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Exhibit 10.39

 
ROSETTA RESOURCES INC.
2005 LONG-TERM INCENTIVE PLAN

PERFORMANCE SHARE UNIT AWARD AGREEMENT

THIS AGREEMENT, made and entered into as of the ___ day of [MONTH], [YEAR], is
entered into by and between ROSETTA RESOURCES INC., a Delaware corporation
(“Rosetta”), and [NAME], an employee, outside director or other service provider
of Rosetta or one of its Affiliates (“Participant”).

WHEREAS, the Compensation Committee of Rosetta’s Board of Directors or such
other committee designated by Rosetta’s Board of Directors (the “Committee”),
acting under Rosetta’s 2005 Long-Term Incentive Plan, as amended from time to
time (the “Plan”), has the authority to award performance awards in the form of
performance share units representing hypothetical shares of Rosetta’s common
stock (“PSUs”), with each PSU equal in value to one share of the Company’s
$0.001 par value per share (a “Share”), to certain employees, directors or other
individuals providing services to Rosetta or an Affiliate; and

WHEREAS, pursuant to the Plan, the Committee has determined to make such an
award to Participant on the terms and conditions and subject to the restrictions
set forth in the Plan and this Agreement, and Participant desires to accept such
award;

NOW, THERFORE, in consideration of the premises and mutual covenants and
agreements contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:

1.            Performance Share Unit Award.  On the terms and conditions and
subject to the restrictions, including forfeiture, hereinafter set forth,
Rosetta hereby awards to Participant, and Participant hereby accepts, a PSU
award (the “Award”) of [NUMBER] PSUs (the “Performance Units”).  The Award is
made effective as of the date of this Agreement (the “Effective Date”).

2.             Vesting and Forfeiture.

(a)           Performance Period.  The Performance Period in which the
Performance Objectives (as provided in paragraph (b)(i) of this Section 2) are
measured shall begin on [DATE] and end on [DATE].

(b)           Restrictions

(i)            Performance Objectives.  The interest of the Participants in the
Performance Units shall vest as the Committee determines in its sole discretion,
to the extent that the “Performance Objectives” set forth in Appendix A are met
and after considering other circumstances, if any, that the Committee determines
should apply.

 
 

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(ii)           Transfer Restrictions.  The Performance Units shall be subject to
forfeiture by Participant to Rosetta as provided in this Agreement, and
Participant may not sell, transfer, pledge, exchange, hypothecate or otherwise
dispose of any of the Performance Units, other than by will or pursuant to the
applicable laws of descent and distribution(the “Transfer
Restrictions”).  Following the settlement of the Performance Units for Shares,
as the Committee determines in its discretion, the Participant shall be free to
sell, transfer, pledge, exchange, hypothecate or otherwise dispose of such
Shares, subject to applicable securities laws and the policies of Rosetta then
in effect.  Furthermore, Rosetta shall not be required to treat as an owner of
Performance Units, and associated benefits hereunder, any transferee to whom
such Performance Units or benefits shall have been so transferred.

(iii)           Service Requirement.  Except as otherwise provided in this
paragraph (b)(iii) of Section 2, upon termination of Participant’s employment or
service with Rosetta or any Affiliate prior to the time that the Committee
certifies the extent to which the performance goals and other material terms of
this Award has been achieved or satisfied for the Performance Period,
Participant shall forfeit all Performance Units granted under this Award and any
rights with respect thereto (the “Service Requirement”).

(A)           Termination with Good Reason or for Reasons Other Than Cause.  If
during the Performance Period Participant’s employment is terminated by Rosetta
other than for Cause, or by Participant for Good Reason (“Cause” and/or “Good
Reason,” as defined in the Participant’s employment agreement with the Company,
if applicable, or if the Participant has not entered into an employment
agreement with the Company, in the Rosetta Resources Inc. Executive Severance
Plan), the Committee may exercise its discretion to accelerate the vesting of
the Performance Units granted to such Participant; provided that the condition
to such acceleration of vesting shall be that the Participant executes and
delivers to Rosetta, and does not revoke, a waiver and release agreement in a
form satisfactory to Rosetta within two months of Participant’s date of
termination (an “Effective Release”).

