Document:

Exhibit

Exhibit 10.3

CENTENNIAL RESOURCE DEVELOPMENT, INC.
AMENDED AND RESTATED 
NON-EMPLOYEE DIRECTOR COMPENSATION PROGRAM
Effective Date: August 1, 2018
Each member of the board of directors (the “Board”) of Centennial Resource Development, Inc. (the “Company”) who is not an employee of the Company or any parent or subsidiary of the Company and is not affiliated with Riverstone Investment Group LLC or NGP Energy Capital Management, L.L.C. (each, a “Non-Employee Director”) will receive the compensation in this Amended and Restated Non-Employee Director Compensation Program (this “Program”) for service as a Non-Employee Director.  The compensation described in this Program will be paid or be made, as applicable, automatically and without further action of the Board to each Non-Employee Director who is entitled to receive the compensation, unless the Non-Employee Director declines receipt of the compensation by written notice to the Company.  The terms and conditions of this Program will supersede any prior cash or equity compensation arrangements for service as a member of the Board between the Company and any of its Non-Employee Directors.  This Program will remain in effect until it is revised or rescinded by further action of the Board.  This Program may be amended, modified or terminated by the Board at any time in its sole discretion.  No Non-Employee Director will have any rights under this Program.  
I. CASH COMPENSATION
A.        Annual Retainers.  Each Non-Employee Director will receive an annual retainer of $87,500 (the “Annual Retainer”). If a Non-Employee Director is also serving as the Lead Director of the Board as contemplated by the Company’s Corporate Governance Guidelines, such Non-Employee Director will receive an additional annual retainer of $50,000 as compensation for the additional responsibilities associated with serving as the Lead Director (the “Lead Director Retainer” and, together with the Annual Retainer, the “Retainers”).
B.        Payment of Retainers.  The Retainers will be earned on a quarterly basis based on a calendar quarter and paid in cash by the Company in arrears not later than the fifteenth day following the end of each calendar quarter.  If a Non-Employee Director does not serve as a Non-Employee Director for an entire calendar quarter, or a Non-Employee Director serves as the Lead Director but not for an entire calendar quarter, the Non-Employee Director’s Retainer will be prorated for the portion of the calendar quarter actually served as a Non-Employee Director or Lead Director, as applicable.
II. EQUITY COMPENSATION 
Non-Employee Directors will be granted the awards of Restricted Stock (as defined in the Company’s 2016 Long Term Incentive Plan or any other applicable Company equity incentive plan then-maintained by the Company (the “Equity Plan”)) described below (each, a “Restricted Stock Award”).  The Restricted Stock Awards will be granted under and subject to the terms of the Plan and award agreements in substantially the form approved by the Board.  All applicable terms of the Equity Plan apply to this Program as if fully set forth herein, and all Restricted Stock Awards under this Program are subject in all respects to the terms of the Equity Plan and the applicable award agreement. 
 

A.        Restricted Stock Awards.  A Non-Employee Director who is serving as a Non-Employee Director as of the last day of the Company’s fiscal year (in each case, an “Annual Grant Date”) will be automatically granted on each Annual Grant Date a number of shares of Restricted Stock equal to the quotient obtained by dividing (i) $162,500 by (ii) the average daily closing price of one share of the Company’s Common Stock on the NASDAQ Capital Market over the five consecutive trading days ending on the day before the applicable Annual Grant Date. If a Non-Employee Director is first appointed or elected on a date other than an Annual Grant Date, or a member of the Board first becomes a Non-Employee Director as described in clause B below on a date other than an Annual Grant Date (in either case, a “Mid-Year Grant Date”), the Non-Employee Director will be automatically granted on the Mid-Year Grant Date a number of shares of Restricted Stock equal to the quotient obtained by dividing (x) the product of $162,500 and the number of days remaining in the Company’s fiscal year following the Mid-Year Grant Date, by (y) the product of 365 and the average daily closing price of one share of the Company’s Common Stock on the NASDAQ Capital Market over the five consecutive trading days ending on the day before the Mid-Year Grant Date. Each Annual Grant Date and Mid-Year Grant Date shall be referred to individually as a “Grant Date.”  

