Based on the foregoing, the compensation committee believes that the Company does not utilize compensation policies and programs creating risks that are reasonably likely to have a material adverse impact on the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONThe compensation committee of our board of directors consists of David L. Houston, Michael P. Cross, and Mark L. Plaumann.Plaumann, Melanie M. Trent and Stephanie K. Mains. No current member of our compensation committee has ever been an officer or employee of ours. None of our executive officers serves, or has served during the past fiscal year, as a member of the board of directors or compensation committee of any other company that has or had one or more executive officers serving as member of our board of directors or compensation committee.
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | 54 |
 | | COMPENSATION TABLES |
—
SUMMARY COMPENSATION TABLE
The following table provides information concerning compensation of our principal executive officer, principal financial officer, and our three other highest paid executive officers during 2020, each identified as our named executive officer,NEO, for the fiscal years ended December 31, 2017, 2016 and 2015.
|
| | | | | | | | | | | | | | | | | | | |
| Name and Principal Position | Year | Salary ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total
($)(4) |
| Performance-based | Time Vested |
| Travis D. Stice | 2017 | $ | 850,000 |
| $ | 5,552,940 |
| $ | 2,423,292 |
| $ | 1,428,000 |
| $ | 28,056 |
| $ | 10,282,288 |
|
| Chief Executive Officer | 2016 | $ | 830,000 |
| $ | 13,938,723 |
| $ | 5,707,698 |
| $ | 1,643,400 |
| $ | 27,940 |
| $ | 22,147,761 |
|
| 2015 | $ | 830,000 |
| $ | 4,914,138 |
| $ | 2,453,196 |
| $ | 1,492,362 |
| $ | 27,940 |
| $ | 9,717,636 |
|
| Teresa L. Dick | 2017 | $ | 410,000 |
| $ | 1,461,300 |
| $ | 637,709 |
| $ | 551,040 |
| $ | 28,056 |
| $ | 3,088,105 |
|
| Chief Financial Officer | 2016 | $ | 380,000 |
| $ | 929,262 |
| $ | 380,496 |
| $ | 601,920 |
| $ | 27,940 |
| $ | 2,319,618 |
|
| 2015 | $ | 350,000 |
| $ | 1,028,550 |
| $ | 513,450 |
| $ | 503,447 |
| $ | 27,940 |
| $ | 2,423,387 |
|
| Michael L. Hollis | 2017 | $ | 590,000 |
| $ | 3,409,700 |
| $ | 1,487,987 |
| $ | 892,080 |
| $ | 28,056 |
| $ | 6,407,823 |
|
| Chief Operating Officer | 2016 | $ | 510,000 |
| $ | 4,646,207 |
| $ | 1,902,545 |
| $ | 908,820 |
| $ | 27,940 |
| $ | 7,995,512 |
|
| and President | 2015 | $ | 445,000 |
| $ | 1,371,400 |
| $ | 684,600 |
| $ | 752,474 |
| $ | 27,940 |
| $ | 3,281,414 |
|
| Russell Pantermuehl | 2017 | $ | 560,000 |
| $ | 2,922,600 |
| $ | 1,275,417 |
| $ | 752,640 |
| $ | 28,056 |
| $ | 5,538,713 |
|
| Executive Vice President - | 2016 | $ | 500,000 |
| $ | 3,716,945 |
| $ | 1,522,049 |
| $ | 792,000 |
| $ | 27,940 |
| $ | 6,558,934 |
|
| Reservoir Engineering | 2015 | $ | 425,000 |
| $ | 1,371,400 |
| $ | 684,600 |
| $ | 611,329 |
| $ | 27,940 |
| $ | 3,120,269 |
|
| Paul Molnar | 2017 | $ | 475,000 |
| $ | 2,922,600 |
| $ | 1,275,417 |
| $ | 638,400 |
| $ | 28,056 |
| $ | 5,339,473 |
|
| Executive Vice President - | 2016 | $ | 425,000 |
| $ | 1,858,421 |
| $ | 760,993 |
| $ | 673,200 |
| $ | 27,940 |
| $ | 3,745,554 |
|
| Exploration and Business Development | 2015 | $ | 335,000 |
| $ | 1,005,510 |
| $ | 501,949 |
| $ | 481,871 |
| $ | 27,940 |
| $ | 2,352,270 |
|
| | | | | | | | | | | Non-Equity | | | | | | | |
| | | | | | | | Stock Awards ($)(1) | | | Incentive Plan | | | All Other | | | | |
| Name and | | | | Salary | | | Performance- | | | | | | Compensation | | | Compensation | | | Total | |
| Principal Position | | Year | | ($) | | | based(2) | | | Time Vested | | | ($)(11) | | | ($)(12) | | | ($)(13)(14) | |
| Travis D. Stice | | 2020 | | $ | 1,250,000 | | | $ | 4,549,228 | | | $ | 2,757,512 | (3) | | $ | 1,562,500 | | | $ | 425,374 | | | $ | 10,544,614 | |
| Chief Executive Officer | | 2019 | | $ | 1,178,366 | | | $ | 6,783,608 | | | $ | 5,649,103 | (4) | | $ | 2,265,625 | | | $ | 172,954 | | | $ | 16,049,655 | |
| | | 2018 | | $ | 978,333 | | | $ | 5,213,268 | | | $ | 3,458,982 | (5) | | $ | 1,955,250 | | | $ | 101,015 | | | $ | 11,706,848 | |
| Kaes Van’t Hof | | 2020 | | $ | 520,000 | | | $ | 2,122,959 | | | $ | 1,286,872 | (6) | | $ | 468,000 | | | $ | 1,292,895 | | | $ | 5,690,726 | |
| Chief Financial Officer | | 2019 | | $ | 488,182 | | | $ | 4,912,149 | | | $ | 24,487,162 | (7) | | $ | 678,600 | | | $ | 497,411 | | | $ | 31,063,504 | |
| Teresa L. Dick | | 2020 | | $ | 447,000 | | | $ | 1,213,100 | | | $ | 735,320 | (8) | | $ | 357,600 | | | $ | 161,993 | | | $ | 2,915,013 | |
| Chief Accounting Officer | | 2019 | | $ | 434,334 | | | $ | 1,808,971 | | | $ | 2,018,821 | (8) | | $ | 518,520 | | | $ | 69,406 | | | $ | 4,850,052 | |
| | | 2018 | | $ | 428,333 | | | $ | 1,431,093 | | | $ | 643,859 | (8) | | $ | 543,520 | | | $ | 34,327 | | | $ | 3,081,132 | |
| Russell Pantermuehl | | 2020 | | $ | 615,000 | | | $ | 2,122,959 | | | $ | 1,286,872 | (9) | | $ | 492,000 | | | $ | 221,787 | | | $ | 4,738,618 | |
| Executive Vice President - Chief Engineer | | 2019 | | $ | 597,299 | | | $ | 3,165,665 | | | $ | 2,709,492 | (9) | | $ | 713,400 | | | $ | 85,762 | | | $ | 7,271,618 | |
| | 2018 | | $ | 587,500 | | | $ | 2,616,856 | | | $ | 1,177,342 | (9) | | $ | 745,760 | | | $ | 36,872 | | | $ | 5,164,330 | |
| Daniel N. Wesson | | 2020 | | $ | 434,616 | | | $ | 909,859 | | | $ | 551,490 | (10) | | $ | 360,000 | | | $ | 378,607 | | | $ | 2,634,572 | |
| Executive Vice President - Operations | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | |
(1) | The amounts shown in the above table reflect the grant date fair value of restricted stock units and/or phantom units granted in 2020, 2019 and stock options granted2018, respectively, determined in accordance with FASB ASC Topic 718. See Note 1013 to our consolidated financial statements for the fiscal year ended December 31, 2017,2020, included in our Annual Report on Form 10-K, filed with the SEC on February 15, 2018,25, 2021, regarding assumptions underlying valuations of equity awards for 2017, 20162020, 2019 and 2015.2018. Details regarding equity awards that are stillwere outstanding at December 31, 2020 can be found in the tables entitled “Outstanding Equity Awards at Fiscal 20172020 Year-End under Diamondback’s Equity Incentive Plan,” “Outstanding Equity Awards under the Viper LTIP at Fiscal 2020 Year-End” table. Ifand “Outstanding Equity Awards under the 2017 performance-based awards were valuedRattler LTIP at aFiscal 2020 Year-End.” |
| (2) | Represents (i) the grant date pricefair value (calculated as discussed in Note 1 above) of $109.01, the maximumperformance-based restricted stock units for each NEO granted under Diamondback’s Equity Incentive Plan for the applicable performance period, subject to the Company’s attainment of certain pre-established performance targets and the NEO’s continuous employment and (ii) in the case of Mr. Van’t Hof, the 2019 value also includes the $1,746,484 grant date fair value attributable to the performance-based restricted stock units that were granted to Mr. Van’t Hof under Diamondback’s Equity Incentive Plan on March 1, 2019 as part of these awardsa one-time retention award, subject to the achievement of the relative TSR over the three-year performance period beginning on January 1, 2019 and ending on December 31, 2021 and continuous employment, vesting and settling in five substantially equal annual installments beginning on March 1, 2025.” |
| (3) | The aggregate grant date fair value for 2020 for Mr. Stice is attributable to the time-based restricted stock units granted to Mr. Stice under Diamondback’s Equity Incentive Plan on March 1, 2020, vesting in three substantially equal annual installments beginning on the date of grant. |
| (4) | Of the aggregate grant date fair value of $5,649,103 for 2019 for Mr. Stice, (i) $3,453,669 is attributable to the time-based restricted stock units granted to Mr. Stice under Diamondback’s Equity Incentive Plan on March 1, 2019, vesting in three substantially equal annual installments beginning on the date of grant and (ii) $2,195,434 is attributable to the one-time, time-based phantom unit award granted to Mr. Stice under the Rattler LTIP in connection with the Rattler IPO on May 28, 2020, vesting in five annual installments beginning on May 28, 2020. |
| (5) | Of the aggregate grant date fair value of $3,458,982 for Mr. Stice for 2018, (i) $2,345,577 is attributable the time-based restricted stock units granted to Mr. Stice in February 2018 under Diamondback’s Equity Incentive Plan, vesting in three substantially equal annual installments beginning on the date of grant and (ii) $1,113,405 is attributable to the one-time, time-based phantom unit award granted to Mr. Stice in February 2018 under the Viper LTIP. |
| (6) | The aggregate grant date fair value for 2020 for Mr. Van’t Hof is attributable to the time-based restricted stock units granted to Mr. Van’t Hof under Diamondback’s Equity Incentive Plan on March 1, 2020, vesting in three substantially equal annual installments beginning on the date of grant. |
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | 55 |
| (7) | Of the aggregate grant date fair value of $24,487,162 for 2019 for Mr. Van’t Hof, (i) $1,611,775 is attributable to the time-based restricted stock units granted to Mr. Van’t Hof under Diamondback’s Equity Incentive Plan on March 1, 2019, vesting in three substantially equal annual installments beginning on the date of grant, (ii) $921,104 is attributable to the time-based restricted stock units granted to Mr. Van’t Hof as part of a one-time retention award under Diamondback’s Equity Incentive Plan, vesting in five equal annual installments beginning on March 1, 2025 and (iii) $21,954,283 is attributable to the one-time, time-based phantom unit award granted to Mr. Van’t Hof under the Rattler LTIP in connection with the Rattler IPO on May 28, 2019, vesting in five equal annual installments beginning on May 28, 2020. |
| (8) | The aggregate grant date fair value for 2020 for Ms. Dick Mr. Hollis,is attributable to the time-based restricted stock units granted to Ms. Dick under Diamondback’s Equity Incentive Plan on March 1, 2020, vesting in three substantially equal annual installments beginning on the date of grant. Of the aggregate grant date fair value of $2,018,821 for 2019 for Ms. Dick, (i) $921,104 is attributable to the time-based restricted stock units that were granted to Ms. Dick under Diamondback’s Equity Incentive Plan on March 1, 2019, vesting in three substantially equal annual installments beginning on the date of grant and (ii) $1,097,717 is attributable to the one-time, time-based phantom unit award granted to Ms. Dick under the Rattler LTIP in connection with the Rattler IPO on May 28, 2019, vesting in five equal annual installments beginning on May 28, 2020. The grant date fair value for Ms. Dick for 2018 is attributable to the time-based restricted stock units that were granted to Ms. Dick under Diamondback’s Equity Incentive Plan in February 2018, vesting in three substantially equal annual installments beginning on the date of grant. |
| (9) | The aggregate grant date fair value for 2020 for Mr. Pantermuehl is attributable to the time-based restricted stock units granted to Mr. Pantermuehl under Diamondback’s Equity Incentive Plan on March 1, 2020, vesting in three substantially equal annual installments beginning on the date of grant. Of the aggregate grant date fair value of $2,709,492 for 2019 for Mr. Pantermuehl, (i) $1,611,775 is attributable to the time-based restricted stock units that were granted to Mr. Pantermuehl under Diamondback’s Equity Incentive Plan on March 1, 2019, vesting in three substantially equal annual installments beginning on the date of grant and (ii) $1,097,717 is attributable to the one-time, time-based phantom unit award granted to Mr. Molnar would be $7,269,877, $1,913,126, $4,463,960, $3,826,251 and $3,826,251, respectively. |
| Pantermuehl under the Rattler LTIP in connection with the Rattler IPO on May 28, 2019, vesting in five equal annual installments beginning on May 28, 2020. The grant date fair value for Mr. Pantermuehl for 2018 is attributable to the time-based restricted stock units that were granted to Mr. Pantermuehl under Diamondback’s Equity Incentive Plan in February 2018, vesting in three substantially equal annual installments beginning on the date of grant. |
(2)(10) | The aggregate grant date fair value for 2020 for Mr. Wesson is attributable to the time-based restricted stock units granted to Mr. Wesson under Diamondback’s Equity Incentive Plan on March 1, 2020, vesting in three substantially equal annual installments beginning on the date of grant. |
| (11) | The amounts shown reflect performance-based annual incentive bonuses granted under the Executive Annual Incentive Compensation Plan. |
| |
(3)(12) | Amounts for 20172020 include (i) for Mr. Stice, our 401(k) plan contributions of $27,000$28,500, life insurance premium payments of $3,722, dividend equivalent rights paid on unvested restricted stock units under Diamondback’s Equity Incentive Plan of $281,057, distribution equivalent rights on unvested phantom units under the Rattler LTIP of $111,086 and the value of $1,009 required to be imputed to Mr. Stice under applicable law and Company policy in connection with the use of the Company chartered aircraft for business purposes by the accompanying spouse, (ii) for Mr. Van’t Hof, our 401(k) plan contributions of $28,500, life insurance premium payments of $1,832, dividend equivalent rights paid on unvested restricted stock units under Diamondback’s Equity Incentive Plan of $151,706 and distribution equivalent rights on unvested phantom units under the Rattler LTIP of $1,110,857, (iii) for Ms. Dick, our 401(k) plan contributions of $28,500, life insurance premium payments of $2,642, dividend equivalent rights paid on unvested restricted stock units under Diamondback’s Equity Incentive Plan of $75,308 and distribution equivalent rights on unvested phantom units under the Rattler LTIP of $55,543, (iv) for Mr. Pantermuehl, our 401(k) plan contributions of $28,500, life insurance premium payments of $4,964, dividend equivalent rights paid on unvested restricted stock units that were granted in 2020 under Diamondback’s Equity Incentive Plan of $132,780 and distribution equivalent rights on unvested phantom units under the Rattler LTIP of $55,543 and (v) for Mr. Wesson, our 401(k) contributions of $28,500, life insurance premium payments of $1,886, dividend equivalent rights paid on unvested restricted stock units under Diamondback’s Equity Incentive Plan of $70,506 and distribution equivalent rights paid on unvested phantom units under the Rattler LTIP of $277,714. Amounts for 2019 include (i) for Mr. Stice, our 401(k) plan contributions of $28,000, life insurance premium payments of $5,074, dividend equivalent rights paid on unvested restricted stock units that were granted in 2019 under Diamondback’s Equity Incentive Plan of $61,194, distribution equivalent rights paid on unvested phantom units that were granted in 2019 under the Viper LTIP of $34,306 and distribution equivalent rights paid on unvested phantom units that were granted in 2019 under the Rattler LTIP of $44,380, (ii) for Mr. Van’t Hof, our 401(k) plan contributions of $28,000, life insurance premium payments of $3,078, dividend equivalent rights paid on unvested restricted stock units that were granted in 2019 under Diamondback’s Equity Incentive Plan of $35,228, distribution equivalent rights paid on unvested phantom units that were granted in 2019 under the Viper LTIP of $41,451 and distribution equivalent rights paid on unvested phantom units that were granted in 2019 under the Rattler LTIP of $389,654, (iii) for Ms. Dick, our 401(k) plan contributions of $28,000, life insurance premium payments of $3,977, dividend equivalent rights paid on unvested restricted stock units that were granted in 2019 under Diamondback’s Equity Incentive Plan of $16,484 and distribution equivalent rights paid on unvested phantom units that were granted in 2019 under the Rattler LTIP of $20,945 and (iv) for Mr. Pantermuehl, our 401(k) plan contributions of $28,000, life insurance premium payments of $6,261, dividend equivalent rights paid on unvested restricted stock units that were granted in 2019 under Diamondback’s Equity Incentive Plan of $29,300 and distribution equivalent rights paid on unvested phantom units that were granted in 2019 under the Rattler LTIP of $22,201. Amounts for 2018 include (i) for Mr. Stice, our 401(k) plan contributions of $27,500, life insurance premium payments of $3,791, dividend equivalent rights paid on unvested restricted stock units that were granted in 2018 under Diamondback’s Equity Incentive Plan of $16,567 and distribution equivalent rights paid on unvested phantom units that were granted in 2018 under the Viper LTIP of $53,157, (ii) for Ms. Dick, our 401(k) plan contributions of $27,500, life insurance premium payments of $2,279 and dividend equivalent rights paid on unvested restricted stock units that were granted in 2018 under Diamondback’s Equity Incentive Plan of $4,548 and (iii) for Mr. Pantermuehl, our 401(k) plan contributions of $27,500, life insurance premium payments of $1,056 for Mr. Stice, (ii) our 401(k) plan contributionsand dividend equivalent rights paid on unvested restricted stock units that were granted in 2018 under Diamondback’s Equity Incentive Plan of $27,000 and life insurance premium payments of $1,056 for Ms. Dick, (iii) our 401(k) plan contributions of $27,000 and life insurance premium payments of $1,056 for Mr. Hollis, (iv) our 401(k) plan contributions of $27,000 and life insurance premium payments of $1,056 for Mr. Pantermuehl and (v) our 401(k) plan contributions of $27,000 and life insurance premium payments of $1,056 for Mr. Molnar. Amounts for 2016 include (i) our 401(k) plan contributions of $26,500 and life insurance premium payments of $1,440 for Mr. Stice, (ii) our 401(k) plan contributions of $26,500 and life insurance premium payments of $1,440 for Ms. Dick, (iii) our 401(k) plan contributions of $26,500 and life insurance premium payments of $1,440 for Mr. Hollis, (iv) our 401(k) plan contributions of $26,500 and life insurance premium payments of $1,440 for Mr. Pantermuehl and (v) our 401(k) plan contributions of $26,500 and life insurance premium payments of $1,440 for Mr. Molnar. Amounts in 2015 include (i) our 401(k) plan contributions of $26,500 and life insurance premium payments of $1,440 for Mr. Stice; (ii) our 401(k) plan contributions of $26,500 and life insurance premium payments of $1,440 for Ms. Dick, (iii) our 401(k) plan contributions of $26,500 and life insurance premium payments of $1,440 for Mr. Hollis, (iv) our 401(k) plan contributions of $26,500 and life insurance premium payments of $1,440 for Mr. Pantermuehl and (v) our 401(k) plan contributions of $26,500 and life insurance premium payments of $1,440 for Mr. Molnar. |
| $8,316. |
(4)(13) | During 2017, 2016 and 2015, Mr. Stice, Ms. Dick, Mr. Hollis, Mr. Pantermuehl and Mr. MolnarCertain of our NEOs also performed services as executive officers and/or directors of the general partner of Viper, our publicly traded subsidiary, as set forth in more detail in their respective biographies above, and their time was allocated between managing our business and managing the business of Viper. During 2020 and 2019, no specific allocations were made by Viper for our executive officers’ services to Viper. During 2018, Viper reimbursed us approximately $421,650, $141,487 and $129,126 attributable to time allocated to providing services to Viper by Mr. Stice, Ms. Dick and Mr. Pantermuehl, respectively.
|
| (14) | During 2020 and 2019, Mr. Stice, Mr. Van’t Hof and Ms. Dick also performed services as executive officers and/or directors of the general partner of Rattler, our publicly traded subsidiary, as set forth in more detail in their respective biographies above, and their time was allocated between managing our business and managing the business of Rattler. In accordance with the terms of Viper’s amended and restatedRattler’s limited partnership agreement, in 2017, 20162020 and 2015,2019, we were reimbursed for compensation related expenses attributable to the portion of the executive’s time allocated to providing services to Viper.Rattler. |
During 2016 and 2015, we did not allocate any time of our named executive officers to Viper for reimbursement. During 2017, Viper reimbursed us approximately $305,930, $130,353, $0, $118,695 and $0 attributable to time allocated to providing services to Viper by Mr. Stice, Ms. Dick, Mr. Hollis, Mr. Pantermuehl and Mr. Molnar, respectively.DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | 56 |
2017 GRANTS OF PLAN-BASED AWARDS
|
| | | | | | | | | | | | | | | | | | | | | | |
| Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units | Grant Date Fair Value of Stock and Option Awards(4) |
| Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) |
| Travis D. Stice | 2/16/2017 | $ | 425,000 |
| $ | 850,000 |
| $ | 1,700,000 |
|
|
| |
|
|
|
| |
|
| | 2/16/2017 |
|
|
|
|
|
| 16,673 |
| 33,345 |
| 66,690 |
| 22,230 |
| (3) | $ | 7,976,232 |
|
| Teresa L. Dick | 2/16/2017 | $ | 164,000 |
| $ | 328,000 |
| $ | 656,000 |
|
|
| |
|
|
|
| |
|
| | 2/16/2017 |
|
|
|
|
|
| 4,388 |
| 8,775 |
| 17,550 |
| 5,850 |
| (3) | $ | 2,099,009 |
|
| Michael L. Hollis | 2/16/2017 | $ | 265,500 |
| $ | 531,000 |
| $ | 1,062,000 |
| | | | | | |
| | 2/16/2017 | | | | 10,238 |
| 20,475 |
| 40,950 |
| 13,650 |
| (3) | $ | 4,897,687 |
|
| Russell Pantermuehl | 2/16/2017 | $ | 224,000 |
| $ | 448,000 |
| $ | 896,000 |
|
|
| |
|
|
|
| |
|
| | 2/16/2017 |
|
|
|
|
|
| 8,775 |
| 17,550 |
| 35,100 |
| 11,700 |
| (3) | $ | 4,198,017 |
|
| Paul Molnar | 2/16/2017 | $ | 190,000 |
| $ | 380,000 |
| $ | 760,000 |
|
|
| |
|
|
|
| |
|
| | 2/16/2017 |
|
|
|
|
| 8,775 |
| 17,550 |
| 35,100 |
| 11,700 |
| (3) | $ | 4,198,017 |
|
| — | 2020 GRANTS OF PLAN-BASED AWARDS UNDER DIAMONDBACK’S EQUITY INCENTIVE PLAN |
| | | | | | | | | | | All Other | | | Grant Date | |
| | | | | Estimated Future Payouts Under | | | Estimated Future Payouts Under | | | Stock Awards: | | | Fair Value | |
| | | | | Non-Equity Incentive Plan Awards(1) | | | Equity Incentive Plan Awards(2) | | | Number of | | | of Stock | |
| | | Grant | | Threshold | | | Target | | | Maximum | | | Threshold | | | Target | | | Maximum | | | Shares of | | | and Option | |
| Name | | Date | | ($) | | | ($) | | | ($) | | | (#) | | | (#) | | | (#) | | | Stock or Units(3) | | | Awards(4) | |
| Travis D. Stice | | 3/1/2020 | | $ | 781,250 | | | $ | 1,562,500 | | | $ | 3,125,000 | | | | | | | | | | | | | | | | | | | | | |
| | | 3/1/2020 | | | | | | | | | | | | | | | 33,357 | | | | 66,714 | | | | 166,785 | | | | 44,476 | | | $ | 7,306,740 | |
| Kaes Van’t Hof | | 3/1/2020 | | $ | 234,000 | | | $ | 468,000 | | | $ | 936,000 | | | | | | | | | | | | | | | | | | | | | |
| | | 3/1/2020 | | | | | | | | | | | | | | | 15,567 | | | | 31,133 | | | | 77,833 | | | | 20,756 | | | $ | 3,409,831 | |
| Teresa L. Dick | | 3/1/2020 | | $ | 178,800 | | | $ | 357,600 | | | $ | 715,200 | | | | | | | | | | | | | | | | | | | | | |
| | | 3/1/2020 | | | | | | | | | | | | | | | 8,895 | | | | 17,790 | | | | 44,475 | | | | 11,860 | | | $ | 1,948,420 | |
| Russell Pantermuehl | | 3/1/2020 | | $ | 246,000 | | | $ | 492,000 | | | $ | 984,000 | | | | | | | | | | | | | | | | | | | | | |
| | | 3/1/2020 | | | | | | | | | | | | | | | 15,567 | | | | 31,133 | | | | 77,833 | | | | 20,756 | | | $ | 3,409,831 | |
| Daniel N. Wesson | | 3/1/2020 | | $ | 180,000 | | | $ | 360,000 | | | $ | 720,000 | | | | | | | | | | | | | | | | | | | | | |
| | | 3/1/2020 | | | | | | | | | | | | | | | 6,672 | | | | 13,343 | | | | 33,358 | | | | 8,895 | | | $ | 1,461,349 | |
| (1) | Reflects performance-based annual incentive cash bonuses granted under the Annual Incentive Plan for 2017.2020. No non-equity incentive plan awards are paid under the Annual Incentive Plan for performance below the pre-determined thresholds. |
| |
| (2) | RepresentsFor each NEO, this amounts represents the performance-based restricted stock units granted under the 2012Equity Incentive Plan, which awards are subject to the satisfaction of certain total stockholder returnrelative TSR performance conditions relativecompared to ourthe Company’s peer group for the three-year performance period commencing on January 1, 20172020 and ending on December 31, 2018 for2022, as certified by the two-year performance period and for the performance period commencing on January 1, 2017 and ending on December 31, 2019 for the three-year performance period,compensation committee by not later than March 15, 2022, and continuous service requirements. The restricted stock units will vest once the compensation committee has made a certification as to whether the performance goals have been reached. The compensation committee will make this determination following the date of publication of our quarterly earnings statement for the fourth quarter of 2018 and before March 15, 2019 for the two-year performance period and following the date of publication of our quarterly earnings statement for the fourth quarter of 2019 and before March 15, 2020 for the three-year performance period. The number of restricted stock units that will vest is based on the Company’s Total Stockholder Returnachievement of a pre-established threshold, target or maximum relative TSR goal, as compared to its peers.the Company’s peers, as modified by the absolute TSR modifier. The Total Stockholder ReturnTSR is calculated over the performance period by dividing (1) the sum of (a) the cumulative value of dividends received during the performance period, assuming reinvestment, plus (b) the difference between the stock price at the end and at the beginning of the performance period; by (2) the stock price at the beginning of the performance period. No equity incentive plan awards vest if the relative Total Stockholder ReturnTSR for the applicable performance period is below the threshold percentile. |
| The absolute TSR modifier reduces payouts upon negative performance period TSR, pays at target upon achieving a performance period annual TSR of zero to 15%, and has a multiplier upon achieving a performance period annual TSR of greater than 15%. |
| (3) | Represents the restricted stock units granted to each NEO under the 2012Equity Incentive Plan on March 1, 2020, vesting in three equal annual installments beginning on the date of which one-third vested on eachgrant. All of February 16, 2017 and February 16, 2018, and the remaining units will vest on February 16, 2019. Thesethese awards are subject to continuous service requirements. |
| |
| (4) | The amounts shown reflect the grant date fair value of restricted stock units granted, determined in accordance with FASB ASC Topic 718. See Note 1013 to our consolidated financial statements for the fiscal year ended December 31, 2017,2020, included in our Annual Report on Form 10-K, filed with the SEC on February 15, 2018,25, 2021, regarding assumptions underlying valuations of equity awards for 2017.2020. |
— 2020 GRANTS OF PLAN-BASED AWARDS UNDER THE VIPER LTIP
No awards were made to our NEOs by Viper, our publicly traded subsidiary, during the year ended December 31, 2020 under the Viper LTIP. Viper’s common units are listed on the NASDAQ Global Select Market under the symbol “VNOM.” See “Compensation Discussion and Analysis—Executive Compensation Program Elements—Awards under Long-term Incentive Plans of Diamondback’s Publicly Traded Subsidiaries” for more information.
