Exhibit 10.4

 

FORM OF PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT

PURSUANT TO THE

BATTALION OIL CORPORATION
2020 LONG-TERM INCENTIVE PLAN

 

[GRANTED UNDER 2020 MANAGEMENT INCENTIVE PLAN]

 

Employee:

 

 

Date of Grant:

 

 

Number of Restricted Stock Units Granted:

 

 

Performance Period:

 

The period beginning on the Date of Grant and ending on the earlier of (a) the
fourth anniversary of the Date of Grant or (b) a Change of Control Event

Vesting Date:

 

The last day of the Performance Period

 

THIS PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Award
Agreement”), dated as of the Date of Grant specified above, is made between
BATTALION OIL CORPORATION, a Delaware corporation (the “Company”), and the
employee specified above (the “Participant”). Capitalized terms not defined
herein shall have the meaning ascribed to them in the Battalion Oil Corporation
2020 Long-Term Incentive Plan, as it may be amended from time to time (the
“Plan”).

 

WHEREAS, pursuant to the 2020 Management Incentive Plan approved by the Board,
the Company desires to grant Restricted Stock Units to the Participant pursuant
to the terms of this Award Agreement and the Plan.

 

NOW THEREFORE, in consideration of the mutual agreements and other matters set
forth herein and in the Plan, the Company and the Participant hereby agree as
follows:

 

1.                                      Grant. On the Date of Grant, the Company
hereby grants to the Participant the number of Restricted Stock Units specified
above, pursuant to Article VII of the Plan (the “Awarded RSUs”). Each of the
Awarded RSUs may be converted into one share of Common Stock, subject to the
terms of the Plan and this Award Agreement. The Awarded RSUs have been granted
to the Participant in addition to, and not in lieu of, any other form of
compensation otherwise payable or to be paid to the Participant.

 

2.                                      Subject to Plan. This Agreement is
subject to the terms and conditions of the Plan, and the terms of the Plan shall
control; provided, however, in the event of a conflict or inconsistency between
the discretionary terms and provisions of the Plan and the provisions of this
Award Agreement, this Award Agreement shall control. Unless otherwise expressly
provided in this Award Agreement, provisions of the Plan that confer
discretionary authority on the Committee or the Board shall be limited as set
forth in the Plan and do not (and shall not be deemed to) create any rights in
the Participant unless such rights are expressly set forth herein or are
conferred by appropriate action of the Committee or the Board under the Plan
after the date hereof. This Agreement is subject to any rules promulgated
pursuant to the Plan by the Committee, subject to Board approval, and
communicated to the Participant in writing.

 

3.                                      Vesting. Subject to Sections 4 and 5
below, the Awarded RSUs shall vest and become nonforfeitable as set forth in
Exhibit A, attached hereto.

 

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4.                                      Continuance of Employment. Except as
provided in Section 5 below, vesting of the Awarded RSUs requires continued
employment with the Company through the Vesting Date. Employment or service for
only a portion of the Performance Period (as defined above), even if a
substantial portion, will not entitle the Participant to any proportionate
vesting of the Awarded RSUs.

 

5.                                      Effect of Termination of Service. Except
as provided below, the Awarded RSUs shall terminate to the extent such Awarded
RSUs have not become vested prior to the first date the Participant is no longer
employed by the Company (the “Severance Date”), regardless of the reason for the
Participant’s termination of employment, whether with or without cause, whether
voluntarily or involuntarily, or whether the Participant was employed or
provided services for a portion of the Performance Period.

 

(a)                                 In the event (i) the Participant’s Severance
Date is the result of the Participant’s termination of employment due to the
Participant’s death or Disability and (ii) the Severance Date occurs prior to
the Vesting Date, the Board, in its sole discretion, may permit the Awarded RSUs
to vest on the Vesting Date pursuant to the vesting conditions set forth in
Exhibit A, attached hereto.

 

(b)                                 In the event that (i) the Participant’s
Severance Date is the result of the Participant’s termination of employment
without “Cause” (as defined below), (ii) the Participant had remained
continuously employed by the Company until the date of such termination, (iii)
the Severance Date occurs prior to the Vesting Date, and (iv) the Company enters
into a binding agreement to consummate a transaction that is a Change of Control
Event prior to the Severance Date, the Board, in its sole discretion, may permit
the Awarded RSUs to vest on the Vesting Date pursuant to the vesting conditions
set forth in Exhibit A, attached hereto.

