Exhibit 10.3

 

SANCHEZ ENERGY CORPORATION

 

THIRD AMENDED AND RESTATED 2011 LONG TERM INCENTIVE PLAN

 

PHANTOM STOCK AGREEMENT

 

Participant: Howard J. Thill

 

Address: 1000 Main Street, Suite 3000, Houston, Texas 77002

 

Number of Phantom Shares: 175,000

 

Date of Grant: October 10, 2016

 

Vesting of Phantom Shares:

 

Vesting Date

 

Vested %

 

 

 

October 10, 2017

 

331/3

%

 

 

October 10, 2018

 

331/3

%

 

 

October 10, 2019

 

331/3

%

 

 

 

 

Total: 100

%

 

Sanchez Energy Corporation, a Delaware corporation (the “Company”), hereby
grants to the Participant, pursuant to the provisions of the Sanchez Energy
Corporation Third Amended and Restated 2011 Long Term Incentive Plan, as amended
from time to time in accordance with its terms (the “Plan”), an award (this
“Award”) pursuant to Section 6(b) of the Plan of shares of Phantom Stock (the
“Phantom Shares”), effective as of the “Date of Grant” as set forth above, upon
and subject to the terms and conditions set forth in this Phantom Stock
Agreement (this “Agreement”) and in the Plan, which are incorporated herein by
reference.  Each Phantom Share subject to this Award represents a notional share
granted under the Plan that upon vesting and settlement would entitle the
Participant to receive an amount of cash equal to the Fair Market Value of one
Common Share as of the applicable Vesting Date (as defined below). The Phantom
Shares will be credited to a separate account maintained for the Participant on
the books of the Company (the “Account”) and will vest and be settled in
accordance with Section 3 below.  Unless otherwise defined in this Agreement,
capitalized terms used in this Agreement shall have the meanings assigned to
them in the Plan.

 

1.             EFFECT OF THE PLAN. The Phantom Shares granted to Participant are
subject to all of the provisions of the Plan and this Agreement, together with
all rules and determinations from time to time issued by the Committee and by
the Board pursuant to the Plan. The Company hereby reserves the right to amend,
modify, restate, supplement or terminate the Plan without the consent of
Participant, so long as such amendment, modification, restatement or supplement
shall not materially reduce the rights and benefits available to Participant
hereunder, and this Award shall be subject, without further action by the
Company or Participant, to such amendment, modification, restatement or
supplement unless provided otherwise therein.

 

2.             VESTING SCHEDULE; SERVICE REQUIREMENT. Except as otherwise
accelerated by the Committee, a portion of the Phantom Shares shall vest during
Participant’s continued service with the Company or an Affiliate  (including
Participant’s services for the Company pursuant to the Services Agreement, dated
as of December 19, 2011, by and between Sanchez Oil & Gas Corporation and the
Company) (“Continuous Service”) on each “Vesting Date” set forth above (each, a
“Vesting Date”), in each case, as set forth on the first page of this Agreement
under the heading “Vesting of Phantom Shares,” as follows:

 

(a)           thirty-three and one-third percent (33 1/3%) of the Phantom Shares
will vest on the first Vesting Date;

 

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(b)           an additional thirty-three and one-third percent (33 1/3%) of the
Phantom Shares will vest on the second Vesting Date; and

 

(c)           an additional thirty-three and one-third percent (33 1/3%) of the
Phantom Shares will vest on the third Vesting Date.

 

Phantom Shares that have vested pursuant to this Agreement are referred to
herein as “Vested Phantom Shares” and Phantom Shares that have not yet vested
pursuant to this Agreement are referred to herein as “Unvested Phantom Shares.”
If an installment of the vesting would result in a fractional Vested Phantom
Share, such installment will be rounded to the next lower Phantom Share except
the final installment, which will be for the balance of the Phantom Shares.

 

3.             SETTLEMENT.  Subject to Section 2 above and Section 9 below, with
respect to the Vested Phantom Shares that become vested as of a given Vesting
Date, the Company shall pay to the Participant an amount of cash equal to
(x) the Fair Market Value of one Common Share as of the Vesting Date multiplied
by (y) the aggregate number of the Phantom Shares that become vested on the
applicable Vesting Date on the thirtieth (30th) day following the applicable
Vesting Date (such date, the “Settlement Date”) and upon settlement, such Vested
Phantom Shares will cease to be credited to the Account.

