Exhibit 10.1

 

SRC/PDC MERGER
PERFORMANCE SHARE AGREEMENT

 

This SRC/PDC Merger Performance Share Agreement (hereinafter referred to as this
"Agreement") dated January 13, 2020 is by and between SRC Energy Inc., a
Colorado corporation (hereinafter referred to as the "Company") and [•]
(hereinafter referred to as "Executive").

 

Article 1

 

MERGER; PURPOSE OF AGREEMENT

 

1.1           Merger. The Company and PDC Energy, Inc. (“PDC”) have entered into
that certain Agreement and Plan of Merger, dated as of August 25, 2019 (the
“Merger Agreement”), pursuant to which the Company will merge with and into PDC,
with PDC being the surviving company (the “Merger”). Pursuant to the Merger
Agreement, the Company is to make a performance share award to Executive under
the Company's 2015 Equity Incentive Plan, as amended (hereinafter referred to as
the "Plan"), and the Plan and the award set forth in this Agreement will be
assumed by PDC upon consummation of the Merger.

 

1.2           Grant. In furtherance of same, and subject to the Plan and the
additional terms and conditions herein set forth, the Company and Executive
hereby enter into this Agreement pursuant to which the Executive may earn
performance shares (the “Performance Shares”). Each Performance Share will
initially represent the value of one share of $0.001 par value common stock of
the Company, and upon consummation of the Merger each Performance Share will be
adjusted to represent the value of a number of shares of $0.01 par value common
stock of PDC (the “PDC Shares”) based on the “Exchange Ratio” set forth in the
Merger Agreement, as set forth in Section 2.2, below. Upon the achievement of
pre-determined objectives for the specified performance period set forth below
(hereinafter referred to as the "Performance Period"), PDC will distribute to
the Executive a number of PDC Shares equal to the number of Performance Shares
earned by the Executive for the Performance Period, or a cash payment equal to
the Fair Market Value of such number of PDC Shares.

 

1.3           Merger not Consummated. In the event the Merger Agreement is
terminated for any reason without consummation of the Merger, this Agreement
shall terminate immediately, and Executive shall have no further rights
hereunder.

 

1.4           Administrator Authority. The Plan is administered by the
Administrator. Under the Plan, the Administrator has, among its other powers,
the authority to determine the final payout under this Agreement.
Notwithstanding the foregoing, for avoidance of doubt, the Performance Metrics
(defined below) under this Agreement are intended to be the same as, and will be
administered the same as, the performance metrics applicable to the performance
share awards granted by PDC to its executive officers on February 20, 2019.

 

 

 

 

Article 2

 

PERFORMANCE CONDITIONS

 

2.1           Performance Period. Pursuant to this Agreement, the Performance
Period will be the three-year period beginning January 1, 2019 and ending on
December 31, 2021, subject to Section 2.10(b).

 

2.2           Performance Award. Executive has a pre-Merger target of [•]
Performance Shares, which pre-Merger target shall be adjusted upon consummation
of the Merger in accordance with the Merger Agreement so that the award applies
to PDC Shares, with the result being that Executive will have a post-Merger
target of [•] Performance Shares (with each Performance Share applying
post-Merger to PDC Shares). The target number of Performance Shares, as adjusted
to apply to PDC Shares following the Merger, is hereinafter referred to as the
"Target Award." The range of Performance Shares which may be earned by the
Executive is 0% to 200% of the Target Award.

 

2.3           Performance Metric. Except as otherwise provided in this
Agreement, Awards of Performance Shares will be paid out to the Executive, if at
all, following the close of the Performance Period based generally upon Total
Shareholder Return ("TSR") of PDC relative to TSR for the Peer Companies
(defined below) for such Performance Period (the "Performance Metric").

 

2.4           Total Shareholder Return (TSR). For purposes of the Performance
Metric, except as otherwise provided in this Agreement, TSR for a company,
including PDC, will be a percentage equal to (x) the “Performance Period Value
Change” (as defined below) divided by (y) the “Beginning Value” (as defined
below).