(c)           Vesting

(i)            Except for Performance Units that are earlier vested under
paragraph (b)(iii)(A) of this Section 2 or in the event of a Corporate Change
(as defined in the Plan), as provided in paragraph (d) of this Section 2, at the
end of the Performance Period, the Committee shall determine in its sole
discretion whether the Performance Objectives set forth in paragraph (b)(i) of
this Section 2 have been met and the number of Performance Units that will vest
in accordance with the level of achievement of such Performance
Objectives.  Participant may receive from zero percent (0%) to two hundred
percent (200%) of the Performance Units set forth in Section 1.

 
 

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(ii)           Upon the vesting of the Performance Units, Participant shall be
entitled to receive, as soon as administratively practicable, but not later than
thirty (30) days after such vesting event, Shares, cash or a combination of
Shares and cash, as the Committee determines in its sole discretion, equal to
the number of Performance Units that have vested.  If the Performance Units are
settled in cash, in full or in part, prior to the end of the Performance Period,
the cash settlement shall be based upon the Fair Market Value (as defined in the
Plan) of a Share on the date of vesting. If the Performance Units are settled in
cash, in full or in part, after the end of the Performance Period, the cash
value shall be based on the Fair Market Value of a Share as of the last trading
day of the Performance Period.

(d)           Corporate Change.  After a Corporate Change, the Performance
Objectives shall be deemed to be met at target; provided that the Transfer
Restrictions and Service Requirements will continue until the end of the
Performance Period; provided further that the Service Requirements shall end at
the end of the Performance Period and not at the time when the Committee
certifies that the Performance Objectives have been met.  For the avoidance of
doubt, after a Corporate Change, this grant of Performance Units shall convert
to a time-vested grant of Performance Units, rather than based on the
achievement of Performance Objectives and restrictions on the Performance Units
shall lapse as to the number of Performance Units set forth in Section 1 at the
end of the Performance Period if Participant remains employed by the Company
until the end of the Performance Period, unless earlier vested under paragraph
(d)(i) of this Section 2.

(i)            Termination with Good Reason or for Reasons Other Than Cause
after a Corporate Change.  If after a Corporate Change and prior to the end of
the Performance Period Participant’s employment is terminated by Rosetta other
than for Cause, or by Participant for Good Reason, all Performance Units granted
to such Participant in Section 1 hereunder shall immediately be 100% vested
conditioned  upon the Participant providing to Rosetta an Effective Release.

3.             No Rights as Stockholder.

(a)           PSUs represent hypothetical Shares, subject to attainment of
specified performance conditions.  The Participant shall not be entitled to any
of the rights or benefits generally accorded to stockholders.

(b)           Upon the lapse of restrictions, if Rosetta determines, in its sole
discretion, to issue a Share for each vested Performance Unit pursuant to
paragraph (c)(ii) of Section 2, such Shares shall be released into an
unrestricted book entry account with Rosetta’s transfer agent; provided,
however, that a portion of such Shares shall be surrendered in payment of
required withholding taxes, if necessary and in accordance with Section 4 below,
unless Rosetta, in its sole discretion, establishes alternative procedures for
the payment of required withholding taxes.

4.             Withholding Taxes.

 
 

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(a)           Participant (or in the event of Participant’s death, the
administrator or executor of Participant’s estate) will pay to Rosetta or the
appropriate Affiliate, or make arrangements satisfactory to Rosetta or such
Affiliate regarding payment of, any federal, state or local taxes of any kind
required by law to be withheld with respect to the cash or Shares in settlement
of the Performance Units.

(b)           Any provision of this Agreement to the contrary notwithstanding,
if Participant does not satisfy his or her obligations under paragraph (a) of
this Section 4, Rosetta shall, to the extent permitted by law, have the right to
deduct from any payments made under the Plan, regardless of the form of such
payment, or from any other compensation payable to Participant, whether or not
pursuant to this Agreement or the Plan and regardless of the form of payment,
any federal, state or local taxes of any kind required by law to be withheld
with respect to the cash or Shares in settlement of the Performance Units.

