addition, the chairperson of the audit committee and the chairperson of the nominating and corporate governance committee is expected to each receive an additional cash retainer of $15,000.


The foregoing description of the independent director agreements contained herein does not purport to be complete and is qualified in its entirety by reference to the form of independent director agreement, which is attached hereto as Exhibit 10.10 and is incorporated herein by reference.


Executive Officers


On February 26, 2021, effective immediately after the closing of the Merger, the Company's board of directors appointed Bobby D. Riley as the Company's Chairman of the Board and Chief Executive Officer, Kevin Riley as the Company's President, Michael J. Rugen as the Company's Chief Financial Officer and Director, Corey Riley as the Company's Executive Vice President Business Intelligence and Michael Palmer as the Company's Executive Vice President Corporate Land. Messrs. Riley, Riley, Rugen, Riley and Palmer entered into an indemnification agreement with the Company on February 26, 2021, immediately following the Merger. There is a family relationship between Mr. Bobby D. Riley and the Company's President, Mr. Kevin Riley, and the Company's Executive Vice President Business Intelligence, Mr. Corey Riley, as father and sons. Mr. Kevin Riley and Mr. Corey Riley are brothers.


The foregoing description of the indemnification agreements contained herein does not purport to be complete and is qualified in its entirety by reference to the form of indemnification agreement, which is attached hereto as Exhibit 10.9 and is incorporated herein by reference.


These executive officers received the following Company securities:


- 
Mr. Bobby D. Riley received 85,699 shares of the Company's restricted common stock in exchange for his 10,515.7 shares of REP LLC restricted common units pursuant to the Plan, and 137,247 shares of the Company's common stock in connection with the closing of the Merger;


- 
Mr. Kevin Riley received 46,879 shares of the Company's restricted common stock in exchange for his 5,752.3 shares of REP LLC restricted common units pursuant to the Plan, and 77,134 shares of the Company's common stock in connection with the closing of the Merger;


- 
Mr. Corey Riley received 28,863 shares of the Company's restricted common stock in exchange for his 3,541.7 shares of REP LLC restricted common units pursuant to the Plan, and 6,941 shares of the Company's common stock in connection with the closing of the Merger; and


- 
Mr. Michael Palmer received 16,978 shares of the Company's restricted common stock in exchange for his 2,083.3 shares of REP LLC restricted common units pursuant to the Plan, and 3,414 shares of the Company's common stock in connection with the closing of the Merger.


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The foregoing description of the grants of the Company's restricted common stock in exchange for REP LLC restricted common units contained herein does not purport to be complete and is qualified in its entirety by reference to the form of substitute grant agreement, which is attached hereto as Exhibit 10.11 and is incorporated herein by reference.


Bobby D. Riley. Mr. Riley, age 65, was appointed as the Chairman of REP LLC's board of managers, President and Chief Executive Officer in June 2016. Mr. Riley also served as the Chief Executive Officer of Riley Exploration Group, LLC, a Delaware limited liability company ("REG") from when it was founded in 2012 to May 1, 2018. Prior to joining REP LLC, Mr. Riley was the Chairman and Chief Executive Officer of Riley Exploration, LLC ("REX"), since he founded REX in 2007 through 2012. Mr. Riley has nearly 40 years of experience in the independent oil and gas sector, in North America, South America, Europe, Africa and Asia. He has an extensive background in all aspects of oil and gas management and operations, including drilling, completion, work-over and production. In addition to his management and operational expertise, he has designed and patented specialized completion equipment that was licensed to Baker-Hughes and participated in the design, development and testing of Intelligent Well Bore Systems, which was sold to Weatherford International in 2000. In 2009, Mr. Riley created a joint venture with a private equity group to invest in unconventional oil and gas plays and deployed over $350.0 million of debt and equity capital in the Eagle Ford Shale and the Permian Basin. The joint venture acquired approximately 50,000 acres of prime leasehold acreage, drilled and completed over 40 wells and reached peak production of 4,000 BOE/d. From 2005 to 2007 Mr. Riley was Vice President of Operations at Activa Resources, Inc. ("Activa"), a publicly-traded exploration and production company. From 2002 to 2005, he was Managing Partner of Tuleta Energy Partners, LLC, a privately-held exploration and production company, until it was acquired by Activa Resources, Inc. From 1991 to 2001 Mr. Riley was President of an oil and gas service company specializing in well design and reservoir data acquisition, that was active in Nigeria, Venezuela, and Norway. He founded his first independent exploration and production company, Durango Energy, Inc., in 1984, and operated up to 150 wells in Oklahoma. Prior to that he was District Manager of Monitoring Systems Inc., a drilling and well control instrumentation company, installing equipment on jack-up rigs and semi-submersibles in the U.S., Brazil and Korea. Mr. Riley began his oil and gas career with Cameron Iron Works in Houston, Texas, in 1974. Mr. Riley has a bachelor's degree in Business, Accounting and Finance from the University of Science & Arts of Oklahoma and completed the Advanced Drilling Operations and Well Control program at Murchison Drilling Schools. He is a member of the American Petroleum Institute and the Society of Professional Engineers and is IADC / MMS Well-Cap Certified.