B.        Termination of Employment of Employee Directors.  Members of the Board who are employees of the Company or any parent or subsidiary of the Company who subsequently terminate their employment with the Company and any parent or subsidiary of the Company and remain on the Board will, to the extent that they are otherwise eligible, be eligible to receive, Restricted Stock Awards under this Policy on Grant Dates occurring on or after their termination of employment with the Company and any parent or subsidiary of the Company.
C.        Vesting.  Each Restricted Stock Award shall vest in a single installment on the earlier to occur of (i) the first anniversary of the Grant Date and (ii) immediately prior to and contingent upon the closing of a Change in Control (as defined in the Equity Plan), subject in each case to the Non-Employee Director continuing in service as a Non-Employee Director through the vesting date.  Unless the Board otherwise determines, any Restricted Stock Award that is unvested at the time of a Non-Employee Director’s termination of service on the Board as a Non-Employee Director will be immediately forfeited upon such termination of service and will not thereafter become vested. 
III. COMPENSATION LIMITS
Notwithstanding anything to the contrary in this Program, all compensation payable under this Program will be subject to any limits on the maximum amount of Non-Employee Director compensation set forth in the Equity Plan, as in effect from time to time.
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2Exhibit

Exhibit 10.4

CENTENNIAL RESOURCE DEVELOPMENT, INC. 
2016 LONG TERM INCENTIVE PLAN

PERFORMANCE RESTRICTED STOCK UNIT GRANT NOTICE
Capitalized terms not specifically defined in this Performance Restricted Stock Unit Grant Notice (the “Grant Notice”) have the meanings given to them in the 2016 Long Term Incentive Plan (as amended from time to time, the “Plan”) of Centennial Resource Development, Inc. (the “Company”).
The Company has granted to the participant listed below (“Participant”) the Restricted Stock Units described in this Grant Notice (the “PSUs”), subject to the terms and conditions of the Plan and the Performance Restricted Stock Unit Agreement attached as Exhibit A (the “Agreement”), both of which are incorporated into this Grant Notice by reference.  
	
		
	Participant:
	[__________]

	Grant Date:
	[__________]

	Performance Period:
	July 1, 2018 through June 30, 2021

	Target Number of PSUs:
	[__________]

By Participant’s signature below, Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement.  Participant has reviewed the Plan, this Grant Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of the Plan, this Grant Notice and the Agreement.  Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement.
	
				
	CENTENNIAL RESOURCE DEVELOPMENT, INC.
	 
	PARTICIPANT

	By:
	 
	 
	 

	Name:
	 
	 
	[Participant Name]

	Title:
	 
	 
	 

Exhibit A

PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT
Capitalized terms not specifically defined in this Agreement have the meanings specified in the Grant Notice or, if not defined in the Grant Notice, in the Plan.
Article I.
GENERAL

1.1    Award of PSUs and Dividend Equivalents.  
(a)    The Company has granted the PSUs to Participant effective as of the grant date set forth in the Grant Notice (the “Grant Date”).  Each PSU represents the right to receive one Share or, at the option of the Administrator, an amount of cash, in either case, as set forth in this Agreement.  Participant will have no right to the distribution of any Shares or payment of any cash until the time (if ever) the PSUs have vested.
(b)    The Company hereby grants to Participant, with respect to each PSU, a Dividend Equivalent for ordinary cash dividends paid to substantially all holders of outstanding Shares with a record date after the Grant Date and prior to the date the applicable PSU is settled, forfeited or otherwise expires.  Each Dividend Equivalent entitles Participant to receive the equivalent value of any such ordinary cash dividends paid on a single Share.  The Company will establish a separate Dividend Equivalent bookkeeping account (a “Dividend Equivalent Account”) for each Dividend Equivalent and credit the Dividend Equivalent Account (without interest) on the applicable dividend payment date with the amount of any such cash paid.
1.2    Incorporation of Terms of Plan.  The PSUs and Dividend Equivalents are subject to the terms and conditions set forth in this Agreement and the Plan, which is incorporated herein by reference.  In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan will control.
1.3    Unsecured Promise.  The PSUs and Dividend Equivalents will at all times prior to settlement represent an unsecured Company obligation payable only from the Company’s general assets.
Article II. 
VESTING; FORFEITURE AND SETTLEMENT
2.1    Vesting; Forfeiture.  
(a)    The PSUs will be earned based on the Company’s achievement of the performance conditions set forth in Appendix A and, to the extent earned, the PSUs will vest in accordance with the schedule and terms set forth in Section 2.1(b).  Any fraction of a PSU that would otherwise be vested will be rounded to the nearest whole PSU.  Any PSUs that are not earned in accordance with the performance conditions set forth in Appendix A will immediately and automatically be cancelled and forfeited without consideration as of the date of determination.  In the event of Participant’s Termination of Service for any reason, all unvested PSUs will immediately and automatically be cancelled and forfeited, except as otherwise determined by the Administrator or provided in a binding written agreement between Participant and the Company.  Dividend Equivalents (including any Dividend Equivalent Account balance) will vest or be forfeited, as applicable, upon the vesting or forfeiture of the PSU with respect to which the Dividend Equivalent (including the Dividend Equivalent Account) relates.

