EXHIBIT 10.3

 

SM ENERGY COMPANY

 

PERFORMANCE SHARE AND RESTRICTED STOCK UNIT AWARD AGREEMENT

 

This Performance Share and Restricted Stock Unit Award Agreement (the
“Agreement”) is made effective as of [Award Date] (1) (the “Award Date”), by and
between SM Energy Company, a Delaware corporation formerly named St. Mary Land &
Exploration Company (the “Company”), and [Name of Participant] (the
“Participant”) to whom performance shares and restricted stock units have been
awarded pursuant to the Company’s long term incentive program (“LTIP”) under the
Company’s Equity Incentive Compensation Plan, as amended (the “Plan”).

 

Pursuant to the terms of the Plan and this Agreement, as of the Award Date the
Company has made an award (the “Award”) to the Participant of [Amount]
performance shares (the “Performance Shares”) and [Amount] restricted stock
units (the “Units”).  Capitalized terms used but not defined in this Agreement
shall have the meanings given to them in the Plan.

 

ARTICLE I

 

PERFORMANCE SHARES

 

1.1 Performance Shares and Performance Period.  The Performance Shares represent
the right to receive, upon the payment of the Performance Shares pursuant to
Section 1.4 hereof after the completion of the Performance Period (as defined
below), a number of shares of the Company’s common stock, $.01 par value per
share (sometimes referred to herein as the “Common Stock”), that will be
calculated as set forth in Section 1.2 below based on the extent to which the
Company’s Performance Criteria (as defined in Section 1.2) have been achieved
and the extent to which the Performance Shares have vested.  Any Common Stock
that is issued pursuant to any provision of this Agreement may be referred to in
this Agreement as a “Share” or “Shares.”  Such actual number of Shares that may
be issued upon payment of the Performance Shares may be from zero (0) to two
(2.0) times the number of Performance Shares granted on the Award Date.  The
number of Performance Shares granted herein may be referred to as the “target”
number of Shares.  The performance period (the “Performance Period”) for the
Performance Shares shall be the three-year period set forth in the attached
Performance Share and Restricted Stock Unit Award Notice (the “Award Notice”).

 

1.2 Determination of Number of Shares Earned.

 

(a) Performance Criteria.  The actual number of Shares that may be earned from
the Performance Shares and issued upon payment of the Performance Shares after
completion of the Performance Period shall be based upon the Company’s
achievement of performance criteria (the “Performance Criteria”) established by
the

 

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(1)                                  Items in brackets are features that may
vary among individual awards.

 

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Compensation Committee of the Board of Directors of the Company (the
“Committee”) for the Performance Period in accordance with the terms of the Plan
and as set forth below and reflected in the payout matrix (the “Payout Matrix”)
attached as Appendix A hereto and discussed further in subsection (d) hereof. 
The Performance Criteria for the calculation of the actual number of Shares to
be issued upon payment of the Performance Shares as reflected in the Payout
Matrix are based on a combination of (i) the absolute measure of the cumulative
total shareholder return (“TSR”) and associated Compound Annual Growth Rate
(“CAGR”) of the Company for the Performance Period, and (ii) the relative
measure of the Company’s TSR and CAGR for the Performance Period compared with
the cumulative TSR and CAGR of the Peer Companies (as defined below) for the
Performance Period as reflected in the Company’s Performance Share Plan Peer
Group Custom Index (the “Custom Index”) to be specifically prepared by
Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”), for
the purpose of administering the LTIP.

 

(b) Calculation of TSR and CAGR.  The TSR and CAGR of the Company and the Peer
Companies for the Performance Period shall be calculated in accordance with the
methodology utilized by S&P with respect to the Custom Index.

 

(c) Peer Companies and Custom Index.  The “Peer Companies” to be reflected in
the Custom Index shall consist of the constituents of the Oil & Gas
Exploration & Production GIC Sub-Industry Group in the S&P SmallCap 600 Index
and the S&P MidCap 400 Index, excluding the Company.  The Custom Index will be
equally weighted, and will be adjusted to include the dividend payments of the
constituents of the Custom Index.  The Custom Index will be rebalanced on a
quarterly basis, and will also be rebalanced whenever there are additions and
deletions to the S&P SmallCap 600 and the S&P MidCap 400 indices.  The Custom
Index is the exclusive property of S&P.  The Company has contracted with S&P to
maintain and calculate the Custom Index.  S&P shall have no liability for any
errors or omissions in calculating the Custom Index.