 

Any Awarded RSUs that are unvested on the Severance Date shall terminate on the
later of the Severance Date or the date such Awarded RSUs are not eligible to
vest pursuant to Subsection (a) or Subsection (b). If any unvested Awarded RSUs
are terminated pursuant to this Award Agreement, such Awarded RSUs shall
automatically be forfeited as of the applicable Severance Date (or, to the
extent the applicable performance-based vesting conditions are not satisfied, as
of the Vesting Date, as provided in Exhibit A) without payment of any
consideration by the Company and without any other action by the Participant, or
the Participant’s beneficiary or personal representative, as the case may be.
For purposes of this Award Agreement, “Cause” means one or more of the
following: (i) the willful failure by the Participant to perform the
Participant’s duties in any material respect as required hereunder (other than
any such failure resulting from the Participant’s incapacity due to physical or
mental illness or disability) or the commission by the Participant of an act of
willful misconduct in any material respect with respect to the Company; (ii) the
engaging by the Participant in conduct which is demonstrably and materially
injurious to the Company and/or any Affiliated Entity; (iii) the willful
engaging, or failure to engage, by the Participant in conduct which is in
material violation of any of the Company’s written policies and procedures; (iv)
the Participant’s breach of duty (other than inadvertent acts or omissions)
involving fraud, dishonesty, disloyalty, or a conflict of interest; (v) the
Participant’s failure to cooperate with any investigation or inquiry authorized
by the Company or an Affiliated Entity or conducted by a governmental authority
related to the Company’s or an Affiliated Entity’s business or the Participant’s
conduct; or (vi) the Participant’s conviction of, or entry of a plea agreement
or consent decree or similar arrangement with respect to, any felony, any crime
involving deceit, fraud, perjury or embezzlement, or any violation of federal or
state securities laws. For purposes of a “Cause” determination, no act, or
failure to act, shall be deemed “willful” unless done, or omitted to be done, by
the Participant not in good faith and without reasonable belief that the
Participant’s action or omission was in the best interest of the Company. With
respect to elements (i) through (v) above, the Company shall provide the
Participant with thirty (30) days to cure such failure or conduct following
written notice of the specific facts and circumstances that are deemed to
constitute Cause, unless such failure or conduct is not reasonably capable of
being cured.

 

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6.                                      Settlement of Awarded RSUs; Delivery of
Common Stock. Subject to the satisfaction of any applicable provisions of this
Award Agreement, when any Awarded RSUs vest pursuant to Section 3 herein, the
Company shall as soon as practicable (and in all events not later than two and
one-half (2 ½) months after the applicable vesting date) cause to be issued and
delivered to the Participant one share of Common Stock in payment and settlement
of each of the vested Awarded RSUs. Delivery of the Common Stock shall be
effected by the electronic delivery of the Common Stock to a brokerage account
designated by the Participant or by book-entry registration of such Common Stock
with the Company’s transfer agent (with no physical certificate issued to the
Participant) and shall be subject to the tax withholding provisions of Section
14.3 of the Plan and compliance with all applicable legal requirements as
provided in the Plan, and shall be in complete satisfaction and settlement of
such vested Awarded RSUs. If the Company so elects, its obligation to deliver
shares of Common Stock pursuant to this Agreement shall be conditioned upon its
receipt from Participant or other permitted recipient of an executed investment
letter, in form and content satisfactory to the Company and its legal counsel,
evidencing the investment intent of such person and such other matters as the
Company may reasonably require. If the Company so elects, the certificate or
certificates representing the shares of Common Stock issued hereunder shall bear
a legend to reflect any restrictions on transferability.

 

7.                                      Stockholder Rights. The Participant will
have no rights as a stockholder with respect to any shares of Common Stock
covered by this Award Agreement, no dividend rights, and no voting rights with
respect to the Awarded RSUs or any shares of Common Stock underlying or issuable
in respect of such Awarded RSUs until such shares of Common Stock are actually
issued to and held of record by the Participant. No adjustments will be made for
dividends or other rights of a holder for which the record date is prior to the
date of issuance of the stock certificate or book entry evidencing such shares.