 

(a)           “Performance Period Value Change” shall mean:

 

(i)               Average Share Price for the last twenty (20) business days of
the Performance Period,

 

minus

 

(ii)              Beginning Value,

 

plus

 

(iii)             Dividends (cash or stock based on ex-dividend date) paid per
share of company common stock over the Performance Period.

 

(b)           “Beginning Value” shall mean the Average Share Price for the
twenty (20) business days preceding the beginning of the Performance Period.

 

2.5           Average Share Price. For purposes of determining the TSR used in
the Performance Metric, the "Average Share Price" means the average daily
closing price of the shares on the NASDAQ Global Select Market (or if the
company is not listed on the NASDAQ Global Select Market, then on the principal
securities exchange on which such shares are tracked) as published by a
reputable source over the relevant measuring period.

 

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2.6           Peer Companies. For purposes of the Performance Metric for the
relevant Performance Period, "Peer Companies" means the companies listed on
Schedule A. In the event a Peer Company ceases to be publicly traded at any
point during the Performance Period, the Administrator shall have full
discretion to take any action it deems necessary or advisable in its sole and
absolute discretion in order to preserve the integrity of the Performance Metric
and the incentive intended by this Agreement, including, but not limited to,
determining whether the Peer Company will be replaced with a new Peer Company,
dropping such Peer Company from the list of Peer Companies and calculating the
Performance Metric without designating a replacement, treating the Peer Company
as being ranked in last place on the TSR list for the Performance Period (e.g.
for bankrupt or other delisted companies), or determining an alternate method of
calculating TSR for such Peer Company (e.g. by calculating TSR through the date
of acquisition of such Peer Company, and then assuming TSR for the remainder of
the period is determined based on an index). The Administrator need not take the
same action with respect to all Peer Companies that cease to be publicly traded
during the Performance Period.

 

2.7           Award Determination.

 

(a)           General. At the end of the Performance Period, the Peer Companies
and PDC shall be ranked together based on their TSR for the Performance Period
with the highest TSR being number 1 and the lowest TSR being the number of Peer
Companies, including PDC, remaining in the group at the end of the Performance
Period. Based on PDC’s relative TSR rank among the Peer Companies for the
Performance Period, Executive will have earned Performance Shares as determined
by PDC’s rank as follows:

 

·If PDC is ranked at or above the 90th percentile of the Peer Companies,
including PDC, 200% of the Target Award

 

·If PDC is ranked at the 50th percentile or median of the Peer Companies,
including PDC, 100% of the Target Award

 

·If PDC is ranked at the 25th percentile of the Peer Companies, including PDC,
50% of the Target Award

 

·If PDC is ranked below the 25th percentile of the Peer Companies, including
PDC, no award will be paid

 

If PDC is ranked between any of these payout levels, the percentage multiple of
the Target Award will be interpolated based on the actual percentile ranking of
PDC (rounded to the nearest whole percentile) in relation to the payout levels.

 

(b)           Cap if TSR is Negative. Notwithstanding Section 2.7(a), if PDC’s
overall TSR is negative for the Performance Period, then the number of
Performance Shares earned will be the lesser of (i) one hundred percent (100%)
of the Target Award, or (ii) the number of Performance Shares determined in
accordance with Section 2.7(a) based on PDC’s relative TSR rank during the
Performance Period.

 

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(c)            Floor if TSR Meets Minimum Level. Notwithstanding Section 2.7(a),
if PDC’s TSR over the Performance Period is at least 52.0875% (i.e. 15%
annualized), then the number of Performance Shares earned will be the greater of
(i) 50% of the Target Award, or (ii) the number of Performance Shares determined
in accordance with Section 2.7(a) based on PDC’s relative TSR rank during the
Performance Period.