Kevin Riley. Mr. Riley, age 39, was appointed as REP LLC's President on January 23, 2020, prior to that he had served as REP LLC's Executive Vice President and Chief Operating Officer since June 2016. Prior to joining REP LLC, Mr. Kevin Riley served in various roles, including Chief Operating Officer of REG from when it was founded in 2012 through 2016. He led the successful acquisition and development of REG's +50,000 acres located across three active operating areas: the Permian Basin, Eagle Ford Shale and Arkoma-Woodford Shale. From 2007 to 2012, Mr. Kevin Riley was the Chief Operating Officer of REX. Mr. Kevin Riley co-founded REX in 2007, which developed early entrant positions into the Wolfberry trend of the Permian Basin and the Eagle Ford Shale in Karnes County. He had direct oversight of REP LLC's land, drilling, completion and production activities, which included more than 70,000 acres under lease and +50 operated horizontal wells via a multi-rig drilling program. Mr. Kevin Riley holds a degree in Business Administration from the University of Central Oklahoma and a Master of Business Administration with emphasis in Energy from the University of Oklahoma. He is a member of the Independent Petroleum Association of America, American Association of Petroleum Landmen and the Society of Petroleum Engineers.


On April 1, 2019, REP LLC entered into employment agreements with Mr. Bobby D. Riley and Mr. Kevin Riley. The employment agreements set forth the material terms of employment for each such person. The initial term of the employment agreements is three years, each with automatic annual renewals thereafter. Each of these employment agreements sets forth the initial terms and conditions of employment of each named executive officer, including base salary, target annual cash bonus opportunity, target annual equity award opportunity, standard employee benefit plan participation, severance and change in control benefits. Each employment agreement also includes certain restrictive covenants that generally prohibit REP LLC's named executive officers from (i) competing against REP LLC, (ii) disclosing information that is confidential to REP LLC and its subsidiaries and (iii) from soliciting or hiring REP LLC's employees and those of its subsidiaries or soliciting REP LLC's customers. The employment agreements may be assigned to an affiliate of REP LLC and were assigned to Riley Permian Operating Company, LLC ("RPOC") in June 2019. Effective October 1, 2020, the employment agreement for Mr. Bobby D. Riley was amended to reduce his annual base salary for a period of three years, increase the target percentage for his annual equity award, increase his separation payment upon the occurrence of certain events and to grant him a special equity award.


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The foregoing description of the employment agreements for Mr. Bobby D. Riley and Mr. Kevin Riley contained herein do not purport to be complete and are qualified in their entirety by reference thereto, which is attached hereto as Exhibit 10.12 through Exhibit 10.14 and are incorporated herein by reference.


Michael J. Rugen. Mr. Rugen, age 60, was named Chief Financial Officer of the Company in September 2009 and as interim Chief Executive Officer in June 2013. Mr. Rugen is a certified public accountant (Texas) with over 35 years of experience in exploration, production and oilfield service. Prior to joining the Company, Mr. Rugen spent 2 years as Vice President of Accounting and Finance for Nighthawk Oilfield Services. From 2001 to June 2007, he was a Manager/Sr. Manager with UHY Advisors, primarily responsible for managing internal audit and Sarbanes-Oxley 404 engagements for various oil and gas clients. In 1999 and 2000, Mr. Rugen provided finance and accounting consulting services with Jefferson Wells International. From 1982 to 1998, Mr. Rugen held various accounting and management positions at BHP Petroleum, with accounting responsibilities for onshore and offshore US operations as well as operations in Trinidad and Bolivia. Mr. Rugen earned a Bachelor of Science in Business with a Major in Accounting in 1982 from Indiana University.