 

8.                                      Non-Transferability. Except as provided
in Section 14.2 of the Plan, the Awarded RSUs and any interest therein or shares
of Common Stock payable in respect thereof shall not be sold, assigned,
transferred, pledged or otherwise disposed of, alienated or encumbered, either
voluntarily or involuntarily.

 

9.                                      Compliance with Applicable Law.
Notwithstanding any provision of this Award Agreement to the contrary and
subject to Section 14.5 of the Plan, the Participant agrees that the issuance of
Common Stock hereunder will be subject to compliance with all requirements of
applicable law with respect to such securities and with the requirements of any
stock exchange or market system upon which the Common Stock may then be listed.
As a condition to any issuance of Common Stock hereunder, the Company may
require the Participant to satisfy any requirements that may be necessary or
appropriate to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect to such compliance as may be
requested by the Company.

 

10.                               Representations and Warranties of Participant.
The Participant represents and warrants to the Company as follows:

 

(a)                                 The Participant has received a copy of the
Plan and has read and understands the terms of the Plan and this Award
Agreement, and agrees to be bound by their terms and conditions. The Participant
acknowledges that there may be adverse tax consequences upon the granting of the
Awarded RSUs, vesting of the Awarded RSUs, or disposition of the Awarded RSUs
once vested, and that the Participant should consult a tax adviser prior to such
time.

 

(b)                                 The Participant agrees to sign such
additional documentation as may reasonably be required from time to time by the
Company in connection with this Award Agreement.

 

11.                               Data Privacy. By participating in the Plan,
the Participant acknowledges and consents to the collection, use, processing,
and transfer of personal data as described in this Section 11. The Company,

 

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its Subsidiaries, and their Affiliated Entities hold certain personal
information about the Participant, including the Participant’s name, home
address and telephone number, email address, date of birth, social security
number or other employee identification number, salary, nationality, job title,
any shares of Common Stock held in the Company, details of all Awarded RSUs or
any other entitlement to shares of Common Stock or equivalent benefits awarded,
canceled, purchased, vested, unvested or outstanding in the Participant’s favor,
for the purpose of managing and administering the Plan (“Data”). The Company and
its related entities may transfer Data amongst themselves as necessary for the
purpose of implementation, administration, and management of the Participant’s
participation in the Plan, and the Company, its Subsidiaries, and their
Affiliated Entities may each further transfer Data to any third parties
assisting the Company, any of its Subsidiaries, and any of their Affiliated
Entities in the implementation, administration, and management of the Plan. The
Participant acknowledges that the transferors and transferees of such Data may
be located anywhere in the world and hereby authorizes each of them to receive,
possess, use, retain and transfer the Data, in electronic or other form, for the
purposes of implementing, administering, and managing the Participant’s
participation in the Plan, including any transfer of such Data as may be
required for the administration of the Plan and the subsequent holding of shares
of Common Stock on the Participant’s behalf to a broker or to another third
party with whom the Participant may elect to deposit any shares of Common Stock
acquired under the Plan.

 

12.                               Binding Effect. This Agreement shall be
binding upon and inure to the benefit of any successors to the Company and all
persons lawfully claiming under the Participant.

 

13.                               Notices. All notices between the parties
hereto shall be in writing and shall be deemed sufficiently given if either hand
delivered or if sent by electronic delivery, overnight courier, or by postage
paid first-class mail. Notices shall be directed, if to Participant, at the
Participant’s address as contained in the Company’s records, or if to the
Company, addressed to its Senior Vice President, Human Resources &
Administration, at the principal executive offices of the Company.

 

14.                               Modification. Pursuant to Section 14.4 of the
Plan and subject to the restrictions specified therein, the Board may
unilaterally amend this Award Agreement, whether or not the Awarded RSUs are
vested, to the extent it deems appropriate; provided, however, amendments that
are adverse to the Participant require the consent of the Participant or the
Participant’s successors and permitted assigns. Amendments to this Award
Agreement must be in writing.

 

15.                               Severance of Terms. If any provision of this
Award Agreement is or may be held by a court or arbitrator of competent
jurisdiction to be invalid, void, or unenforceable to any extent, the validity
of the remaining parts, terms, or provisions of this Award Agreement shall not
be affected thereby, and such illegal or invalid part, term, or provision shall
be deemed not to be part of this Award Agreement. The remaining provisions shall
nevertheless survive and continue in full force and effect without being
invalidated in any way.