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | 57 |
—
2020 GRANTS OF PLAN-BASED AWARDS UNDER THE RATTLER LTIPNo awards were made to our NEOs by Rattler, our publicly traded subsidiary, during the year ended December 31, 2020 under the Rattler LTIP. Rattler’s common units are listed on the NASDAQ Global Select Market under the symbol “RTLR.” See “Compensation Discussion and Analysis—Executive Compensation Program Elements—Awards under Long-term Incentive Plans of Diamondback’s Publicly Traded Subsidiaries” for more information.
— OUTSTANDING EQUITY AWARDS AT FISCAL 20172020 YEAR-END
UNDER DIAMONDBACK’S EQUITY INCENTIVE PLANThe following table provides information concerning equity awards outstanding for our named executive officersNEOs at December 31, 2017.2020 under Diamondback’s Equity Incentive Plan:
| Name | | Number of Shares or
Units of Stock That
Have Not Vested
(#) | | | Market Value of Shares
or Units of Stock That
Have Not Vested
($)(1) | | | Equity Incentive Plan Awards:
Number of Unearned Shares
or Units of Stock That Have
Not Vested | | | Equity Incentive Plan Awards:
Market or Payout Value of
Unearned Shares or Units of
Stock That Have Not Vested(1) | |
| Travis D. Stice | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 61,170 | (3) | | $ | 2,960,628 | |
| | | | 10,986 | (2) | | $ | 531,722 | | | | 98,872 | (4) | | $ | 4,785,405 | |
| | | | 29,650 | (2) | | $ | 1,435,060 | | | | 168,785 | (5) | | $ | 8,072,394 | |
| Kaes Van’t Hof | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 11,994 | (3) | | $ | 580,510 | |
| | | | 5,127 | (6) | | $ | 248,147 | | | | 46,140 | (4) | | $ | 2,233,176 | |
| | | | 13,837 | (6) | | $ | 669,711 | | | | 77,833 | (5) | | $ | 3,767,117 | |
| | | | 8,790 | (7) | | $ | 425,436 | | | | 26,366 | (8) | | $ | 1,276,114 | |
| Teresa L. Dick | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 16,792 | (3) | | $ | 812,733 | |
| | | | 2,930 | (9) | | $ | 141,812 | | | | 26,366 | (4) | | $ | 1,276,114 | |
| | | | 7,906 | (9) | | $ | 382,650 | | | | 44,475 | (5) | | $ | 2,152,590 | |
| Russell Pantermuehl | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | 30,706 | (3) | | $ | 1,486,170 | |
| | | | 5,127 | (10) | | $ | 248,147 | | | | 46,140 | (4) | | $ | 2,233,176 | |
| | | | 13,837 | (10) | | $ | 669,711 | | | | 77,833 | (5) | | $ | 3,767,117 | |
| Daniel N. Wesson | | | | | | | | | | | | | | | | |
| | | | 1,319 | | | $ | 63,840 | | | | 11,864 | (3) | | $ | 574,218 | |
| | | | 5,930 | (11) | | $ | 287,012 | | | | 33,358 | (4) | | $ | 1,614,527 | |
| | | | 6,595 | (12) | | $ | 319,198 | | | | 19,774 | (5) | | $ | 957,062 | |
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | 58 |
|
| | | | | | | | | | | | |
| Name | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares or Units of Stock That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares or Units of Stock That Have Not Vested(1) |
| Travis D. Stice | | | | 180,338 |
| (3) | $ | 22,767,673 |
|
| | | | | 90,168 |
| (4) | $ | 11,383,710 |
|
| | 30,056 |
| (2) | $ | 3,794,570 |
| 22,230 |
| (5) | $ | 2,806,538 |
|
| | 14,820 |
| (2) | $ | 1,871,025 |
| 44,460 |
| (6) | $ | 5,613,075 |
|
| Teresa L. Dick | | | | 12,022 |
| (3) | $ | 1,517,778 |
|
| | | | | 6,012 |
| (4) | $ | 759,015 |
|
| | 2,004 |
| (7) | $ | 253,005 |
| 5,850 |
| (5) | $ | 738,563 |
|
| | 3,900 |
| (7) | $ | 492,375 |
| 11,700 |
| (6) | $ | 1,477,125 |
|
| Michael L. Hollis | | | | 60,112 |
| (3) | $ | 7,589,140 |
|
| | | | | 30,056 |
| (4) | $ | 3,794,570 |
|
| | 10,019 |
| (8) | $ | 1,264,899 |
| 13,650 |
| (5) | $ | 1,723,313 |
|
| | 9,100 |
| (8) | $ | 1,148,875 |
| 27,300 |
| (6) | $ | 3,446,625 |
|
| Russell Pantermuehl | | | | 48,090 |
| (3) | $ | 6,071,363 |
|
| | | | | 24,044 |
| (4) | $ | 3,035,555 |
|
| | 8,015 |
| (9) | $ | 1,011,894 |
| 11,700 |
| (5) | $ | 1,477,125 |
|
| | 7,800 |
| (9) | $ | 984,750 |
| 23,400 |
| (6) | $ | 2,954,250 |
|
| Paul Molnar | | | | 24,044 |
| (3) | $ | 3,035,555 |
|
| | | | | 12,022 |
| (4) | $ | 1,517,778 |
|
| | 4,007 |
| (10) | $ | 505,884 |
| 11,700 |
| (5) | $ | 1,477,125 |
|
| | 7,800 |
| (10) | $ | 984,750 |
| 23,400 |
| (6) | $ | 2,954,250 |
|
| (1) | |
(1) | Market value of shares or units that have not vested is based on the closing price of $126.25$48.40 per share of our common stock on the Nasdaq Global Select Market on December 29, 2017,31, 2020, the last trading day of 2017. |
| 2020. |
| (2) | The 30,05610,986 restricted stock units vested on January 2, 2018March 1, 2021 and, of the 14,82029,650 restricted stock units, 7,41014,825 vested on February 16, 2018March 1, 2021 and the remaining 7,41014,825 will vest on February 16, 2019. |
| March 1, 2022. |
| (3) | Reflects the maximum number of performance-based restricted stock units granted. These performance-based restricted stock units were granted under the 2012Equity Incentive Plan subject to the satisfaction of certain total stockholder returnrelative TSR performance conditions relativeas compared to our peer group for the performance period commencing on January 1, 20162018 and ending on December 31, 2017.2020. All of these performance-based restricted stock units vested as of December 31, 20172020 at 111.6% of target (rather than the maximum 200% reported in this table) upon certification by the compensation committee of attainment of the applicable performance conditions and settlement of these units on February 14, 2018. |
| 23, 2021. |
| (4) | Reflects the maximum number of performance-based restricted stock units granted. These performance-based restricted stock units were granted under the 2012Equity Incentive Plan subject to the satisfaction of certain total stockholder return performancerelative TSR conditions relativeas compared to our peer group for the performance period commencing on January 1, 20162019 and ending on December 31, 2018,2021, as certified by the compensation committee by not later than March 15, 2019,2022, and continuous service requirements. |
| |
| (5) | Reflects the maximum number of performance-based restricted stock units granted. These performance-based restricted stock units were granted under the 2012Equity Incentive Plan subject to the satisfaction of certain total stockholder returnrelative TSR performance conditions relativeas compared to our peer group for the performance period commencing on January 1, 20172020 and ending on December 31, 2018,2022, as certified by the compensation committee by not later than March 15, 2019,2022, and continuous service requirements. |
| The number of restricted stock units that will vest is based on the achievement of a pre-established threshold, target or maximum relative TSR goal, as compared to the Company’s peers, as modified by the absolute TSR modifier. The TSR is calculated over the performance period by dividing (1) the sum of (a) the cumulative value of dividends received during the performance period, assuming reinvestment, plus (b) the difference between the stock price at the end and at the beginning of the performance period; by (2) the stock price at the beginning of the performance period. No awards vest if the relative TSR for the applicable performance period is below the threshold percentile. The absolute TSR modifier reduces payouts upon negative performance period TSR, pays at target upon achieving a performance period annual TSR of zero to 15%, and has a multiplier upon achieving a performance period annual TSR of greater than 15%. |
| (6) | The 5,127 restricted stock units vested on March 1, 2021 and, of the 13,837 restricted stock units, 6,919 vested on March 1, 2021 and the remaining 6,918 will vest on March 1, 2022. |
| (7) | These time-based restricted stock units were granted to Mr. Van’t Hof under the Equity Incentive Plan as part of a one-time retention award and will vest in five equal annual instalments beginning on March 1, 2025. |
| (8) | Reflects the maximum number of performance-based restricted stock units granted. These performance-based restricted stock units were granted to Mr. Van’t Hof under the 2012Equity Incentive Plan as part of a one-time retention award subject to the satisfaction of certain total stockholder return performancerelative TSR conditions relativeas compared to our peer group for the performance period commencing on January 1, 20172019 and ending on December 31, 2019,2021, as certified by the compensation committee by not later than March 15, 2020,2022, and continuous service requirements. |
| requirements, vesting and settling in five substantially equal annual installments beginning on March 1, 2025. |
(7)(9) | The 2,0042,930 restricted stock units vested on January 2, 2018March 1, 2021 and, of the 3,9007,906 restricted stock units 1,9503,953 vested on February 16, 2018March 1, 2021 and the remaining 1,9503,953 will vest on February 16, 2019. |
| March 1, 2022. |
(8)(10) | The 10,0195,127 restricted stock units vested on January 2, 2018March 1, 2021 and, of the 9,10013,837 restricted stock units, 4,5506,919 vested on February 16, 2018March 1, 2021 and the remaining 4,5506,918 will vest on February 16, 2019. |
| March 1, 2022. |
(9)(11) | The 8,0151,319 restricted stock units vested on January 2, 2018March 1, 2021 and, of the 7,8005,930 restricted stock units, 3,9002,965 vested on February 16, 2018March 1, 2021 and the remaining 3,9002,965 will vest on February 16, 2019. |
| March 1, 2022. |
(10)(12) | The 4,007These time-based restricted stock units vested on January 2, 2018were granted to Mr. Wesson under the Equity Incentive Plan as part of a one-time retention award and of the 7,800 restricted stock units, 3,900 vested on February 16, 2018 and the remaining 3,900 will vest in five equal annual instalments beginning on February 16, 2019.March 1, 2025. |
— OUTSTANDING EQUITY AWARDS UNDER THE VIPER LTIP AT FISCAL 2020 YEAR-END
No equity awards under the Viper LTIP were outstanding for any of our NEOs at December 31, 2020.
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | 59 |
STOCK VESTED DURING FISCAL YEAR 2017
| — | OUTSTANDING EQUITY AWARDS UNDER THE RATTLER LTIP AT FISCAL 2020 YEAR-END |
The following table provides information concerning equity awards under the Rattler LTIP outstanding for NEOs at December 31, 2020:
| Name | | Number of Shares or
Units of Stock That
Have Not Vested
(#) | | | Market Value of Shares
or Units of Stock That
Have Not Vested
($)(1) | |
| Travis D. Stice | | | 91,429 | (2) | | $ | 866,747 | |
| Kaes Van’t Hof | | | 914,286 | (2) | | $ | 8,667,431 | |
| Teresa L. Dick | | | 45,715 | (2) | | $ | 433,378 | |
| Russell Pantermuehl | | | 45,715 | (2) | | $ | 433,378 | |
| Daniel N. Wesson | | | 228,572 | (2) | | $ | 2,166,863 | |
| (1) | Market value of shares or units that have not vested is based on the closing price of $9.48 per share of our common stock on the Nasdaq Global Select Market on December 31, 2020, the last trading day of 2020. |
| (2) | These phantom units will vest in four remaining equal or substantially equal annual installments beginning on May 28, 2021. |
| — | STOCK VESTED DURING FISCAL YEAR 2020 UNDER DIAMONDBACK’S EQUITY INCENTIVE PLAN |
The following table provides certain information for the named executive officersNEOs with respect to the number of shares acquired upon the vesting of restricted stock awards under Diamondback’s Equity Incentive Plan during 2017.
|
| | | | | | |
| Name | Stock Awards |
Number of Shares Acquired on Vesting
(#) | | Value Realized on Vesting
($)(1) |
| Travis D. Stice | 121,076 |
| | $ | 12,925,075 |
|
| Teresa L. Dick | 21,454 |
| | $ | 2,309,380 |
|
| Michael L. Hollis | 37,902 |
| | $ | 4,044,777 |
|
| Russell Pantermuehl | 35,248 |
| | $ | 3,768,510 |
|
| Paul Molnar | 25,017 |
| | $ | 2,685,108 |
|
| | | Stock Awards |
| Name | | Number of Shares
Acquired on Vesting
(#) | | | Value Realized
on Vesting
($)(1) |
| Travis D. Stice | | | 74,624 | | | $ | 5,431,110 |
| Kaes Van’t Hof | | | 20,750 | | | $ | 1,429,942 |
| Teresa L. Dick | | | 19,807 | | | $ | 1,441,005 |
| Russell Pantermuehl | | | 37,571 | | | $ | 2,750,054 |
| Daniel N. Wesson | | | 5,217 | | | $ | 299,495 |
| (1) | |
(1) | Value realized on vesting is based on the vesting date closing price per share of our common stock on the Nasdaq Global Select Market. If the Nasdaq Global Select Market was closed on the vesting date, the calculation was made using the opening price on the next day on which the market was open. |
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 60 |
OPTION EXERCISES UNDER THE VIPER LTIP DURING FISCAL YEAR 2017
No| — | PHANTOM UNITS VESTED UNDER THE RATTLER LTIP DURING FISCAL YEAR 2020 |
The following table provides certain information for the NEOs with respect to the number of shares acquired upon the vesting of phantom unit options granted to our named executive officersawards under the ViperRattler LTIP were exercised by them during 2017. The exercise price for such unit options was below the trading price for Viper’s common units on the Nasdaq Global Select Market during 2017. No phantom units or other equity awards were held by our named executive officers during 2017 under the Viper LTIP.
Pay Ratio Disclosure
2020:| | | Stock Awards |
| Name | | Number of Shares
Acquired on Vesting
(#) | | | Value Realized
on Vesting
($)(1) |
| Travis D. Stice | | | 22,857 | | | $ | 202,742 |
| Kaes Van’t Hof | | | 228,571 | | | $ | 2,027,425 |
| Teresa L. Dick | | | 11,428 | | | $ | 101,366 |
| Russell Pantermuehl | | | 11,428 | | | $ | 101,366 |
| Daniel N. Wesson | | | 57,142 | | | $ | 506,850 |
| (1) | Value realized on vesting is based on the closing price per common unit of Rattler on the Nasdaq Global Select Market on the trading day prior to the vesting date. |
Pursuant to Item 402(u) of Regulation S-K, we are disclosing the pay ratio and supporting information comparing the median of the annual total compensation of our employees (including full-time, part-time, seasonal and temporary employees) other than Mr. Stice, our Chief Executive Officer, and the annual total compensation of our Chief Executive Officer. The pay ratio is calculated in a manner consistent with Item 402(u) of Regulation S-K.
For the year ended December 31, 2017,2020, our last completed fiscal year:
The median of the annual total compensation of all of our employees, other than our Chief Executive Officer, is $135,159.
The annual total compensation of our Chief Executive Officer is $10,282,288.
| • | The median of the annual total compensation of all of our employees, other than our Chief Executive Officer, is $115,307. |
| • | The annual total compensation of our Chief Executive Officer is $10,544,614. |
Based on this information, the ratio of the annual total compensation of outour Chief Executive Officer to the median of the annual total compensation of all other employees is 76:91 to 1.
To identify the median employee
for 2020 (the 2020 Median Employee), we
selectedreviewed our employee population as of December 31,
20172020. For 2020, we used wages reported in Box 1 of IRS Form W-2 during the 12-month period ending on December 31, 2020, as
a consistently applied compensation measure. We did not annualize the
date upon whichwages for new employees or employees on unpaid leave of absence who were employed for less than the full fiscal year, or make cost of living adjustments. Based on this methodology, we identified an employee whose compensation was at the median of the employee data.Once we identified the "median employee". On that date, our employee population consisted of 250 employees excluding the Chief Executive Officer. To identify the median compensated employee, we (a) used annual base pay at December 31, 2017, (b) estimated short-term incentive at target for the 2017 performance year and (c) estimated long-term incentive at target based on 2017 annual base salary.
Once we identified our median employee,2020 Median Employee, we calculated
that employee’sthe annual total compensation
for 2017 inusing the
same manner that we determinedrules applicable to the
Summary Compensation Table. With respect to the annual total compensation of our
named executive officers for purposes of the Summary Compensation Table set forth above. This resulted in an annual compensation of $135,159 for the identified employee for the year ended December 31, 2017. The calculation of the total compensation for our Chief Executive Officer
is includedwe used the amount reported in the “Total” column for 2020 in the Summary Compensation Table
set forth above.on page 55.The pay ratio rules provide companies with flexibility to select the methodology and assumptions used to identify the median employee, calculate the median employee’s compensation and estimate the pay ratio. As a result, our methodology may differ from those used by other companies, including those within our industry.
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 61 |
POTENTIAL PAYMENTS UPON TERMINATION, RESIGNATION OR CHANGE OF CONTROL FOR FISCAL YEAR 2017
| — | POTENTIAL PAYMENTS UPON TERMINATION, RESIGNATION OR CHANGE OF CONTROL FOR FISCAL YEAR 2020 |
The following tables provide information regarding potential payments to each of our named executive officersNEOs in connection with certain termination events, including a termination related to a change of control of the Company, as of December 31, 2017.
|
| | | | | | | | | | | | | |
| | Termination Without Cause or Resignation for Good Reason(1) |
| Name | Base Salary | Annual Incentive Bonus | $126.25
RSUs(3) | Total |
| Travis D. Stice | $ | 3,431,562 |
| (2) | $ | 0 |
| $ | 48,236,590 |
| $ | 51,668,152 |
|
| Teresa L. Dick | $ | 410,000 |
| (6) | $ | 0 |
| $ | 0 |
| $ | 410,000 |
|
| Michael L. Hollis | $ | 590,000 |
| (7) | $ | 0 |
| $ | 0 |
| $ | 590,000 |
|
| Russell Pantermuehl | $ | 560,000 |
| (8) | $ | 0 |
| $ | 0 |
| $ | 560,000 |
|
| Paul Molnar | $ | 475,000 |
| (9) | $ | 0 |
| $ | 0 |
| $ | 475,000 |
|
|
| | | | | | | | | | | | | |
| | Change of Control |
| Name | Base Salary | Annual Incentive Bonus (10) | $126.25
RSUs(3) | Total |
| Travis D. Stice | $ | 0 |
| $ | 850,000 |
| $ | 48,236,590 |
| (4)(5) | $ | 49,086,590 |
|
| Teresa L. Dick | $ | 0 |
| $ | 328,000 |
| $ | 5,237,860 |
| (4)(5) | $ | 5,565,860 |
|
| Michael L. Hollis | $ | 0 |
| $ | 531,000 |
| $ | 18,967,421 |
| (4)(5) | $ | 19,498,421 |
|
| Russell Pantermuehl | $ | 0 |
| $ | 448,000 |
| $ | 15,534,936 |
| (4)(5) | $ | 15,982,936 |
|
| Paul Molnar | $ | 0 |
| $ | 380,000 |
| $ | 10,475,341 |
| (4)(5) | $ | 10,855,341 |
|
|
| | | | | | | | | | | | | | |
| | Termination upon Death or Disability(1) |
| Name | Base Salary | | Annual Incentive Bonus (11) | $126.25
RSUs(3) | Total |
| Travis D. Stice | $ | 3,431,562 |
| (2) | $ | 1,428,000 |
| $ | 48,236,590 |
| (4)(5)(12) | $ | 53,096,152 |
|
| Teresa L. Dick | $ | 410,000 |
| (6) | $ | 551,040 |
| $ | 5,237,860 |
| (4)(5)(12) | $ | 6,198,900 |
|
| Michael L. Hollis | $ | 590,000 |
| (7) | $ | 892,080 |
| $ | 18,967,421 |
| (4)(5)(12) | $ | 20,449,501 |
|
| Russell Pantermuehl | $ | 560,000 |
| (8) | $ | 752,640 |
| $ | 15,534,936 |
| (4)(5)(12) | $ | 16,847,576 |
|
| Paul Molnar | $ | 475,000 |
| (9) | $ | 638,400 |
| $ | 10,475,341 |
| (4)(5)(12) | $ | 11,588,741 |
|
| | | Termination Without Cause or Resignation for Good Reason(1)(2) |
| | | | | | Annual Incentive | | | COBRA | | | RSUs and Phantom | | | |
| Name | | Base Salary | | | Bonus | | | Reimbursement | | | Units(3) | | | Total |
| Travis D. Stice | | $ | 5,000,000 | (4) | | $ | 1,562,500 | (6) | | $ | 20,436 | (8) | | $ | 18,651,956 | (9) | | $ | 25,234,892 |
| Kaes Van’t Hof | | $ | 780,000 | (5) | | $ | 468,000 | (7) | | $ | 20,436 | (8) | | $ | — | | | $ | 1,268,436 |
| Teresa L. Dick | | $ | 670,500 | (5) | | $ | 357,600 | (7) | | $ | 20,436 | (8) | | $ | — | | | $ | 1,048,536 |
| Russell Pantermuehl | | $ | 922,500 | (5) | | $ | 492,000 | (7) | | $ | 9,373 | (8) | | $ | — | | | $ | 1,423,873 |
| Daniel N. Wesson | | $ | 675,000 | (5) | | $ | 360,000 | (7) | | $ | 29,986 | (8) | | $ | — | | | $ | 1,064,986 |
| | | | | | | | | | | | | | | | | | | | |
| | | Change of Control/No Termination |
| | | | | | | Annual Incentive | | | COBRA | | | RSUs and Phantom | | | | |
| Name | | Base Salary | | | Bonus(7) | | | Reimbursement | | | Units(3) | | | | Total |
| Travis D. Stice | | $ | — | | | $ | 1,562,500 | (6) | | $ | — | | | $ | 18,651,956 | (9) | | $ | 20,214,456 |
| Kaes Van’t Hof | | $ | — | | | $ | 468,000 | (7) | | $ | — | | | $ | 8,667,431 | (10) | | $ | 9,135,431 |
| Teresa L. Dick | | $ | — | | | $ | 357,600 | (7) | | $ | — | | | $ | 433,378 | (10) | | $ | 790,978 |
| Russell Pantermuehl | | $ | — | | | $ | 492,000 | (7) | | $ | — | | | $ | 433,378 | (10) | | $ | 925,378 |
| Daniel N. Wesson | | $ | — | | | $ | 360,000 | (7) | | $ | — | | | $ | 2,166,863 | (10) | | $ | 2,526,863 |
| | | Change of Control/Qualifying Termination((1)(11)) |
| | | Lump Sum | | | | | | | | | |
| | | Cash Severance | | | COBRA | | | RSUs and Phantom | | | |
| Name | | Payment | | | Reimbursement | | | Units(3) | | | Total |
| Travis D. Stice | | $ | 11,095,875 | (12) | | $ | 20,436 | (8) | | $ | 18,651,956 | (9)(14) | | $ | 29,768,267 |
| Kaes Van’t Hof | | $ | 3,144,833 | (13) | | $ | 20,436 | (8) | | $ | 13,562,472 | (10) | | $ | 16,727,741 |
| Teresa L. Dick | | $ | 2,658,133 | (13) | | $ | 20,436 | (8) | | $ | 2,863,300 | (10) | | $ | 5,541,869 |
| Russell Pantermuehl | | $ | 3,655,467 | (13) | | $ | 9,373 | (8) | | $ | 4,717,746 | (10) | | $ | 8,382,586 |
| Daniel N. Wesson | | $ | 2,254,042 | (13) | | $ | 29,986 | (8) | | $ | 4,248,363 | (10) | | $ | 6,532,391 |
| | | Termination upon Death or Disability((1)(15)) |
| | | | | | Annual Incentive | | | COBRA | | | RSUs and Phantom | | | |
| Name | | Base Salary | | | Bonus | | | Reimbursement | | | Units(3) | | | Total |
| Travis D. Stice | | $ | 5,000,000 | (4) | | $ | 1,562,500 | (6) | | $ | 20,436 | (16) | | $ | 18,651,956 | (9)(14) | | $ | 25,234,892 |
| Kaes Van’t Hof | | $ | 780,000 | (5) | | $ | 468,000 | (7) | | $ | — | | | $ | 13,596,158 | (17) | | $ | 14,844,158 |
| Teresa L. Dick | | $ | 670,500 | (5) | | $ | 357,600 | (7) | | $ | — | | | $ | 2,910,442 | (17) | | $ | 3,938,542 |
| Russell Pantermuehl | | $ | 922,500 | (5) | | $ | 492,000 | (7) | | $ | — | | | $ | 4,803,947 | (17) | | $ | 6,218,447 |
| Daniel N. Wesson | | $ | 675,000 | (5) | | $ | 360,000 | (7) | | $ | — | | | $ | 4,248,363 | (17) | | $ | 5,283,363 |
| (1) | |
(1) | InThe payment of any amounts or provision of any benefits to each NEO under the event a named executive officer is terminated upon death or disability or is terminated without cause, or if the executive officer resigns for good reason, the receipt of the payments and benefits described in this tableseverance plan is subject to (i) such executive’sNEO’s (or, if applicable, his or his estate’s (i) fullher representative’s or estate’s) execution, within forty five (45) days following receipt (or such shorter period as set forth in such release), of a waiver and general release of all knownclaims, and unknownsuch waiver and general release of claims against us related to the executive officer’sbecoming effective and irrevocable in accordance with its terms within sixty (60) days following such NEO’s termination or employmentdate and (ii) continued compliance with the confidentiality, non-interference, proprietary information, return of property, non-solicitation, non-disparagement, cooperation and, except in certain cases described below, non-competition provisions of such executive’s employment agreement. The executive officer is bound by the non-competition, non-interference and non-solicitation provisionsobligations. |
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 62 |
| (2) | Represents the amounts payable to each NEO under the severance plan and the applicable NEO participation agreement, under which, in the event we terminate such NEO’s employment with us other than for six months after“cause” (and not by reason of death or disability), or if such NEO terminates his or her employment ends. Mr. Stice is bound by the cooperation provisions of his employment agreementwith us for 12 months after his employment ends. |
| |
(2) | Represents the amount payable under Mr. Stice’s employment agreement, which was amended and restated effective April 18, 2014 to provide for a three-year term commencing on April 18, 2014, which will be extended for successive one-year periods unless we“good reason,” he or the executive elects to not extend the term. Under the employment agreement, as amended and restated to date, if (i) we terminate Mr. Stice’s employment without “cause” or due to non-renewal of the term of his employment agreement, (ii) Mr. Stice resigns for good reason, meaning such resignation follows a material uncured breach by us of the employment agreement, relocation of his principal office 25 miles outside of Midland, Texas or a material diminution in Mr. Stice’s position, duties or authority, or (iii) Mr. Stice’s employment is terminated due to death or disability, then Mr. Sticeshe will be entitled to (y) monthly severance pay inreceive (i) an amount, if any, equal to twice his monthlythe bonus that would be payable for services attributable to a completed prior year performance period that has not been paid under the terms of the Annual Incentive Plan, (ii) a multiple of base salary continuation (2x for the longer of 24 months or the number of months remaining in the term of his employment agreement and (z) full coverage for health care benefits for Mr. Stice and his family1x for 18 months for each other NEO), (iii) a target annual cash bonus for the year of termination (pro-rated, if applicable based on the number of days employed during the year of termination), (iv) reimbursement for the cost of up to 18 months of premiums for COBRA group health continuation coverage and (v) the vesting or until they are coveredforfeiture (as applicable) of each outstanding unvested equity-based compensation award granted by another employer’s benefits. To receive this severance pay and benefits, Mr. Stice must complyus or our affiliates in accordance with the restrictive covenants described above and execute a full general release in our favor, except thatterms of the restriction on competition will not apply in the event the executive resigns for good reason within 12 months following our change of control. In the event Mr. Stice's employment is terminated for “cause,” our obligations |
will terminate with respect to the payment of any base salary or bonuses effective as of the termination date, except for accrued but unpaid base salary. Mr. Stice’s severance pay will be paid in the same manner and at the same time as it would have if Mr. Stice employment had not ended, except that if, within 24 months after a change in control, Mr. Stice resigns for good reason or is terminated without cause his severance pay under clause (y) above will be paid in a lump sum amount. The $3,431,562 base amount includes $31,578 attributable to full coverage health care benefits for Mr. Stice and his family for 18 months.
