Form of Performance Share Unit Grant Notice and Performance Share Unit Agreement Adjusted Free Cash Flow between John D. Schmitz and Select Energy Services, Inc. under the Select Energy Services, Inc. 2016 Equity Incentive Plan
SELECT ENERGY SERVICES, INC.
2016 EQUITY INCENTIVE PLAN
PERFORMANCE SHARE UNIT GRANT NOTICE – ADJUSTED FREE CASH FLOW
Pursuant to the terms and conditions of the Select Energy Services, Inc. 2016 Equity Incentive Plan, as amended from time to time (the “Plan”), Select Energy Services, Inc. (the “Company”) hereby grants to the individual listed below (“you” or the “Participant”) the number of performance share units (the “PSUs”) set forth below. This award of PSUs (this “Award”) is subject to the terms and conditions set forth herein and in the Performance Share Unit Agreement attached hereto as Exhibit A (the “Agreement”) and the Plan, each of which is incorporated herein by reference. Capitalized terms used but not defined herein shall have the meanings set forth in the Plan.
John D. Schmitz
Date of Grant:
March 5, 2021
Award Type and Description:
Other Stock-Based Award granted pursuant to Section 6(h) of the Plan that has been designated as a Performance Award under Section 6(k) of the Plan. This Award represents the right to receive shares of Stock in an amount up to 175% of the Target PSUs (defined below), subject to the terms and conditions set forth herein and in the Agreement.
Your right to receive settlement of this Award in an amount ranging from 0% to 175% of the Target PSUs shall vest and become earned and nonforfeitable upon (i) your satisfaction of the continued employment described below under “Service Requirement” and (ii) the Committee’s certification of the level of achievement of the Performance Goal (defined below). The portion of the Target PSUs actually earned upon satisfaction of the foregoing requirements is referred to herein as the “Earned PSUs.” For purposes of clarity, a termination of employment with the Company or any Affiliate will include any termination of your employment status with the Company or any Affiliate even if you continue to serve as a non-employee member of the Board.
Target Number of PSUs:
108,398 (the “Target PSUs”).
January 1, 2021 (the “Performance Period Commencement Date”) through December 31, 2023 (the “Performance Period End Date”).
Except as expressly provided in Sections 4 and 5 of the Agreement, you must remain continuously employed by the Company or an Affiliate, as applicable, from the Date of Grant through the Performance Period End Date to be eligible to receive payment of this Award, which is based on the level of achievement with respect to the Performance Goal (as defined below).
Subject to the terms and conditions set forth in the Plan, the Agreement and herein, the number of Target PSUs, if any, that become Earned PSUs during the Performance Period will be determined based on the Company’s achievement of Adjusted Free Cash Flow per Share (as defined below) as compared to the Annual Target (as defined below) (the “Performance Goal”)
The number of Target PSUs, if any, that become Earned PSUs during the Performance Period will be determined based on the following table:
Less than 70%
*The percentage of Target PSUs earned for an Adjusted FCF Performance Percentage that is between the values set forth in the table, excluding between the first and second rows of the table, shall be linearly interpolated between the values in the table.
For purposes of this Award, the following definitions shall apply:
“Adjusted FCF Performance Percentage” means the percentage obtained by dividing (i) the sum of the Adjusted Free Cash Flow per Share achieved for each calendar year of the Performance Period by (ii) the sum of the Annual Target for each calendar year of the Performance Period.
“Adjusted Free Cash Flow” means, for each calendar year during the Performance Period: (i) Cash Flow from Operations, determined in accordance with generally accepted accounting principles (“GAAP”) or on a non-GAAP basis consistent with the Company’s practices (as determined by the Committee), minus (ii) net capital expenditures, including the impact of asset sales in the ordinary course of business.
“Adjusted Free Cash Flow per Share” means, with respect to a calendar year, the value obtained by dividing (i) Adjusted Free Cash Flow for such calendar year by (ii) the number of shares of Stock outstanding utilized for purposes of establishing the Annual Target for such calendar year. For purposes of clause (ii) of this definition, (A) the number of shares of
Stock outstanding shall not reflect any issuances or repurchases of Stock during the applicable year of the Performance Period, unless the Annual Target for such year has been adjusted to account for any such issuances or repurchases and (B) the number of shares of Stock outstanding shall be increased to account for any non-ordinary course debt borrowed during the applicable year of the Performance Period by dividing the aggregate total of such debt by the volume weighted average price of the Company’s shares of Stock for the thirty (30) days preceding the date of incurrence of such debt; provided, such Share increase contemplated by subsection (B) hereof shall be prorated to reflect the portion of the applicable year during the Performance Period that such debt was outstanding.
“Annual Target” means, for a calendar year during the Performance Period, the target Adjusted Free Cash Flow per share of Stock approved by the Committee for such year in connection with the Company’s annual budget process, as adjusted for any incremental capital expenditures or acquisition costs not accounted for in the budget process but otherwise approved by the Board.
The Committee may adjust the Performance Goal as permitted by the Plan.
Settlement of the Earned PSUs shall be made solely in shares of Stock, which shall be delivered to you in accordance with Section 6 of the Agreement.
By your acceptance below, you agree to be bound by the terms and conditions of the Plan, the Agreement and this Performance Share Unit Grant Notice (this “Grant Notice”). You acknowledge that you have reviewed the Agreement, the Plan and this Grant Notice in their entirety and fully understand all provisions of the Agreement, the Plan and this Grant Notice. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee regarding any questions or determinations that arise under the Agreement, the Plan or this Grant Notice.
IN ORDER TO RECEIVE THE BENEFITS OF THE AGREEMENT AND THIS GRANT NOTICE, AND FOR THIS AWARD TO BE EFFECTIVE, YOU MUST ACKNOWLEDGE YOUR ACCEPTANCE BY CLICKING THE APPROPRIATE BUTTON BELOW (THE “ACCEPTANCE REQUIREMENTS”). IF YOU FAIL TO SATISFY THE ACCEPTANCE REQUIREMENTS WITHIN 90 DAYS FOLLOWING THE DATE OF GRANT, THEN (1) THIS AWARD WILL BE OF NO FORCE OR EFFECT AND WILL BE AUTOMATICALLY FORFEITED TO THE COMPANY WITHOUT CONSIDERATION AND (2) NEITHER YOU NOR THE COMPANY WILL HAVE ANY FUTURE RIGHTS OR OBLIGATIONS UNDER THE AGREEMENT OR THIS GRANT NOTICE.
PERFORMANCE SHARE UNIT AGREEMENT
This Performance Share Unit Agreement (together with the Grant Notice to which this Agreement is attached, this “Agreement”) is made as of the Date of Grant set forth in the Grant Notice to which this Agreement is attached by and between Select Energy Services, Inc., a Delaware corporation (the “Company”), and _________ (the “Participant”). Capitalized terms used but not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice.
If to the Company, unless otherwise designated by the Company in a written notice to the Participant (or other holder):
Select Energy Services, Inc.
Attn: Senior Vice President, General Counsel and Secretary
1233 W. Loop South, Suite 1400
Houston, Texas 77027
If to the Participant, at the Participant’s last known address on file with the Company.
Any notice that is delivered personally or by overnight courier or telecopier in the manner provided herein shall be deemed to have been duly given to the Participant when it is mailed by the Company or, if such notice is not mailed to the Participant, upon receipt by the Participant. Any notice that is addressed and mailed in the manner herein provided shall be conclusively presumed to have been given to the party to whom it is addressed at the close of business, local time of the recipient, on the fourth day after the day it is so placed in the mail.