 

16.                               Entire Agreement. This Agreement sets forth
the entire understanding between the parties with respect to the subject matter
hereof and supersedes and replaces all prior communications, understandings and
agreements between the parties, whether written or oral, express or implied,
relating to the subject matter hereof.

 

17.                               Limitation on the Participant’s Rights.
Participation in the Plan confers no rights or interests other than as herein
provided. This Award Agreement creates only a contractual obligation on the part
of the Company as to amounts payable and shall not be construed as creating a
trust. Neither the Plan nor any underlying program, in and of itself, has any
assets. The Participant shall have only the rights of a general unsecured
creditor of the Company with respect to amounts credited and benefits payable,
if any, with respect to the Awarded RSUs, and rights no greater than the right
to receive the Common Stock as a

 

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general unsecured creditor with respect to Awarded RSUs, as and when payable
hereunder.

 

18.                               State Law. This Agreement is made within the
State of Texas. Therefore, except where preempted by federal law, this Award
Agreement shall in all respects be interpreted, enforced, and governed under the
laws of the State of Texas and shall in all cases be construed as a whole
(according to its fair meaning, and not strictly for or against any of the
parties). Subject to the terms of any arbitration agreement between the Company
and the Participant, any action seeking interpretation or enforcement of its
terms may be maintained only in the state courts of Harris County, Texas without
regard to where the cause of action arose.

 

19.                               Counterparts. This Agreement may be executed
in counterparts, each of which shall be construed as an original for all
purposes, but all of which taken together shall constitute one and the same
Agreement.

 

20.                               Incorporation of Recitals. All recitals
included in the introductory portion of this Award Agreement are incorporated
into the terms hereof by this reference.

 

21.                               Titles. The titles of Sections, Subsections,
and Paragraphs in this Award Agreement are placed herein for convenience of
reference only, and this Award Agreement is not to be construed by reference
thereto.

 

22.                               No Contract of Employment. Nothing contained
herein shall be construed to constitute a contract of employment between the
Company and the Participant. Nothing contained herein shall be deemed to give
the Participant the right to be retained in the employ of the Company, to be
rehired by the Company, or to interfere with the right of the Company to
discharge the Participant at any time without regard to the effect such
discharge might have on the Participant’s right to receive benefits under this
Award Agreement.

 

[signature page follow]

 

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IN WITNESS WHEREOF, the parties have caused this Award Agreement to be executed
on the dates written below.

 

“COMPANY”

 

 

 

 

 

 

 

BATTALION OIL CORPORATION

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

Signature

 

Date

 

 

 

 

 

 

 

 

 

 

 

 

Name (printed)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Title

 

 

 

 

 

 

 

“PARTICIPANT”

 

 

 

 

 

 

 

 

 

 

 

[EMPLOYEE NAME]

 

Date

 

 

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EXHIBIT A

 

PERFORMANCE VESTING REQUIREMENTS

 

The Awarded RSUs that will vest on the Vesting Date will be determined based on
a comparison of the Company’s TSR to the average TSR of the Permian Peer Index
for the Performance Period, as follows:

 

·                  If the Company’s TSR for the Performance Period is at least
twenty-five percentage points greater than the average TSR of the Permian Peer
Index for the Performance Period, 100% of the Awarded RSUs will vest on the
Vesting Date.

 

·                  If the Company’s TSR for the Performance Period is greater
than the average TSR of the Permian Peer Index for the Performance Period but is
not at least twenty-five percentage points greater than the average TSR of the
Permian Peer Index for the Performance Period, the portion of the Awarded RSUs
that will vest on the Vesting Date will be determined on a straight-line basis
(i.e., linearly interpolated) between (i) the average TSR of the Permian Peer
Index for the Performance Period and (ii) the Company’s TSR for the Performance
Period.

 

·                  The number of Awarded RSUs that vest on the Vesting Date will
be rounded to the nearest whole unit, and the balance of the Awarded RSUs will
not vest and will terminate on the Vesting Date.