 

2.8           Termination of Continuous Employment Prior to End of Performance
Period.

 

(a)           General. If Executive’s continuous employment terminates for any
reason other than for “Cause” (as defined in the Executive’s employment
agreement or severance compensation agreement with the Company, as applicable),
then the Target Award and the right to earn Performance Shares hereunder shall
remain outstanding and unaffected by such termination of continuous employment.
At the end of the Performance Period, the Company shall determine the number of
Performance Shares earned based on achievement of the Performance Metric
(without proration) and shall make payment to Executive pursuant to Section 2.9,
below, or if earlier, pursuant to Section 2.10(b) below. The Administrator shall
determine in its reasonable discretion whether and when Executive’s continuous
employment with the Company or a Subsidiary (PDC and its Subsidiaries,
post-Merger) has ended (including as a result of any leave of absence).

 

(b)           Termination for Cause. If Executive’s continuous employment is
terminated for Cause, then Executive shall immediately forfeit any and all
rights under this Agreement and shall not be entitled to receive any PDC Shares
or any other payment hereunder.

 

2.9           Payment of Performance Shares.

 

(a)            Determination of Results. Performance Shares earned for the
Performance Period will be paid to the Executive only following the
Administrator's formal review and certification of the actual TSR performance
results for the Performance Period, which formal review and certification shall
occur in time for payout to occur at the times set forth below.

 

(b)           Timing. Performance Shares payable to Executive pursuant to
Section 2.3 or, except as otherwise provided for in Section 2.10(b) below,
Section 2.8(a), will be paid in a lump sum to the Executive between January 1,
2022 and March 15, 2022.

 

(c)            Form of Settlement. Payment in respect of earned Performance
Shares pursuant to this Section 2.9 shall be made by distributing a number of
PDC Shares equal to the number of Performance Shares earned, or through payment
of cash equal to the Fair Market Value of such number of PDC Shares determined
as of the last day of the Performance Period, or any combination thereof, as
determined by the Administrator in its sole discretion.

 

2.10         Change in Control.

 

(a)            Merger not a Change in Control. The Merger shall not be deemed to
be a Change in Control under the Plan and shall not affect in any way the
earning, vesting, or payout of the Performance Shares.

 

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(b)           PDC Change in Control. In the event of a “PDC Change in Control”
(which shall mean a “Change in Control” as defined in the PDC Energy, Inc. 2018
Equity Incentive Plan, as may be amended from time to time, that also qualifies
as a “change in control event” pursuant to Treasury Regulation 1.409A-3(i)(5))
prior to the end of the Performance Period, the Performance Period shall be
deemed to have ended on the date of the PDC Change in Control, and the
Administrator shall determine the number of Performance Shares to which
Executive is entitled based on actual results through the date of the PDC Change
in Control, with the Performance Metric calculated by reference to the Average
Share Price for the twenty (20) business days prior to the PDC Change in Control
(the number of Performance Shares determined pursuant to the foregoing being the
“CIC Calculated Shares”). The CIC Calculated Shares shall be paid within
seventy-four (74) days following the date of the PDC Change in Control, by
distributing to the Executive a number of PDC Shares equal to the number of CIC
Calculated Shares, or through payment of cash equal to the Fair Market Value of
the CIC Calculated Shares determined as of the date of the PDC Change in
Control, or any combination thereof, as determined by the Administrator in its
sole discretion. Notwithstanding anything herein to the contrary, in the event
the PDC Shares cease to be outstanding or publicly traded as a result of a PDC
Change in Control, the Administrator shall make such adjustments as it deems
necessary or appropriate in its sole and absolute discretion in order to
preserve the incentive intended under this Agreement, including, but not limited
to, providing that payments of the CIC Calculated Shares shall be made solely in
cash or property (or any combination thereof) and that such payout shall be
determined by reference to any of the following: (i) the Fair Market Value of
PDC Shares as of the date of the consummation of the PDC Change in Control, (ii)
the consideration received in the PDC Change in Control, (iii) securities of the
acquirer or any parent or affiliate thereof, or (iv) such other metric as the
Administrator may determine in its discretion.