 

(d) Payout Matrix.  The Payout Matrix attached as Appendix A hereto sets forth
the possible multipliers, which range from zero percent (0%) to two hundred
percent (200%), which may be applied to the number of vested Performance Shares
to determine the actual number of Shares to be issued upon payment of the vested
Performance Shares after the completion of the Performance Period.  The final
multiplier (the “Final Multiplier”) shall be determined by the Committee after
the completion of the Performance Period based on the two variables that
comprise the Performance Criteria, related to (i) the Company’s TSR and CAGR for
the Performance Period, and (ii) the Peer Companies’ TSR and CAGR for the
Performance Period as reflected in the Custom Index.  The number of Shares, if
any, that shall be issued to the Participant upon payment of the Performance
Shares shall be calculated as the number of Performance Shares that have vested
in accordance with Section 1.3 or Section 1.6 hereof, multiplied by the Final
Multiplier, as determined by the Committee in accordance with the Payout
Matrix.  There shall be no rounding of variables or extrapolation of variables
between data points within the Payout Matrix, and the data point for which the
associated variables equal or exceed the target variables for such data point,
but do not result in qualification for another

 

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higher data point, shall be utilized with respect to the Final Multiplier.  Any
fractional Shares which would otherwise result from application of the Final
Multiplier shall be rounded up to the nearest whole share of Common Stock.

 

1.3 Vesting of Performance Shares.

 

(a) Vesting.  Subject to the provisions contained herein, the Performance Shares
shall vest over the Performance Period as set forth in the vesting schedule for
Performance Shares contained in the Award Notice (the “PSA Vesting Schedule”). 
As of the Award Date, the Participant must be an employee of the Company or a
subsidiary thereof.  If the Participant ceases to be an employee of the Company
or a subsidiary thereof prior to the vesting of all of the Performance Shares
pursuant to the PSA Vesting Schedule, the Participant shall forfeit the
remaining unvested Performance Shares under the Award, except as otherwise
provided in this Section 1.3 and Section 1.6.

 

(b) Continued Vesting Upon Early Retirement.  The Performance Shares shall,
notwithstanding any other provisions of this Section 1.3, continue to vest
according to the PSA Vesting Schedule after the termination of the Participant’s
employment with the Company or a subsidiary thereof if (i) such termination is
the result of the Participant’s retirement from the Company or a subsidiary
thereof upon the Participant’s having both reached the age of sixty (60) and
completed twelve (12) years of service with the Company or a subsidiary thereof,
and (ii) the Participant does not after such early retirement become employed on
a full-time basis by a competitor of the Company prior to the earlier of the
payment of the Performance Shares or the Participant’s reaching the age of
sixty-five (65).  Any such continued vesting of the Performance Shares pursuant
to this Section 1.3(b) will not result in an acceleration of the PSA Payment
Date (as defined in Section 1.4), since the number of Shares earned from the
Performance Shares shall be calculated after the completion of the Performance
Period.

 

(c) Acceleration Upon Death, Total Disability or Normal Retirement.  The
Performance Shares shall become fully vested, notwithstanding any other
provisions of this Section 1.3, upon termination of the Participant’s employment
with the Company or a subsidiary thereof because of death, Total Disability (as
defined below), or retirement upon reaching the Company’s normal retirement age
of sixty-five (65).  Any such acceleration of the vesting of the Performance
Shares pursuant to this Section 1.3(c) will not result in an acceleration of the
PSA Payment Date, since the number of Shares earned from the Performance Shares
shall be calculated after the completion of the Performance Period.  For
purposes of this Agreement, “Total Disability” means a medically determinable
physical or mental impairment that can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, by reason
of which the Participant is unable to engage in any substantial gainful activity
or is receiving income replacement benefits for a period of not less than three
months under an accident and health plan covering employees of the Company.

 

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(d) Termination for Cause.  Notwithstanding any other provisions of this
Section 1.3, the Participant shall forfeit all Performance Shares under this
Award, including those that have previously vested, upon the termination of the
employment of the Participant by the Company or a subsidiary thereof for Cause
(as defined below) prior to the completion of the Performance Period. As used in
this Agreement with respect to the Performance Shares, the term Cause shall have
the meaning defined in Section 1.6(a), and shall also include the termination of
the employment of the Participant by the Company or a subsidiary thereof due to
the Participant’s having committed (i) a wrongful taking of money, property,
goods, services, or other items of value from the Company, whether or not such
wrongful taking is prosecuted in a civil or criminal proceeding, (ii) any act of
fraud or willful misconduct in connection with the performance of the
Participant’s duties for the Company, or (iii) a significant violation of the
Company’s written policies and procedures, in each case which is demonstrably
harmful to the Company.