| applicable equity award agreement. |
| (3) | The value of restricted stock units was calculated based on the closing price of our common stock of 126.25$48.40 per share on December 29, 2017. |
| 31, 2020. The value of phantom units was calculated based on the closing price of Rattler’s common units of $9.48 per unit on December 31, 2020. |
| (4) | Represents an amount equal to the base salary continuation of 2x for 24 months for Mr. Stice. |
| (5) | Represents an amount equal to the base salary continuation of 1x for 18 months for each of Mr. Van’t Hof, Ms. Dick, Mr. Pantermuehl and Mr. Wesson. |
| (6) | Represents an amount equal to the target bonus under the Annual Incentive Plan for Mr. Stice, representing 125% of his annual base salary. |
| (7) | Represents an amount equal to the target bonus under the Annual Incentive Plan for each of these NEOs, representing (i) 90% of the annual base salary for Mr. Van’t Hof and (ii) 80% of the applicable annual base salary for each of Ms. Dick and Messrs. Pantermuehl and Wesson. |
| (8) | Represents reimbursement for the cost of up to 18 months of premiums for COBRA group health continuation coverage. |
| (9) | Mr. Stice’s participation agreement includes terms that are intended to maintain certain benefits under his prior employment agreement and require each equity award granted to Mr. Stice to become 100% vested upon an eligible termination, and in the case of outstanding performance-based equity awards to vest at the maximum level under the equity award agreement and be settled within ten business days. |
| (10) | The restricted stock units granted under Diamondback’s Equity Incentive Plan to each of Mr. Van’t Hof, Ms. Dick, Mr. Pantermuehl and Mr. Wesson that remained unvested as of December 31, 2020 have double-trigger provisions and will vest upon (i) qualifying termination without cause within 24 months of the occurrence of the change in control of the Company or (ii) upon such executive officer’s death or disability. Under the terms of the phantom unit awards granted under the Viper LTIP and the Rattler LTIP prior to 2020, each such phantom unit award will vest immediately upon a change in control of Viper or Rattler, as applicable, or a change in control of Diamondback. |
| (11) | Represents the amounts payable to each NEO under the severance plan and the applicable NEO participation agreement, under which, in the event that the employment of an NEO is terminated by us other than for “cause” (and not by reason of death of disability), or if such NEO terminates his or her employment with us for “good reason,” in each case within the two-year period immediately following a change in control (as defined in the severance plan), he or she will be entitled to receive (i) an amount, if any, equal to the bonus that would be payable for services attributable to a completed prior year performance period that has not been paid under the terms of the Annual Incentive Plan, (ii) a lump sum cash payment equal to a multiple of the participant’s base salary plus such participant’s average bonus for the preceding three years (3x for Mr. Stice and 2.5x for each other NEO), (iii) a target annual cash bonus for the year of termination (pro-rated, if applicable based on the number of days employed during the year of termination), (iv) reimbursements for the cost of up to 18 months of premiums for COBRA group health continuation coverage and (v) the vesting or forfeiture (as applicable) of each outstanding unvested equity-based compensation award granted by us or our affiliates in accordance with the terms of the applicable equity award agreement. |
| (12) | Represents a lump sum cash payment equal to 3x Mr. Stice’s base salary plus Mr. Stice’s average bonus for the preceding three years ended December 31, 2020 and a target annual cash bonus for the year of termination. |
| (13) | For each of Mr. Van’t Hof, Ms. Dick, Mr. Pantermuehl and Mr. Wesson, represents a lump sum cash payment equal to 2.5x such NEO’s base salary plus such NEO’s average bonus for the preceding three years ended December 31, 2020 and a target annual cash bonus for the year of termination. |
| (14) | Under the terms of the applicable award agreement with each of Mr. Stice, Ms. Dick, Mr. Hollis, Mr. Pantermuehl and Mr. Molnar, restricted stock units granted in January 2016 under our 2012Diamondback’s Equity Incentive Plan prior to 2020 will vest at a maximum level immediately (a) upon the sale, transfer or conveyance of substantially all of our assets, (b) if there is a significant change to the composition of our board of directors, (c) we adopt a plan of dissolution or liquidation, (d) in the event that more than 50% of the combined voting power of our then outstanding stock is controlled by one or more parties that is not us or (e) upon such executive officer’s death or disability. |
| |
(5) | Under the terms of the applicablephantom unit awards granted under the Viper LTIP and the Rattler LTIP prior to 2020, each such phantom unit award agreement with each of Mr. Stice, Ms. Dick, Mr. Hollis, Mr. Pantermuehl and Mr. Molnar, restricted stock units granted in February 2017 under our Equity Incentive Plan will vest immediately (a) upon the sale, transfera change in control of Viper or conveyanceRattler, as applicable, or a change in control of substantially all of our assets, (b) if there is a significant change to the composition of our board of directors, (c) we adopt a plan of dissolutionDiamondback, or liquidation, (d) inupon such NEO’s death or disability. |
| (15) | In the event that more than 50% of the combined voting power of our then outstanding stock is controlled by onean NEO dies or more parties that is not us or (e) upon such executive officer’s death or disability. |
| |
(6) | Represents the amount payable under Ms. Dick’s employment agreement, which was amended and restated effective January 1, 2014 to provide for a two-year term commencing on January 1, 2014, which will be extended for successive one-year periods unless we or the executive elects to not extend the term. Under the employment agreement, as amended and restated to date, if (i) we terminate Ms. Dick’s employment without “cause” or due to non-renewal of the term of her employment agreement, (ii) Ms. Dick resigns for good reason, meaning such resignation follows a material uncured breachbecomes disabled while employed by us, of the employment agreement, relocation of her principal office 25 miles outside of Oklahoma City, Oklahoma or a material diminution in Ms. Dick’s position, duties or authority, or (iii) Ms. Dick’s employment is terminated due to death or disability, then Ms. Dicksuch NEO will be entitled to severance pay in(i) an amount, if any, equal to 12 months’ base salary, provided, in each case,the bonus that the executive continueswould be payable for services attributable to comply with the restrictive covenants described above and executes a full general release in our favor, exceptcompleted prior year performance period that the restriction on competition willhas not apply in the event the executive resigns for good reason within 12 months following our change of control. This severance pay will bebeen paid in the same manner and at the same time as it would have if Ms. Dick’s employment had not ended. In the event Ms. Dick’s employment is terminated for “cause,” our obligations will terminate with respect to the payment of any base salary or bonuses effective as of the termination date, except for accrued but unpaid base salary. |
| |
(7) | Represents the amount payable under Mr. Hollis’ employment agreement, which was amended and restated effective January 1, 2014 to provide for a two-year term commencing on January 1, 2014, which will be extended for successive one-year periods unless we or the executive elects to not extend the term. Under the employment agreement, as amended and restated to date, if (i) we terminate Mr. Hollis’ employment without “cause” or due to non-renewal of the term of his employment agreement, (ii) Mr. Hollis resigns for good reason, meaning such resignation follows a material uncured breach by us of the employment agreement, relocation of his principal office 25 miles outside of Midland, Texas or a material diminution in Mr. Hollis’ position, duties or authority, or (iii) Mr. Hollis’ employment is terminated due to death or disability, then Mr. Hollis will be entitled to severance pay in an amount equal to 12 months’ base salary, provided, in each case, that the executive continues to comply with the restrictive covenants described above and executes a full general release in our favor, except that the restriction on competition will not apply in the event the executive resigns for good reason within 12 months following our change of control. This severance pay will be paid in the same manner and at the same time as it would have if Mr. Hollis’ employment had not ended. In the event Mr. Hollis’ employment is terminated for “cause,” our obligations will terminate with respect to the payment of any base salary or bonuses effective as of the termination date, except for accrued but unpaid base salary. |
| |
(8) | Represents the amount payable under Mr. Pantermuehl’s employment agreement, which was amended and restated effective January 1, 2014 to provide for a two-year term commencing on January 1, 2014, which will be extended for successive one-year periods unless we or the executive elects to not extend the term. Under the employment agreement, as amended and restated to date, if (i) we terminate Mr. Pantermuehl’s employment without “cause” or due to non-renewal of the term of his employment agreement, (ii) Mr. Pantermuehl resigns for good reason, meaning such resignation follows a material uncured breach by us of the employment agreement, relocation of his principal office 25 miles outside of Midland, Texas or a material diminution in Mr. Pantermuehl’s position, duties or authority, or (iii) Mr. Pantermuehl’s employment is terminated due to death or disability, then Mr. Pantermuehl will be entitled to severance pay in an amount equal to 12 months’ base salary, provided, in each case, that the executive continues to comply with the restrictive covenants described above and executes a full general release in our favor, except that the restriction on competition will not apply in the event the executive resigns for good reason within 12 months following our change of control. This severance pay will be paid in the same manner and at the same time as it would have if Mr. Pantermuehl’s employment had not ended. In the event Mr. Pantermuehl’s employment |
is terminated for “cause,” our obligations will terminate with respect to the payment of any base salary or bonuses effective as of the termination date, except for accrued but unpaid base salary.
| |
(9) | Represents the amount payable under Mr. Molnar's employment agreement, which was entered into effective January 1, 2014 and provides for a two-year term commencing on January 1, 2014, which will be extended for successive one-year periods unless we or the executive elects to not extend the term. Under the employment agreement, if (i) we terminate Mr. Molnar's employment without “cause” or due to non-renewal of the term of his employment agreement, (ii) Mr. Molnar resigns for good reason, meaning such resignation follows a material uncured breach by us of the employment agreement, relocation of his principal office 25 miles outside of Midland, Texas or a material diminution in Mr. Molnar's position, duties or authority, or (iii) Mr. Molnar's employment is terminated due to death or disability, then Mr. Molnar will be entitled to severance pay in an amount equal to 12 months’ base salary, provided, in each case, that the executive continues to comply with the restrictive covenants described above and executes a full general release in our favor, except that the restriction on competition will not apply in the event the executive resigns for good reason within 12 months following our change of control. This severance pay will be paid in the same manner and at the same time as it would have if Mr. Molnar's employment had not ended. In the event Mr. Molnar's employment is terminated for “cause,” our obligations will terminate with respect to the payment of any base salary or bonuses effective as of the termination date, except for accrued but unpaid base salary. |
| |
(10) | Under the terms of the 2014 Executive Annual Incentive Compensation Plan, the awards granted under the 2014 Plan will be paid at the(ii) a multiple of base salary continuation (2x for 24 months for Mr. Stice and 1x for 18 months of each other NEO) and (iii) a target award amount based on the assumption that the performance target was attained at the target levelannual cash bonus for the entire performance periodyear of termination (pro-rated, if a “change of control” occurs. A “change of control” under the 2014 Plan is defined as (a) the sale, transfer or conveyance of substantially all of our assets, other than to Wexford Capital or its affiliates, (b) a significant change to the composition of our board of directors, (c) the adoption of a plan of dissolution or liquidation or (c) anyone other than Wexford Capital or its affiliates becoming the owner of more than 50% of the voting power of the Company. This amount will be paid within ten days following the triggering event. |
| |
(11) | Under the terms of the 2014 Executive Annual Incentive Compensation Plan, if the executive officer is terminated due to his or her death or disability, the officer is entitled to a prorated amount of the granted awardapplicable based on the number of days the officer was employed by us during the applicable performance period. These awards will be paid at the same time as they would have had the officer remained employed. |
| year of termination). |
(12)(16) | Represents reimbursements for the cost of up to 18 months of premiums for COBRA group health continuation coverage to Mr. Stice’s spouse and any eligible dependents, as provided by the terms of Mr. Stice’s participation agreement under the severance plan. |
| (17) | Under the terms of the applicable award agreement, upon each named executive officer’ssuch NEO’s death or disability the number of performance-based restricted stock units the officer is entitled to is not determined until the end of the performance period and is settled at the same time it would have had the officer remained employed. For purposes of calculating the number of performance-based restricted stock units that each named executive officersuch NEO would be entitled to upon his or her death or disability, the Company assumed that itsthe performance during the 2016-2018, 2017-2018 and 2017-2019 fiscal years relative to its peers would be substantially similar to its performance during the 2015-2017, 2016-2017 and 2015-2017 fiscal years, respectively. As a result, the chart reflects that each named executive officer would be entitled to the maximum award amount under the award agreement for such named executive officer. conditions were satisfied at target. |
2017 EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth, as of December 31, 2017, certain| — | 2020 EQUITY COMPENSATION PLAN INFORMATION |
Certain information with respect to all compensation plans under which equity securities are authorized for issuance.issuance, as of December 31, 2020, is set forth in Proposal 4 beginning on page 76.
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 63 |
|
| | | | | | | | |
| Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)(1) | | Weighted average exercise price of outstanding options, warrants and rights
(b)(2) | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c) |
| Equity compensation plans approved by security holders(1) | | 984,856 |
| | $0.00 | | 2,363,592 |
|
| Equity compensation plans not approved by security holders (3) | | 113,039 |
| | $18.48 | | 8,957,317 |
|
| — | |
(1) | Refers to the Equity Incentive Plan.2020 DIRECTOR COMPENSATION |
| |
(2) | The weighted average exercise price does not take into account restricted stock units because they have no exercise price. |
(3) Refers to the options to purchase common units of Viper and phantom units of Viper, in each case granted under the Viper LTIP.
2017 DIRECTOR COMPENSATION
The following table contains information with respect to 20172020 compensation of our directors who served in such capacity during that year, except that the 20172020 compensation of those directors who are also our named executive officers is disclosed in the 2017, 20162020, 2019 and 20152018 Summary Compensation Table above.
|
| | | | | | | | | | | | |
| Name | | Fees Earned or Paid in Cash ($)(1) | | Stock Awards ($)(2) | | Total ($) |
Steven E. West (3) | | $ | 164,875 |
| | $ | 181,066 |
| | $ | 345,941 |
|
Michael P. Cross | | $ | 96,375 |
| | $ | 181,066 |
| | $ | 277,441 |
|
| David L. Houston | | $ | 96,375 |
| | $ | 181,066 |
| | $ | 277,441 |
|
| Mark L. Plaumann | | $ | 96,375 |
| | $ | 181,066 |
| | $ | 277,441 |
|
| Name | | Fees Earned or
Paid in Cash
($)(1) | | | Stock Awards
($)(2) | | | All Other
Compensation
($)(3) | | | Total
($) | |
| Steven E. West(4) | | $ | 200,000 | | | $ | 141,075 | | | $ | 3,596 | | | $ | 344,671 | |
| Michael P. Cross | | $ | 111,250 | | | $ | 141,075 | | | $ | 3,596 | | | $ | 255,921 | |
| David L. Houston | | $ | 111,250 | | | $ | 141,075 | | | $ | 3,596 | | | $ | 255,921 | |
| Mark L. Plaumann | | $ | 111,250 | | | $ | 141,075 | | | $ | 3,596 | | | $ | 255,921 | |
| Melanie M. Trent | | $ | 111,250 | | | $ | 141,075 | | | $ | 3,596 | | | $ | 255,921 | |
| Vincent K. Brooks | | $ | 62,500 | | | $ | 141,075 | | | $ | 2,224 | | | $ | 205,799 | |
| Stephanie K. Mains | | $ | 62,500 | | | $ | 141,075 | | | $ | 2,224 | | | $ | 205,799 | |
| (1) | |
(1) | Of these amounts, $50,000, $23,750, $23,750$25,000, $25,000, $25,000 and $23,750$25,000 were payments made in December 20172019 to Mr. West, Mr. Cross, Mr. Houston, and Mr. Plaumann and Ms. Trent, respectively, for services performed in the first quarter of 2020. Excluded from these amounts were payments of $50,000, $28,750, $28,750, $28,750, $28,750, $21,250 and $21,250 made in December 2020 to Mr. West, Mr. Cross, Mr. Houston, Mr. Plaumann, Ms. Trent, Mr. Brooks and Ms. Mains, respectively, for services to be performed in the first quarter of 2018. |
| 2021. |
| (2) | The amounts shown reflect the grant date fair value of restricted stock units granted, determined in accordance with FASB ASC Topic 718. See Note 1013 to our consolidated financial statements for the fiscal year ended December 31, 2017,2020, included in our Annual Report on Form 10-K, filed with the SEC on February 15, 2018,25, 2021, regarding assumptions underlying valuations of equity awards for 2017.2020. Each non-employee director was awarded 2,0552,965 restricted stock units in 2017,2020, which will vest on the earlier of the one-year anniversary of the date of grant and the date of the 20182021 annual meeting of stockholders. No additional equity awards were received by our non-employee directors to date in 2018. |
| 2021. |
| (3) | The amounts shown reflect cash paid for dividend equivalent rights on restricted stock units that were granted in 2020. |
| (4) | Excludes the compensation awarded to Mr. West for his serviceservices as the Executive Chairman and(i) a director and Chairman of the Board of the general partner of Viper in 2017,2020, which consisted of $58,875$60,000 in cash and a grant of 6,4149,970 phantom unit awardsunits on July 25, 2017, valued at $107,627,10, 2020, with the grant date fair value of $97,905, and a vesting date of July 10, 2021, for a total compensation of $166,502. The$157,905 and (ii) a director and Chairman of the Board of the general partner of Rattler in 2020, which consisted of $75,000 in cash and a grant of 11,011 phantom units granted will vest on July 1, 2018.10, 2020, with the grant date fair value of $90,621 and a vesting date of July 10, 2021, for a total compensation of $165,621. |
Prior to July 1, 2017,During 2020, non-employee directors of the Company received $47,500a base annual retainer of $80,000 in cash plus additional annual payments of $15,000 for$120,000 to the Chairman of the Board, $20,000 to the chairperson of the audit committee, and $10,000 forto each other member of the audit committee, and $10,000 for$15,000 to the chairperson of all other committees and $5,000 forto each other member of each other committee, with such amounts paid in quarterly installments. Additionally, each director received $1,000 for each board or committee meeting the director attends in person, and $500 for each board or committee meeting the director attends telephonically. After giving consideration to a competitive analysis prepared by Aon Hewitt with respect to director compensation and other factors, effective as of July 1, 2017, our board of directors eliminated the fees payable to non-employee directors for each meeting of the board or its committees attended in person or telephonically and increased the annual cash retainer for the Chairman of the Board from $47,500 to $200,000 and for the other non-employee directors from $47,500 to $65,000. Further, our board of directors adjusted the annual retainers for the chairperson of each of the board’s committees, increasing the annual retainer for the Chairman of the Audit Committee from $15,000 to $20,000 and for the chairperson of all other committees from $10,000 to $15,000, leaving unchanged the annual retainer of $10,000 payable to non-chair members of the Audit Committee and the annual retainer of $5,000 payable to each non-chair member of the board’s other committees. Consistent with our prior practice, cash compensation is payable to
During 2020, we also provided our non-employee directors in quarterly installments.
Effective July 1, 2017, our board of directors increased the annualwith equity compensation of our non-employee directors granted to them under our equity incentive plan. The value of such annual equity compensation, granted to non-employee directors in restricted stock units, was increased from $120,000 to $180,000, based on the average closing price per share of our common stock on the Nasdaq Global Select Market for the five trading days immediately preceding the date of grant.plan valued $200,000. The annual grant of restricted stock will beis generally made to non-employee directors at the close of business on the date of each annual meeting of our stockholders. In April 2020, our board of directors modified the equity compensation component of director compensation with respect to the awards to be made to non-employee directors at the close of business on the date of our 2020 annual stockholders except thatmeeting. As modified, the 2017 equity grantnumber of 2,055 restricted stock units granted to each non-employee director was to be calculated using the higher of (i) the stock price used to calculate equity awards granted to our non-employee directors was madeNEOs on July 12, 2017,March 1, 2020 and (ii) the existing methodology under our director compensation program (calculated based on the average closing price per share of our common stockprice for the five trading days immediately preceding July 1, 2017. Our boardthe applicable annual meeting of directors also adjusted the vesting schedule for the annual equity grant from a three-year vesting schedule to a one-year vesting schedule for equity awards granted after July 1, 2017. As a result, the entire annual equity awardstockholders). This modification resulted in fewer shares of our common stock being granted to our non-employee directors in their 2020 Awards. On June 3, 2020, each non-employee director was granted 2,965 restricted stock units which will vest on the earlier of the first anniversary of the date of grant and the next annual meeting of our stockholders following the date of grant.
Director Stock Ownership Guidelines
The compensation committee has adopted stock ownership and retention guidelines for our non-employee directors. The stock ownership guidelines for our executive officers who are classified as Vice President and above and described in the “Compensation Discussion and Analysis” above. The stock ownership guidelines for our non-employee directors were adopted to encourage our non-employee directors to have a meaningful stake in the Company, which encourages a focus on our long-term success, aligns directors’ interests with the interests of our stockholders and further promotes our commitment to sound corporate governance.
Under their stock ownership guidelines, each of our non-employee directors must own an amount of our common stock equal in value to five times of the base annual retainer for non-employee directors.
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 64 |
Holdings of Major Stockholders
| 
STOCK OWNERSHIP |
| — | HOLDINGS OF MAJOR STOCKHOLDERS |
The following table sets forth certain information regarding the beneficial ownership as of April 2, 20181, 2021 of shares of our common stock by each person or entity known to us to be a beneficial owner of 5% or more of our common stock.
|
| | | | | | |
Name and Address of Beneficial Owner (1) | | Amount and Nature of Beneficial Ownership | | Percent of Class |
| FMR LLC | | 11,008,374 | (2) | | 11.2 | % |
245 Summer Street
Boston, MA 02210 | | | | | |
| Capital World Investors | | 9,819,497 | (3) | | 10.0 | % |
333 South Hope Street
Los Angeles, CA 90071 | | | | | |
| Wellington Management Group LLP | | 8,516,281 | (4) | | 8.6 | % |
c/o Wellington Management Company LLP
280 Congress Street
Boston, MA 02210 | | | | | |
| The Vanguard Group | | 8,211,298 | (5) | | 8.3 | % |
100 Vanguard Blvd.
Malvern, PA 19355 | | | | | |
| Boston Partners | | 7,051,477 | (6) | | 7.2 | % |
One Beacon Street, 30th Floor
Boston, MA 02108 | | | | | |
| JPMorgan Chase & Co. | | 5,698,495 | (7) | | 5.8 | % |
270 Park Ave
New York, NY 10017 | | | | | |
| Brigham Resources, LLC | | 576,502 | (8) | | 0.6 | % |
5914 W. Courtyard Drive, Suite 200
Austin, TX 78730 | | | | | |
| Name and Address of Beneficial Owner(1) | | Amount and Nature of
Beneficial Ownership | | | Percent of Class | |
| Capital Research Global Investors | | | 19,337,005 | (2) | | | 10.7 | % |
| 333 South Hope Street | | | | | | | | |
| Los Angeles, CA 90071 | | | | | | | | |
| The Vanguard Group | | | 17,424,201 | (3) | | | 9.6 | % |
| 100 Vanguard Blvd. | | | | | | | | |
| Malvern, PA 19355 | | | | | | | | |
| JPMorgan Chase & Co. | | | 12,396,327 | (4) | | | 6.9 | % |
| 383 Madison Avenue | | | | | | | | |
| New York, NY 10179 | | | | | | | | |
| The Blackstone Group Inc. | | | 10,676,116 | (5) | | | 5.9 | % |
| 345 Park Avenue | | | | | | | | |
| New York, NY 10154 | | | | | | | | |
| BlackRock, Inc. | | | 9,700,955 | (6) | | | 5.4 | % |
| 55 East 52nd Street | | | | | | | | |
| New York, NY 10055 | | | | | | | | |
| State Street Corporation | | | 9,568,056 | (7) | | | 5.3 | % |
| One Lincoln Street | | | | | | | | |
| Boston, MA 02111 | | | | | | | | |
| (1) | |
(1) | Beneficial ownership is determined in accordance with SEC rules. The percentage of shares beneficially owned is based on 98,610,608180,981,740 shares of common stock outstanding as of April 2, 2018. |
| 1, 2020. |
| (2) | Based solely on Schedule 13G/A jointly filed with the SEC on February 13, 2018 by FMR LLC ("FMR") and Abigail P. Johnson. Ms. Johnson is a Director, the Chairman and the Chief Executive Officer of FMR. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of 49% of the voting power of FMR. Members of the Johnson family may be deemed to form a controlling group with respect to FMR. Neither FMR nor Ms. Johnson has the sole power to vote or direct the voting of the common stock owned directly by the various investment companies (“Fidelity Funds”) advised by Fidelity Management & Research Company (“FMR Co.”), a wholly owned subsidiary of FMR, which power resides with the Fidelity Funds’ Boards of Trustees. FMR Co. carries out the voting of the common stock under written guidelines established by the Fidelity Funds’ Boards of Trustees. FMR reported sole voting power over 1,292,018 shares of common stock and sole dispositive power over 11,008,374 shares of common stock. Ms. Johnson reported sole dispositive power over 11,008,374 shares of common stock. Various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of common stock. FMR Co. Inc., beneficially owns more than five percent of the common stock. |
| |
(3) | Based solely on Schedule 13G/A filed with the SEC on March 9, 2018 by Capital World Investors. Capital World Investors reported sole voting power over 9,819,497 shares of common stock and sole dispositive power over 9,819,497 shares of common stock. |
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(4) | Based solely on Schedule 13G/A jointly filed with the SEC on February 14, 2018 by Wellington Management Group LLP (“Wellington Management”), Wellington Group Holdings LLP ("Wellington Holdings"), Wellington Investment Advisors Holdings LLP ("Wellington Advisors") and Wellington Management Company LLP (" Wellington Company"). These shares are owned of record by clients of Wellington Company, Wellington Management Canada LLC, Wellington Management Singapore Pte Ltd., Wellington Management Hong Kong Ltd, Wellington Management International Ltd., Wellington Management Japan Pte Ltd., Wellington Management Australia Pty Ltd. (collectively, the "Wellington Investment Advisors"). Wellington Advisors controls directly, or indirectly through Wellington Management Global Holdings Ltd., the Wellington Investment Advisors. Wellington Advisors is owned by Wellington Holdings, which is in turn owned by Wellington Management. The clients of the Wellington Investment Advisors have the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of, such securities. No |
such client is known to have such right or power with respect to more than five percent of this class of securities. Each of Wellington Management, Wellington Holdings and Wellington Advisors reported shared voting power over 5,433,331 shares and shared dispositive power over 8,516,281 shares. Wellington Company reported shared voting power over 4,499,618 shares and shared dispositive power over 7,285,225 shares.