(b)    The PSUs will be earned, if at all, at a level of between 50% and 200% of the Target Number of PSUs specified in the Grant Notice (the “Target Number of PSUs”) based on the Company’s achievement of the performance conditions set forth in Appendix A for the Performance Period set forth in the Grant Notice (the “Performance Period”).  When practicable following the completion of the Performance Period, but in no event more than thirty (30) days thereafter, the Administrator shall determine the extent to which the performance conditions set forth in Appendix A have been satisfied (such date of determination, the “Final Determination Date”).  To the extent earned, the PSUs will vest on the Final Determination Date, subject to Participant not incurring a Termination of Service on or prior to the last day of the Performance Period.  
2.2    Settlement.
(a)    PSUs and Dividend Equivalents (including any Dividend Equivalent Account balance) will be paid in Shares or cash at the Administrator’s option as soon as administratively practicable after the vesting of the applicable PSU, but in no event more than thirty (30) days after the PSU’s vesting date.  Notwithstanding the foregoing, the Company may delay any payment under this Agreement that the Company reasonably determines would violate Applicable Law until the earliest date the Company reasonably determines the making of the payment will not cause such a violation (in accordance with Treasury Regulation Section 1.409A-2(b)(7)(ii)), provided the Company reasonably believes the delay will not result in the imposition of excise taxes under Section 409A.
(b)    If a PSU is paid in cash, the amount of cash paid with respect to the PSU will equal the Fair Market Value of a Share on the fifth business day preceding the payment date.  If a Dividend Equivalent is paid in Shares, the number of Shares paid with respect to the Dividend Equivalent will equal the quotient, rounded down to the nearest whole Share, of the Dividend Equivalent Account balance divided by the Fair Market Value of a Share on the fifth business day preceding the payment date.
Article III. 
TAXATION AND TAX WITHHOLDING
3.1    Representation.  Participant represents to the Company that Participant has reviewed with Participant’s own tax advisors the tax consequences of this Award and the transactions contemplated by the Grant Notice and this Agreement.  Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents.
3.2    Tax Withholding.  
(a)    The Company has the right and option, but not the obligation, to treat Participant’s failure to provide timely payment in accordance with the Plan of any withholding tax arising in connection with the PSUs or Dividend Equivalents as Participant’s election to satisfy all or any portion of the withholding tax by requesting the Company retain Shares otherwise issuable under the Award.
(b)    Participant acknowledges that Participant is ultimately liable and responsible for all taxes owed in connection with the PSUs and the Dividend Equivalents, regardless of any action the Company or any Subsidiary takes with respect to any tax withholding obligations that arise in connection with the PSUs or Dividend Equivalents.  Neither the Company nor any Subsidiary makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding, vesting or payment of the PSUs or the Dividend Equivalents or the subsequent sale of Shares.  The Company and the 

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Subsidiaries do not commit and are under no obligation to structure the PSUs or Dividend Equivalents to reduce or eliminate Participant’s tax liability.
Article IV. 
OTHER PROVISIONS
4.1    Adjustments.  Participant acknowledges that the PSUs, the Shares subject to the PSUs and the Dividend Equivalents are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan.
4.2    Notices.  Any notice to be given under the terms of this Agreement to the Company must be in writing and addressed to the Company in care of the Company’s Secretary at the Company’s principal office or the Secretary’s then-current email address or facsimile number.  Any notice to be given under the terms of this Agreement to Participant must be in writing and addressed to Participant at Participant’s last known mailing address, email address or facsimile number in the Company’s personnel files.  By a notice given pursuant to this Section, either party may designate a different address for notices to be given to that party.  Any notice will be deemed duly given when actually received, when sent by email, when sent by certified mail (return receipt requested) and deposited with postage prepaid in a post office or branch post office regularly maintained by the United States Postal Service, when delivered by a nationally recognized express shipping company or upon receipt of a facsimile transmission confirmation.
4.3    Titles.  Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
4.4    Conformity to Securities Laws.  Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws and, to the extent Applicable Laws permit, will be deemed amended as necessary to conform to Applicable Laws.
4.5    Successors and Assigns.  The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement will inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer set forth in the Plan, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
4.6    Limitations Applicable to Section 16 Persons.  Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Grant Notice, this Agreement, the PSUs and the Dividend Equivalents will be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule.  To the extent Applicable Laws permit, this Agreement will be deemed amended as necessary to conform to such applicable exemptive rule.
4.7    Entire Agreement.  The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
4.8    Agreement Severable.  In the event that any provision of the Grant Notice or this Agreement is held illegal or invalid, the provision will be severable from, and the illegality or invalidity of the provision will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.