 

1.4 Payment of Performance Shares.  Following the last day of the Performance
Period and prior to the payment of the earned and vested Performance Shares on
or about the PSA Payment Date, the Committee shall determine, and certify in
writing to the extent deemed necessary or advisable or as required to comply
with Section 162(m) of the Internal Revenue Code of 1986, as amended (the
“Code”), (i) the extent to which the Performance Criteria have been achieved
over the Performance Period, and (ii) the Final Multiplier.  The Final
Multiplier shall then be applied to the number of vested Performance Shares to
determine the number of Shares (the “Earned Shares”), if any, to be issued to
the Participant in payment of the Performance Shares.  The determination of the
Earned Shares by the Committee shall be binding on the Participant and
conclusive for all purposes.  The Earned Shares, if any, shall be issued to the
Participant in payment of the Performance Shares on or about the payment date
set forth in the Award Notice (the “PSA Payment Date”).  Upon the payment of the
Performance Shares, the Company shall deliver to the Participant evidence of
book-entry Shares or a certificate for the number of Shares issued to the
Participant in payment of the Performance Shares.  The Earned Shares shall not
be subject to any holding or transfer restrictions after payment of the
Performance Shares.

 

1.5 Transfer Restrictions for Unpaid Performance Shares.  Performance Shares
that have not been paid shall not be transferable by the Participant, and the
Participant shall not be permitted to sell, transfer, pledge, assign, or
otherwise alienate or encumber such Performance Shares or the Shares issuable in
payment thereof, other than (i) to the person or persons to whom the
Participant’s rights under such Performance Shares pass by will or the laws of
descent and distribution, (ii) to the spouse or the descendants of the
Participant or to trusts for such persons to whom or which the Participant may
transfer such Performance Shares by gift, (iii) to the legal representative of
any of the foregoing, or (iv) pursuant to a qualified domestic relations order
as defined under Section 414(p) of the Code or a similar order or agreement
pursuant to state domestic relations law (including a community property law)
relating to the provision of child support, alimony payments, or marital
property rights to a spouse, former spouse, child, or other dependent of the
Participant.  Any such transfer shall be made only in compliance with the
Securities Act of 1933 and the requirements therefor as set forth by the

 

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Company.  Any attempted transfer in contravention of the foregoing provisions
shall be null and void and of no effect.

 

1.6 Change of Control Termination.

 

(a) Vesting upon Change of Control Termination.  Notwithstanding any other
provision of this Agreement, the Performance Shares shall become fully vested
upon a Change of Control Termination.  For purposes of this Agreement, a “Change
of Control Termination” occurs upon the termination of the Participant’s
employment with the Company or a subsidiary thereof in the event that (i) a
Change of Control (as defined in the Plan) of the Company occurs, and (ii) the
Participant’s employment with the Company or a subsidiary thereof is
subsequently terminated without Cause (as defined below) or the Participant
terminates his or her employment with the Company or a subsidiary thereof for
Good Reason (as defined below), and such termination of employment occurs
(x) within 30 months of the Change of Control and (y) with respect to
Performance Shares, prior to the normal completion of vesting of the Performance
Shares at the end of the Performance Period, or, with respect to Units, prior to
the normal completion of vesting of the Units.  The normal vesting and payment
provisions in Article I of this Agreement shall not be affected by the first
sentence of this subsection if a Change of Control of the Company occurs but
there is not also a Change of Control Termination with respect to the
Participant’s employment with the Company or a subsidiary thereof.  If the
Participant has entered into a separate written Change of Control Executive
Severance Agreement or Change of Control Severance Agreement (with either to be
subsequently referred to herein as a “Change of Control Severance Agreement”)
with the Company, the terms “Cause” and “Good Reason” used herein shall have the
meanings set forth in such Change of Control Severance Agreement, with the
definition of the term “Cause” to be as modified in Section 1.3(d) of this
Agreement.  If the Participant has not entered into a separate written Change of
Control Severance Agreement, the terms “Cause” and “Good Reason” used herein
shall have the meanings set forth in the Company’s Change of Control Severance
Plan (the “Change of Control Severance Plan”), with the definition of the term
“Cause” to be as modified in Section 1.3(d) of this Agreement.