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(5) | Based solely on Schedule 13G/A filed with the SEC on February 7, 201816, 2021 by The Vanguard Group (“Vanguard”). VanguardCapital Research Global Investors. Capital Research Global Investors reported sole voting power over 72,863 shares of common stock, sole dispositive power over 8,122,699 shares of common stock, shared voting power over 19,83519,322,037 shares of common stock and sharedsole dispositive power over 88,59919,337,005 shares of common stock. Vanguard FiduciaryCapital Research Global Investors (“CRGI”) is a division of Capital Research and Management Company (“CRMC”), as well as its investment management subsidiaries and affiliates Capital Bank and Trust Company, Capital International, Inc., Capital International Limited, Capital International Sarl and Vanguard Investments Australia, Ltd., both wholly owned subsidiariesCapital International K.K. (together with CRMC, the “investment management entities”). CRGI’s divisions of Vanguard, areeach of the beneficial owners of 44,953 and 71,556 shares, respectively, of common stock. |
| investment management entities collectively provide investment management services under the name “Capital Research Global Investors.” |
(6)(3) | Based solely on Schedule 13G/A filed with the SEC on February 12, 201810, 2021 by Boston Partners. These shares are held by Boston Partners for the discretionary account of certain of its clients. To the knowledge of Boston Partners, no client has the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of common stock which represents more than five percent of the common stock. Boston PartnersThe Vanguard Group (“Vanguard”). Vanguard reported sole voting power over 5,840,038 shares, sole dispositive power over 7,051,47716,766,865 shares andof common stock, shared voting power over 11,018 shares. |
| 219,349 shares of common stock and shared dispositive power over 657,336 shares of common stock of the aggregate amount beneficially owned reported herein. The common stock reported herein, over which Vanguard is deemed to be the beneficial owner, Each of Vanguard Asset Management, Limited, Vanguard Fiduciary Trust Company, The following subsidiaries of Vanguard beneficially own securities reported on the Schedule 13G/A: Vanguard Global Advisors, LLC, Vanguard Group (Ireland) Limited, Vanguard Investments Australia Ltd, Vanguard Investments Canada Inc., Vanguard Investments Hong Kong Limited, Vanguard Investments UK, Limited. |
(7)(4) | Based solely on Schedule 13G/A filed with the SEC on January 19, 201822, 2021 by JPMorgan Chase & Co. (“JPMorgan”). JPMorgan reported sole voting power over 4,766,37211,476,397 shares of common stock, sole dispositive power over 12,340,742 shares of common stock, shared voting power over 114,720 shares of common stock, sole dispositive power over 5,546,51730,447 shares of common stock and shared dispositive power over 151,76447,620 shares of common stock. The following subsidiaries of JPMorgan beneficially own securities reported on the Schedule 13G/A: J.P Morgan Investment Management Inc., JPMorgan Chase Bank, National Association, JPMorgan Asset Management (UK) Limited, J.P. Morgan (Suisse) SA, J.P. Morgan Trust Company of Delaware, J.P. Morgan Securities LLC, J.P., JPMorgan Asset Management (Japan) Limited. |
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 65 |
| (5) | Based solely on Schedule 13G jointly filed with the SEC on March 8, 2021 by Guidon Operating LLC, Guidon FinanceCo LLC, Guidon Energy MidCo II LLC, Guidon Energy MidCo LLC, Guidon Energy Holdings LP, Guidon Energy Holdings GP LLC, Blackstone Management Associates VII L.L.C., Blackstone Energy Management Associates II L.L.C., BMA VII L.L.C., Blackstone EMA II L.L.C., Blackstone Holdings III L.P., Blackstone Holdings III GP L.P., Blackstone Holdings III GP Management L.L.C., Blackstone Holdings III GP Management L.L.C., The Blackstone Group Inc., Blackstone Group Management L.L.C. and Steven A. Schwarzman (collectively, the “Blackstone reporting persons”). Guidon Operating LLC and Guidon Energy Holdings LP are together referred to herein as the “Blackstone Funds”. Guidon Operating LLC maintains sole voting and dispositive power with respect to 1,594,500 shares of common stock reported herein. Guidon FinanceCo LLC is the managing member of Guidon Operating LLC. Guidon Energy MidCo II LLC is the managing member of Guidon FinanceCo LLC. Guidon Energy MidCo LLC is the managing member of Guidon Energy MidCo II LLC. Guidon Energy Holdings LP is the managing member of Guidon Energy MidCo LLC and directly holds 1,594,500 shares of common stock reported herein. Guidon Energy Holdings GP LLC is the general partner of Guidon Energy Holdings LP. The controlling membership interests of Guidon Energy Holdings GP LLC are held by Blackstone Management Associates VII L.L.C. and Blackstone Energy Management Associates II L.L.C. BMA VII L.L.C. is the sole member of Blackstone Management Associates VII L.L.C. Blackstone EMA II L.L.C. is the sole member of Blackstone Energy Management Associates II L.L.C. Blackstone Holdings III L.P. is the managing member of each of BMA VII L.L.C. and Blackstone EMA II L.L.C. Blackstone Holdings III GP L.P. is the general partner of Blackstone Holdings III L.P. Blackstone Holdings III GP Management L.L.C. is the general partner of Blackstone Holdings III GP L.P. The Blackstone Group Inc. is the sole member of Blackstone Holdings III GP Management L.L.C. The sole holder of the Class C common stock of The Blackstone Group Inc. is Blackstone Group Management L.L.C. Blackstone Group Management L.L.C. is wholly-owned by Blackstone’s senior managing directors and controlled by its founder, Stephen A. Schwarzman. Each Blackstone reporting person may be deemed to beneficially own the common stock beneficially owned by the Blackstone Funds or indirectly controlled by it or him, but (other than the Blackstone Funds to the extent they directly hold common stock reported herein) each such Blackstone reporting person expressly disclaims beneficial ownerownership of such shares of common stock. |
| (6) | Based solely on Schedule 13G filed with the SEC on January 29, 2021 by BlackRock, Inc. (“BlackRock”). BlackRock reported sole voting power over 8,662,448 shares of common stock and sole dispositive power over 9,700,955 shares of common stock. The following subsidiaries of BlackRock, Inc. hold shares of our common stock reported on behalf of other persons, none of which is known to have anthe Schedule 13G/A: BlackRock Life Limited, BlackRock International Limited, BlackRock Advisors, LLC, BlackRock (Netherlands) B.V., BlackRock Institutional Trust Company, National Association, BlackRock Asset Management Ireland Limited, BlackRock Financial Management, Inc., BlackRock Japan Co., Ltd., BlackRock Asset Management Schweiz AG, BlackRock Investment Management, LLC, BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock (Luxembourg) S.A., BlackRock Investment Management (Australia) Limited, BlackRock Advisors (UK) Limited, BlackRock Fund Advisors, BlackRock Asset Management North Asia Limited and BlackRock Fund Managers Ltd. No one person’s interest in the common stock is more than five percent of the classtotal outstanding shares of such securities. |
| common stock. |
(8)(7) | Based solely on Schedule 13G/A jointly filed with the SEC on February 14, 2018 jointly2020 by Brigham Resources Upstream Holdings, LPState Street Corporation (“Brigham Upstream”), Brigham Resources, LLC (“Brigham”), Warburg Pincus & Company US, LLC (“Warburg Pincus”), PBRA, LLC (“Pine Brook”), Yorktown IX Associates LLC (“Yorktown IX”), Yorktown X Associates LLC (“Yorktown X”), Yorktown XI Associates LLC (“Yorktown XI”), and YT Brigham Associates LLC (together with Yorktown IX, Yorktown X and Yorktown XI, “Yorktown”State Street”). Brigham UpstreamState Street reported shared voting power over 8,637,447 shares of common stock and shared dispositive power over 543,9909,566,156 shares of common stock. Brigham, Warburg Pincus, Pine Brook, Yorktown IX, Yorktown X, Yorktown XIThe Schedule 13G further indicates that the following subsidiaries of State Street beneficially own securities reported on the Schedule 13G/A: SSGA Funds Management, Inc., State Street Global Advisors Limited (UK), State Street Global Advisors Ltd (Canada), State Street Global Advisors, Australia Limited, State Street Global Advisors (Japan) Co., Ltd., State Street Global Advisors Asia Ltd, State Street Global Advisors GmbH, State Street Global Advisors Ireland Limited and YT Brigham Associates LLC reported shared voting power and shared dispositive power over 576,502 shares of common stock. Warburg Pincus is the ultimate controlling entity of certain Warburg Pincus affiliated entities that are members of Brigham (the “WP Group”) and that, collectively, hold the right to appoint three of the nine representatives to the board of managers of Brigham. As a result, the WP Group (and Warburg Pincus, as the ultimate controller of the WP Group) may be deemed to have the power to vote or direct the vote or to dispose or direct the disposition of the shares owned by Brigham and, because Brigham is the general partner of Brigham Upstream, may be deemed to have the power to vote or direct the vote or to dispose or direct the disposition of the shares owned by Brigham Upstream. Warburg Pincus is the reporting person for purposes of this filing due to the State Street Global Advisors Trust Company.de minimis interest of each member of the WP Group in Brigham. Pine Brook is the ultimate controlling entity of certain Pine Brook affiliated entities that are members of Brigham (the “Pine Brook Group”) and that, collectively, hold the right to appoint two of the nine representatives to the board of managers of Brigham. As a result, the Pine Brook Group (and Pine Brook, as the ultimate controller of the Pine Brook Group) may be deemed to have the power to vote or direct the vote or to dispose or direct the disposition of the shares owned by Brigham and, because Brigham is the general partner of Brigham Upstream, may be deemed to have the power to vote or direct the vote or to dispose or direct the disposition of the shares owned by Brigham Upstream. Pine Brook is the reporting person for purposes of this filing due to the de minimis interest of each member of the Pine Brook Group in Brigham. Yorktown and certain of its affiliates (the “Yorktown Entities”), collectively, hold the right to appoint two of the nine representatives to the board of managers of Brigham. As a result, the Yorktown Entities may be deemed to have the power to vote or direct the vote or to dispose or direct the disposition of the shares owned by Brigham and, because Brigham is the general partner of Brigham Upstream, may be deemed to have the power to vote or direct the vote or to dispose or direct the disposition of the shares owned by Brigham Upstream. |
Holdings of Officers and Directors
| — | HOLDINGS OF OFFICERS AND DIRECTORS |
The following table sets forth certain information regarding the beneficial ownership as of April 2, 20181, 2021 of shares of our common stock by each of our directors, by each named executive officer and by all directors and executive officers as a group:
group. |
| | | | | |
Name of Beneficial Owner(1) | | Amount and Nature
of Beneficial
Ownership(10)(11) | | | Percent of Class | |
Travis D. Stice(2) | | 289,917 |
479,999 | | | | * | |
Teresa L. DickKaes Van’t Hof(3)
| | 23,465 |
39,261 | | | | * | |
MichaelTeresa L. HollisDick(4)
| | 90,782 |
54,632 | | | | * | |
Russell Pantermuehl(5) | | 82,808 |
114,427 | | | | * | |
Paul Molnar Daniel N. Wesson(6)
| | 33,257 |
17,457 | | | | * | |
Steven E. West(7) | | 3,379 |
9,291 | | | | * | |
Michael P. Cross(7)(8) | | 11,952 |
13,864 | | | | * | |
David L. Houston(7) | | 11,952 |
11,364 | | | | * | |
Mark L. Plaumann(7)(9) | | 6,052 |
11,964 | | | | * | |
| Melanie M. Trent(7) | | | 3,404 | | | | * | |
| Vincent K. Brooks(7) | | | — | | | | — | |
| Stephanie K. Mains(7) | | | — | | | | — | |
Directors and Executive Officers as a Group (13(15 persons) | | 565,297 |
785,354 | | | | * | |
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 66 |
| (1) | |
(1) | Beneficial ownership is determined in accordance with SEC rules. In computing percentage ownership of each person, (i) shares of common stock subject to options held by that person that are exercisable as of April 2, 20181, 2021 and (ii) shares of common stock subject to options or restricted stock units held by that person that are exercisable or vesting within 60 days of April 2, 2018,1, 2021, are all deemed to be beneficially owned. These shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of each other person. The percentage of shares beneficially owned is based on 98,610,608180,981,740 shares of common stock outstanding as of April 2, 2018.1, 2021. Unless otherwise indicated, all amounts exclude shares issuable upon the exercise of outstanding options and vesting of restricted stock units that are not exercisable and/or vested as of April 2, 20181, 2021 or within 60 days of April 2, 2018. |
| 1, 2021. Except as noted, each stockholder in the above table is believed to have sole voting and sole investment power with respect to the common stock beneficially held. |
| (2) | All of these shares are held by Stice Investments, Ltd., which is managed by Stice Management, LLC, its general partner. Mr. Stice and his spouse hold 100% of the membership interests in Stice Management, LLC, of which Mr. Stice is the manager. Excludes (i) 7,41014,825 restricted stock units which willthat are scheduled to vest on February 16, 2019March 1, 2022 and (ii) 13,59422,999 restricted stock units which willgranted on March 1, 2021 that are scheduled to vest in two remaining substantially equal annual installments beginning on February 21, 2019.March 1, 2022. Also excludes (i) 45,08449,436 performance-based restricted stock units awarded to Mr. Stice on January 19, 2016, whichMarch 1, 2019 that are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending on December 31, 2018, (ii) 11,1152021, (iii) 66,714 performance-based restricted stock units awarded to Mr. Stice on February 16, 2017, whichMarch 1, 2020 that are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the two-yearthree-year performance period ending on December 31, 2018, (iii) 22,2302022 and (iv) 51,748 performance-based restricted stock units awarded to Mr. Stice on February 16, 2017,March 1, 2021 that are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three years performance period ending on December 31, 2023. |
| (3) | Excludes (i) 6,918 restricted stock units, that are scheduled to vest on March 1, 2022, (ii) 12,074 restricted stock units granted on March 1, 2021 that are scheduled to vest in two remaining substantially equal annual installments beginning on March 1, 2022, (iii) 8,790 restricted stock units that are scheduled to vest in five equal annual installments beginning on March 1, 2025, (iii) 23,070 performance-based restricted stock units awarded on March 1, 2019 that are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending on December 31, 2021, (v) 13,183 performance-based restricted stock units awarded to Mr. Van’t Hof on March 1, 2019 that are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending on December 31, 2021 and are scheduled to vest in five equal annual installments beginning on March 1, 2025, (vi) 31,133 performance-based restricted stock units awarded to Mr. Van’t Hof on March 1, 2020 that are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending on December 31, 2022 and (v) 27,168 performance-based restricted stock units awarded to Mr. Van’t Hof on March 1, 2021 that are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three years performance period ending on December 31, 2023. |
| (4) | Excludes (i) 3,953 restricted stock units that are scheduled to vest on March 1, 2022 and (ii) 6,900 restricted stock units that are scheduled to vest in two remaining substantially equal annual installments beginning on March 1, 2022. Also excludes (i) 13,183 performance-based restricted stock units awarded to Ms. Dick on March 1, 2019, which awards are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending December 31, 2019 and (iv) 30,585 performance-based restricted stock units awarded to Mr. Stice on February 13, 2018, which are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending on December 31, 2020. |
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(3) | Excludes (i) 1,950 restricted stock units, which will vest on February 16, 2019 and2021, (ii) 3,732 restricted stock units, which will vest in two equal annual installments beginning on February 21, 2019. Also excludes (i) 3,00617,790 performance-based restricted stock units awarded to Ms. Dick on January 19, 2016, which are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending December 31, 2018, (ii) 2,925 performance-based restricted stock units awarded to Ms. Dick on February 16, 2017, which are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the two-year performance period ending on December 31, 2018, (iii) 5,850 performance-based restricted stock units awarded to Ms. Dick on February 16, 2017, which awards are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending December 31, 2019 and (iv) 8,396 performance-based restricted stock units awarded to Ms. Dick on February 13, 2018, which are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending on December 31, 2020. |
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(4) | All of these shares are held by MBH Investments, Ltd., which is managed by MBH Financial, LLC, its general partner. Mr. Hollis, his spouse and the Hollis 2014 Irrevocable Trust hold 100% of the membership interests in MBH Financial, LLC, of which Mr. Hollis is the manager. Excludes (i) 4,550 restricted stock units, which will vest on February 16, 2019 and (ii) 7,890 restricted stock units, which will vest in two equal annual installments beginning on February 21, 2019. Also excludes (i) 15,028 performance-based restricted stock units awarded to Mr. Hollis on January 19, 2016, which are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending on December 31, 2018, (ii) 6,825 performance-based restricted stock units awarded to Mr. Hollis on February 16, 2017, which are subject to the |
satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the two-year performance period ending on December 31, 2018, (iii) 13,650 performance-based restricted stock units awarded to Mr. Hollis on February 16, 2017, which awards are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending December 31, 2019 and (iv) 17,751 performance-based restricted stock units awarded to Mr. Hollis on February 13, 2018, which are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending on December 31, 2020.
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(5) | Excludes (i) 3,900 restricted stock units, which will vest on February 16, 2019 and (ii) 6,824 restricted stock units, which will vest in two equal annual installments beginning on February 21, 2019. Also excludes (i) 12,022 performance-based restricted stock units awarded to Mr. Pantermuehl on January 19, 2016, which are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending on December 31, 2018, (ii) 5,850 performance-based restricted stock units awarded to Mr. Pantermuehl on February 16, 2017, which are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the two-year performance period ending on December 31, 2018, (iii) 11,700 performance-based restricted stock units awarded to Mr. Pantermuehl on February 16, 2017, which awards are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending December 31, 2019 and (iv) 15,353 performance-based restricted stock units awarded to Mr. Pantermuehl on February 13, 2018, which are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending on December 31, 2020. |
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(6) | Excludes (i) 3,900 restricted stock units, which will vest on February 16, 2019 and (ii) 6,398 restricted stock units, which will vest in two equal annual installments beginning on February 21, 2019. Also excludes (i) 6,011 performance-based restricted stock units awarded to Mr. Molnar on January 19, 2016,March 1, 2020, which awards are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending on December 31, 2018, (ii) 5,8502022 and (iii) 15,524 performance-based restricted stock units awarded to Mr. MolnarMs. Dick on February 16, 2017, whichMarch 1, 2021 that are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the two-yearthree years performance period ending on December 31, 2018, (iii) 11,7002023. |
| (5) | Excludes 6,918 restricted stock units that are scheduled to vest on March 1, 2022 and (ii) 12,074 restricted stock units that are scheduled to vest in two remaining substantially equal annual installments beginning on March 1, 2022. Also excludes (i) 23,070 performance-based restricted stock units awarded to Mr. MolnarPantermuehl on February 16, 2017, which awards are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending December 31,March 1, 2019 and (iv) 14,393 performance-based restricted stock units awarded to Mr. Molnar on February 13, 2018, whichthat are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending on December 31, 2020. |
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(7) | Excludes 4532021, (ii) excludes 31,133 performance-based restricted stock units whichawarded to Mr. Pantermuehl on March 1, 2020 that are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending on December 31, 2022 and (iii) 27,168 performance-based restricted stock units awarded to Ms. Dick on March 1, 2021 that are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three years performance period ending on December 31, 2023. |
| (6) | Excludes (i) 2,965 restricted stock units that are scheduled to vest on March 1, 2022, (ii) 6,595 restricted stock units will vest in five equal installments beginning on JulyMarch 1, 2018,2025 and 2,055(iii) 5,174 restricted stock units that are scheduled to vest in two approximately equal annual installments beginning on March 1, 2022. Also excludes (i) 5,932 performance-based restricted stock units awarded to Mr. Wesson on March 1, 2019 that are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending on December 31, 2021, (ii) 9,887 performance-based restricted stock units awarded to Mr. Wesson on March 1, 2019 that are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending on December 31, 2021 and are scheduled to vest in five equal annual installments beginning on March 1, 2025, (iii) 13,343 performance-based restricted stock units awarded to Mr. Wesson on March 1, 2020 that are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three-year performance period ending on December 31, 2022 and (iv) 11,643 performance-based restricted stock units awarded to Mr. Wesson on March 1, 2021 that are subject to the satisfaction of certain stockholder return performance conditions relative to Diamondback’s peer group during the three years performance period ending on December 31, 2023. |
| (7) | Excludes 2,965 restricted stock units, which will vest on the earlier of the one-year anniversary of the date of grantJune 3, 2021 and the date of the 20182021 annual meeting of stockholders of the issuer. |
| stockholders. |
| (8) | Excludes 453 restricted stock units, which will vest on July 1, 2018, and 2,055 restricted stock units, which will vest onThese shares are held by the earlier of the one-year anniversary of the date of grant and the date of the 2018 annual meeting of stockholders of the issuer. All these shares have been transferred to a trust,Michael P. Cross Revocable Trust, of which Mr. Cross and his spouse are co-trustees. |
| is a co-trustee. |
| (9) | Excludes 453 restricted stock units, which will vest on July 1, 2018, and 2,055 restricted stock units, which will vest on the earlier of the one-year anniversary of the date of grant and the date of the 2018 annual meeting of stockholders of the issuer. These shares are held by Greyhawke Capital Advisors LLC ("Greyhawke"(“Greyhawke”) of which Mr. Plaumann is the managing member. Mr. Plaumann holds a 50% ownership interest in Greyhawke and may be deemed to have a pecuniary interest in these securities. |
| |
| (10) | In addition to the Company common stock reported in the table, as of January 25, 2018,31, 2021, our directors and executive officers beneficially owned common units of Viper Energy Partners LP, or Viper, as follows: Mr. Stice - 68,311;– 106,169; Mr. Van’t Hof – 35,362; Ms. Dick -– 11,540; Mr. Pantermuehl - 48,487, Mr. Hollis - 78,461– 48,487; and Mr. Molnar - 18,487.Wesson—0. As of January 25, 201831, 2021, Mr. West beneficially owned 48,26562,807 common units of Viper, which number excludes 1,808 unvested phantom units that will vest on June 17, 2018 and 6,4149,970 unvested phantom units that will vest on July 1, 2018.10, 2021. As of January 25, 2018, our executive officers other than31, 2021, we owned 91,441,446 of the named executive officers owned 30,648 commontotal units outstanding of Viper.Viper, or 58%. As of January 25, 2018, we owned 73,150,000 of the31, 2021, there were 65,462,281 common units of Viper or 64%. As of January 25, 2018, there were 113,882,045 commonoutstanding and 90,709,946 Class B units of Viper outstanding. As of January 25, 2018, ourOur directors and executive officers individually and as a group beneficially ownedown less than one percent1% of Viper’s outstanding common units as of January 31, 2021. |
| (11) | In addition to the Company common stock reported in the table, as of January 31, 2021, our directors and executive officers beneficially owned common units of Rattler Midstream LP, or Rattler, as follows: Mr. Stice – 104,557; Mr. Van’t Hof – 144,628; Ms. Dick – 14,389; Mr. Pantermuehl – 18,360; and Mr. Wesson – 97,118. The common units reported as owned by Mr. Stice are held by Stice Investments, Ltd., which is managed by Stice Management, LLC, its general partner. Mr. Stice and his spouse hold 100% of the membership interests in Stice Management, LLC, of which Mr. Stice is the manager. As of January 31, 2021, Mr. West beneficially owned 34,264 common units of Rattler, which number excludes 11,011 phantom units that will vest on July 10, 2021. As of February 19, 2021, there were 41,612,027 common units of Rattler outstanding and 107,815,152 Class B units of Rattler outstanding. Our directors and officers individually and as a group beneficially owned 304,199own less than 1% of Viper'sRattler’s outstanding common units.units as of February 19, 2021. |
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 67 |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) |
STOCK PERFORMANCE GRAPH |
Since our initial public offering in October of 2012, our executive management has been focused not only on achieving peer-leading operational performance and cost structure in the Exchange Act requiresPermian Basin, but also on creating superior stockholder value. Despite the challenges that 2020 presented, we maintained our directorsbase $1.50 per share dividend for the first three quarters of 2020, and executive officers, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownershipwe increased our divided 6.7% beginning with the SECfourth quarter of 2020. Our commitment to creating superior stockholder returns is also reflected in the design of our executive compensation program, which includes grants of long-term equity awards to our NEOs and other executives and senior management that are measured by TSR, as compared to furnish usthe TSR of peer group companies, and our 2020 and 2021 performance-based equity awards are measured by the relative TSR as modified by an absolute TSR modifier, which reduces payouts upon negative performance period Diamondback TSR and increases payouts if Diamondback TSR exceeds 15%.
Historically, our cumulative total stockholder return was not only consistently and substantially above our proxy peer groups, but also consistently and substantially above the applicable industry index and S&P 500 index in each year following our initial public offering. The following performance graph compares our cumulative total stockholder return from the first trading date following our IPO through December 31, 2020, with copiesthe average performance of our 2020 proxy peer groups identified in the forms they file. To our knowledge, based solelyCompensation Discussion and Analysis,” the Standard & Poor’s 500 Stock Index, a broad market index, or the S&P 500 Index, and the SPDR S&P Oil & Gas Exploration and Production ETF, or XOP Index. The graph assumes an investment of $100 on such date, and that all dividends were reinvested and are weighted on a review of the copies of such reports furnished to us and written representations of our officers and directors, all Section 16(a) reports for the year ended December 31, 2017 applicable to our officers and directors and such other persons were filed on a timelymarket capitalization basis.
COMPARATIVE CUMULATIVE TOTAL STOCKHOLDER RETURN
| | | 10/12/12 | | | 12/31/13 | | | 12/31/14 | | | 12/31/15 | | | 12/30/16 | | | 12/29/17 | | | 12/31/18 | | | 12/31/19 | | | 12/31/20 | |
| Diamondback Energy, Inc. | | $ | 100.00 | | | $ | 302.06 | | | $ | 341.60 | | | $ | 382.29 | | | $ | 577.49 | | | $ | 721.43 | | | $ | 531.34 | | | $ | 536.20 | | | $ | 289.52 | |
| 2019 Proxy Peer Group | | $ | 100.00 | | | $ | 129.75 | | | $ | 96.38 | | | $ | 69.68 | | | $ | 110.83 | | | $ | 100.82 | | | $ | 59.36 | | | $ | 60.42 | | | $ | 52.60 | |
| 2020 Proxy Peer Group | | $ | 100.00 | | | $ | 131.76 | | | $ | 103.46 | | | $ | 71.79 | | | $ | 112.93 | | | $ | 102.01 | | | $ | 68.94 | | | $ | 74.25 | | | $ | 59.96 | |
| 2021 Proxy Peer Group | | $ | 100.00 | | | $ | 133.48 | | | $ | 109.87 | | | $ | 79.18 | | | $ | 123.42 | | | $ | 116.37 | | | $ | 79.73 | | | $ | 85.14 | | | $ | 58.89 | |
| 2021 Proxy Peer - Energy Group | | $ | 100.00 | | | $ | 134.61 | | | $ | 119.81 | | | $ | 86.28 | | | $ | 125.74 | | | $ | 122.72 | | | $ | 90.53 | | | $ | 99.80 | | | $ | 79.11 | |
| XOP | | $ | 100.00 | | | $ | 125.19 | | | $ | 88.34 | | | $ | 56.75 | | | $ | 78.47 | | | $ | 71.04 | | | $ | 51.08 | | | $ | 46.26 | | | $ | 29.46 | |
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 68 |
Certain Relationships and Related Transactions
Review and Approval of Related Party Transactions
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
| — | REVIEW AND APPROVAL OF RELATED PARTY TRANSACTIONS |
Our board of directors has adopted a written policy regarding related party transactions. Under the policy, the audit committee reviews and approves all relationships and transactions in which we and our directors, director nominees and executive officers and their immediate family members, as well as holders of more than 5% of any class of our voting securities and their immediate family members, have a direct or indirect material interest. The policy provides that, the following do not create a material direct or indirect interest on behalf of the related party and are therefore not related party transactions:
a transaction involving compensation of directors;
a transaction involving compensation of an executive officer or involving an employment agreement, severance arrangement, change in control provision or agreement or special supplemental benefit of an executive officer;
a transaction with a related party involving less than $120,000;
a transaction in which the interest of the related party arises solely from the ownership of a class of our equity securities and all holders of that class receive the same benefit on a pro rata basis;
a transaction involving indemnification payments and payments under directors and officers indemnification insurance policies made pursuant to our certificate of incorporation or bylaws or pursuant to any policy, agreement or instrument of the Company or to which the Company is bound; and
a transaction in which the interest of the related party arises solely from indebtedness of a 5% stockholder or an “immediate family member” of a 5% stockholder.
| • | a transaction involving compensation of directors; |
| • | a transaction involving compensation of an executive officer or involving an employment agreement, severance arrangement, change in control provision or agreement or special supplemental benefit of an executive officer; |
| • | a transaction with a related party involving less than $120,000; |
| • | a transaction in which the interest of the related party arises solely from the ownership of a class of our equity securities and all holders of that class receive the same benefit on a pro rata basis; |
| • | a transaction involving indemnification payments and payments under directors and officers indemnification insurance policies made pursuant to our certificate of incorporation or bylaws or pursuant to any policy, agreement or instrument of the Company or to which the Company is bound; and |
| • | a transaction in which the interest of the related party arises solely from indebtedness of a 5% stockholder or an “immediate family member” of a 5% stockholder. |
The policy supplements the conflict of interest provisions in our Code of Business Conduct and Ethics.