5.             Reclassification of Performance Units.  In the event of any
reorganization, recapitalization, stock split, stock dividend, merger,
consolidation, combination of shares or other change affecting the Common Stock,
the Committee shall make such adjustments as it may deem appropriate with
respect to the Performance Units.  Any such adjustments made by the Committee
shall be conclusive.

6.             Effect on Employment.  Nothing contained in this Agreement shall
confer upon Participant the right to continue in the employment or service of
Rosetta or any Affiliate, or affect any right which Rosetta or any Affiliate may
have to terminate the employment or service of Participant.  This Agreement does
not constitute evidence of any agreement or understanding, express or implied,
that Rosetta or any Affiliate will retain Participant as a Participant for any
period of time or at any particular rate of compensation.

7.             Assignment.  Rosetta may assign all or any portion of its rights
and obligations under this Agreement.  The Award, the Performance Units and the
rights and obligations of Participant under this Agreement are subject to the
Transfer Restrictions in paragraph (c)(ii) of Section 2.

8.            Binding Effect.  This Agreement shall be binding upon and inure to
the benefit of (i) Rosetta and its successors and assigns, and (ii) Participant
and his or her heirs, devisees, executors, administrators and personal
representatives.

9.            Notices.  All notices between the parties hereto shall be in
writing and given in the manner provided in Section 15.7 of the Plan.  Notices
to Participants shall be given to Participant’s address as contained in
Rosetta’s records.  Notices to Rosetta shall be addressed to its General Counsel
at the principal executive offices of Rosetta as set forth in Section 15.7 of
the Plan.

10.           Governing Law; Exclusive Forum; Consent to Jurisdiction. This
Agreement shall be governed by and construed in accordance with the internal
laws (and not the principles relating to conflicts of laws) of the State of
Texas, except as superseded by applicable federal law.  The exclusive forum for
any action concerning this Agreement or the transactions contemplated hereby
shall be in a court of competent jurisdiction in Harris County, Texas, with
respect to a state court, or the United States District Court for the Southern
District of Texas, Houston Division, with respect to a federal
court.  PARTICIPANT HEREBY CONSENTS TO THE EXERCISE OF JURISDICTION OF A COURT
IN THE EXCLUSIVE FORUM AND WAIVES ANY RIGHT HE OR SHE MAY HAVE TO CHALLENGE OR
CONTEST THE REMOVAL AT ANY TIME BY THE COMPANY OR ANY OF ITS AFFILIATES TO
FEDERAL COURT OF ANY SUCH ACTION HE OR SHE MAY BRING AGAINST IT IN STATE COURT.

 
 

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11.           The Plan.

(a)           Agreement.  The Plan is incorporated herein by reference. The Plan
and this Agreement constitute the entire agreement of the parties with respect
to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of Rosetta and Participant with respect to the
subject matter hereof, and may not be modified adversely to Participant’s
interest except by means of a writing signed by Rosetta and Participant.

(b)           Receipt of the Plan.  Participant acknowledges receipt of a copy
of the Plan currently in effect and the Plan prospectus and agrees to receive
stockholder information, including copies of any annual report, proxy and Form
10-K from the investor relations section of Rosetta’s website at
www.rosettaresources.com.  Alternatively, Participant may request to receive the
information in this Section 11 upon written or telephonic request to Rosetta’s
Corporate Secretary.

IN WITNESS WHEREOF, Rosetta and Participant have executed this Agreement as of
the date first written above.

  ROSETTA RESOURCES INC.                     By:
 
  Randy L. Limbacher   President and Chief Executive Officer                    
PARTICIPANT                      
[NAME]

 
 

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APPENDIX A

Performance Objectives

Performance Metric
 
Performance Goal on 12/31/11
     
Mcfe Reserves per Share
 
9.7
     
Inventory / Proved Reserves Multiple
 
2.0
     
Percentage Change in Cash Flow Multiple
 
Higher Percentage Change than the
S&P 400 Oil & Gas Exploration &
   
Production Index
   

 

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