 

(b) Payment upon Change of Control Termination.  Notwithstanding any other
provisions of this Agreement to the contrary, in the event of a Change of
Control Termination with respect to the Participant’s employment with the
Company or a subsidiary thereof as set forth in Section 1.6(a) above, the vested
Performance Shares shall be paid in accordance with this Section 1.6(b).  In the
event of a Change of Control Termination, the Committee shall determine the
extent to which the Performance Criteria have been achieved and the Final
Multiplier to apply to the vested Performance Shares by utilizing the same
method as set forth in Section 1.2 hereof; provided, however, that the
Performance Period for the calculation of the TSR and CAGR of the Company and
the Peer Companies to obtain the Final Multiplier shall be shortened to end as
of the effective date of the Change of Control.  The Final Multiplier shall then
be applied to the number of vested Performance Shares to calculate the number of
Earned Shares, if any, that the Participant is entitled to in payment of the
Performance Shares.  In the event of a Change

 

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of Control Termination, any Earned Shares shall be paid to the Participant in
payment of the Performance Shares either in Shares or in cash of equivalent
value, as determined by the Committee or other duly authorized administrator of
the Plan, in its discretion, within thirty (30) days following the effective
date of the Change of Control Termination; provided, however, that the time and
manner of such payment shall comply with Section 409A of the Code as referred to
in Section 3.11 of this Agreement.

 

(c) Controlling Documents for Change of Control Termination.  To the extent that
the Participant is subject to either a written Change of Control Severance
Agreement or the Change of Control Severance Plan, the terms and conditions of
such Change of Control Severance Agreement or Change of Control Severance Plan,
as applicable, shall also apply to this Award in the event of a Change of
Control Termination; provided, however, that with respect to the Performance
Shares under this Award, the terms of the Plan and this Agreement shall control
in the event of any inconsistency between their terms and the terms of the
Change of Control Severance Agreement or the Change of Control Severance Plan.

 

ARTICLE II

 

RESTRICTED STOCK UNITS

 

2.1 Units.  Each Unit represents the right to receive one Share of Common Stock
to be delivered upon settlement of the Units as set forth in Section 2.3 below,
subject to the terms and conditions set forth in the Plan and this Agreement.

 

2.2 Vesting of Units.

 

(a) Vesting.  Subject to the provisions contained herein, the Units shall vest
as set forth in the vesting schedule for Units contained in the Award Notice
(the “RSU Vesting Schedule”).  As of the Award Date, the Participant must be an
employee of the Company or a subsidiary thereof.  If the Participant ceases to
be an employee of the Company or a subsidiary thereof prior to the vesting of
all of the Units pursuant to the RSU Vesting Schedule, the Participant shall
forfeit the remaining unvested Units under the Award, except as otherwise
provided in this Section 2.2 and Section 2.5.

 

(b) Continued Vesting Upon Early Retirement.  The Units shall, notwithstanding
any other provisions of this Section 2.2, continue to vest according to the RSU
Vesting Schedule after the termination of the Participant’s employment with the
Company or a subsidiary thereof if (i) such termination is the result of the
Participant’s retirement from the Company or a subsidiary thereof upon the
Participant’s having both reached the age of sixty (60) and completed twelve
(12) years of service with the Company or a subsidiary thereof, and (ii) the
Participant does not after such early retirement become employed on a full-time
basis by a competitor of the Company prior to the earlier of the settlement of
the Units or the Participant’s reaching the age of sixty-five (65).

 

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(c) Acceleration Upon Death, Total Disability or Normal Retirement.  The Units
shall become fully vested, notwithstanding any other provisions of this
Section 2.2, upon termination of the Participant’s employment with the Company
or a subsidiary thereof because of death, Total Disability, or retirement upon
reaching the Company’s normal retirement age of sixty-five (65).  In the event
of such acceleration of the vesting of the Units, the RSU Settlement Date (as
defined in Section 2.3) shall also be accelerated to permit prompt settlement of
the Units.

 

(d) Termination for Cause.  Notwithstanding any other provisions of this
Section 2.2, the Participant shall forfeit any unvested and unsettled Units
under this Award upon the termination of the employment of the Participant by
the Company or a subsidiary thereof for cause, which term is specifically not
capitalized as such term was in Sections 1.3(d) and 1.6(a) of this Agreement, it
being the specific intent of the Company and the Participant that “cause” in
this instance shall be broadly defined as any event, action, or inaction by the
Participant that would reasonably be the basis for an employer to terminate the
employment of the affected individual.