Although our management believes that the terms of the related party transactions described below are reasonable, it is possible that we could have negotiated more favorable terms for such transactions with unrelated third parties.
Viper Energy Partners LP
| — | VIPER ENERGY PARTNERS LP |
Viper is a publicly traded Delaware limited partnership, the common units of which are listed on the Nasdaq Global Market under the symbol “VNOM.” We control the general partner of Viper and, as of December 31, 2017,2020, owned approximately 64%52% of all of the outstanding common units in Viper.
Payments from Viper under its Partnership Agreement
.Under the terms of Viper’s partnership agreement, Viper is required to reimburse its general partner for all direct and indirect expenses incurred or paid on its behalf and all other expenses allocable to Viper or otherwise incurred by its general partner, which we control, in connection with operating Viper’s business. The partnership agreement does not set a limit on the amount of expenses for which the general partner and its affiliates may be reimbursed. These expenses include salary, bonus, incentive compensation and other amounts paid to persons who perform services for Viper or on its behalf and expenses allocated to the general partner by its affiliates. The general partner is entitled to determine the expenses that are allocable to Viper. During the year ended December 31, 2017,2020, the general partner received from the Partnership reimbursements of $2.5$3.7 million.
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 69 |
Distributions paid to us by Viper
.We are entitled to receive our pro rata portion of the distributions Viper makes in respect of its common units.units, distributions Viper’s subsidiary Viper Energy Partners LLC makes in respect of its common units and preferred cash distributions equal to 8% per annum payable quarterly on the $1.0 million capital contribution we made to Viper. During the yearsyear ended December 31, 2017 and 2016,2020, we received such distributions in the aggregate amount of $89.5 million and $55.3 million, respectively.
Registration Rights Agreement. On June 23, 2014, in connection with the Viper IPO, we entered into a registration rights agreement with Viper in which Viper agreed to file a registration statement to register the Viper common units that we own. The registration rights agreement also includes provisions dealing with holdback agreements, indemnification and contribution and allocation of expenses. These registration rights are transferable to affiliates and, in certain circumstances, to third parties. In July 2015, Viper registered our common units for resale in its registration statement on Form S-3 filed with the SEC.
Advisory Services Agreement.On June 23, 2014, in connection with the closing of the Viper IPO, Viper entered into an advisory services agreement with Wexford Capital, the holder of more than 5% of our common stock during 2014, under which Wexford Capital provides Viper and its general partner with general financial and strategic advisory services related to Viper’s business in return for
an annual fee of $0.5 million, plus reimbursement of reasonable out-of-pocket expenses. This annual fee does not cover any advisory services related to acquisitions, divestitures, financings or other transactions in which Viper may be involved in the future. In addition, under this agreement, Viper will pay Wexford Capital to-be-negotiated market-based fees approved by the conflicts committee of the board of directors of Viper’s general partner for such services as may be provided by Wexford Capital at Viper’s request in connection with future acquisitions and divestitures, financings or other transactions in which Viper may be involved. This agreement has a term of two years commencing on the completion of the Viper IPO. The agreement will continue for additional one-year periods unless terminated in writing by either party at least ten days prior to the expiration of the then current term. The agreement may be terminated at any time by either party upon 30 days’ prior written notice. In the event Viper terminates the agreement, Viper will be obligated to pay all amounts due through the remaining term of the agreement. The services provided by Wexford Capital under the advisory services agreement do not extend to Viper’s day-to-day business or operations. In this agreement, Viper agreed to indemnify Wexford Capital and its affiliates from any and all losses arising out of or in connection with the agreement except for losses resulting from Wexford Capital’s or its affiliates’ gross negligence or willful misconduct. In the event Viper is dissatisfied with the services provided by Wexford Capital, its only remedy against Wexford Capital is to terminate the agreement. During the year ended December 31, 2017, Viper did not incur any costs under the advisory services agreement.
$62.3 million.Tax Sharing Agreement
.On June 23, 2014, in connection with the closing of the Viper IPO, we entered into a tax sharing agreement with Viper pursuant to which Viper is required to reimburse us for its share of state and local income and other taxes borne by us as a result of Viper’s results being included in a combined or consolidated tax return filed by us with respect to taxable periods including or beginning on the closing date of the Viper IPO. The amount of any such reimbursement is limited to the tax that Viper would have paid had it not been included in a combined group with us. We may use our tax attributes to cause our combined or consolidated group, of which Viper may be a member for this purpose, to owe no tax. However, Viper would nevertheless reimburse us for the tax it would have owed had the attributes not been available or used for Viper’s benefit, even though we had no cash expense for that period. For the year ended December 31, 2020, Viper did not accrue any state income tax expense for its share of Texas margin tax for which the Partnership’s results are included in a combined tax return filed by Diamondback.
Viper-Lease Bonus
During the year ended December 31, 2017, Viper did not reimburse us under the tax sharing agreement.
Viper-Lease Bonus. During the year ended December 31, 2017,2020, we paid Viper $0.1$0.4 million in lease bonus payments to extend the term of twoseven leases reflecting an averageand $2.1 million in lease bonus payments for three new leases.| — | RATTLER MIDSTREAM PARTNERS LP |
Rattler is a publicly traded Delaware limited partnership, the common units of $7,459 per acre.
Proposal to Approve, on an Advisory Basis, the Company’s Executive Compensation
(Proposal 2which are listed on the
Proxy Card)Nasdaq Global Market under the symbol “RTLR.” We control the general partner of Rattler and, as of December 31, 2020, owned approximately 71% of all of the outstanding common units in Rattler.Payments from Rattler under its Partnership Agreement
Under the terms of Rattler’s partnership agreement, Rattler is required to reimburse its general partner for all direct and indirect expenses incurred or paid on its behalf and all other expenses allocable to Rattler or otherwise incurred by its general partner, which we control, in connection with operating Rattler’s business. The partnership agreement does not set a limit on the amount of expenses for which the general partner and its affiliates may be reimbursed. These expenses include salary, bonus, incentive compensation and other amounts paid to persons who perform services for Rattler or on its behalf and expenses allocated to the general partner by its affiliates. The general partner is entitled to determine the expenses that are allocable to Rattler. During the year ended December 31, 2020, the general partner received from Rattler reimbursements of $0.7 million.
Payments from Rattler under its Services and Secondment Agreement
Under the terms of Rattler’s services and secondment agreement, Rattler is required to reimburse us for the cost of the seconded employees and contractors, including their wages and benefits. During the year ended December 31, 2020, we received from Rattler reimbursements of $5.9 million.
Distributions paid to us by Rattler
We are entitled to receive our pro rata portion of the distributions Rattler makes in respect of its common units, distributions Rattler’s subsidiary Rattler Midstream Operating LLC, or Rattler LLC, makes in respect of its common units and preferred cash distributions equal to 8% per annum payable quarterly on the $1.0 million capital contribution we made to Rattler. During the year ended December 31, 2020, we received such distributions in the aggregate amount of $115.4 million.
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 70 |
Tax Sharing Agreement
On May 28, 2019, in connection with the closing of the Rattler IPO, Rattler LLC entered into a tax sharing agreement with us. Pursuant to this tax sharing agreement, Rattler LLC reimburses us for its share of state and local income and other taxes borne by us as a result of Rattler LLC’s results being included in a combined or consolidated tax return filed by us with respect to taxable periods including or beginning on May 28, 2019. The amount of any such reimbursement is limited to the tax Rattler LLC would have paid had it not been included in a combined group with us. We may use our tax attributes to cause our combined or consolidated group, of which Rattler LLC may be a member for this purpose, to owe less or no tax. In such a situation, Rattler LLC agreed to reimburse us for the tax Rattler LLC would have owed had the tax attributes not been available or used for Rattler LLC’s benefit, even though we had no cash tax expense for that period.
For the year ended December 31, 2020, Rattler accrued state income tax expense of $0.2 million for its share of Texas margin tax for which Rattler’s share of Rattler LLC’s results are included in a combined tax return filed by us.
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 71 |
| 
PROPOSAL 2 APPROVE, ON AN ADVISORY BASIS, THE COMPANY’S EXECUTIVE COMPENSATION |
In accordance with Section 14A of the Exchange Act, our board of directors is providing our stockholders with a non-binding advisory vote on the Company’s executive compensation as reported in this proxy statement, or “say on pay” vote. The Company’s stockholders are being asked to vote on the following resolution:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved.”
While the vote on executive compensation is non-binding and solely advisory in nature, our board of directors and the compensation committee will review and consider the “say on pay” voting results when making future decisions regarding our executive compensation program. Our stockholders have a “say on pay” vote each year. The next “say on pay” vote will take place at our 20192022 Annual Meeting.
Stockholders are encouraged to carefully review the “Compensation Discussion and Analysis” section of this proxy statement, which discusses in detail the Company’s compensation policy and compensation arrangements which the Company believes are appropriate and reasonably consistent with market practice and with the long-term interests of the Company and its stockholders. In furtherance of the Company’s goals and objectives, the compensation committee, among other things, ensures that the Company’s executive compensation arrangements (i) do not incentivize executives to take unnecessary risks, (ii) do not include excessive change in control provisions, (iii) include long-term vesting provisions in the awards of restricted stock units to encourage executives to focus on long-term performance and (iv) offer performance-based compensation, consisting of cash compensation with performance goals tied to our Company’s performance and performance-based equity awards, based on total stockholder return relative to the peer group and (iv) include long-term vesting provisions in the awards of time-based restricted stock units retain key executive talent and to encourage executives to focus on long-term performance, in each case to motivate our executives to contribute to the growth, profitability and increased value of the Company.
| — | BOARD VOTING RECOMMENDATION |
 | THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPANY’S EXECUTIVE COMPENSATION AS REPORTED IN THIS PROXY STATEMENT. |
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 72 |
Board Voting Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPANY'S EXECUTIVE COMPENSATION AS REPORTED IN THIS PROXY STATEMENT.
Proposal  | PROPOSAL 3 APPROVE AN AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE TOTAL NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 200,000,000 SHARES TO 400,000,000 SHARES |
Our stockholders are being asked to Ratifyapprove an amendment to our amended and restated certificate of incorporation to increase the Appointmenttotal number of Our Independent Auditors
(shares of common stock that we are authorized to issue from 200,000,000 shares to 400,000,000 shares. The additional shares of common stock for which authorization is sought would be part of the existing class of common stock and, if and when issued, would have the same rights and privileges as the shares of common stock presently outstanding. Such additional shares would not (and the shares of common stock presently outstanding do not) entitle the holders thereof to preemptive or cumulative voting rights. The number of authorized shares of our preferred stock will not be affected by this amendment to our amended and restated certificate of incorporation and will be maintained at 10,000,000 share, and we are not seeking to amend any other provisions of our amended and restated certificate of incorporation in this amendment.| — | WHAT VOTE IS REQUIRED TO APPROVE THIS PROPOSAL? |
Approval of the proposed amendment to our amended and restated certificate of incorporation requires the affirmative “FOR” vote of a majority of the outstanding shares of our common stock entitled to vote thereon. Abstentions will have the same effect as negative votes in determining whether Proposal 3 was approved by our stockholders. Broker non-votes will not be counted for voting purposes and will have no effect on Proposal 3.
The proposed amendment to our amended and restated certificate of incorporation is attached as Annex A to this proxy statement and will become effective on the date such amendment is filed with the Secretary of State of the State of Delaware, which the Company anticipates doing as soon as practicable following approval of this proposal.
Our amended and restated certificate of incorporation currently provides for authorized capital stock consisting of 200,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per share. As of the record date, we had 180,981,740 shares of common stock outstanding, excluding approximately 3.1 million shares of common stock reserved for issuance pursuant to the existing equity incentive plans maintained by the Company, and no shares of preferred stock outstanding. Our common stock is listed on the Nasdaq Global Select Market under the symbol “FANG.”
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 73 |
Our Board believes that the number of shares of common stock presently available for future issuance under our amended and restated certificate of incorporation is insufficient to provide us with flexibility in issuing shares for future corporate purposes and has therefore proposed to increase the number of authorized shares to ensure that we have such flexibility, without further stockholder approval, except as may be required by any federal or state law, regulation or stock exchange rules. We may issue shares in the future in connection with, among other things, acquisitions, equity incentives for employees, strategic investments, public or private stock offerings, partnerships and similar transactions and payments of stock dividends, stock splits or other recapitalizations, or for any other corporate purposes.
Historically, we have issued shares of our common stock in connection with our acquisitions of businesses and oil and natural gas properties and related assets, either as equity consideration for such acquisitions or in public offerings of our common stock, the net proceeds of which we then used to fund such acquisitions. As previously disclosed, we have recently completed our stock-for-stock merger with QEP Resources, Inc., or QEP, in which we issued approximately 12.1 million shares of our common stock to former QEP stockholders as consideration for the merger completed on March 17, 2021. In addition, on February 26, 2021, we completed our acquisition of certain assets from Guidon Operating LLC, or Guidon, in which we issued approximately 10.68 million shares as part of the total consideration for such assets. Diamondback’s acquisition of QEP and assets from Guidon added material Tier-1 Midland Basin inventory to our acreage portfolio, increasing out net acreage in the Northern Midland Basin by over 81,500 net acres. These and other acquisitions completed by us since we last sought approval from our stockholders to increase the number of shares authorized shares of our common stock in December 2016 have been instrumental in driving our strong operational performance. We regularly review additional acquisition opportunities. Depending upon the number and size of any prospective acquisition opportunities, we may not have a sufficient number of authorized, but unissued, shares of common stock to access capital markets to fund, or otherwise complete, such acquisitions on an opportunistic basis.
In addition, we have issued, and intend to continue to issue, shares of our common stock upon vesting and settlement of the underlying equity awards under our equity incentive plans to provide long-term incentive to our executive officers, other employees and directors. We believe our ability to use equity awards is an important component of our compensation strategy, aligning interests of our executive officers, other employees and directors with those of our stockholders.
Prior to the proposed increase in the authorized shares of our common stock, we expect to have approximately 181 million shares of common stock outstanding and an additional approximate 3.1 million shares of common stock reserved for issuance to cover outstanding equity awards under the existing equity plans maintained by the Company, leaving only approximately 15.9 million shares available for future issuances for these and other corporate purposes. Accordingly, the proposed increase in authorized common stock contemplated by this proxy statement is necessary to ensure that we will be able to continue to fund and complete strategic acquisitions, grant future equity awards under our equity incentive plans and, if appropriate, use share issuances for other corporate purposes. We do not currently have any agreement, arrangement or understanding with respect to any specific acquisition for which the additional authorized shares sought by this amendment would be issued or for any other purpose beyond our typical equity incentive compensation practices. However, if the proposed increase in authorized shares of common stock is not approved by our stockholders at the 2021 annual meeting, our ability to engage in strategic corporate activities that have been key to our success in the past could be adversely affected.
The additional shares of common stock being authorized by this amendment to our amended and restated certificate of incorporation may be issued at times and under circumstances as to have a dilutive effect on earnings per share, book value per share or the percentage ownership interest of the present holders of our common stock, none of whom have preemptive rights under our amended and restated certificate of incorporation to subscribe for additional securities that we may issue.
Unless required by law or by the rules or regulations of Nasdaq or any other stock exchange on which our common stock may in the future be listed, no further vote by the stockholders will be sought with respect to any issuance of shares of our common stock. Under existing Nasdaq rules and regulations, subject to certain exceptions, stockholder approval would nevertheless be required prior to the issuance of securities in connection with the acquisition of the stock or assets of another company when: (a) due to the present or potential issuance of common stock, or securities convertible into or exercisable for common stock, other than a public offering for cash: (i) the common stock has or will have upon issuance voting power equal to or in excess of 20% of the voting power outstanding before the issuance of stock or securities convertible into or exercisable for common stock; or (ii) the number of shares of common stock to be issued is or will be equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the stock or securities; or (b) any director, officer or substantial shareholder of the Company has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the company or assets to be acquired or in the consideration to be paid in the transaction or series of related transactions and the present or potential issuance of common stock, or securities convertible into or exercisable for common stock, could result in an increase in outstanding common shares or voting power of 5% or more. Under the existing Nasdaq rules and regulations, stockholder approval would also be required, subject to certain exceptions, in connection with a transaction other than a public offering involving: (i) the sale, issuance or potential issuance by the Company of common stock (or securities convertible into or exercisable for common stock) at a price less than the greater of book or market value which together with sales by officers, directors or substantial stockholders of the Company equals 20% or more of common stock or 20% or more of the voting power outstanding before the issuance; or (ii) the sale, issuance or potential issuance by the Company of common stock (or securities convertible into or exercisable common stock) equal to 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance for less than the greater of book or market value of the stock. Further, stockholder approval is required, among certain other circumstances specified by Nasdaq rules and regulations, prior to the issuance of securities when the issuance or potential issuance will result in a change of control of the Company.
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 74 |
Our board of directors may issue or fix the terms of the preferred stock without the vote of the holders of common stock. The actual effect of the authorization of the preferred stock upon the rights of the holders of common stock is unknown until our board of directors determines the specific rights of owners of any series of preferred stock. Depending upon the rights granted to any series of preferred stock, the voting power, liquidation preference or other rights of common stock could be adversely affected. Preferred stock may be issued in acquisitions or for other corporate purposes. Issuance in connection with a stockholder rights plan or other takeover defense could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, control of our company. The Company currently has no outstanding preferred stock and has no present plans to issue any shares of preferred stock.
Our Board has determined that it is advisable and in the best interest of the Company’s stockholders for the Company to amend the Company’s amended and restated certificate of incorporation to increase the total number of authorized shares of the Company’s common stock from 200,000,000 shares to 400,000,000 shares. Accordingly, on April 6, 2021, our board of directors approved an amendment to our amended and restated certificate of incorporation in substantially the form attached hereto as Appendix A, subject to stockholder approval, and directed that this amendment be submitted to a vote of our stockholders.
An increase in the number of authorized shares of our common stock could potentially have an anti-takeover effect, making it more difficult to, or discourage an attempt to, obtain control of our Company by means of a takeover bid that our board of directors determines is not in our best interests or the best interests of our stockholders. However, our board of directors does not intend or view the proposed increase in authorized common stock as an anti-takeover measure and is not proposing the increase in response to any attempt or plan to obtain control of the Company. In addition, certain existing provisions of our amended and restated certificate of incorporation and our bylaws could make it more difficult to acquire us by means of a merger, tender offer, proxy contest or otherwise, or to remove our incumbent officers and directors. Those provisions are described in detail under “Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities and Exchange Act of 1934” included as Exhibit 4.1 to our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 25, 2021. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging such proposals because negotiation of such proposals could result in an improvement of their terms.
| — | WHAT DOES THE BOARD OF DIRECTORS RECOMMEND? |
 | THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE TOTAL NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 200,000,000 SHARES TO 400,000,000 SHARES. |
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 75 |
| PROPOSAL 4 APPROVE THE COMPANY’S 2021 AMENDED AND RESTATED EQUITY INCENTIVE PLAN |
You are voting on a proposal to approve the Company’s 2021 Amended and Restated Equity Incentive Plan.
After careful consideration, on April 6, 2021, our board of directors unanimously adopted, subject to stockholder approval, our 2021 Amended and Restated Equity Incentive Plan, amending and restating our 2019 Amended and Restated Equity Incentive Plan, which we refer to as the Equity Incentive Plan, or the Plan. If approved by our stockholders, the amendment and restatement of the Plan will do the following:
| • | Increase the share reserve under the Plan by an additional 3,450,000 shares. |
| • | Extend the expiration date of the Plan from April 23, 2029 to April 6, 2031. |
| • | Make certain ministerial changes, including the removal of provisions relating to the performance-based compensation exception under Section 162(m) of the Internal Revenue Code, which are no longer relevant following enactment of the Tax Cuts and Jobs Act of 2017. |
| — | WHAT VOTE IS REQUIRED TO APPROVE THIS PROPOSAL? |
Approval of the 2021 Amended and Restated Equity Plan requires the affirmative “FOR” vote of a majority of the votes cast by the stockholders present in person or represented by proxy at the Annual Meeting and entitled to vote thereon. Only votes for or against Proposal 4 will be counted as votes cast, and abstentions and broker non-votes will not be counted for voting purposes.
Rationale for Approval
The Equity Incentive Plan was originally adopted by our board of directors on October 10, 2012, before the initial public offering of our common stock. On April 25, 2016, the compensation committee adopted the 2016 amendment and restatement of the Plan, which was approved by our stockholders on June 8, 2016, and on April 24, 2019, the compensation committee adopted the 2019 amendment and restated of the Plan, which was approved by our stockholders on June 6, 2019. The purpose of the Plan is to enable our Company to obtain and retain the services of the types of employees, consultants and directors who will contribute to our long-range success and to provide incentives that are linked directly to increases in share value, which will inure to the benefit of all of our stockholders.
As of April 1, 2021, approximately 2,037,524 shares remained available for issuance under the Equity Incentive Plan. Our average total adjusted shares issued under the Plan during the past three years was approximately 2,363,112 shares. The Plan is the only plan pursuant to which we can grant equity awards, and the limited number of shares remaining restricts our ability to grant future equity awards. The amendment and restatement of the Plan will add 3,450,000 shares to the Plan’s share reserve by increasing the maximum number of shares available for issuance from 8,300,000 shares to 11,750,000 shares. We believe this increase in the number of shares available for issuance is necessary to accommodate the needs associated with our recent and anticipated growth.
Potential Dilution
The amendment and restatement of the Plan provides that the total number of shares of common stock available for issuance under the Plan will include (a) the 3,450,000 newly authorized shares of common stock plus (b) the 2,037,524 shares available for future issuance under the Plan as of April 1, 2021, which would represent approximately 3% percent of our 180,981,740 shares of common stock outstanding as of April 1, 2021.
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 76 |
Information on Equity Compensation Plans as of April 1, 2021
The information included in this Proxy Card)Statement and our 2020 Annual Report is updated by the following information regarding all of our existing equity compensation plans (excluding the equity plans of our publicly traded subsidiaries Viper and Rattler) as of April 1, 2021:
| Total stock options outstanding(1) | | | 151,137 | |
| Weighted-average exercise price of stock options outstanding | | $ | 93.74 | |
| Weighted-average remaining duration of stock options outstanding | | | 0.75 | |
| Total remaining SARs outstanding in connection with the merger with Energen | | | 15,182 | |
| Total full value awards outstanding(2) | | | 2,866,594 | |
| Total full value awards outstanding(3) | | | 5,722 | |
| Shares available for grant under the 2019 Amended and Restated Equity Incentive Plan(4) | | | 2,037,524 | |
| Total shares of common stock outstanding | | | 180,981,740 | |
| (1) | Options to purchase shares of Diamondback common stock assumed in connection with the merger with Energen that remain outstanding as of April 1, 2021. |
| (2) | The number of outstanding performance-based RSUs assumes performance at the maximum level. |
| (3) | The number of RSUs assumed in connection with the merger with QEP that remain outstanding as of April 1, 2021, assuming performance at the maximum level. |
| (4) | Assumes outstanding performance-based RSUs at the maximum level. |
Burn Rate
The “burn rate” measures the potential dilutive effect of our annual equity awards. The annual burn rate expresses the amount of stock awards a company grants annually relative to its shares of common stock outstanding, by dividing the number of shares granted during the applicable fiscal year by the weighted average number of shares outstanding for that year.
The following table provides information on the annual burn rate and the three-year burn rate for the past three fiscal years:
Shares Awarded Under 2019 Amended and Restated Equity Incentive Plan
| | | | | | | | | | | | Weighted Average | | | | |
| | | Shares Subject | | | Shares Subject | | | Total Adjusted | | | Number of Shares | | | | |
| Year | | to Options | | | to RSU Awards | | | Shares(1) | | | Outstanding | | | Burn Rate (%) | |
| 2020 | | | — | | | | 1,203,249 | | | | 3,008,123 | | | | 157,976,000 | | | | 1.90 | % |
| 2019 | | | — | | | | 1,053,906 | | | | 2,634,765 | | | | 163,493,000 | | | | 1.61 | % |
| 2018 | | | — | | | | 578,579 | | | | 1,446,448 | | | | 104,622,000 | | | | 1.38 | % |
| Average | | | | | | | | | | | 2,363,112 | | | | 142,030,333 | | | | 1.66 | % |
| (1) | Applying the ISS assigned premium multiplier of 2.5x to full value awards granted under the Equity Incentive Plan. |
Summary of the Plan as Amended and Restated
The following is a summary of the material terms of the Equity Incentive Plan as amended and restated. This summary is qualified in its entirety by reference to the Plan as amended and restated. A copy of the 2031 Amended and Restated Equity Incentive Plan is attached as Appendix B to this proxy statement.
Effective Date and Duration
If the stockholders approve the amendment and restatement of the Plan, it will become effective as of April 6, 2021, the date adopted by our board of directors, and remain in effect until April 6, 2031, unless otherwise terminated earlier by the board of directors. No awards may be granted under the Plan after its termination date, but awards granted before the Plan’s termination will continue to be effective in accordance with their respective terms and conditions.
Administration
The Equity Incentive Plan is administered by the compensation committee of our board of directors, or the “committee.” Among other responsibilities, the committee selects individuals to receive awards, establishes the terms of awards, and takes whatever action it determines to be necessary or advisable in administering the Plan. Our board of directors may amend, suspend or terminate the Plan at any time, and the committee may amend outstanding awards at any time. Amendments to the Plan or awards will not be effective without stockholder approval if stockholder approval is required by applicable law or stock exchange requirements, and in the event any amendment may impair the rights of any participant, such participant must consent in writing.
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 77 |
Eligibility
The committee may grant awards under the Equity Incentive Plan to employees, consultants and directors of our Company and its affiliates; however, incentive stock options may be granted only to employees of our Company and its subsidiary corporations. As of April 1, 2021, we had approximately 968 employees and 7 non-employee directors eligible to receive awards under the Equity Incentive Plan, including 132 former QEP employees who will remain employed by us on a transitional basis until the completion of the transition period and are not expected to receive any new awards under our plans. Consultants do not receive awards pursuant to our current equity compensation program.
Share Reserve
Subject to adjustments for certain changes in corporate capitalization, the maximum number of shares of common stock authorized for issuance under awards granted under the Equity Incentive Plan (the “share reserve”) is 11,750,000 shares. All such shares are available for incentive stock options. Shares covered by awards that expire or otherwise terminate without having been exercised in full or that are forfeited or repurchased by us will again be available for future awards under the Plan. However, shares used or withheld to satisfy the exercise price or tax withholding obligations will be counted against the share reserve and not be available for future awards under the Plan. Additionally, awards settled in cash instead of shares are counted against the maximum share reserve in the same manner as if they were settled in shares of common stock.
Limitations on Awards
No participant may receive awards under the Equity Incentive Plan covering more than 1,000,000 shares in the aggregate during any calendar year. In addition, each non-employee director’s total annual compensation, including awards under the Plan and cash paid under the Plan or otherwise, is limited to $500,000.
Types of Awards under the Equity Incentive Plan
STOCK OPTIONS
The committee may grant incentive stock options intended to comply with Section 422 of the Code or “nonstatutory” stock options that are not intended to qualify as incentive stock options. Employees, directors and consultants may be granted nonstatutory stock options, but only employees may be granted incentive stock options. The committee determines the exercise price of a stock option, which generally cannot be less than 100% (or 110% in the case of an incentive stock option granted to a more than 10% stockholder) of the fair market value of our common stock on the date of grant, except when assuming or substituting options in limited situations such as an acquisition. Generally, options granted under the Plan will vest ratably over a five-year period and have a term of ten years (or five years in the case of an incentive stock option granted to a more than 10% stockholder), unless otherwise specified by the committee in the option agreement. The committee determines the methods and form of payment for the exercise price per share on exercise of a stock option. Stock options generally are not transferable except by will or the laws of descent and distribution, unless the committee provides otherwise with respect to a nonstatutory stock option (and solely with respect to transfers to certain family members and estate planning vehicles).