 

4.             CONDITIONS OF FORFEITURE. Upon any termination of Participant’s
Continuous Service (the “Termination Date”) for Participant’s voluntary
resignation or termination by the Company for Cause, before all of the Phantom
Shares become Vested Phantom Shares, all Unvested Phantom Shares as of the
Termination Date shall, without further action of any kind by the Company or
Participant, be forfeited.

 

For purposes of this Agreement, “Cause” shall mean a termination of
Participant’s Continuous Service by the Company due to Participant’s
(i) commission of, conviction for, plea of guilty or nolo contendere to a
felony, or other material act or omission involving dishonesty or fraud,
(ii) gross negligence or willful malfeasance, or (iii) Participant’s continued
failure to substantially perform his job duties for the Company.

 

5.             NON-TRANSFERABILITY. Participant may not sell, transfer, pledge,
exchange, hypothecate, or otherwise encumber or dispose of any of the Phantom
Shares, or any right or interest therein, by operation of law or otherwise,
except only with respect to a transfer of title effected pursuant to
Participant’s will or the laws of descent and distribution following
Participant’s death. References to Participant, to the extent relevant in the
context, shall include references to authorized transferees. Any transfer in
violation of this Section 5 shall be void and of no force or effect, and shall
result in the immediate forfeiture of all Phantom Shares.

 

6.             DIVIDEND EQUIVALENTS AND VOTING RIGHTS. The Participant shall not
be deemed for any purpose to be the owner of the Common Shares underlying the
Phantom Shares subject to the Award, other than with respect to the
Participant’s right to receive payment upon vesting and settlement of the
Phantom Shares pursuant to Section 3 above.  The Participant acknowledges and
agrees that, with respect to each Phantom Share credited to the Account, the
Participant has no voting rights with respect to the Company.  If the Company
pays a cash dividend on its outstanding Common Shares for which the Record Date
(for purposes of this Agreement, the “Record Date” is the date on which
shareholders of record are determined for purposes of paying the cash dividend
on Common Shares) occurs after the Date of Grant and prior to the Settlement
Date, the Participant shall receive a lump sum cash payment on the applicable
Settlement Date equal to the aggregate amount of the ordinary cash dividends
paid by the Company on a single Common Share multiplied by the number of Phantom
Shares awarded under this Agreement that are both (x) unvested and unpaid as of
each applicable Record Date and (y) settled upon such Settlement Date.

 

7.             CAPITAL ADJUSTMENTS AND CORPORATE EVENTS. If, from time to time
during the term of this Agreement, there is any capital adjustment affecting the
outstanding Common Shares as a class without the Company’s receipt of
consideration, the Unvested Phantom Shares shall be adjusted in accordance with
the provisions of Section 4(c) of the Plan. Any and all new, substituted or
additional securities that become subject to the Award hereunder because of a
capital adjustment shall be immediately subject to the forfeiture provisions of
this Agreement and included thereafter as “Unvested Phantom Shares” for purposes
of this Agreement.

 

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8.             GENERAL ASSETS.  All amounts credited to the Participant’s
Account under this Agreement shall continue for all purposes to be part of the
general assets of the Company.  The Participant’s interest in the Account shall
make the Participant only a general, unsecured creditor of the Company.

 

9.             TAX MATTERS.

 

(a)           The Company’s obligation to pay amounts to Participant upon the
vesting and settlement of the Phantom Shares shall be subject to the
satisfaction of any and all applicable federal, state and local income and/or
employment tax withholding requirements (the “Required Withholding”) and the
Company shall withhold from any payment due to the Participant such amount
necessary to satisfy Participant’s Required Withholding.

 

(b)           Participant acknowledges that the tax consequences associated with
this Award are complex and that the Company has urged Participant to review with
Participant’s own tax advisors the federal, state, and local tax consequences of
this Award. Participant is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents. Participant
understands that Participant (and not the Company) shall be responsible for
Participant’s own tax liability that may arise as a result of the Award.

 

10.          ENTIRE AGREEMENT; GOVERNING LAW. The Plan and this Agreement
constitute the entire agreement of the Company and Participant (collectively,
the “Parties”) with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Parties with respect to
the subject matter hereof. If there is any inconsistency between the provisions
of this Agreement and of the Plan, the provisions of the Plan shall govern.
Nothing in the Plan and this Agreement (except as expressly provided therein or
herein) is intended to confer any rights or remedies on any person other than
the Parties. The Plan and this Agreement are to be construed in accordance with
and governed by the internal laws of the State of Delaware, without giving
effect to any choice-of-law rule that would cause the application of the laws of
any jurisdiction other than the internal laws of the State of Delaware to the
rights and duties of the Parties. Should any provision of the Plan or this
Agreement relating to the subject matter hereof be determined by a court of law
to be illegal or unenforceable, such provision shall be enforced to the fullest
extent allowed by law and the other provisions shall nevertheless remain
effective and shall remain enforceable.