 

2.3 Settlement of Units.  The portion of the Units that vest on a particular
vesting installment date as set forth in the RSU Vesting Schedule in the Award
Notice shall be settled on such vesting installment date (the “RSU Settlement
Date”), provided that such portion of the Units has not been previously
terminated.  Settlement of the vested Units may be made (a) solely through the
issuance of Shares or (b) at the mutual election of the Participant and the
Company, in a combination of Shares and cash.  The cash value of Units settled
in cash shall be based on the closing price of a Share as reported on the New
York Stock Exchange or other applicable public market on the trading day
corresponding to the RSU Settlement Date.  In no event shall the total value of
Unit settlements with the Participant under the Plan during any calendar year
exceed the value at the time of settlement of the maximum number of Shares
issuable to any one participant under the Plan during any calendar year pursuant
to Section 4.1 of the Plan.  Upon the settlement of the Units through the
issuance of Shares, the Company shall deliver to the Participant evidence of
book-entry Shares or a certificate for the number of Shares issued to the
Participant in settlement of the Units.  The Shares shall not be subject to any
holding or transfer restrictions after settlement of the Units.  The Participant
shall not be permitted to elect to further defer settlement beyond the RSU
Settlement Date pursuant to Section 6.1(b)(ii) of the Plan.

 

2.4 Transfer Restrictions.  Outstanding Units that have not been settled shall
not be transferable by the Participant, and the Participant shall not be
permitted to sell, transfer, pledge, assign, or otherwise alienate or encumber
such Units or the Shares issuable in settlement thereof, other than (i) to the
person or persons to whom the Participant’s rights under such Units pass by will
or the laws of descent and distribution, (ii) to the spouse or the descendants
of the Participant or to trusts for such persons to whom or which the
Participant may transfer such Units by gift, (iii) to the legal representative
of any of the foregoing, or (iv) pursuant to a qualified domestic relations
order as defined under Section 414(p) of the Code or a similar order or
agreement pursuant to state domestic relations law (including a community
property law) relating to the provision of child support, alimony payments, or
marital property rights to a spouse, former spouse, child, or other dependent of
the Participant.  Any such transfer shall be

 

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made only in compliance with the Securities Act of 1933 and the requirements
therefor as set forth by the Company.  Any attempted transfer in contravention
of the foregoing provisions shall be null and void and of no effect.

 

2.5 Change of Control Termination.

 

(a) Vesting upon Change of Control Termination.  Notwithstanding any other
provisions of this Agreement, the Units shall become fully vested upon a Change
of Control Termination (as defined in Section 1.6(a)).  The normal vesting and
settlement provisions in Article II of this Agreement shall not be affected by
the immediately foregoing sentence if a Change of Control of the Company occurs
but there is not also a Change of Control Termination with respect to the
Participant’s employment with the Company or a subsidiary thereof.  For purposes
of determining whether a Change of Control Termination has occurred with respect
to this section, the term “Cause” shall be as defined in Section 1.6(a);
provided, however, in the context of a Change of Control Termination, the term
“Cause” shall be as modified in Section 1.3(d), and not as set forth in
Section 2.2(d).

 

(b) Settlement upon Change of Control Termination.  Notwithstanding any other
provisions of this Agreement to the contrary, in the event of a Change of
Control Termination with respect to the Participant’s employment with the
Company or a subsidiary thereof as set forth in Section 2.5(a) above, the vested
Units shall be settled either in Shares or in cash of equivalent value, as
determined by the Committee or other duly authorized administrator of the Plan,
in its discretion, within thirty (30) days following the effective date of the
Change of Control Termination; provided, however, that the time and manner of
such settlement shall comply with Section 409A of the Code as referred to in
Section 3.11 of this Agreement.

 

(c) Controlling Documents for Change of Control Termination.  To the extent that
the Participant is subject to either a written Change of Control Severance
Agreement or the Change of Control Severance Plan, the terms and conditions of
such Change of Control Severance Agreement or Change of Control Severance Plan,
as applicable, shall also apply to this Award in the event of a Change of
Control Termination; provided, however, that with respect to the Units under
this Award, the terms of the Plan and this Agreement shall control in the event
of any inconsistency between their terms and the terms of the Change of Control
Severance Agreement or the Change of Control Severance Plan.

 

ARTICLE III

 

GENERAL PROVISIONS

 

3.1 Adjustments Upon Changes in Capitalization.  In the event that a stock
split, stock dividend, or other similar change in capitalization of the Company
occurs, the number and kind of Shares that may be issued under this Agreement
and that have not yet been issued shall be proportionately and appropriately
adjusted.