RESTRICTED AWARDS
Restricted awards may be in the form of restricted stock awards or restricted stock units. A restricted stock award consists of shares of our common stock that generally are non-transferable and subject to forfeiture or other restrictions imposed by the committee. Any certificates representing shares of restricted stock that are registered in a participant’s name will bear an appropriate legend referring to the applicable terms, conditions and restrictions, and may be retained in the Company’s possession until all applicable restrictions have lapsed. A restricted stock unit award represents the right to receive a specified number of shares of our common stock, or a cash payment equal to the fair market value of a specified number of shares of our common stock as of a specified date, subject to any vesting or other restrictions deemed appropriate by the committee. Restrictions on restricted awards may lapse separately or in combination, at such times, in such circumstances, in installments or otherwise as determined by the committee. If a participant terminates employment or services during the restricted period, then any unvested restricted award will be forfeited except as otherwise provided in the award agreement. The committee may waive any restrictions or forfeiture conditions relating to a restricted award. Restricted stock units will be settled at the time designated by the committee in the award agreement, in the form of cash or shares of common stock, or in a combination of both, as provided by the committee in the award agreement.
PERFORMANCE AWARDS
Performance awards entitle the recipient to vest in or acquire shares of common stock or in the right to receive a specified number of shares of common stock, a cash payment equal to the fair market value of a specified number of shares as of a specified date, or a combination of shares and cash, upon the attainment of specified performance goals. Performance awards may be granted independent of or in connection with the granting of any other award under the Plan.
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 78 |
Performance goals are established by the committee based on one or more business criteria that apply to the participant, a business unit, or us and our affiliates. Performance goals may be objective or subjective and established before 25% of the service period has elapsed, and in any event not later than 90 days after the beginning of the service period. Performance awards are non-transferable and generally terminate on a participant’s termination of service during the service period.
STOCK APPRECIATION RIGHTS
Stock appreciation rights may be granted independent of or in tandem with any option under the Plan. The strike price of a stock appreciation right is determined by the committee, but as a general rule will not be less than the fair market value of our common stock on the date of grant. The strike price of a stock appreciation right granted in tandem with an option is the same as the exercise price of the option. A stock appreciation right generally entitles the holder to receive, on exercise, the excess of the fair market value of a share of our common stock on the date of exercise over the strike price, multiplied by the number of shares for which the right is exercised. Generally, stock appreciation rights granted under the Plan will have a term of ten years. Payment may be made in cash, delivery of stock or a combination of cash and stock as determined by the committee. Stock appreciation rights may not be sold, assigned, transferred, pledged or otherwise encumbered.
Other Provisions of the Equity Incentive Plan
CAPITALIZATION ADJUSTMENTS
In the event of certain corporate events or changes in our common stock, the committee will proportionally adjust awards, the number and class of shares available under the Equity Incentive Plan and the maximum number of shares that may be granted under awards to any participant in a calendar year as it determines to be appropriate.
CHANGE IN CONTROL AND OTHER CORPORATE TRANSACTIONS
In the event of a change in control transaction or other corporate transaction such as a dissolution or liquidation of our Company, or any corporate separation or division, the Equity Incentive Plan provides that all outstanding awards under the Equity Incentive Plan may be assumed, continued or substituted for by any surviving or acquiring entity (or its parent company), or may be cancelled either with or without consideration for the vested portion of the awards, all as determined by the committee. If an award would be cancelled without payment of consideration to the extent vested, the participant may exercise the award in full or in part for a period of ten days.
TAX WITHHOLDING
We may deduct or withhold, or require a participant to remit, an amount sufficient to satisfy any taxes required by law or regulation to be withheld with respect to any award under the Equity Incentive Plan. This includes the authority to withhold or receive shares of common stock and to make cash payments or require participants to make cash payments in satisfaction of participant tax obligations.
CLAWBACK OR RECOUPMENT
Awards granted under the Equity Incentive Plan are subject to the Company’s clawback policy, which allows us to recoup paid compensation from current and former executive officers in the event of a material financial statement restatement if the executive’s intentional misconduct caused, in whole or in part, the restatement.
U.S. Federal Tax Consequences of Awards under the 2021 Amended and Restated Equity incentive Plan
The following is a brief summary of certain federal income tax consequences relating to awards granted under the Equity Incentive Plan. This summary does not purport to address all aspects of federal income taxation and does not describe state, local, or foreign tax consequences. This discussion is based upon provisions of the Code and the Treasury regulations issued thereunder, and judicial and administrative interpretations under the Code and regulations, all as in effect as of the date hereof, and all of which are subject to change (possibly on a retroactive basis) or different interpretation.
STOCK OPTIONS
Stock options may be intended to qualify as incentive stock options under Section 422 of the Code or may be nonstatutory stock options. A participant generally will not recognize any taxable income, and we will not be entitled to a tax deduction, on the grant of an option. On exercise of a nonstatutory stock option a participant generally will recognize ordinary taxable income equal to the excess of the fair market value of the acquired common stock on the exercise date over the exercise price paid for those shares. Subject to satisfying applicable reporting requirements and any deduction limitations under the Code (discussed below), we should be entitled to a corresponding income tax deduction.
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 79 |
A participant generally will not recognize taxable income on exercise of an incentive stock option, and we will not be entitled to a deduction. However, the excess of the fair market value of the acquired common stock on the exercise date over the exercise price for those shares could result in alternative minimum tax liability for the participant. A participant’s disposition of shares acquired on exercise of any option will ordinarily result in capital gain or loss. However, a disposition of shares acquired on exercise of an incentive stock option less than two years after the grant date or one year after the exercise date (referred to as a “disqualifying disposition”) generally will result in ordinary taxable income equal to the excess of the fair market value of the acquired common stock on the exercise date and the exercise price for those shares, with any excess of the amount received by the participant over the fair market value of the stock on the exercise date being treated as capital gain. We may be entitled to a deduction corresponding to the participant’s ordinary taxable income in the case of a disqualifying disposition.
RESTRICTED STOCK AND PERFORMANCE STOCK
A participant who receives a restricted stock award, including performance stock, generally will recognize ordinary income only when the shares are no longer subject to forfeiture or restrictions, in an amount equal to the fair market value of the shares of restricted stock at the time of vesting. However, a participant may make an election under Section 83(b) of the Code at the time of grant to recognize ordinary income on the grant date equal to the fair market value of such shares (determined without regard to the restrictions on such shares) on the grant date. If a participant does not make a Section 83(b) election, the participant will recognize as ordinary income any dividends received with respect to shares of restricted stock. Subject to satisfying applicable income reporting requirements and any applicable deduction limitation under the Code, we should be entitled to a corresponding income tax deduction at the same time as the participant recognizes ordinary income. When the participant sells the shares, any gain (or loss) realized by the participant will be treated as either short-term or long-term capital gain (or loss) depending on the holding period. For purposes of determining any gain or loss realized, the participant’s tax basis will be the amount previously taxable as ordinary income for such shares.
RESTRICTED STOCK UNITS AND PERFORMANCE UNITS
The grant of a restricted stock unit award, including performance units, will not result in taxable income to the participant. The participant generally will recognize ordinary income when the award is settled in an amount equal to the fair market value of the shares or the amount of any cash received on the date of settlement. Subject to satisfying applicable income reporting requirements and any deduction limitations under the Code, we should be entitled to a corresponding income tax deduction. The participant’s disposition of any shares received on settlement of a restricted stock unit will result in capital gain (or loss) on the difference between the disposition price and the amount recognized as income at settlement, and will be long-term or short-term depending on the holding period.
STOCK APPRECIATION RIGHTS
The grant or vesting of a stock appreciation right generally will not result in taxable income to a participant. The participant will recognize ordinary taxable income on exercise of the right equal to the amount of cash received or the fair market value of shares received. Subject to satisfying applicable income reporting requirements and any deduction limitations under the Code, we should be entitled to a corresponding income tax deduction. The participant’s disposition of any shares received on exercise of a stock appreciation right will result in capital gain (or loss) on the difference between the disposition price and the amount recognized as income at exercise, and will be long-term or short-term depending on the holding period.
DEDUCTION LIMIT AND OTHER TAX MATTERS
Section 162(m) of the Code generally prohibits us from deducting annual compensation exceeding $1 million per person to our NEOs and other “covered employees” as defined in Section 162(m).
Section 409A of the Code imposes complex rules on nonqualified deferred compensation arrangements. Generally, Section 409A of the Code should not apply to awards under the Equity Incentive Plan, but may apply in some cases to restricted stock units and performance units. For such awards subject to Section 409A of the Code, certain key employees of the Company may experience a six-month delay in the settlement of such awards.
Under certain circumstances, the granting or enhancement of awards, the accelerated vesting or exercise of stock options or the accelerated lapse of restrictions with respect to other awards in connection with a change in control (as defined in the Equity Incentive Plan) could be deemed an “excess parachute payment” under the golden parachute tax provisions of Section 280G of the Code. To the extent this happens, the participant could be subject to a 20% excise tax, and the Company could be denied a federal income tax deduction.
New Plan Benefits
Because future awards under the Equity Incentive Plan will be granted in amounts and to persons in the sole discretion of the committee, the type, number, recipients and other terms of such awards cannot be determined at this time. Therefore, we have omitted the tabular disclosure of the benefits or amounts allocated under the Equity Incentive Plan.
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 80 |
2020 Equity Compensation Plan Information
The following table sets forth, as of December 31, 2020, certain information with respect to all compensation plans under which equity securities are authorized for issuance.
| Plan Category | | Number of
securities to be issued
upon exercise of
outstanding options,
warrants and rights
(a) | | | Weighted average
exercise price
of outstanding
options, warrants
and rights
(b)(2) | | | Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding securities
reflected in column (a))
(c) | |
| Equity compensation plans approved by security holders(1) | | | 2,039,296 | | | $ | 0.00 | | | | 2,992,253 | |
| Equity compensation plans not approved by security holders(3) | | | 179,287 | | | $ | 0.00 | | | | 8,657,057 | |
| Equity compensation plans not approved by security holders(4) | | | 2,089,668 | | | $ | 0.00 | | | | 12,755,210 | |
| Equity compensation plans not approved by security holders(5) | | | 217,444 | | | $ | 91.58 | | | | — | |
| (1) | Refers to the Equity Incentive Plan and assumes that awards of restricted stock units will vest at maximum levels. |
| (2) | The weighted average exercise price does not take into account restricted stock units because they have no exercise price. |
| (3) | Refers to the options to purchase common units of Viper and phantom units of Viper, in each case granted under the Viper LTIP that was approved by Viper’s unitholders. |
| (4) | Refers to the options to purchase common units of Rattler and phantom units of Rattler, in each case granted under the Rattler LTIP that was approved by Rattler’s unitholders. |
| (5) | Refers to the options to purchase common shares of Diamondback granted in connection with the merger with Energen. |
| — | WHAT DOES THE BOARD OF DIRECTORS RECOMMEND? |
| THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE 2021 AMENDED AND RESTATED EQUITY INCENTIVE PLAN. |
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 81 |
| PROPOSAL 5 RATIFY THE APPOINTMENT OF OUR INDEPENDENT AUDITORS |
You are voting on a proposal to ratify the appointment of Grant Thornton LLP, or Grant Thornton, as our independent auditors for fiscal year 2018.2021. The audit committee has appointed Grant Thornton to serve as independent auditors.
What services do the independent auditors provide?
| — | WHAT SERVICES DO THE INDEPENDENT AUDITORS PROVIDE? |
Audit services of Grant Thornton for fiscal 20172020 included an audit of our consolidated financial statements and services related to periodic filings made with the SEC. Additionally, Grant Thornton provided certain services related to the consolidated quarterly reports and annual and other periodic reports, registration statements and comfort letters and other services as described below.
How much were| — | HOW MUCH WERE THE INDEPENDENT AUDITORS PAID IN 2020, 2019 AND 2018? |
The following table summarizes the independent auditors paid in 2017, 2016 and 2015?
aggregate fees of Grant
Thornton’s feesThornton for professional
services totaled $688,800, $551,250 and $490,350 for 2017, 2016 and 2015, respectively. Grant Thornton’s fees for professional services included the following:services:| | | 2020 | | | 2019 | | | 2018 | |
| Audit fees(1)(2) | | $ | 1,469,288 | | | $ | 1,599,150 | | | $ | 1,569,750 | |
| Audit related fees(3) | | | — | | | | 89,250 | | | | — | |
| Tax fees(4) | | | — | | | | — | | | | — | |
| All other fees(5) | | | — | | | | — | | | | — | |
| | | $ | 1,469,288 | | | $ | 1,688,400 | | | $ | 1,569,750 | |
| (1) | Audit fees represent aggregate fees for audit services, which relate to the fiscal year consolidated audit, quarterly reviews, registration statements, and comfort letters. |
| (2) | Represents fees for the audit of our annual financial statements and internal controls, review of our quarterly financial statements, and professional audit services provided in connection with our regulatory filings. For 2020, the amount includes audit fees related to Rattler Midstream LP of $430,553, and audit fees related to Viper Energy Partners LP of $263,550. |
| (3) | Audit related fees represent aggregate fees for Viper audit-related services. |
| (4) | Tax fees represent aggregate fees for tax services, consisting of tax return compliance, tax advice and tax planning. |
| (5) | All other fees represent aggregate fees for all other services. |
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 82 |
Audit Fees – aggregate fees for audit services, which relate to the fiscal year consolidated audit, quarterly reviews, registration statements, and comfort letters were $688,800, $551,250 and $490,350 in 2017, 2016 and 2015, respectively.
Audit-Related Fees – aggregate fees for audit-related services were zero in 2017, 2016 and 2015.
Tax Fees– aggregate fees for tax services, consisting of tax return compliance, tax advice and tax planning, were zero in 2017, 2016 and 2015.
All Other Fees – aggregate fees for all other services, were zero in 2017, 2016 and 2015.
Does the Audit Committee approve the services provided by Grant Thornton?
| — | DOES THE AUDIT COMMITTEE APPROVE THE SERVICES PROVIDED BY GRANT THORNTON? |
It is our audit committee’s policy to pre-approve all audit, audit related and permissible non-audit services rendered to us by our independent auditor. Consistent with such policy, all of the fees listed above that we incurred for services rendered by Grant Thornton LLP subsequent to our initial public offering in October 2012 and the formation of our audit committee were pre-approved by our audit committee.
Will a representative of Grant Thornton LLP be present at the meeting?
| — | WILL A REPRESENTATIVE OF GRANT THORNTON BE PRESENT AT THE MEETING? |
Yes, one or more representatives of Grant Thornton will be present at the meeting. The representatives will have an opportunity to make a statement if they desire and will be available to respond to appropriate questions from the stockholders.
What vote is required to approve this proposal?
| — | WHAT VOTE IS REQUIRED TO APPROVE THIS PROPOSAL? |
Stockholder ratification of the appointment of our independent auditors is not required by the Company’s bylaws or otherwise. However, we are submitting this proposal to the stockholders as a matter of good corporate practice. Approval of this proposal requires the affirmative vote of a majority of the votes cast on the proposal. If the appointment of Grant Thornton is not ratified, the audit committee will reconsider the appointment. Even if the appointment is ratified, the audit committee in its discretion may direct the appointment of a different independent audit firm at any time during the year if it is determined that such change would be in best interests of the Company and its stockholders.
Has Grant Thornton LLP always served as Diamondback’s independent auditors?
| — | HAS GRANT THORNTON ALWAYS SERVED AS DIAMONDBACK’S INDEPENDENT AUDITORS? |
Grant Thornton has served as our independent auditors since 2011.
| — | WHAT DOES THE BOARD OF DIRECTORS RECOMMEND? |
| THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP AS THE COMPANY’S INDEPENDENT AUDITORS FOR THE YEAR 2021. |
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 83 |
What does the board of directors recommend?
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP AS THE COMPANY’S INDEPENDENT AUDITORS FOR THE YEAR 2018.
Solicitation by Board; Expenses of Solicitation
 | SOLICITATION BY BOARD;
EXPENSES OF SOLICITATION |
Our board of directors has sent you this proxy statement. Our directors, officers and employees may solicit proxies by mail, by telephone or in person. Those persons will receive no additional compensation for any solicitation activities. We will request banking institutions, brokerage firms, custodians, trustees, nominees and fiduciaries to forward solicitation materials to the beneficial owners of common stock held of record by those entities, and we will, upon the request of those record holders, reimburse reasonable forwarding expenses. We will pay the costs of preparing, printing, assembling and mailing the proxy material used in the solicitation of proxies.
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 84 |
Submission of Future Stockholder Proposals
| SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS |
Under SEC rules, a stockholder who intends to present a proposal, including the nomination of directors,other than director nominations, at the 20192022 Annual Meeting of Stockholders and who wishes the proposal to be included in the proxy statement for that meeting must submit the proposal in writing to our Corporate Secretary. The proposal must comply with the requirements set forth in our bylaws and must be received no later than December 28, 2018.
24, 2021.Our proxy access bylaw provisions permit a stockholder, or a group of up to 20 eligible stockholders, that has continuously owned for no less than three years at least 3% of our outstanding common stock, to nominate and include in our proxy materials up to the greater of two directors and 20% of the number of directors currently serving on the Company’s board, provided that the stockholder(s) and the nominee(s) satisfy the requirements specified in our bylaws. Subject to compliance with other applicable requirements specified in the proxy access provisions of our bylaws, stockholder director nominations for inclusion in our proxy materials for the 2021 Annual Meeting of Stockholders must be received between November 24, 2021 and December 24, 2021.
Stockholders who wish to propose a matter for action at the 20192021 Annual Meeting, including the nomination of directors, but who do not wish to have the proposal or nomination included in the proxy statement, must notify the Company in writing of the information required by the provisions of our by-lawsbylaws dealing with stockholder proposals. The notice must be delivered to our Corporate Secretary between February 6, 20193, 2022 and March 8, 2019.5, 2022. You can obtain a copy of our by-lawsbylaws by writing the Corporate Secretary at the address below.
All written proposals should be directed to Corporate Secretary, Diamondback Energy, Inc., 9400 N. Broadway Extension,500 West Texas Ave, Suite 700, Oklahoma City, Oklahoma 73114.
1200, Midland, TX 79701.The board of directors is responsible for selecting and recommending director candidates and will consider nominees recommended by stockholders. If you wish to have the board of directors consider a nominee for director, you must send a written notice to our Corporate Secretary at the address provided above and include the information required by our by-lawsbylaws and discussed on page 10 of this proxy statement.
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 85 |
Availability of Form 10-K and Annual Report to Stockholders
| | AVAILABILITY OF FORM 10-K AND ANNUAL REPORT TO STOCKHOLDERS |
SEC rules require us to provide an Annual Report to stockholders who receive this proxy statement. Additional copies of the Annual Report, along with copies of our Annual Report on Form 10-K for the fiscal years ended December 31, 20162019 and 2015,2018, including the financial statements and the financial statement schedules, are available without charge to stockholders upon written request to Corporate Secretary, Diamondback Energy, Inc., 9400 N. Broadway Extension,500 West Texas Ave, Suite 700, Oklahoma City, Oklahoma 731141200, Midland, TX 79701 or via the Internet at http://ir.diamondbackenergy.com/financials.cfm. We will furnish the exhibits to our Annual Report on Form 10-K upon payment of our copying and mailing expenses.
Householding
The SEC permits a single set of Notice of Internet Availability of Proxy Materials or annual reports and proxy statements to be sent to any household at which two or more stockholders reside if they appear to be members of the same family. Each stockholder continues to receive a separate proxy card, if a proxy card is provided. This procedure, referred to as householding, reduces the volume of duplicate information stockholders receive and reduces our mailing and printing expenses.
If you and other residents at your mailing address own shares of our common stock, you may have only received one Notice of Internet Availability of Proxy Materials or Annual Report and proxy statement, unless we have received contrary instructions from you. If you would like to receive your own set of Notice of Internet Availability of Proxy Materials or the annual report and proxy statement this year or in future years, follow the instructions described below. We will promptly send a separate copy of the Notice of Internet Availability of Proxy Materials or Annual Report and proxy statement, as applicable.
Similarly, if you share an address with another Diamondback stockholder and together both of you would like to receive in the future only a single Notice of Internet Availability of Proxy Materials or annual report and proxy statement, follow these instructions:| • | If your shares of our common stock are registered in your own name, please contact our transfer agent, Computershare Trust Company, N.A., and inform them of your request by calling their toll-free number: (800) 962-4284 or by mail: Computershare Trust Company, N.A., 250 Royall Street, Canton, MA 02021. |
| • | If a broker or other nominee holds your shares, please contact your broker or nominee. |
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 86 |
If your shares of our common stock are registered in your own name, please contact our transfer agent, Computershare Trust Company, N.A., and inform them of your request by calling their toll-free number: (800) 962-4284 or by mail: Computershare Trust Company, N.A., 250 Royall Street, Canton, MA 02021.
If a broker or other nominee holds your shares, please contact your broker or nominee.
Other Matters
| OTHER MATTERS |
The board of directors does not intend to present any other items of business other than those stated in the Notice of Annual Meeting of Stockholders. If other matters are properly brought before the meeting, the persons named as your proxies will vote the shares represented by it in accordance with their best judgment. Discretionary authority to vote on other matters is included in the proxy.
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 87 |
Schedule A
Reconciliation of Adjusted EBITDA to Net Income
Adjusted EBITDA| | SCHEDULE A RECONCILIATION OF OPERATING CASH FLOW TO FREE CASH FLOW |
Free Cash Flow is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted EBITDAFree Cash Flow as net income (loss) plus non-cash (gain) loss on derivative instruments, net, net interest expense, depreciation, depletioncash flow from operating activities before changes in working capital in excess of cash capital expenditures. The Company believes that Free Cash Flow is useful to investors as it provides a measure to compare both cash flow from operating activities and amortization, impairment ofadditions to oil and natural gas properties non-cash equity-based compensation expense, capitalized equity-based compensation expense, asset retirement obligation accretion expense, lossacross periods on extinguishment of debt and income tax (benefit) provision. Adjusted EBITDAa consistent basis. Operating cash flow before working capital changes, which is not a non-GAAP financial measure, ofrepresents net income (loss)cash provided by operating activities as determined by United States’ generally accepted accounting principles, or GAAP. Management believes Adjusted EBITDA is useful because it allows it to more effectively evaluate the Company’s operating performance and compare the results of its operations from period to periodunder GAAP without regard to its financing methods or capital structure.changes in operating assets and liabilities. The Company adds the items listed abovebelieves operating cash flow before working capital changes is an accepted measure of an oil and natural gas company’s ability to net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially from companygenerate cash used to company within its industry depending upon accounting methodsfund exploration, development and book values of assets, capital structuresacquisition activities and the method by which the assets were acquired. Adjusted EBITDAservice debt or pay dividends.
These measures should not be considered as an alternative to, or more meaningful than, net income (loss) as determined in accordance with GAAP orcash provided by operating activities as an indicator of the Company’s operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Adjusted net income is a non-GAAP financial measure equal to net income attributable to Diamondback Energy, Inc. plus non-cash (gain) loss on derivative instruments, net, (gain) loss on sale of assets, net, impairment of oil and gas properties and related income tax adjustments.performance. The Company’s computationscomputation of Adjusted EBITDAoperating cash flow before working capital changes and adjusted net incomeFree Cash Flow may not be comparable to other similarly titled measures of other companies or to such measure in our credit facility or any of our other contracts.
companies.The following tables presenttable presents a reconciliation of net cash provided by operating activities to Free Cash Flow.
DIAMONDBACK ENERGY, INC.
FREE CASH FLOW
(IN MILLIONS)
| | Year Ended December 31, | |
| | | 2020 | | | 2019 | |
| Net cash provided by operating activities | | $ | 2,118 | | | $ | 2,739 | |
| Less: Working Capital Changes | | | 97 | | | | (167) | |
| Operating cash flow before working capital changes | | | 2,021 | | | | 2,906 | |
| Less: | | | | | | | | |
| Drilling, completions and non-operated additions to oil and natural gas properties | | | 1,611 | | | | 2,557 | |
| Infrastructure additions to oil and natural gas properties | | | 108 | | | | 120 | |
| Additions to midstream assets | | | 140 | | | | 244 | |
| Total Cash CAPEX | | | 1,859 | | | | 2,921 | |
| Free Cash Flow | | $ | 162 | | | $ | (15 | ) |
| DIAMONDBACK ENERGY, INC.•2021 PROXY STATEMENT | 88 |
| | APPENDIX A CERTIFICATE OF AMENDMENT NO. 2 TO AMENDED AND RESTATED CHARTER (DIAMONDBACK) |
(Pursuant to Section 242 of the non-GAAP financial measureGeneral Corporation Law of Adjusted EBITDAthe State of Delaware)
Diamondback Energy, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), hereby certifies as follows:
| 1. | The name of the Corporation is Diamondback Energy, Inc. |
| 2. | Article IV of the Corporation’s Amended and Restated Certificate of Incorporation is hereby amended by striking Section 4.1 in its entirety and replacing it with the following: |
“Section 4.1 Authorized Capital Stock. The total number of shares of capital stock that the Corporation is authorized to issue is 410,000,000 shares, divided into two classes consisting of 400,000,000 shares of common stock, par value $0.01 per share (“Common Stock”), and 10,000,000 shares of preferred stock, par value $0.01 per share (“Preferred Stock”).”
| 3. | The above-referenced amendment was duly adopted in accordance with the applicable provisions of Section 242 of the General Corporation Law of the State of Delaware. |
IN WITNESS WHEREOF, Diamondback Energy, Inc. has caused this Certificate of Amendment to be executed as of , 2021
| DIAMONDBACK ENERGY, INC. |
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| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | A-1 |
| | APPENDIX B 2021 AMENDED AND RESTATED DIAMONDBACK ENERGY, INC. EQUITY INCENTIVE PLAN |
| (a) | General Purpose. The name of the Plan is the 2021 Amended and Restated Diamondback Energy, Inc. Equity Incentive Plan. The purpose of the Plan is to enable Diamondback Energy, Inc., a Delaware corporation (the “Company”), and any Affiliate to obtain and retain the services of the types of Employees, Consultants and Directors who will contribute to the Company’s long-range success and to provide incentives that are linked directly to increases in share value which will inure to the benefit of all stockholders of the Company. This is an amendment and restatement of the 2019 Amended and Restated Diamondback Energy, Inc. Equity Incentive Plan adopted by the Company on April 24, 2019, which amended and restated the 2016 Amended and Restated Diamondback Energy, Inc. Equity Incentive Plan adopted by the Company on April 25, 2016, which amended and restated the Diamondback Energy, Inc. 2012 Equity Incentive Plan originally adopted October 10, 2012. |
| (b) | Eligible Award Recipients. The Persons eligible to receive Awards are the Employees, Consultants and Directors of the Company and its Affiliates. |
| (c) | Available Awards. The purpose of the Plan is to provide a means by which eligible recipients of Awards may be given an opportunity to benefit from increases in value of the Common Stock through the granting of one or more of the following Awards: (a) Incentive Stock Options, (b) Nonstatutory Stock Options, (c) Restricted Awards (Restricted Stock and Restricted Stock Units), (d) Performance Awards and (e) Stock Appreciation Rights. |
| (a) | “Administrator” means the Board or the Committee appointed by the Board in accordance with Section 3(e). |
| (b) | “Affiliate” means any individual, partnership, corporation, limited liability company, association, joint stock company, trust, joint venture or unincorporated organization that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the Company. For this purpose, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of another, whether through ownership of voting securities, by contract or otherwise. |
| (c) | “Award” means any right granted under the Plan, including an Incentive Stock Option, a Nonstatutory Stock Option, a Restricted Award (Restricted Stock and Restricted Stock Units), a Performance Award, and a Stock Appreciation Right. |
| (d) | “Award Agreement” means a written agreement between the Company and a holder of an Award evidencing the terms and conditions of an individual Award grant. Each Award Agreement will be subject to the terms and conditions of the Plan and need not be identical. |
| (e) | “Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular Person, such Person will be deemed to have beneficial ownership of all securities that such Person has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time, the satisfaction of performance goals, or both. The term “Beneficial Ownership” has a corresponding meaning. |
| (f) | “Board” means the Board of Directors of the Company. |
| (g) | “Cause” means, (i) with respect to any Participant who is a party to a severance plan participation agreement with the Company or its Affiliates and such agreement provides for a definition of Cause, as defined therein and (ii) with respect to all other Participants: (A) the commission of, or plea of guilty or no contest to, a felony or a crime involving moral turpitude or the commission of any other act involving willful malfeasance or material fiduciary breach with respect to the Company or an Affiliate, (B) conduct tending to bring the Company into substantial public disgrace, or disrepute, (C) gross negligence or willful misconduct with respect to the Company or an Affiliate or (D) material violation of state or federal securities laws. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to whether a Participant has been discharged for Cause. |
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | B-1 |
| (h) | “Change in Control” means: |
| (i) | The direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions occurring within a 12-month period, of all or substantially all of the assets of the Company to any Person, where “substantially all” means assets of the Company having a total gross fair market value equal to 40% or more of the total gross fair market value of all of the Company’s assets immediately before such transaction or series of transactions; |
| (ii) | The Incumbent Directors cease for any reason to constitute a majority of the Board; |
| (iii) | The adoption of a plan relating to the liquidation or dissolution of the Company; |
| (iv) | Any Person acquires stock of the Company that results in such Person holding Beneficial Ownership of stock of the Company possessing more than 50% of the total fair market value or the total voting power of the Company; or |
| (v) | Any Person acquires, over a 12-month period, Beneficial Ownership of stock of the Company possessing 30% or more of the total voting power of the Company. |
The foregoing notwithstanding, a transaction will not constitute a Change in Control if (i) its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the Persons who held the Company’s securities immediately before such transaction; or (ii) solely because 50% or more of the total voting power of the Company’s then outstanding securities is acquired by (A) a trustee or other fiduciary holding securities under one or more employee benefit plans of the Company or any Affiliate, or (B) any Person that, immediately before such acquisition, is owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock in the Company immediately before such acquisition.