 

2.11         Tax Withholding. Executive shall make arrangements with PDC to
satisfy all applicable income and employment tax withholdings that may result
from the issuance of PDC Shares or the payment of cash hereunder, which
withholdings may, if payment under Section 2.9 or 2.10 is made all or in part
through the issuance of PDC Shares, be satisfied (at the election of Executive
made prior to the payment date): (i) by Executive paying to PDC directly in cash
the amount of such withholdings, (ii) by having PDC withhold from PDC Shares
paid to Executive a number of PDC Shares necessary to satisfy such tax
withholding obligations, or (iii) by a combination of the foregoing methods;
provided, however, that in the absence of an affirmative election by Executive
prior to the payment date, PDC shall satisfy such tax obligations pursuant to
subsection (ii), above. In addition, to the extent provided by the Plan, the
Executive may elect to have PDC perform additional voluntary tax withholding
through the withholding of PDC Shares up to the maximum statutory tax rates in
the Executive’s applicable jurisdictions.

 

2.12         Dividend Equivalents. Executive shall be entitled to a cash payment
with respect to each Performance Share earned and payable under this Agreement
in an amount equal to the ordinary cash dividends that would have been payable
to Executive had Executive been the owner of an actual PDC Share of stock (as
opposed to a Performance Share) from the first day of the Performance Period
through the date the Performance Share is paid. Such cash payment shall be made
in a single lump sum on the date on which payment is made in respect of the
related Performance Share.

 

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2.13         Stockholder Rights. An Executive will not have any voting or other
stockholder rights with respect to any Performance Shares. Executive shall have
full stockholder rights with respect to any PDC Shares issued as payment for
Performance Shares.

 

2.14         Fractional Shares. PDC will not be required to issue any fractional
PDC Shares pursuant to this Agreement. The Administrator may provide for the
elimination of fractions or for the settlement of fractions in cash.

 

Article 3

 

GENERAL

 

3.1           Capitalized Terms. All capitalized terms shall have the meaning
ascribed to them under this Agreement or, if not otherwise defined in this
Agreement, then such capitalized terms will have the meaning ascribed to them
under the Plan.

 

3.2           Construction. The provisions of this Agreement will be construed
in a manner consistent with the Plan. In the event of any inconsistency between
the terms of this Agreement and the terms of the Plan, the terms of the Plan
will control.

 

3.3           Compliance with Section 409A of the Internal Revenue Code.
Notwithstanding anything herein to the contrary, this Agreement, the Performance
Shares and all payments made hereunder are intended to comply with or be exempt
from the requirements and provisions of Section 409A of the Code and the
regulations promulgated thereunder and shall be construed and interpreted in a
manner consistent with such intent. Notwithstanding the foregoing, the Company
does not guarantee that any payment under this Agreement complies with or is
exempt from Section 409A of the Code and the regulations promulgated thereunder,
and neither the Company, its Subsidiaries or affiliates, nor their respective
executives, members, partners, directors, officer, or affiliates shall have any
liability with respect to any failure of any payments or benefits under this
Agreement to comply with or be exempt from Section 409A of the Code and the
regulations promulgated thereunder. Notwithstanding anything in this Agreement
to the contrary, if any provision of this Agreement would result in the
imposition of taxes under Section 409A of the Code and the regulations
promulgated thereunder, that provision may be reformed unilaterally by the
Administrator, to the extent permissible under Section 409A of the Code and the
regulations promulgated thereunder, to avoid the imposition of the additional
tax, and no such action shall be deemed to adversely affect Executive’s rights
with respect to the Performance Shares granted hereunder; provided, however that
the Administrator has no affirmative obligation to make any such reformation. In
no event may Executive, directly or indirectly, designate the calendar year of
any payment made under this Agreement which constitutes a “deferral of
compensation” within the meaning of Section 409A of the Code and the regulations
promulgated thereunder. Executive is solely responsible and liable for the
satisfaction of all taxes and penalties that may be imposed on or in respect of
Executive in connection with the Performance Shares granted hereunder (including
any taxes or penalties under Section 409A of the Code).