 

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3.2 No Dividend Equivalents or Stockholder Rights Until Shares Issued.  The
Performance Shares and Units shall not be credited with Dividend Equivalents. 
In addition, the Participant shall have no voting, transfer, liquidation, or
other rights of a holder of Shares with respect to the Performance Shares or
Units until such time as Shares, if any, have been issued by the Company to the
Participant in payment of the Performance Shares or settlement of the Units. 
Until the Performances Shares or Units are paid or settled or terminated, they
will represent only bookkeeping entries by the Company to evidence unfunded and
unsecured obligations of the Company.

 

3.3 Notices.  Any notice relating to this Agreement shall be in writing and
delivered in person or by mail, fax, or email transmission to the address or
addresses on file with the Company.  Any notice to the Company shall be
addressed to it at its principal office, and be specifically directed to the
attention of the Secretary.  Anyone to whom a notice may be given under this
Agreement may designate a new address by notice to that effect.

 

3.4 Benefits of Agreement.  This Agreement shall inure to the benefit of and be
binding upon each successor of the Company and the Participant’s heirs, legal
representatives, and permitted transferees.  This Agreement and the Plan shall
be the sole and exclusive source of any and all rights that the Participant and
the Participant’s heirs, legal representatives, and permitted transferees may
have with respect to this Award, the Performance Shares and Units, and the Plan.

 

3.5 Resolution of Disputes.  Any dispute or disagreement which arises under, or
is a result of, or in any way relates to, the interpretation, construction, or
applicability of this Agreement shall be resolved as determined by the
Committee, or the Board of Directors of the Company (the “Board”), or by any
other committee appointed by the Board for such purpose.  Any determination made
hereunder shall be final, binding, and conclusive for all purposes.

 

3.6 Controlling Documents.  The provisions of the Plan are hereby incorporated
into this Agreement by reference.  In the event of any inconsistency between
this Agreement and the Plan, the Plan shall control.  The provisions of the
Award Notice are also hereby incorporated into this Agreement by reference.  In
the event of any inconsistency between this Agreement and the Award Notice, this
Agreement shall control.

 

3.7 Amendments.  This Agreement may be amended only by a written instrument
executed by both the Company and the Participant.

 

3.8 No Right of Participant to Continued Employment.  Nothing contained in this
Agreement or the Plan shall confer on the Participant any right to continue to
be employed by the Company or any subsidiary thereof, or shall limit the
Company’s right to terminate the employment of the Participant at any time;
provided, however, that nothing contained in this Agreement shall affect any
separate contractual provisions that exist between the Participant and the
Company or its subsidiaries with respect to the employment of the Participant.

 

3.9 Vesting Dates, Payment Dates and Settlement Dates.  In the event that any
vesting date, payment date, settlement date, or any other measurement date with
respect to this

 

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Award, does not fall on a normal business day, such date shall be deemed to
occur on the next following normal business day.

 

3.10 Tax Withholding.  The Company may make such provisions and take such steps
as it deems necessary or appropriate for the withholding of any taxes that the
Company is required by law or regulation of any governmental authority, whether
Federal, state, or local, to withhold in connection with the Performance Shares,
Units, or Shares subject to this Agreement.  The Participant shall elect, prior
to any tax withholding event related to this Award and at a time when the
Participant is not aware of any material nonpublic information about the Company
and the Participant would be permitted to engage in a transaction in the
Company’s securities under the Company’s Securities Trading Policy, whether the
Participant will satisfy all or part of such tax withholding requirement by
paying the taxes in cash or by having the Company withhold Shares having a fair
market value equal to the minimum statutory withholding that may be imposed on
the transaction (based on minimum statutory withholding rates for Federal,
state, and local tax purposes, as applicable, that are applicable to such
transaction).  The Participant’s election shall be irrevocable, made in writing,
signed by the Participant, and shall be subject to any restrictions or
limitations that the Committee, in its sole discretion, deems appropriate.

 

3.11 Compliance with Section 409A of the Code.  Notwithstanding any provision in
this Agreement to the contrary, to the extent that this Agreement constitutes a
nonqualified deferred compensation plan or arrangement to which Section 409A of
the Code applies, the administration of this Award (including the time and
manner of payments under the Award and this Agreement) shall comply with
Section 409A of the Code.  In connection therewith, any settlement or payment to
the Participant with respect to the Award under this Agreement which
Section 409A(a)(2)(B)(i) of the Code indicates may not be made before the date
which is six months after the date of the Participant’s separation from
employment service (the “Section 409A Six-Month Waiting Period”), as a result of
the fact that the Participant is a specified key employee referred to in
Section 409A(a)(2)(B)(i) of the Code, shall not occur or be made during the
Section 409A Six-Month Waiting Period but rather shall be delayed, if such
settlement or payment would otherwise occur during the Section 409A Six-Month
Waiting Period, until the expiration of the Section 409A Six-Month Waiting
Period.