 

For purposes of the Award Agreement, the following definitions will apply:

 

(1)         “TSR” means total shareholder return and shall be determined with
respect to the Company and any other Permian Peer Index member by dividing (a)
the sum of (i) the difference obtained by subtracting the applicable Beginning
Price from the applicable Ending Price plus (ii) all dividends and other
distributions during the Performance Period by (b) the applicable Beginning
Price. Any non-cash distributions shall be valued at fair market value. For the
purpose of determining TSR, the value of dividends and other distributions shall
be determined by treating them as reinvested in additional shares of stock at
the closing market price on the date of distribution

 

(2)         “Beginning Price” means, with respect to each Permian Peer Index
member, the average of the closing market prices of such company’s common stock
on the principal exchange on which such stock is traded for the thirty (30)
consecutive trading days beginning with the first trading day of the Performance
Period. For the purpose of determining Beginning Price, the value of dividends
and other distributions shall be determined by treating them as reinvested in
additional shares of stock at the closing market price on the date of
distribution. For the Company, “Beginning Price” shall be $18.91 per share of
the Company’s common stock.

 

(3)         “Ending Price” means, with respect to the Company and each Permian
Peer Index member, the average of the closing market prices of such company’s
common stock on the principal exchange on which such stock is traded for the
thirty (30) consecutive trading days ending on the last trading day of the
Performance Period; provided, however, in the event the Company has entered into
a binding agreement to consummate a transaction that is a Change of Control
Event, the Ending Price means, with respect to the Company, the average of the
closing market prices of the Company’s common stock on the principal exchange on
which such stock is traded for the period beginning on the date such binding
agreement is fully executed and the date the transaction contemplated by such
agreement closes. For the purpose of determining Ending Price, the value of
dividends and other distributions shall be determined by treating them as
reinvested in additional shares of stock at the closing market price on the date
of distribution.

 

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(4)         “Permian Peer Index” means each company listed below and, except as
provided below, the common stock (or similar equity security) of which continues
to be listed or traded on a national securities exchange through the last
trading day of the Performance Period. In the event a member of the Permian Peer
Index files for bankruptcy or liquidates due to an insolvency, such company
shall continue to be treated as a Permian Peer Index member, and such company’s
Ending Price will be treated as $0 if the common stock (or similar equity
security) of such company is no longer listed or traded on a national securities
exchange on the last trading day of the Performance Period. In the event of a
formation of a new parent company by a Permian Peer Index member, substantially
all of the assets and liabilities of which consist immediately after the
transaction of the equity interests in the original Permian Peer Index member or
the assets and liabilities of such Permian Peer Index member immediately prior
to the transaction, such new parent company shall be substituted for the Permian
Peer Index member to the extent (and for such period of time) as its common
stock (or similar equity securities) are listed or traded on a national
securities exchange but the common stock (or similar equity securities) of the
original Permian Peer Index member are not. In the event of a merger or other
business combination of two Permian Peer Index members (including, without
limitation, the acquisition of one Permian Peer Index member, or all or
substantially all of its assets, by another Permian Peer Index member), the
surviving, resulting or successor entity, as the case may be, shall continue to
be treated as a member of the Permian Peer Index, provided that the common stock
(or similar equity security) of such entity is listed or traded on a national
securities exchange through the last trading day of the Performance Period. With
respect to the preceding two sentences, the applicable stock prices shall be
equitably and proportionately adjusted by the Committee with approval of the
Board to the extent (if any) necessary to preserve the intended incentives of
the awards and mitigate the impact of the transaction.

 

Permian Peer Index

 

Abraxas Petroleum Corporation

Devon Energy Corporation

Matador Resources Company

QEP Resources, Inc.

 

 

 

 

Callon Petroleum Company

Diamondback Energy, Inc.

Oasis Petroleum, Inc.

Ring Energy, Inc.

 

 

 

 

Centennial Resource Development, Inc.

Earthstone Energy, Inc.

Parsley Energy, Inc.

Rosehill Resources, Inc.

 

 

 

 

Cimarex Energy Co.

Laredo Petroleum, Inc.

PDC Energy, Inc.

SM Energy Company

 

 

 

 

Concho Resources, Inc.

Lilis Energy, Inc.

Pioneer Natural Resources Company

WPX Energy, Inc.

 

With respect to the computation of TSR, Beginning Price, and Ending Price, there
shall also be an equitable and proportionate adjustment to the extent (if any)
necessary to preserve the intended incentives of the Awarded RSUs and mitigate
the impact of any stock split, stock dividend or reverse stock split occurring
during the Performance Period (or during the applicable 30-day period in
determining Beginning Price or Ending Price, as the case may be).

 

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