| (i) | “Code” means the Internal Revenue Code of 1986, as amended. |
| (j) | “Committee” means a committee of one or more members of the Board appointed by the Board to administer the Plan in accordance with Section 3(e). |
| (k) | “Common Stock” means the common stock, $0.01 par value per share of the Company. |
| (l) | “Consultant” means any natural person who provides bona fide consulting or advisory services and who is compensated for such services or who provides or has provided bona fide services to the Company or an Affiliate pursuant to a written agreement, so long as such services are not in connection with the offer or sale of securities in a capital raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities. |
| (m) | “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. The Participant’s Continuous Service will not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, so long as there is no interruption or termination of the Participant’s Continuous Service. For example, a change in status from an Employee of the Company to a Consultant of an Affiliate or a Director will not constitute an interruption of Continuous Service. The Administrator or its delegate, in its sole discretion, may determine whether Continuous Service will be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal or family leave of absence. |
| (n) | “Date of Grant” means, if the key terms and conditions of the Award are communicated to the Participant within a reasonable period following the Administrator’s action, the date on which the Administrator adopts a resolution, or takes other appropriate action, expressly granting an Award to a Participant that specifies the key terms and conditions of the Award and from which the Participant begins to benefit from or be adversely affected by subsequent changes in the Fair Market Value of the Common Stock or, if a subsequent date is set forth in such resolution, or determined by the Administrator, as the Date of Grant, then such date as is set forth in such resolution. |
In any situation where the terms of the Award are subject to negotiation with the Participant, the Date of Grant will not be earlier than the date the key terms and conditions of the Award are communicated to the GAAP financial measureParticipant.
| (o) | “Detrimental Activity” means: (i) violation of the terms of any agreement with the Company concerning non-disclosure, confidentiality, intellectual property, privacy or exclusivity; (ii) disclosure of the Company’s confidential information to anyone outside the Company, without prior written authorization from the Company, or in conflict with the interests of the Company, whether the confidential information was acquired or disclosed by the Participant during or after employment by the Company; (iii) failure or refusal to disclose promptly or assign to the Company all right, title and interest in any invention, work product or idea, patentable or not, made or conceived by the Participant during employment by the Company, relating in any manner to the interests of the Company or, the failure or refusal to do anything reasonably necessary to enable the Company to secure a patent where appropriate in the United States and in other countries; (iv) activity that is discovered to be grounds for or results in termination of the Participant’s employment for Cause; (v) any breach of a restrictive covenant contained in any employment or service agreement, Award Agreement or other agreement between the Participant and the Company or any Affiliate, during any period for which a restrictive covenant prohibiting Detrimental Activity, or other similar |
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | B-2 |
| | conduct or act, is applicable to the Participant during or after employment by the Company; (vi) any attempt directly or indirectly to induce any Employee of the Company to be employed or perform services or acts in conflict with the interests of the Company; or (vii) any attempt, in conflict with the interests of the Company, directly or indirectly, to solicit the trade or business of any current or prospective customer, client, supplier or partner of the Company. |
| (p) | “Director” means a member of the Board. |
| (q) | “Disability” means the Participant’s inability to substantially perform his or her duties to the Company or any Affiliate by reason of a medically determinable physical or mental impairment that is expected to last for a period of six months or longer or to result in death; provided, however, for purposes of determining the term of an Incentive Stock Option pursuant to Section 6(i) hereof, the term Disability has the meaning ascribed to it under Section 22(e)(3) of the Code. The Administrator will determine whether an individual has a Disability under procedures established by the Administrator. Except in situations where the Administrator is determining Disability within the meaning of Section 22(e)(3) of the Code for purposes of the term of an Incentive Stock Option pursuant to Section 6(i) hereof, the Administrator may rely on any determination that a Participant is disabled for purposes of benefits under any long-term disability plan maintained by the Company or any Affiliate in which a Participant participates. |
| (r) | “Effective Date” means October 10, 2012, the original date the Board adopted the Plan. This amendment and restatement of the Plan is effective April 6, 2021, the date of its adoption by the Compensation Committee, acting on behalf of the Board. |
| (s) | “Employee” means any Person employed by the Company or an Affiliate. Mere service as a Director or payment of a director’s fee by the Company or an Affiliate is not sufficient to constitute “employment” by the Company or an Affiliate. |
| (t) | “Established Securities Market” means a national securities exchange that is registered under Section 6 of the Exchange Act; a foreign national securities exchange that is officially recognized, sanctioned, or supervised by governmental authority; and any over-the-counter market that is reflected by the existence of an interdealer quotation system. |
| (u) | “Exchange Act” means the Securities Exchange Act of 1934, as amended. |
| (v) | “Fair Market Value” means, as of any date, unless otherwise determined by the Administrator, the value of the Common Stock determined as follows: (i) if the Common Stock is listed on any Established Securities Market, its Fair Market Value shall be the closing price for the Common Stock as quoted on such Established Securities Market (or, if no sale of Common Stock is reported for such date, on the next preceding date on which any sale shall have been reported); and (ii) in the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator by the reasonable application of a reasonable valuation method, taking into account factors consistent with Treas. Reg. § 409A-1(b)(5)(iv)(B) as the Administrator deems appropriate. |
| (w) | “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder. |
| (x) | “Incumbent Directors” means individuals who, on the Effective Date, constitute the Board, provided that any individual becoming a Director subsequent to the Effective Date whose election or nomination for election to the Board was approved by a vote of a majority of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such Person is named as a nominee for Director without objection to such nomination) will be an Incumbent Director. No individual initially elected or nominated as a Director of the Company as a result of an actual or threatened election contest with respect to Directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board will be an Incumbent Director. |
| (y) | “Insider” means an individual subject to Section 16 of the Exchange Act and includes an Officer, a Director, or any other person who is directly or indirectly the Beneficial Owner of more than 10% of any class of any equity security of the Company (other than an exempted security) that is registered pursuant to Section 12 of the Exchange Act. |
| (z) | “Non-Employee Director” means a Director who is a “non-employee director” within the meaning of Rule 16b-3. |
| (aa) | “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option. |
| (bb) | “Officer” means a Person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. |
| (cc) | “Option” means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to the Plan. |
| (dd) | “Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an individual Option grant. Each Option Agreement will be subject to the terms and conditions of the Plan and need not be identical. |
| (ee) | “Optionholder” means a Person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option. |
| (ff) | “Participant” means a Person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Award. |
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | B-3 |
| (gg) | “Performance Award” means an Award granted pursuant to Section 7(b). |
| (hh) | “Permitted Transferee” means (i) any spouse, parents, siblings (by blood, marriage or adoption) or lineal descendants (by blood, marriage or adoption) of a Participant; (ii) any trust or other similar entity for the benefit of a Participant or the Participant’s spouse, parents, siblings or lineal descendants; provided, however, that any transfer made by a Participant to a Permitted Transferee may only be made if the Permitted Transferee, prior to the time of transfer of stock, agrees in writing to be bound by the terms of the Plan and provides written notice to the Company of such transfer. |
| (ii) | “Person” means an individual, partnership, limited liability company, corporation, association, joint stock company, trust, joint venture, labor organization, unincorporated organization, governmental entity or political subdivision thereof, or any other entity, and includes a syndicate or group as such terms are used in Section 13(d)(3) or 14(d)(2) of the Exchange Act. |
| (jj) | “Plan” means this 2021 Amended and Restated Diamondback Energy, Inc. Equity Incentive Plan. Prior to the 2021 amendment and restatement of the Plan, the Plan was known as the 2019 Amended and Restated Diamondback Energy, Inc. Equity Incentive Plan. |
| (kk) | “Restricted Award” means any Award granted pursuant to Section 7(a), including Restricted Stock and Restricted Stock Units. |
| (ll) | “Restricted Stock Unit” means a hypothetical Common Stock unit having a value equal to the Fair Market Value of an identical number of shares of Common Stock as determined in Section 7(a). |
| (mm) | “Right of Repurchase” means the Company’s option to repurchase unvested Common Stock acquired under the Plan upon the Participant’s termination of Continuous Service pursuant to Section 10(f). |
| (nn) | “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3. |
| (oo) | “Securities Act” means the Securities Act of 1933, as amended. |
| (pp) | “Stock Appreciation Right” or “SAR” means the right pursuant to an Award granted under Section 7(c) to receive an amount equal to the excess, if any, of (i) the Fair Market Value, as of the date such Stock Appreciation Right or portion thereof is surrendered, of the shares of Common Stock covered by such right or such portion thereof, over (ii) the aggregate Strike Price of such right or such portion thereof. |
| (qq) | “Strike Price” means the threshold value per share of Common Stock, the excess over which will be payable upon exercise of a Stock Appreciation Right, as determined by the Administrator pursuant to Section 7(c)(v) and set forth in the Award Agreement for a Stock Appreciation Right. |
| (rr) | “Surviving Entity” means the Company if immediately following any merger, consolidation or similar transaction, the holders of outstanding voting securities of the Company immediately prior to the merger or consolidation own equity securities possessing more than 50% of the voting power of the entity existing following the merger, consolidation or similar transaction. In all other cases, the other entity to the transaction and not the Company will be the Surviving Entity. In making the determination of ownership by the stockholders of an entity immediately after the merger, consolidation or similar transaction, equity securities that the stockholders owned immediately before the merger, consolidation or similar transaction as stockholders of another party to the transaction will be disregarded. Further, outstanding voting securities of an entity will be calculated by assuming the conversion of all equity securities convertible (immediately or at some future time whether or not contingent on the satisfaction of performance goals) into shares entitled to vote. |
| (ss) | “Ten Percent Stockholder” means a Person who owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any of its Affiliates. |
| (a) | Administration by Board. The Plan will be administered by the Board unless and until the Board delegates administration to a Committee, as provided in Section 3(e). |
| (b) | Authority of Administrator. The Administrator will have the power and authority to select Participants and grant Awards pursuant to the terms of the Plan. |
| (c) | Specific Authority. In particular, the Administrator will have the authority to: (i) construe and interpret the Plan and apply its provisions; (ii) promulgate, amend, and rescind rules and regulations relating to the administration of the Plan; (iii) authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan; (iv) delegate its authority to one or more Officers of the Company with respect to Awards that do not involve Insiders, provided such delegation is pursuant to a resolution that specifies the total number of shares of Common Stock that may be subject to Awards by such Officer and such Officer may not make an Award to himself or herself; (v) determine when Awards are to be granted under the Plan; (vi) select, subject to the limitations set forth in the Plan, those Participants to whom Awards will be granted; (vii) determine the number of shares of Common Stock to be made subject to each Award; (viii) determine whether each Option is to be an Incentive Stock Option or a Nonstatutory Stock Option; (ix) prescribe the terms and conditions of each Award, including the Strike Price or Exercise Price and medium of payment, vesting provisions and Right of Repurchase provisions, and to specify the provisions of the Award Agreement relating to such grant or sale; (x) subject to restrictions |
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | B-4 |
| | applicable under Section 12(d), amend any outstanding Awards, including for the purpose of modifying the time or manner of vesting, the purchase price, Exercise Price or Strike Price, or the term of any outstanding Award; provided, however, that if any such amendment impairs a Participant’s rights or increases a Participant’s obligations under his or her Award, such amendment shall also be subject to the Participant’s consent (for the avoidance of doubt, a cancellation of an Award where the Participant receives a payment equal in value to the Fair Market Value of the vested Award or, in the case of vested Options or SARs, the difference between the Fair Market Value of the Common Stock subject to an Option or SAR and the Exercise Price or Strike Price, will not constitute an impairment of the Participant’s rights that requires consent); (xi) determine the duration and purpose of leaves of absences that may be granted to a Participant without constituting termination of their Continuous Service for purposes of the Plan, which periods will be no shorter than the periods generally applicable to Employees under the Company’s employment policies or as required under applicable law; (xii) make decisions with respect to outstanding Awards that may become necessary upon a Change in Control or an event that triggers capital adjustments; and (xiii) to exercise discretion to make any and all other determinations that it may determine to be necessary or advisable for administration of the Plan. |
| (d) | Decisions Final. All decisions made by the Administrator pursuant to the provisions of the Plan will be final and binding on the Company and the Participants, unless such decisions are determined by a court having jurisdiction to be arbitrary and capricious. |
| (i) | General. The Board may delegate administration of the Plan to a Committee or Committees of one or more members of the Board, and the term “Committee” will apply to any person or persons to whom such authority has been delegated. If administration is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in the Plan to the Board or the Administrator will thereafter be to the Committee or subcommittee), subject, however, to such resolutions, consistent with the provisions of the Plan, as the Board may adopt. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. The members of the Committee will be appointed by and serve at the pleasure of the Board. The Board may increase or decrease the size of the Committee, add additional members to, remove members (with or without cause) from, appoint new members in substitution therefor, and fill vacancies, however caused, in the Committee. The Committee shall act pursuant to a vote of the majority of its members or, in the case of a Committee comprised of only two members, the unanimous consent of its members, whether present or not, or by the written consent of the majority of its members and will keep minutes of all of its meetings. Subject to the limitations prescribed by the Plan and the Board, the Committee will establish and follow such rules and regulations for the conduct of its business as it may determine to be advisable. |
| (ii) | Committee Composition. In the discretion of the Board, a Committee may consist solely of two or more Non-Employee Directors. The Board will have discretion to determine whether or not it intends to comply with the exemption requirements of Rule 16b-3. If, however, the Board intends to satisfy such exemption requirements, with respect to any Officer, Director or other Insider, the Committee must at all times consist solely of two or more Non-Employee Directors. Within the scope of such authority, the Board or the Committee may delegate to a committee of one or more members of the Board who are not Non-Employee Directors the authority to grant Awards to eligible Persons who are not then Insiders. Nothing herein is intended to create an inference that an Award is not validly granted under the Plan in the event Awards are granted under the Plan by a committee of the Board that does not at all times consist solely of two or more Non-Employee Directors. |
| (f) | Indemnification. In addition to such other rights of indemnification as they may have as Directors or members of the Committee, and to the extent allowed by applicable law, the Company shall indemnify the Administrator against the reasonable expenses, including attorney’s fees, actually incurred in connection with any action, suit or proceeding or in connection with any appeal therein, to which the Administrator may be party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted under the Plan, and against all amounts paid by the Administrator in settlement thereof (subject, however, to the Company’s approval of the settlement, which approval the Company shall not unreasonably withhold) or paid by the Administrator in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it is adjudged in such action, suit or proceeding that the Administrator did not act in good faith, did not act in a manner that such Person reasonably believed to be in the best interests of the Company, or in the case of a criminal proceeding, had no reason to believe that the conduct complained of was lawful; provided, however, that within 60 days after institution of any such action, suit or proceeding, such Administrator or Committee member shall, in writing, offer the Company the opportunity at its own expense to handle and defend such action, suit or proceeding. |
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | B-5 |
| 4. | Shares Subject to the Plan. |
| (a) | Share Reserve. Subject to the provisions of Section 11(a) relating to adjustments upon changes in Common Stock, the shares that may be issued pursuant to Awards will consist of the Company’s authorized but unissued Common Stock, and the maximum aggregate amount of such Common Stock that may be issued upon exercise of all Awards under the Plan will not exceed 11,750,000 shares of Common Stock, all of which may be used for Incentive Stock Options or any other Awards. Awards for fractional shares of Common Stock may not be issued under the terms of the Plan. Prior to this amendment and restatement, an aggregate of 8,300,000 shares were reserved for issuance under the Plan. This amendment and restatement authorizes an additional 3,450,000 shares that may be issued in connection with Awards under the Plan. |
| (b) | Reversion of Shares to the Share Reserve. If any Award for any reason expires or otherwise terminates, in whole or in part, the shares of Common Stock not acquired under such Award will revert to and again become available for issuance under the Plan. If the Company reacquires shares of Common Stock issued under the Plan pursuant to the terms of any forfeiture provision, including the Right of Repurchase of unvested Common Stock under Section 10(f), such shares will again be available for purposes of the Plan. Each share of Common Stock subject to any Award granted hereunder will be counted against the share reserve set forth in Section (a) on the basis of one share for every share subject thereto. Notwithstanding anything herein to the contrary, shares of Common Stock used to pay the required Exercise Price or tax obligations, or shares not issued in connection with settlement of an Option or SAR or that are used or withheld to satisfy tax obligations of the Participant will not be available again for other Awards under the Plan. Awards or portions thereof that are settled in cash and not in shares of Common Stock will be counted against the foregoing maximum share limitations. |
| (c) | Source of Shares. The shares of Common Stock subject to the Plan may be authorized but unissued Common Stock or reacquired Common Stock, bought on the market, pursuant to any forfeiture provision, Right of Repurchase or otherwise. |
| (a) | Eligibility for Specific Awards. Incentive Stock Options may be granted only to Employees of the Company or any parent corporation or subsidiary corporation of the Company, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code. Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants. |
| (b) | Ten Percent Stockholders. An Incentive Stock Option Ten Percent Stockholder granted to a Ten Percent Stockholder must have an Exercise Price no less than 110% of the Fair Market Value of the Common Stock at the Date of Grant and must not be exercisable after the expiration of five years from the Date of Grant. |
| (i) | Subject to the provisions of Section 11(a) relating to adjustments upon changes in the shares of Common Stock, no Person will be eligible to be granted Awards (including Options, SARs and hypothetical Common Stock units) covering more than 1,000,000 shares in the aggregate during any calendar year. |
| (i) | Each Director of the Company will be eligible to receive grants of Awards under the Plan pursuant to the terms of the Director Compensation Program approved by Board of Directors. If the Board or the Compensation Committee of the Board separately has adopted or in the future adopts a compensation policy covering some or all Directors that provides for a predetermined formula grant that specifies the type of Award, the timing of the Date of Grant and the number of shares to be awarded under the terms of the Plan, such formula grant will be incorporated by reference and will be administered as if such terms were provided under the terms of the Plan without any requirement that the Administrator separately take action to determine the terms of such Awards. |
| (ii) | Subject to the provisions of Section 11(a) relating to adjustments upon changes in the shares of Common Stock, the aggregate dollar value of Awards (calculated as the Date of Grant fair value of such Awards for financial reporting purposes) granted under this Plan and cash compensation granted under this Plan or otherwise paid by the Company during any calendar year to any one Non-Employee Director shall not exceed $500,000, rounded up to the nearest full Share. The foregoing limit shall not count any Tandem SARs (as defined in Section 7(c)(i)). |
Each Option will be in such form and will contain such terms and conditions as the Administrator deems appropriate. All Options will be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of net income.grant, and, if certificates are issued, a separate certificate or certificates will be issued for shares of Common Stock purchased on exercise of each type of Option. Notwithstanding the foregoing, the Company will have no liability to any Participant or any other person if an Option designated as an Incentive Stock Option fails to qualify as such at any time. The provisions of separate Options need not be identical, but each Option will include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:
| (a) | Term. Subject to the provisions of Section 5(b) regarding Ten Percent Stockholders, no Option will be exercisable after the expiration of 10 years from the Date of Grant. |
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | B-6 |
| (b) | Exercise Price. The exercise price per share of Common Stock for each Option (the “Exercise Price”) will not be less than 100% of the Fair Market Value of such share on the Date of Grant; provided, however, that in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, the Exercise Price will be no less than 110% of the Fair Market Value per share of Common Stock on the Date of Grant. Notwithstanding the foregoing, an Option granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code, as if the Option was a statutory stock option, may be granted with an Exercise Price lower than the Fair Market Value per share on the Date of Grant. |
| (c) | Consideration. The Optionholder will pay the Exercise Price of Common Stock acquired pursuant to an Option, to the extent permitted by applicable statutes and regulations, either (x) in cash or by certified or bank check at the time the Option is exercised or (y) in the Administrator’s discretion, and upon such terms as the Administrator approves: (i) by delivery to the Company of other Common Stock, duly endorsed for transfer to the Company, with a Fair Market Value on the date of delivery equal to the Exercise Price (or portion thereof) due for the number of shares being acquired, or by means of attestation whereby the Participant identifies for delivery specific shares of Common Stock held by the Participant that have a Fair Market Value on the date of attestation equal to the Exercise Price (or portion thereof) and receives a number of shares of Common Stock equal to the difference between the number of shares thereby purchased and the number of identified attestation shares of Common Stock (a “Stock for Stock Exchange”); (ii) during any period for which the Common Stock is readily tradable on an Established Securities Market, by a copy of instructions to a broker directing such broker to sell the Common Stock for which such Option is exercised, and to remit to the Company the aggregate Exercise Price of such Options (a “Cashless Exercise”); (iii) subject to the discretion of the Administrator, upon such terms as the Administrator shall approve, by notice of exercise including a statement directing the Company to retain such number of shares of Common Stock from any transfer to the Optionholder (“Stock Withholding”) that otherwise would have been delivered by the Company upon exercise of the Option having a Fair Market Value equal to all or part of the Exercise Price of such Option exercise, or (iv) in any other form of legal consideration that may be acceptable to the Administrator; provided, however, if applicable law requires, the Optionholder shall pay the par value (if any) of Common Stock, if newly issued, in cash or cash equivalents. Unless the Administrator determines otherwise, the purchase price of Common Stock acquired pursuant to an Option that is paid by delivery (or attestation) to the Company of other shares of Common Stock acquired, directly or indirectly from the Company, will be paid only by shares of Common Stock of the Company that have been held for more than six months (or such other period of time as may be required to avoid a charge to earnings for financial accounting purposes). Unless otherwise provided in the terms of an Option Agreement, payment of the Exercise Price by a Participant who is an Insider in the form of a Stock for Stock Exchange is subject to pre-approval by the Administrator, in its sole discretion. The Administrator shall document any such pre-approval in a manner that complies with the specificity requirements of Rule 16b-3, including the name of the Participant involved in the transaction, the nature of the transaction, the number of shares to be acquired or disposed of by the Participant and the material terms of the Options involved in the transaction. |
| (d) | Transferability of an Incentive Stock Option. An Incentive Stock Option will not be transferable except by will or by the laws of descent and distribution and will be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, upon the death of the Optionholder, will thereafter be entitled to exercise the Option. |
| (e) | Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock Option may, in the sole discretion of the Administrator, be transferable to a Permitted Transferee upon written approval by the Administrator to the extent provided in the Option Agreement. A Permitted Transferee includes: a transfer by gift or domestic relations order to a member of the Optionholder’s immediate family (child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships), any person sharing the Optionholder’s household (other than the Optionholder’s tenant or employee), a trust in which these Persons (or the Optionholder) have more than 50% of the beneficial interest, a foundation in which these Persons (or the Optionholder) control the management of assets, and any other entity in which these Persons (or the Optionholder) own more than 50% of the voting interests. If the Nonstatutory Stock Option does not provide for transferability, then the Nonstatutory Stock Option will not be transferable except by will or by the laws of descent and distribution and will be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, will thereafter be entitled to exercise the Option. |
| (f) | Vesting Generally. The Option may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Administrator may deem appropriate. The vesting provisions of individual Options may vary. The Administrator may, but will not be required to provide that no Option may be exercised for a fraction of a share of Common Stock. The Administrator may, but will not be required to, provide for an |
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | B-7 |
|
| | | | | | | |
| Diamondback Energy, Inc. |
| Reconciliation of Adjusted EBITDA to Net Income |
| (in thousands) |
| | | | |
| | Year Ended December 31, |
| | 2017 | | 2016 |
| Net income (loss) | $ | 516,757 |
| | $ | (164,908 | ) |
| Non-cash loss on derivative instruments, net | 84,240 |
| | 26,522 |
|
| Interest expense, net | 40,554 |
| | 40,684 |
|
| Depreciation, depletion and amortization | 326,759 |
| | 178,015 |
|
| Impairment of oil and gas properties | — |
| | 245,536 |
|
| Non-cash equity-based compensation expense | 34,178 |
| | 33,532 |
|
| Capitalized equity-based compensation expense | (8,641 | ) | | (7,079 | ) |
| Asset retirement obligation accretion expense | 1,391 |
| | 1,064 |
|
| Loss on extinguishment of debt | — |
| | 33,134 |
|
| Income tax (benefit) provision | (19,568 | ) | | 192 |
|
| Consolidated Adjusted EBITDA | $ | 975,670 |
| | $ | 386,692 |
|
| Less: EBITDA attributable to noncontrolling interest | (47,631 | ) | | 843 |
|
| Adjusted EBITDA attributable to Diamondback Energy, Inc. | $ | 928,039 |
| | $ | 387,535 |
|
| | acceleration of vesting and exercisability in the terms of any Option Agreement upon the occurrence of a specified event. Unless otherwise specified in the terms of any Option Agreement, each Option granted pursuant to the terms of the Plan will become exercisable at a rate of 20% per year over the five year period commencing on the Date of Grant of the Option. |
| (g) | Termination of Continuous Service. Unless otherwise provided in an Option Agreement or in an employment or service agreement the terms of which have been approved by the Administrator, if an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability or termination by the Company for Cause), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination) but only within such period ending on the earlier of (a) the date three months following the termination of the Optionholder’s Continuous Service, or (b) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Option Agreement, the Option will terminate. Unless otherwise provided in an Option Agreement or in an employment or service agreement the terms of which have been approved by the Administrator, or as otherwise provided in Sections 6(h), (i) and (j) of this Plan, outstanding Options that are not exercisable at the time an Optionholder’s Continuous Service terminates for any reason other than for Cause (including an Optionholder’s death or Disability) will be forfeited and expire at the close of business on the date of such termination. If the Optionholder’s Continuous Service terminates for Cause, all outstanding Options (whether or not vested) will be forfeited and expire as of the beginning of business on the date of such termination for Cause. |
| (h) | Extension of Termination Date. An Option Agreement may also provide that if the exercise of the Option following the termination of the Optionholder’s Continuous Service for any reason (other than upon the Optionholder’s death or Disability or termination by the Company for Cause) would violate any applicable federal, state or local law, the Option will terminate on the earlier of (i) the expiration of the term of the Option in accordance with Section 6(a) or (ii) the date that is 30 days after the exercise of the Option would no longer violate any applicable federal, state or local law. |
| (i) | Disability of Optionholder. Unless otherwise provided in an Option Agreement, or in an employment or service agreement the terms of which have been approved by the Administrator, if an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (i) the date 12 months following such termination or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein, the Option will terminate. |
| (j) | Death of Optionholder. Unless otherwise provided in an Option Agreement, or in an employment or service agreement the terms of which have been approved by the Administrator, if an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a Person who acquired the right to exercise the Option by bequest or inheritance or by a Person designated to exercise the Option upon the Optionholder’s death, but only within the period ending on the earlier of (i) the date 12 months following the date of death or (ii) the expiration of the term of such Option as set forth in the Option Agreement. If, after death, the Option is not exercised within the time specified herein, the Option will terminate. |
| (k) | Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market Value of Common Stock on the Date of Grant with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and its Affiliates) exceeds $100,000, the Options or portions thereof which exceed such limit (according to the order in which they were granted) will be treated as Nonstatutory Stock Options. |
| (l) | Early Exercise. The Option may, but need not, include a provision whereby the Optionholder may elect at any time before the Optionholder’s Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option. In such case, the shares of Common Stock acquired on exercise shall be subject to the vesting schedule that otherwise would apply to determine the exercisability of the Option. Any unvested shares of Common Stock so purchased may be subject to any other restriction the Administrator determines to be appropriate. |
| (m) | Transfer, Approved Leave of Absence. For purposes of Incentive Stock Options, no termination of employment by an Employee will be deemed to result from either (i) a transfer to the employment of the Company from an Affiliate or from the Company to an Affiliate, or from one Affiliate to another; or (ii) an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the period of such leave does not exceed three months or, if longer, the Employee’s right to re-employment is guaranteed either by a statute or by contract. |