 

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3.4           Consent Relating to Personal Data. Executive voluntarily
acknowledges and consents to the collection, use, processing and transfer of
personal data as described in this Section even though Executive is not obliged
to consent to such collection, use, processing and transfer of personal data.
The Company and its subsidiaries (PDC and its subsidiaries, post-Merger) hold,
for the purpose of managing and administering the Plan, certain personal
information about Executive, including Executive’s name, home address and
telephone number, date of birth, social security number or other employee
identification number, salary, nationality, job title, any shares or
directorships held in the Company (or PDC, post-Merger), details of all equity
awards or any other entitlement to shares awarded, canceled, purchased, vested,
unvested or outstanding in Executive’s favor (“Data”). The Company and/or its
subsidiaries (PDC and its subsidiaries, post-Merger) will transfer Data among
themselves as necessary for the purpose of implementation, administration and
management of Executive’s participation in the Plan and the Company and/or any
of its subsidiaries (PDC and its subsidiaries, post-Merger) may each further
transfer Data to any third parties assisting in the implementation,
administration and management of the Plan. These recipients may be located
throughout the world, including the United States. Executive authorizes them to
receive, possess, use, retain and transfer the Data, in electronic or other
form, for the purposes of implementing, administering and managing Executive’s
participation in the Plan, including any requisite transfer of such Data as may
be required for the administration of the Plan and/or the subsequent holding of
PDC Shares on Executive’s behalf to a broker or other third party with whom
Executive may elect to deposit any PDC Shares acquired pursuant to the Plan.
Executive may, at any time, review Data, require any necessary amendments to it
or withdraw the consents herein in writing by contacting the Company (or PDC,
post-Merger).

 

3.5           Other Employee Benefits. Except as specifically provided otherwise
in any relevant employee benefit plan, program, or arrangement, any amounts
payable hereunder are not part of normal or expected compensation for purposes
of calculating any severance, resignation, redundancy, end of service payments,
bonuses, long-service awards, pension or retirement benefits or similar
payments.

 

3.6           Electronic Delivery. EXECUTIVE HEREBY CONSENTS TO ELECTRONIC
DELIVERY OF THE PLAN, AND ANY DISCLOSURE OR OTHER DOCUMENTS RELATED TO THE PLAN,
INCLUDING FUTURE GRANT DOCUMENTS (COLLECTIVELY, THE “PLAN DOCUMENTS”). THE
COMPANY (OR PDC, POST-MERGER) WILL DELIVER THE PLAN DOCUMENTS ELECTRONICALLY TO
EXECUTIVE BY E-MAIL, BY POSTING SUCH DOCUMENTS ON ITS INTRANET WEBSITE OR BY
ANOTHER MODE OF ELECTRONIC DELIVERY AS DETERMINED BY THE COMPANY (OR PDC,
POST-MERGER) IN ITS SOLE DISCRETION. EXECUTIVE ACKNOWLEDGES THAT HE OR SHE IS
ABLE TO ACCESS, VIEW AND RETAIN AN E-MAIL ANNOUNCEMENT INFORMING EXECUTIVE THAT
THE PLAN DOCUMENTS ARE AVAILABLE IN EITHER HTML, PDF OR SUCH OTHER FORMAT AS THE
COMPANY (OR PDC, POST-MERGER) DETERMINES IN ITS SOLE DISCRETION.

 

3.7           Notices. Any notice required or permitted to be given hereunder
shall be in writing and shall be given by hand delivery, by e-mail, by
facsimile, or by first class registered or certified mail, postage prepaid,
addressed, if to the Company (or PDC, post-Merger), to its Corporate Secretary,
and if to Executive, to Executive’s address now on file with the Company (or
with PDC, post-Merger), or to such other address as either may designate in
writing. Any notice shall be deemed to be duly given as of the date delivered in
the case of personal delivery, e-mail, or facsimile, or as of the second day
after enclosed in a properly sealed envelope and deposited, postage prepaid, in
a United States post office, in the case of mailed notice.