 

11.          INTERPRETIVE MATTERS. Whenever required by the context, pronouns
and any variation thereof shall be deemed to refer to the masculine, feminine,
or neuter, and the singular shall include the plural, and vice versa. The term
“include” or “including” does not denote or imply any limitation. The captions
and headings used in this Agreement are inserted for convenience and shall not
be deemed a part of this Award or this Agreement for construction or
interpretation.

 

12.          NATURE OF PAYMENTS. Any and all payments in respect of Phantom
Shares hereunder shall constitute special incentive payments to Participant and
shall not be taken into account in computing the amount of salary or
compensation of Participant for the purpose of determining any retirement, death
or other benefits under (a) any retirement, bonus, life insurance or other
employee benefit plan of the Company, or (b) any agreement between the Company
and Participant, except as such plan or agreement shall otherwise expressly
provide.

 

13.          AMENDMENT; WAIVER. This Agreement may be amended or modified only
by means of a written document or documents signed by the Company and
Participant. Any provision for the benefit of the Company contained in this
Agreement may be waived, either generally or in any particular instance, by the
Board or by the Committee. A waiver on one occasion shall not be deemed to be a
waiver of the same or any other breach on a future occasion.

 

14.          NOTICE. Any notice or other communication required or permitted
hereunder shall be given in writing and shall be deemed given, effective, and
received upon prepaid delivery in person or by courier or upon the earlier of
delivery or the third business day after deposit in the United States mail if
sent by certified mail, with postage and fees prepaid, addressed to the other
Party at its address as shown beneath its signature in this Agreement, or to
such other address as such Party may designate in writing from time to time by
notice to the other Party in accordance with this Section 14.

 

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15.          SECTION 409A.  Notwithstanding anything herein to the contrary,
this Agreement is intended to be interpreted and applied so that the payments
set forth herein either shall either be exempt from the requirements of
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), or
shall comply with the requirements of Section 409A of the Code, and,
accordingly, to the maximum extent permitted, this Agreement shall be
interpreted to be exempt from or in compliance with Section 409A of the Code. 
Notwithstanding the foregoing, none of the Company, its Affiliates, officers,
directors, employees, or agents guarantees that this Agreement complies with, or
is exempt from, the requirements of Section 409A of the Code and none of the
foregoing shall have any liability for the failure of this Agreement to comply
with, or be exempt from, such requirements.

 

[signature page follows]

 

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SANCHEZ ENERGY CORPORATION

 

 

 

By:

/s/ Gregory B. Kopel

 

Title:

Gregory B. Kopel - SVP & GC

 

Address:

1000 Main Street, Suite 3000

 

 

Houston, TX 77002

 

PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE PHANTOM SHARES SUBJECT TO THIS
AWARD SHALL VEST AND BECOME SETTLED, IF AT ALL, ONLY DURING THE PERIOD OF
PARTICIPANT’S CONTINUOUS SERVICE OR AS OTHERWISE PROVIDED IN THIS AGREEMENT (NOT
THROUGH THE ACT OF BEING GRANTED THIS AWARD). PARTICIPANT FURTHER ACKNOWLEDGES
AND AGREES THAT NOTHING IN THIS AGREEMENT OR THE PLAN SHALL CONFER UPON
PARTICIPANT ANY RIGHT WITH RESPECT TO FUTURE AWARDS OR CONTINUATION OF
PARTICIPANT’S CONTINUOUS SERVICE. Participant acknowledges receipt of a copy of
the Plan, represents that he or she is familiar with the terms and provisions
thereof, and hereby accepts this Award subject to all of the terms and
provisions hereof and thereof. Participant has reviewed this Agreement and the
Plan in their entirety, has had an opportunity to obtain the advice of tax and
legal counsel prior to executing this Agreement, and fully understands all
provisions of this Agreement and the Plan. Participant hereby agrees that all
disputes arising out of or relating to this Agreement and the Plan shall be
resolved in accordance with the Plan. Participant further agrees to notify the
Company upon any change in the address for notice indicated in this Agreement.

 

DATED:

10/11/2016

 

SIGNED:

/s/ Howard J. Thill

 

 

 

PARTICIPANT

 

 

 

 

 

 

Address:

1000 Main Street, Suite 3000

 

 

 

Houston, TX 77002

 

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