 

3.12 Personal Data.  The Participant hereby consents to the collection, use, and
transfer, in electronic or other form, of the Participant’s personal data as
described in this Agreement by and among, as applicable, the Company and its
affiliates for the exclusive purpose of implementing, administering, and
managing the Participant’s participation in the Plan.  The Company holds, or may
receive from any agent designated by the Company, certain personal information
about the Participant, including, but not limited to, the Participant’s name,
home address and telephone number, date of birth, social security insurance
number or other identification number, salary, nationality, job title, any
shares of Common Stock held, details of this Award and any other rights to
shares of Common Stock awarded, canceled, exercised, vested, unvested, or
outstanding in the Participant’s favor, for the purpose of implementing,
administering, and managing the Plan, including complying with applicable tax
and securities laws (the “Personal Data”).  The Personal Data may be transferred
to any third parties assisting in the implementation, administration, and
management of the Plan.  The Participant authorizes such recipients of the
Personal Data to receive, possess, use, retain, and transfer the Personal

 

10

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Data, in electronic or other form, for the purposes described above.  The
Participant may, at any time, view the Personal Data, request additional
information about the storage and processing of the Personal Data, require any
necessary amendments to the Personal Data, or refuse or withdraw the consents
herein, in any case without cost, by contacting the Secretary of the Company in
writing.  Any such refusal or withdrawal of the consents herein may affect the
Participant’s ability to participate in the Plan.

 

3.13 Electronic Delivery of Documents.  The Company may, in its sole discretion,
deliver any documents related to this Award, or any future awards that may be
granted under the Plan, by electronic means, or request the Participant’s
consent to participate in the Plan or other authorizations from the Participant
in connection therewith by electronic means.  The Participant hereby consents to
receive such documents by electronic delivery and, if requested, to participate
in the Plan through an on-line or electronic system established and maintained
by the Company or another third party designated by the Company.

 

3.14 Execution and Counterparts.  This Agreement may be executed in counterparts
and signature pages may be delivered by email or fax transmission.  Execution of
a written instrument for this Agreement may be evidenced by any appropriate form
of electronic signature or affirmative email or other electronic response
attached to or logically associated with such written instrument, which is
executed or adopted by a party with an indication of the intention by such party
to execute or adopt such instrument for purposes of execution thereof.

 

*     *     *     *     *

 

[Signature page follows]

 

11

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the Company and the Participant have caused this Performance
Share and Restricted Stock Unit Award Agreement to be entered into effective as
of the Award Date.

 

 

COMPANY:

 

SM ENERGY COMPANY,

 

a Delaware corporation

 

 

 

 

 

By:

 

 

 

 

 

Printed Name:

 

 

 

 

 

Title:

 

 

 

 

 

Date Signed:

 

 

 

 

 

 

 

PARTICIPANT:

 

 

 

 

 

 

Signature:

 

 

 

 

 

Printed Name:

 

 

 

 

 

Date Signed:

 

 

 

12

--------------------------------------------------------------------------------

 

APPENDIX A

 

PAYOUT MATRIX FOR PERFORMANCE SHARES

 

2010 PAYOUT MATRIX

Simple Matrix - Add result in Column A and Column B

TOTAL CANNOT BE GREATER THAN 2.0 OR LESS THAN ZERO

 

Column A

 

Absolute St. Mary TSR

 

Annual
TSR

 

EARNED
MULTIPLIER

 

0

%

—

 

1

%

0.050

 

2

%

0.100

 

3

%

0.150

 

4

%

0.200

 

5

%

0.275

 

6

%

0.350

 

7

%

0.425

 

8

%

0.500

 

9

%

0.575

 

10

%

0.650

 

11

%

0.725

 

12

%

0.800

 

13

%

0.875

 

14

%

0.950

 

15

%

1.025

 

16

%

1.100

 

17

%

1.200

 

18

%

1.300

 

19

%

1.400

 

20

%

1.500

 

21

%

1.600

 

22

%

1.700

 

23

%

1.800

 

24

%

1.900

 

25

%

2.000

 

 

Column B

 

St. Mary Annual TSR vs Peer Index

 

Annual % Point
Deviation From
Peers

 

MULTIPLIER
MODIFIER

 

-10%

 

(0.80

)

-8%

 