| (n) | Disqualifying Dispositions. Any Participant who makes a “disposition” (as defined in Section 424 of the Code) of all or any portion of shares of Common Stock acquired upon exercise of an Incentive Stock Option within two years from the Date of Grant of such Incentive Stock Option or within one year after the issuance of the shares of Common Stock acquired upon exercise of such Incentive Stock Option will be required to immediately advise the Company in writing as to the occurrence of the sale and the price realized upon the sale of such shares of Common Stock. |
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | B-8 |
| 7. | Provisions of Awards Other Than Options. |
| (a) | Restricted Awards. A Restricted Award is an Award of actual shares of Common Stock (“Restricted Stock”) or hypothetical Common Stock units (“Restricted Stock Units”) having a value equal to the Fair Market Value of an identical number of shares of Common Stock, which may, but need not, provide that such Restricted Award may not be sold, assigned, transferred or otherwise disposed of, pledged or hypothecated as collateral for a loan or as security for the performance of any obligation or for any other purpose for such period (the “Restricted Period”) as the Administrator shall determine. Each Restricted Award will be in such form and will contain such terms, conditions and Restricted Periods as the Administrator deems appropriate, including the treatment of dividends or dividend equivalents, as the case may be. The Administrator in its discretion may provide for an acceleration of the end of the Restricted Period in the terms of any Restricted Award, at any time, including in the event a Change in Control occurs. The terms and conditions of the Restricted Award may change from time to time, and the terms and conditions of separate Restricted Awards need not be identical, but each Restricted Award must include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions: |
| (i) | Purchase Price. The purchase price of Restricted Awards, if any, will be determined by the Administrator, and may be stated as cash, property, prior or future services. Shares of Common Stock acquired in connection with any Restricted Award may be issued for such consideration, having a value not less than the par value thereof, as determined from time to time by the Administrator. |
| (ii) | Consideration. The Participant shall pay the consideration for Common Stock acquired pursuant to the Restricted Award either: (A) in cash at the time of purchase; or (B) in any other form of legal consideration that may be acceptable to the Administrator in its discretion including property, a Stock for Stock Exchange, or prior or future services that the Administrator determines have a value at least equal to the Fair Market Value of such Common Stock. |
| (iii) | Vesting. The Restricted Award and any shares of Common Stock acquired under the Restricted Award may, but need not, be subject to a Restricted Period that specifies a Right of Repurchase in favor of the Company, or forfeiture in the event the consideration was in the form of services, in accordance with a vesting schedule to be determined by the Administrator. The Administrator in its discretion may provide for an acceleration of vesting in the terms of any Restricted Award, at any time, including upon a Change in Control. The Administrator in its discretion may grant a Restricted Award that is, in whole or in part, vested upon grant and not subject to a Restricted Period. |
| (iv) | Termination of Participant’s Continuous Service. Unless otherwise provided in a Restricted Award or in an employment or service agreement the terms of which have been approved by the Administrator, if a Participant’s Continuous Service terminates for any reason, the Company may exercise its Right of Repurchase or otherwise reacquire, or the Participant shall forfeit the unvested portion of a Restricted Award acquired in consideration of services, and any or all of the shares of Common Stock held by the Participant that have not vested as of the date of termination under the terms of the Restricted Award will be forfeited and the Participant will have no rights with respect to the Award. |
| (v) | Transferability. Rights to acquire shares of Common Stock under the Restricted Award will be transferable by the Participant only upon such terms and conditions as are set forth in the Award Agreement, as the Administrator shall determine in its discretion, so long as Common Stock awarded under the Restricted Award remains subject to the terms of the Award Agreement. |
| (vi) | Concurrent Tax Payment. The Administrator, in its sole discretion, may (but will not be required to) provide for payment of a concurrent cash award in an amount equal, in whole or in part, to the estimated after tax amount required to satisfy applicable federal, state or local tax withholding obligations arising from the receipt and deemed vesting of Restricted Stock for which an election under Section 83(b) of the Code may be required. |
| (vii) | Lapse of Restrictions. Upon the expiration or termination of the Restricted Period and the satisfaction of any other conditions prescribed by the Administrator (including the Participant’s satisfaction of applicable tax withholding obligations attributable to the Award), the restrictions applicable to the Restricted Award will lapse and a stock certificate for the number of shares of Common Stock with respect to which the restrictions have lapsed will be delivered, free of any restrictions except those that may be imposed by law, the terms of the Plan or the terms of a Restricted Award, to the Participant or the Participant’s beneficiary or estate, as the case may be, unless such Restricted Award is subject to a deferral condition that complies with Section 409A of the Code and the regulations and interpretive authority issued thereunder as may be allowed or required by the Administrator in its sole discretion. The Company will not be required to deliver any fractional share of Common Stock but will pay, in lieu thereof, the Fair Market Value of such fractional share in cash to the Participant or the Participant’s beneficiary or estate, as the case may be. With respect only to Restricted Stock Units, unless otherwise subject to a deferral condition that complies with Section 409A of the Code requirements, the Common Stock certificate will be issued and delivered and the Participant will be entitled to the beneficial ownership rights of such Common Stock not later than (A) the later of (x) the date that is 2 1/2 months after the end of the Participant’s taxable year for which the Restricted Period ends and the Restricted |
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | B-9 |
| | Stock Unit is no longer subject to a substantial risk of forfeiture; (y) the date that is 2 1/2 months after the end of the Company’s taxable year for which the Restricted Period ends and Restricted Stock Unit is no longer subject to a substantial risk of forfeiture; or (B) such earlier date as may be necessary to avoid application of Section 409A of the Code to such Award. |
| (i) | Nature of Performance Awards. A Performance Award is an Award entitling the recipient to vest in or acquire shares of Common Stock or hypothetical Common Stock units having a value equal to the Fair Market Value of an identical number of shares of Common Stock that will be settled in the form of shares of Common Stock upon the attainment of specified performance goals. The Administrator may make Performance Awards independent of or in connection with the granting of any other Award under the Plan. Performance Awards may be granted under the Plan to any Participant, including those who qualify for awards under other performance plans of the Company. The Administrator in its sole discretion shall determine whether and to whom Performance Awards will be made, the performance goals applicable under each Award, the periods during which performance is to be measured, and all other limitations and conditions applicable to the awarded shares; provided, however, that the Administrator may rely on the performance goals and other standards applicable to other performance plans of the Company in setting the standards for Performance Awards under the Plan. |
| (1) | Performance goals will be based on a pre-established objective formula or standard that specifies the manner of determining the number of shares of Common Stock under the Performance Award that will be granted or will vest if the performance goal is attained. The Administrator will determine the performance goals before the time that 25% of the service period has elapsed, but not later than 90 days after the commencement of the service period to which the performance goal relates. |
| (2) | Performance goals may be based on one or more business criteria that apply to a Participant, a business unit or the Company and its Affiliates. |
| (3) | A performance goal may be measured over a performance period on a periodic, annual, cumulative or average basis and may be established on a corporate-wide basis or established with respect to one or more operating units, divisions, subsidiaries, acquired businesses, minority investments, partnerships or joint ventures. More than one performance goal may be incorporated in a performance objective, in which case achievement with respect to each performance goal may be assessed individually or in combination with each other. The Administrator may, in connection with the establishment of performance goals for a performance period, establish a matrix setting forth the relationship between performance on two or more performance goals and the amount of the Performance Award payable for that performance period. The level or levels of performance specified with respect to a performance goal may be established in absolute terms, as objectives relative to performance in prior periods, as an objective compared to the performance of one or more comparable companies or an index covering multiple companies, or otherwise as the Administrator may determine. |
| (4) | Performance goals may be objective or subjective and may differ for Performance Awards granted to any one Participant or to different Participants. |
| (iii) | Restrictions on Transfer. Performance Awards and all rights with respect to such Performance Awards may not be sold, assigned, transferred, pledged or otherwise encumbered. |
| (iv) | Satisfaction of Performance Goals. A Participant will be entitled to receive a stock certificate evidencing the acquisition of shares of Common Stock under a Performance Award only upon satisfaction of all conditions specified in the written instrument evidencing the Performance Award (or in a performance plan adopted by the Administrator), including the Participant’s satisfaction of applicable tax withholding obligations attributable to the Award. With respect only to a Performance Award that is denominated in hypothetical Common Stock units, the Common Stock certificate will be issued and delivered and the Participant will be entitled to the beneficial ownership rights of such Common Stock (A) not later than (x) the date that is 2 1/2 months after the end of the Participant’s taxable year for which the Administrator certifies that the Performance Award conditions have been satisfied and the Performance Award is no longer subject to a substantial risk of forfeiture; or (y) the date that is 2 1/2 months after the end of the Company’s taxable year for which the Administrator certifies that the Performance Award conditions have been satisfied and the Performance Award is no longer subject to a substantial risk of forfeiture; or (B) such other date as may be necessary to avoid application of Section 409A of the Code to such Award. |
| (v) | Termination. Except as may otherwise be provided by the Administrator at any time, a Participant’s rights in all Performance Awards will automatically terminate upon the Participant’s termination of employment (or business relationship) with the Company and its Affiliates for any reason. |
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | B-10 |
| (vi) | Acceleration, Waiver, Etc. At any time before the Participant’s termination of Continuous Service by the Company and its Affiliates, the Administrator may in its sole discretion accelerate, waive or, subject to Section 12 hereof, amend any or all of the goals, restrictions or conditions imposed under any Performance Award. The Administrator in its discretion may provide for an acceleration of vesting in the terms of any Performance Award at any time, including upon a Change in Control. |
| (vii) | Certification. Following the completion of each performance period, the Administrator shall certify in writing whether the performance objectives and other material terms of a Performance Award have been achieved or met. Unless the Administrator determines otherwise, Performance Awards will not be settled until the Administrator has made the certification specified under this Section 7(b)(vii). |
| (c) | Stock Appreciation Rights. |
| (i) | General. Stock Appreciation Rights may be granted either alone (“Free Standing SARs”) or, provided the requirements of Section 7(c)(ii) are satisfied, in tandem with all or part of any Option granted under the Plan (“Tandem SARs”). In the case of a Nonstatutory Stock Option, Tandem SARs may be granted either at or after the time of the grant of such Option. In the case of an Incentive Stock Option, Tandem SARs may be granted only at the time of the grant of the Incentive Stock Option. |
| (ii) | Grant Requirements. A Stock Appreciation Right may only be granted if it does not provide for the deferral of compensation within the meaning of Section 409A of the Code. A Stock Appreciation Right does not provide for a deferral of compensation if: (A) the Strike Price may never be less than the Fair Market Value per share of the underlying Common Stock on the Date of Grant, (B) the compensation payable under the Stock Appreciation Right can never be greater than the difference between the Strike Price and the Fair Market Value of the Common Stock on the date the Stock Appreciation Right is exercised, (C) the number of shares of Common Stock subject to the Stock Appreciation Right is fixed on the Date of Grant of the Stock Appreciation Right, and (D) the Stock Appreciation Right does not include any feature for the deferral of compensation other than the deferral of recognition of income until the exercise of the SAR. |
| (iii) | Term. No SAR will be exercisable after the expiration of 10 years from the Date of Grant. |
| (iv) | Exercise and Payment. Upon delivery to the Administrator of a written request to exercise a Stock Appreciation Right the holder of such SAR will be entitled to receive from the Company, an amount equal to the product of (A) the excess of the Fair Market Value, on the date of such exercise, of one share of Common Stock over the Strike Price per share specified in such Stock Appreciation Right or its related Option; multiplied by (B) the number of shares for which such Stock Appreciation Right is exercised. Payment with respect to the exercise of a Stock Appreciation Right will be paid on the date of exercise and made in shares of Common Stock valued at Fair Market Value on the date of exercise. Payment may be made in the form of shares of Common Stock (with or without restrictions as to substantial risk of forfeiture and transferability, as determined by the Administrator in its sole discretion), cash or a combination thereof, as determined by the Administrator in its sole discretion. |
| (v) | Strike Price. The Administrator will determine the Strike Price of a Free Standing SAR, which may not be less than 100% of the Fair Market Value per share of Common Stock on the Date of Grant of such Stock Appreciation Right. The Strike Price of a Tandem SAR granted simultaneously with or subsequent to the grant of an Option and in conjunction therewith or in the alternative thereto will be the Exercise Price of the related Option. A Tandem SAR will be transferable only upon the same terms and conditions as the related Option, and will be exercisable only to the same extent as the related Option; provided, however, that a Tandem SAR, by its terms, will be exercisable only when the Fair Market Value per share of Common Stock subject to the Tandem SAR and related Option exceeds the Strike Price per share thereof. |
| (vi) | Reduction in the UnderlyingOption Shares. Upon any exercise of a Stock Appreciation Right, the number of shares of Common Stock for which any related Option will be exercisable will be reduced by the number of shares for which the Stock Appreciation Right will have been exercised. The number of shares of Common Stock for which a Stock Appreciation Right will be exercisable will be reduced upon any exercise of any related Option by the number of shares of Common Stock for which such Option has been exercised. |
| (vii) | Written Request. Unless otherwise determined by the Administrator in its sole discretion, Stock Appreciation Rights will be settled in the form of Common Stock. If permitted in the Award Agreement, a Participant may request that any exercise of a Stock Appreciation Right be settled for cash, but a Participant will not have any right to demand a cash settlement. A request for cash settlement may be made only by a written request filed with the Corporate Secretary of the Company during the period beginning on the third business day following the date of release for publication by the Company of quarterly or annual summary statements of earnings and ending on the twelfth business day following such date. Within 30 days of the receipt by the Company of a written request to receive cash in full or partial settlement of a Stock Appreciation Right or to exercise such Stock Appreciation Right for cash, the Administrator |
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | B-11 |
| | shall, in its sole discretion, either consent to or disapprove, in whole or in part, such written request. A written request to receive cash in full or partial settlement of a Stock Appreciation Right or to exercise a Stock Appreciation Right for cash may provide that, if the Administrator disapproves such written request, such written request will be deemed to be an exercise of such Stock Appreciation Right for shares of Common Stock. |
| (viii) | Disapproval by Administrator. If the Administrator disapproves in whole or in part any request by a Participant to receive cash in full or partial settlement of a Stock Appreciation Right or to exercise such Stock Appreciation Right for cash, such disapproval will not affect such Participant’s right to exercise such Stock Appreciation Right at a later date, to the extent that such Stock Appreciation Right will be otherwise exercisable, or to request a cash form of payment at a later date, provided that a request to receive cash upon such later exercise will be subject to the approval of the Administrator. Additionally, such disapproval will not affect such Participant’s right to exercise any related Option. |
| (ix) | Restrictions on Transfer. Stock Appreciation Rights and all rights with respect to such Awards may not be sold, assigned, transferred, pledged, or otherwise encumbered. |
| 8. | Covenants of the Company. |
| (a) | Availability of Shares. During the terms of the Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Awards. |
| (b) | Securities Law Compliance. Each Award Agreement will provide that no shares of Common Stock may be purchased or sold thereunder unless and until any then applicable requirements of state, federal or applicable foreign laws and regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel. The Company shall use reasonable efforts to seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Awards and to issue and sell shares of Common Stock upon exercise of the Awards; provided, however, that this undertaking will not require the Company to register under the Securities Act the Plan, any Award or any Common Stock issued or issuable pursuant to any such Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company will be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Awards unless and until such authority is obtained. |
| 9. | Use of Proceeds from Stock. |
Proceeds from the sale of Common Stock pursuant to Awards will constitute general funds of the Company.
| (a) | Acceleration of Exercisability and Vesting. The Administrator will have the power to accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest. |
| (b) | Stockholder Rights. Except as provided in Section 11(a) hereof or as otherwise provided in an Award Agreement, no Participant will be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to an Award unless and until the Participant has satisfied all requirements for exercise, payment or delivery of the Award, as applicable, pursuant to its terms and no adjustment will be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions of other rights for which the record date is prior to the date of issue of a Common Stock certificate. |
| (c) | No Employment or Other Service Rights. Nothing in the Plan or any instrument executed or Award granted pursuant thereto will confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or will affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without Cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be. |
| (d) | Investment Assurances. The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, will be inoperative if (x) the issuance of the shares of Common Stock upon the exercise or acquisition of Common Stock under the Award has been registered under a then currently effective registration statement under the Securities Act or (y) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under |
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | B-12 |
| | the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including legends restricting the transfer of the Common Stock. |
| (e) | Withholding Obligations. To the extent provided by the terms of an Award Agreement and subject to the discretion of the Administrator, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under an Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold a number of shares of Common Stock from the shares otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Award, the Fair Market Value of which does not exceed the maximum statutory tax rates in the applicable jurisdictions (subject to the Participant’s written request to withhold more than the required regular tax withholding in the applicable jurisdictions) and in which case the Award will be surrendered and cancelled with respect to the number of shares of Common Stock retained by the Company; or (iii) delivering to the Company previously owned and unencumbered shares of Common Stock. Unless otherwise provided in the terms of an Award Agreement, payment of the tax withholding by a Participant who is an Insider by delivering previously owned and unencumbered shares of Common Stock or in the form of share withholding is subject to pre-approval by the Administrator, in its sole discretion. The Administrator will document any such pre-approval in the case of a Participant who is an Officer, Director or other Insider in a manner that complies with the specificity requirements of Rule 16b-3, including the name of the Participant involved in the transaction, the nature of the transaction, the number of shares to be acquired or disposed of by the Participant and the material terms of the Award involved in the transaction. |
| (f) | Right of Repurchase. Each Award Agreement may provide that, following a termination of the Participant’s Continuous Service, the Company may repurchase the Participant’s unvested Common Stock acquired under the Plan as provided in this Section 10(f) (the “Right of Repurchase”). The Right of Repurchase for unvested Common Stock will be exercisable at a price equal to the lesser of the purchase price at which such Common Stock was acquired under the Plan or the Fair Market Value of such Common Stock (if an Award is granted solely in consideration of past services without payment of any additional consideration, the unvested Common Stock will be forfeited without any repurchase). The Award Agreement may specify the period following a termination of the Participant’s Continuous Service during which the Right of Repurchase may be exercised. |
| 11. | Adjustments Upon Changes in Stock. |
| (a) | Capitalization Adjustments. If any change is made in the Common Stock subject to the Plan, or subject to any Award, without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), then the Administrator shall proportionately adjust (i) the aggregate number of shares of Common Stock or class of shares that may be purchased pursuant to Awards granted hereunder; (ii) the aggregate number of shares of Common Stock or class of shares that may be purchased pursuant to Incentive Stock Options granted hereunder; (iii) the number and/or class of shares of Common Stock covered by outstanding Options and Awards; (iv) the maximum number of shares of Common Stock with respect to which Options and Stock Appreciation Rights may be granted to any single holder during any calendar year; and (v) the Exercise Price of any Option and the Strike Price of any Stock Appreciation Right in effect prior to such change shall be proportionately adjusted by the Administrator to reflect any increase or decrease in the number of issued shares of Common Stock or change in the Fair Market Value of such Common Stock resulting from such transaction; provided, however, that any fractional shares resulting from the adjustment may be eliminated by a cash payment. The Administrator shall make such adjustments in a manner that will provide an appropriate adjustment that neither increases nor decreases the value of such Award as in effect immediately prior to such corporate change, and its determination will be final, binding and conclusive. The conversion of any securities of the Company that are by their terms convertible will not be treated as a transaction “without receipt of consideration” by the Company. |
| (b) | Dissolution or Liquidation. In the event of a dissolution or liquidation of the Company, then, subject to Section 11(c), all outstanding Awards will terminate immediately prior to such event. |
| (c) | Change in Control - Asset Sale, Merger, Consolidation or Reverse Merger. In the event of a Change in Control, a dissolution or liquidation of the Company, an exchange of shares, or any corporate separation or division, including a split-up, a split-off or a spin-off, or a sale, in one or a series of related transactions, of all or substantially all of the assets of the Company; a merger or consolidation in which the Company is not the Surviving Entity; or a reverse merger in which the Company is the Surviving Entity, but the shares of Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, then the Company, to the extent permitted by applicable law, but otherwise in the sole discretion of the Administrator may provide for: (i) the continuation of outstanding Awards by the Company (if the Company is the Surviving Entity); (ii) the assumption of the Plan and such outstanding Awards by the Surviving Entity or its parent; (iii) the substitution by the Surviving Entity or its parent of awards with substantially the same terms (including an award to acquire the same consideration paid to the stockholders in the |
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | B-13 |
transaction described in this Section 11(c)) for such outstanding Awards and, if appropriate, subject to the equitable adjustment provisions of Section 11(a) hereof; (iv) the cancellation of such outstanding Awards in consideration for a payment (in the form of stock or cash) equal in value to the Fair Market Value of vested Awards, or in the case of an Option, the difference between the Fair Market Value and the Exercise Price for all shares of Common Stock subject to exercise (i.e., to the extent vested) under any outstanding Option; or (v) the cancellation of such outstanding Awards without payment of any consideration. If such Awards would be canceled without consideration for vested Awards, the Participant will have the right, exercisable during the latter of the 10-day period ending on the fifth day prior to such merger or consolidation or 10 days after the Administrator provides the Award holder a notice of cancellation, to exercise such Awards in whole or in part without regard to any installment exercise provisions in the Option Agreement.
| 12. | Amendment of the Plan and Awards. |
| (a) | Amendment of Plan. The Board at any time may amend or terminate the Plan. However, except as provided in Section 11(a) relating to adjustments upon changes in Common Stock, no amendment will be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy any applicable law or any securities exchange listing requirements. At the time of such amendment, the Board shall determine, upon advice from counsel, whether such amendment will be contingent on stockholder approval. |
| (b) | Stockholder Approval. The Board may, in its sole discretion, submit any other amendment to the Plan for stockholder approval. |
| (c) | Contemplated Amendments. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options or to the nonqualified deferred compensation provisions of Section 409A of the Code and to bring the Plan and Awards granted hereunder into compliance therewith. Notwithstanding the foregoing, neither the Board nor the Company nor any Affiliate will have any liability to any Participant or any other Person as to (i) any tax consequences expected, but not realized, by a Participant or any other person due to the receipt, exercise, or settlement of any Award granted hereunder; or (ii) the failure of any Award to comply with Section 409A of the Code. |
| (d) | Amendment of Awards; No Impairment of Rights. |
| (i) | The Administrator at any time may amend the terms of any one or more Awards. However, subject to Section 12(d)(ii), no amendment may impair rights under any Award granted before such amendment. Except as otherwise permitted under Section 11, unless stockholder approval is obtained: (A) no amendment or modification may reduce the Exercise Price of any Option or the Strike Price of any SAR; (B) the Committee may not cancel any outstanding Option or SAR and replace it with a new Option or SAR, another Award or cash if such action will be considered a “repricing” for purposes of the shareholder approval rules of the applicable securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted; and (C) the Committee may not take any other action that is considered a “repricing” for purposes of the shareholder approval rules of the applicable securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted. |
| (ii) | No amendment of the Plan or an Award may impair rights under any Award granted before such amendment unless (A) the Company requests the consent of the Participant and (B) the Participant consents in writing. For the avoidance of doubt, a cancellation of an Award where the Participant receives a payment equal in value to the Fair Market Value of the vested Award or, in the case of vested Options or Stock Appreciation Rights, the difference between the Fair Market Value and the Exercise Price or Strike Price, is not an impairment of the Participant’s rights that requires consent of the Participant. |
| (a) | Other Compensation Arrangements. Nothing contained in the Plan will prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. |
| (b) | Recapitalizations. Each Award Agreement will contain provisions required to reflect the provisions of Section 11(a). |
| (c) | Delivery. Upon exercise of a right granted pursuant to an Award under the Plan, the Company shall issue Common Stock or pay any amounts due within a reasonable period of time thereafter. Subject to any statutory or regulatory obligations the Company may otherwise have, for purposes of the Plan, 30 days will be considered a reasonable period. |
| (d) | Other Provisions. The Award Agreements authorized under the Plan may contain such other provisions not inconsistent with the Plan, including restrictions upon the exercise of the Awards, as the Administrator may deem advisable. |
| (e) | Cancellation and Rescission of Awards for Detrimental Activity. |
| (i) | Upon exercise, payment or delivery pursuant to an Award, the Administrator may require a Participant to certify in a manner acceptable to the Company that the Participant has not engaged in any Detrimental Activity. |
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | B-14 |
| (ii) | Unless the Award Agreement specifies otherwise, the Administrator may cancel, rescind, suspend, withhold or otherwise limit or restrict any unexpired, unpaid or deferred Awards at any time if the Participant engages in any Detrimental Activity. |
| (iii) | If a Participant engages in Detrimental Activity after any exercise, payment or delivery pursuant to an Award, during any period for which any restrictive covenant prohibiting such activity is applicable to the Participant, such exercise, payment or delivery may be rescinded within one year thereafter. In the event of any such rescission, the Participant shall pay to the Company the amount of any gain realized or payment received as a result of the exercise, payment or delivery, in such manner and on such terms and conditions as may be required by the Company. The Company will be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company. |
| (f) | Clawback or Forfeiture. Notwithstanding any provision in this Plan or any Award Agreement to the contrary, if required by Company policy, by the Dodd-Frank Wall Street Reform and Consumer Protection Act or the Sarbanes-Oxley Act of 2002 or by other applicable law, each Participant’s Award under this Plan shall be conditioned on repayment or forfeiture in accordance with such applicable laws, Company policy, or any relevant provision of the related Award Agreement. By accepting an Award under this Plan, a Participant will have consented to any such clawback, repayment or forfeiture condition, regardless of whether or not such condition is expressly stated in the Award Agreement. |
| (g) | Interpretation. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference and shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. The use herein of the word “including” following any general statement, term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as “without limitation”, “but not limited to”, or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter. References herein to any agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and not prohibited by the Plan. |
| 15. | Effective Date of Plan. |
The Plan shall become effective as of the Effective Date. No Award in excess of the 8,300,000 share limit that is granted on or after the date (specified in Section 2(r)) on which this amendment and restatement is effective may be exercised (or in the case of a stock Award, may be granted) unless and until the amendment and restatement of the Plan has been approved by the stockholders of the Company, which approval must be within 12 months before or after the date this amendment and restatement of the Plan is adopted by the Board. If the stockholders fail to approve the Plan within 12 months after the date on which the amendment and restatement of the Plan is adopted by the Board, any Awards in excess of 8,300,000 shares that are contingent on stockholder approval shall be rescinded and no additional Awards in excess of 8,300,000 shares may be made under the Plan, and the Plan will terminate on the day before the 10th anniversary of April 24, 2019, the effective date of the prior amendment and restatement of the Plan.
| 16. | Termination or Suspension of the Plan. |
The Plan will terminate automatically on the day before the 10th anniversary of the date (specified in Section 2(u)) on which this amendment and restatement is effective. No Award may be granted pursuant to the Plan after such date, but Awards theretofore granted may extend beyond that date. The Board may suspend or terminate the Plan at any earlier date pursuant to Section 12(a) hereof. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
The law of the State of Delaware will govern all questions concerning the construction, validity and interpretation of the Plan, without regard to such state’s conflict of law rules.
| 18. | Limitation on Liability. |
The Company and any Affiliate that is in existence or that hereinafter comes into existence will have no liability to any Participant or any other person as to (a) the non-issuance or sale of shares of Common Stock as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by counsel to the Company necessary to the lawful issuance and sale of any shares hereunder; (b) any tax consequences expected, but not realized, by a Participant or any other person due to the receipt, exercise, or settlement of any Award granted hereunder; or (c) the failure of any Award that is determined to constitute “nonqualified deferred compensation” to comply with Section 409A of the Code and the regulations thereunder.
| DIAMONDBACK ENERGY, INC. • 2021 PROXY STATEMENT | B-15 |
of LTI opportunity
of LTI opportunity