 

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3.8           Amendment. This Agreement may be amended by the Administrator at
any time without Executive’s consent if such amendment does not reduce the
benefits to which Executive was entitled. In all other cases, this Agreement may
not be amended or otherwise modified unless evidenced in writing and signed by
the Company (or PDC, post-Merger) and Executive.

 

3.9           Construction; Severability. The section headings contained herein
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision hereof, and each other provision hereof shall be severable
and enforceable to the extent permitted by law.

 

3.10         Waiver. Any provision contained in this Agreement may be waived,
either generally or in any particular instance, by the Administrator appointed
under the Plan, but only to the extent permitted under the Plan.

 

3.11         Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Company (and to PDC, post-Merger) and to Executive and their
respective heirs, executors, administrators, legal representatives, successors
and assigns.

 

3.12         Rights to Employment. Nothing contained in this Agreement shall be
construed as giving Executive any right to be retained in the employ of the
Company (or PDC, post-Merger) and this Agreement is limited solely to governing
the parties’ rights and obligations with respect to the Performance Shares.

 

3.13         Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado, without regard to the choice
of law principles thereof.

 

3.14         PDC Policies to Apply. The sale of any PDC Shares received as
payment hereunder is subject to PDC’s policies regulating securities trading by
employees, all relevant federal and state securities laws and the listing
requirements of any stock exchange on which the shares of the PDC’s common stock
are then traded. In addition, Executive’s participation in the Plan and receipt
of remuneration as a result of the Performance Shares is subject in all respects
to any relevant compensation clawback policies that may be in effect from time
to time.

 

3.15          Non-Compete1. As consideration for the Performance Share award
granted hereunder, the Executive hereby acknowledges and agrees that Executive
shall not, either during the term of Executive’s employment by the Company (or
PDC, post-Merger) or for a period of two (2) year thereafter, engage in any
Competitive Business (as defined below) within any county or parish in which the
Company or an affiliate owns an interest (whether by ownership, leasehold or
otherwise) in any oil or natural gas properties or other properties utilized by
the Company in the operation of its business, or in any oil and gas property
that is adjacent to or overlapping with any such county or parish, in each case
determined as of the closing of the Merger; provided, however, that the
ownership of less than five percent (5%) of the outstanding capital stock of a
corporation whose shares are traded on a national securities exchange or on the
over-the-counter market shall not be deemed engaging in a Competitive Business.
“Competitive Business” shall mean the acquisition, development or production of
crude oil and/or natural gas, or any other business activities that are the same
as or similar to the Company’s or an affiliate’s business operations as their
business exists as of the closing of the Merger.

 

 

1 To be included in award agreement for Named Executive Officers.

 

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IN WITNESS WHEREOF, the Company and Executive hereby execute this Agreement to
be effective as of the day and year first above written.

 

 

  SRC ENERGY INC.           By:             Date:             EXECUTIVE        
  Signature             Date:  

 

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SCHEDULE A

 

PEER COMPANIES

 

The following 14 companies compromise the Peer Companies for the 2019 – 2021
Performance Period:

 

·Callon Petroleum Company (CPE)

·Carrizo Oil & Gas Inc. (CRZO)

·Centennial Resource Development Inc. (CDEV)

·Cimarex Energy Co. (XEC)

·Extraction Oil and Gas, Inc. (XOG)

·Jagged Peak Energy Inc. (JAG)

·Laredo Petroleum Holdings, Inc. (LPI)

·Matador Resources Company (MTDR)

·Oasis Petroleum Inc. (OAS)

·Parsley Energy, Inc. (PE)

·QEP Resources, Inc. (QEP)

·SM Energy Company (SM)

·SRC Energy Inc. (SRCI)

·WPX Energy, Inc. (WPX)