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4.9    Limitation on Participant’s Rights.  Participation in the Plan confers no rights or interests other than as herein provided.  This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and may not be construed as creating a trust.  Neither the Plan nor any underlying program, in and of itself, has any assets.  Participant will 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 PSUs and Dividend Equivalents, and rights no greater than the right to receive cash or the Shares as a general unsecured creditor with respect to the PSUs and Dividend Equivalents, as and when settled pursuant to the terms of this Agreement.
4.10    Not a Contract of Employment.  Nothing in the Plan, the Grant Notice or this Agreement confers upon Participant any right to continue in the employ or service of the Company or any Subsidiary or interferes with or restricts in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and Participant.
4.11    Counterparts.  The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which will be deemed an original and all of which together will constitute one instrument.
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Appendix A
Performance Goals
The performance measure for the PSU award is the Company’s total shareholder return (“TSR”) compared to the TSR of a group of peer companies.  TSR combines share price appreciation and dividends paid to show the total return to the shareholder.  The absolute size of the TSR will vary with the stock market, but the relative position to Company’s peers over the Performance Period is the performance metric for this Award. 

TSR will be the sum of the Company’s ending stock price plus dividends over the Performance Period divided by the Company’s beginning stock price. Both the beginning and ending stock prices will be calculated using the average closing price during the last 20 trading days prior to and including the calculation date. This calculation is used instead of the actual closing price on the given date to smooth volatility in the stock price and avoid single-day fluctuations.

TSR =         ending stock price + all dividends with a record date during the Performance Period
beginning stock price

Peer Group
The following companies are included in the Company’s peer group for purposes of this Award:

	
		
	Cimarex Energy Co.
	Matador Resources Company

	PDC Energy, Inc.
	WPX Energy, Inc.

	Energen Corporation
	Parsley Energy, Inc.

	QEP Resources, Inc.
	Callon Petroleum Company

	Diamondback Energy, Inc.
	Laredo Petroleum, Inc.

	SM Energy Company
	 

Should a peer company cease to exist as a separate publicly traded company during the Performance Period due to bankruptcy, it will nonetheless remain as a member of the Company’s peer group for purposes of the payout calculation described below and the Company shall be ranked higher than such peer company for purposes of the payout calculation.  Should a peer company cease to exist as a separate publicly traded company during the Performance Period due to a merger, acquisition or other similar transaction, it will be considered automatically removed from the peer group list and the number of PSUs earned will be determined based on the Company’s percentile rank among the resulting peer group. 

Payout Calculation
At the end of the Performance Period, the number of PSUs earned will be determined based on the Company’s TSR relative to the Company’s peer group over the Performance Period.  The Company’s TSR is ranked among the peers and the percentile rank is calculated, based on the Company’s position in the ranking, as the percentage of members of the peer group (including the Company and as the peer group is constituted on the final day of the Performance Period) with a ranking that is greater than or equal to the Company’s ranking (i.e. with a TSR that is less than or equal to the Company’s TSR).  The payout scale is detailed in the following table.

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	Relative TSR Performance Plan

	Performance
Rank
	TSR Percentile
Ranking
	Payout as % of
Target Number of PSUs

	1
	100%
	200%

	2
	90.9%
	182%

	3
	81.8%
	164%

	4
	72.7%
	145%

	5
	63.6%
	127%

	6
	54.6%
	109%

	7
	45.5%
	91%

	8
	36.4%
	68%

	9
	27.3%
	45%

	10
	18.2%
	0%

	11
	9.1%
	0%

	12
	0%
	0%

The number of PSUs earned will be determined based on the TSR Percentile Ranking, with linear interpolation between any specified TSR Percentile Ranking set forth in the table above.  Notwithstanding the foregoing, if the Company’s TSR is less than or equal to zero on an absolute basis, the number of PSUs shall not be greater than 100% of the Target Number of PSUs (i.e., the payout shall not be greater than 100%).

The actual payout of the PSUs, if any, at the end of the Performance Period will be made as provided under the Performance Restricted Stock Unit Agreement to which this Appendix A is attached.

Adjustments for Extraordinary Events
Notwithstanding the foregoing, if the Administrator determines that due to a reduction in the size of the peer group or other unusual, extraordinary or nonrecurring transactions or events materially affecting the Award, an adjustment in the peer group, the payment schedule and/or other terms of the Award is necessary or appropriate to avoid the dilution or enlargement of the benefits or potential benefits intended to be made available under the Award, the Administrator may adjust the peer group (including by removing constituent companies, substituting for existing constituent companies or selecting new constituent companies to replace withdrawn companies), the payment schedule and/or such other terms of the Award in such a manner as the Administrator determines in good faith to be equitable to reflect such transactions or events. 

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