(0.60

)

-6%

 

(0.40

)

-4%

 

(0.20

)

-2%

 

—

 

0% (Index TSR)

 

0.20

 

+2%

 

0.40

 

+4%

 

0.60

 

+6%

 

0.80

 

+8%

 

1.00

 

 

TABULAR EXPRESSION OF PAYOUT MATRIX

 

St. Mary

 

Percentage Point Deviation From Peer Index

 

TSR (%)

 

-10%

 

-8%

 

-6%

 

-4%

 

-2%

 

0%

 

2%

 

4%

 

6%

 

8%

 

0

%

 

 

 

 

 

 

 

 

0

 

0.20

 

0.40

 

0.60

 

0.80

 

1.00

 

1

%

 

 

 

 

 

 

 

 

0.05

 

0.25

 

0.45

 

0.65

 

0.85

 

1.05

 

2

%

 

 

 

 

 

 

 

 

0.10

 

0.30

 

0.50

 

0.70

 

0.90

 

1.10

 

3

%

 

 

 

 

 

 

 

 

0.15

 

0.35

 

0.55

 

0.75

 

0.95

 

1.15

 

4

%

 

 

 

 

 

 

0

 

0.20

 

0.40

 

0.60

 

0.80

 

1.00

 

1.20

 

5

%

 

 

 

 

 

 

0.08

 

0.28

 

0.48

 

0.68

 

0.88

 

1.08

 

1.28

 

6

%

 

 

 

 

0

 

0.15

 

0.35

 

0.55

 

0.75

 

0.95

 

1.15

 

1.35

 

7

%

 

 

 

 

0.03

 

0.23

 

0.43

 

0.63

 

0.83

 

1.03

 

1.23

 

1.43

 

8

%

 

 

 

 

0.10

 

0.30

 

0.50

 

0.70

 

0.90

 

1.10

 

1.30

 

1.50

 

9

%

 

 

0

 

0.18

 

0.38

 

0.58

 

0.78

 

0.98

 

1.18

 

1.38

 

1.58

 

10

%

 

 

0.05

 

0.25

 

0.45

 

0.65

 

0.85

 

1.05

 

1.25

 

1.45

 

1.65

 

11

%

 

 

0.13

 

0.33

 

0.53

 

0.73

 

0.93

 

1.13

 

1.33

 

1.53

 

1.73

 

12

%

0

 

0.20

 

0.40

 

0.60

 

0.80

 

1.00

 

1.20

 

1.40

 

1.60

 

1.80

 

13

%

0.07

 

0.28

 

0.48

 

0.68

 

0.88

 

1.08

 

1.28

 

1.48

 

1.68

 

1.88

 

14

%

0.15

 

0.35

 

0.55

 

0.75

 

0.95

 

1.15

 

1.35

 

1.55

 

1.75

 

1.95

 

15

%

0.23

 

0.43

 

0.63

 

0.83

 

1.03

 

1.23

 

1.43

 

1.63

 

1.83

 

2.00

 

16

%

0.30

 

0.50

 

0.70

 

0.90

 

1.10

 

1.30

 

1.50

 

1.70

 

1.90

 

 

 

17

%

0.40

 

0.60

 

0.80

 

1.00

 

1.20

 

1.40

 

1.60

 

1.80

 

2.00

 

 

 

18

%

0.50

 

0.70

 

0.90

 

1.10

 

1.30

 

1.50

 

1.70

 

1.90

 

 

 

 

 

19

%

0.60

 

0.80

 

1.00

 

1.20

 

1.40

 

1.60

 

1.80

 

2.00

 

 

 

 

 

20

%

0.70

 

0.90

 

1.10

 

1.30

 

1.50

 

1.70

 

1.90

 

 

 

 

 

 

 

21

%

0.80

 

1.00

 

1.20

 

1.40

 

1.60

 

1.80

 

2.00

 

 

 

 

 

 

 

22

%

0.90

 

1.10

 

1.30

 

1.50

 

1.70

 

1.90

 

 

 

 

 

 

 

 

 

23

%

1.00

 

1.20

 

1.40

 

1.60

 

1.80

 

2.00

 

 

 

 

 

 

 

 

 

24

%

1.10

 

1.30

 

1.50

 

1.70

 

1.90

 

 

 

 

 

 

 

 

 

 

 

25

%

1.20

 

1.40

 

1.60

 

1.80

 

2.00

 

 

 

 

 

 

 

 

 

 

 

 

RED= MINIMUMS

BLUE = MAXIMUMS

 

A-1

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