Effective on February 26, 2021, the Company entered into an employment agreement with Mr. Michael J. Rugen. The employment agreement sets forth the material terms of employment with Mr. Rugen. The initial term of the employment agreement is two years, with automatic annual renewals thereafter. Mr. Rugen's employment agreement sets forth the initial terms and conditions of employment of Mr. Rugen, including base salary, target annual cash bonus opportunity, target annual equity award opportunity, standard employee benefit plan participation, severance and change in control benefits. Mr. Rugen's employment agreement also includes certain restrictive covenants that generally prohibit him from (i) competing against the Company, (ii) disclosing information that is confidential to the Company and its subsidiaries and (iii) from soliciting or hiring the Company's employees and those of its subsidiaries or soliciting the Company's customers. Mr. Rugen's employment agreement may be assigned to an affiliate of the Company.


The foregoing description of the employment agreement for Mr. Michael J. Rugen contained herein does not purport to be complete and is qualified in its entirety by reference thereto, which is attached hereto as Exhibit 10.15 and is incorporated herein by reference.


Corey Riley. Mr. Corey Riley, age 42, joined REP LLC in April of 2019 as Executive Vice President of Business Intelligence and is responsible for the strategies and technologies used by the organization to collect, integrate and analyze business information to support the organizations strategic decisions. Mr. Corey Riley has a diverse experience in technology, accounting, finance, corporate planning, management and executive leadership. Prior to joining REP LLC, he was the Chief Financial Officer of REG from when it was founded in 2012 through mid-2015 when he was promoted to President and served in that role through 2019. Mr. Corey Riley co-founded REX in 2007, the predecessor to REG and was involved with the company until 2012. Mr. Corey Riley holds a bachelor's degree in Biology from the University of Central Oklahoma and a Master of Business Administration with a focus in Technology from Oklahoma Christian University.


Michael Palmer. Mr. Michael Palmer, age 40, joined REP LLC as Executive Vice President Corporate Land in April 2017. Prior to joining REP LLC, Mr. Michael Palmer worked for Continental Resources, Inc. as Manager over their Mid-Continent mineral acquisition company and previously as Land Supervisor of its Bakken assets in North Dakota and Montana. He was employed more than 10 years in similar capacities at SandRidge Energy, Inc., Encore Acquisition Company and Hanna Oil & Gas, working predominately in the Permian Basin as well as Montana, Kansas, Oklahoma and Arkansas. Mr. Michael Palmer holds a B.B.A. in Energy Management and Finance from the University of Oklahoma and is an active member of the AAPL and OCAPL.


Director Compensation


On February 26, 2021, the Company determined that the annual cash retainer for non-employee directors is $65,000, and each director receives a cash payment of $1,500 for each board meeting attended and $10,000 for each committee meeting attended. Annual retainers for committee membership are as follows:


Audit committee chairperson

$

15,000


Nominating and corporate governance committee chairperson

$

15,000


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In addition to the above fees, the board of directors may determine that additional committee fees or other compensation may be appropriate time to time or adopt a director compensation policy.


In addition, the Company grants to new non-employee directors an annual equity grant pursuant to the Plan of $50,000 that will vest on the one-year anniversary of the grant date. As soon as practicable following the effectiveness of the merger, and on each anniversary thereafter during their term, Messrs. Arriaga and Nordberg will receive an annual equity grant pursuant to the Plan of $50,000 that will vest on the one-year anniversary of the grant date.


The foregoing description of the grants to new non-employee directors contained herein does not purport to be complete and is qualified in its entirety by reference to the form of grant agreement for new non-employee directors, which is attached hereto as Exhibit 10.16 and is incorporated herein by reference.


Directors who are also employees of the Company will not receive any additional compensation for their service on the Company's board of directors.


Resignation of Named Executive Officer


On February 26, 2021, immediately prior to and effective upon the closing of the Merger, Cary V. Sorensen, the Company's Vice President, General Counsel and Corporate Secretary, acknowledged his removal as an officer of the Company.