EXHIBIT 10.5


 


SM ENERGY COMPANY


 


CASH BONUS PLAN


 


As Amended on July 30, 2010


 


The
Cash Bonus Plan (the “Plan”) of SM Energy Company, a Delaware corporation (the “Company”),
shall function as follows:


 


1.             On or before March 15 of each year the Compensation
Committee of the Board of Directors of the Company (the “Committee”), each
member of which shall be an “outside director” within the meaning of the
regulations under Section 162(m) of the Internal Revenue Code of
1986, as amended (the “Code”), shall designate the key employees, if any, of
the Company (and of any of the Company’s majority owned subsidiaries) who are
eligible to participate in the Plan with respect to the prior calendar year.


 


2.             No participant shall receive a bonus under the Plan with
respect to a calendar year in excess of two hundred percent of his or her base
salary received for such year.  Unless
and until the Committee determines that a bonus under the Plan to an employee
who is, or who the Committee expects to become, a “covered employee” within the
meaning of Section 162(m) of the Code (a “Covered Employee”), shall
not be designed to qualify as compensation solely on account of the attainment
of one or more performance goals under circumstances that satisfy the
requirements of Section 162(m) of the Code (“Performance Based
Compensation”), the maximum aggregate amount paid as a bonus under the Plan to
any one Covered Employee in any one calendar year shall not exceed $2,000,000.


 


3.             Payments under the Plan shall be made in full to each participant
at the time such payment is first determined, provided that the participant is
employed by the Company or a qualifying subsidiary at that time.  The timing of payments under the Plan shall
comply in all respects with the provisions of Section 409A of the Code and
the regulations thereunder.


 


4.             Payments under the Plan shall not be deemed to
constitute compensation of any nature for purposes of any other compensation,
retirement or other benefit plan of the Company.  


 

















 


To the extent that any such other plan contains
provisions contrary to the foregoing sentence, such other plan shall be deemed
to be amended to conform to the foregoing sentence.


 


5.             All matters with respect to the interpretation and
application of the Plan shall be conclusively determined by the Committee.


 


6.             The Plan may be terminated or modified prospectively at
any time by the Board of Directors. 
Nothing contained in the Plan shall constitute a contract, express or
implied, or any other type of obligation with respect to the employment or the
continued employment by the Company of any person.


 


7.             Notwithstanding any other terms of the Plan, the
payability (as determined by the Committee) of a bonus under the Plan that the
Committee intends to be Performance Based Compensation to a Covered Employee,
shall be determined by the attainment of one or more performance goals as
determined by the Committee in conformity with Section 162(m) of the
Code.  The Committee shall specify in
writing, by resolution or otherwise, the participants eligible to receive such
a bonus (which may be expressed in terms of a class of individuals) and the
performance goal(s) applicable to such bonus within 90 days after the
commencement of the period to which the performance goal(s) relate(s), or
such earlier time as required to comply with Section 162(m) of the
Code.  No such bonus shall be payable
unless the Committee certifies in writing, by resolution or otherwise, that the
performance goal(s) applicable to the bonus were satisfied.  In no case may the Committee increase the
value of a bonus intended to qualify as Performance Based Compensation above
the maximum value determined under the performance formula by the attainment of
the applicable performance goal(s), but the Committee retains the discretion to
reduce the value below such maximum.


 


Unless
and until the Committee proposes for stockholder vote and the stockholders
approve a change in the general performance measures set forth herein, the
performance goal(s) upon which the payment of a bonus to a Covered
Employee that is intended to qualify as Performance Based Compensation shall be
limited to the following performance measures:


 


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(a)           Increases
in, or levels of, net asset value; net asset value per share; pretax earnings;
earnings before interest and taxes; earnings before interest, taxes,
depreciation and amortization; net income and/or earnings per share;


 


(b)           Return
on equity, return on assets or net assets, return on capital (including return
on total capital or return on invested capital);


 


(c)           Share
price or stockholder return performance (including, but not limited to, growth
measures and total stockholder return, which may be measured in absolute terms
and/or in comparison to a group of peer companies or an index);


 


(d)           Oil
and gas reserve replacement, reserve growth and finding and development cost
targets;


 


(e)           Oil
and gas production targets;


 


(f)            Performance
of investments in oil and gas properties;


 


(g)           Cash
flow measures (including, but not limited to, cash flows from operating
activities, discretionary cash flows, and cash flow return on investment,
assets, equity, or capital); and


 


(h)           Increases
in, or levels of, operating and/or nonoperating expenses.


 


Any
performance measure(s) may be used to measure the performance of the
Company as a whole and/or any one or more regional operations and/or
subsidiaries of the Company or any combination thereof, as the Committee may
deem appropriate, and any performance measure(s) may be used in comparison
to the performance of a group of peer companies, or a published or special
index that the Committee, in its sole discretion, deems appropriate.


 


The
Committee may provide that any evaluation of attainment of a performance goal
may include or exclude any of the following events that occurs during the
relevant period: (a) asset write downs; (b) litigation judgments or
settlements; (c) the effect of changes in tax laws, accounting principles,
or other laws or regulations affecting reported results; (d) any
reorganization or restructuring transactions; (e) extraordinary
nonrecurring items as described in 


 


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Accounting
Principles Board Opinion No. 30 and/or in management’s discussion and
analysis of financial condition and results of operations appearing in the
Company’s Annual Report on Form 10-K for the applicable year; and (f) significant
acquisitions or divestitures.  To the
extent such inclusions or exclusions affect bonuses to Covered Employees, they
shall be prescribed in a form that meets the requirements of Section 162(m) of
the Code for deductibility.


 


In
the event that applicable tax and/or securities laws change to permit
discretion by the Committee to alter the governing performance measures without
obtaining stockholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining stockholder approval.  In addition, in the event that the Committee
determines that it is advisable to make bonus payments to Covered Employees
that shall not qualify as Performance Based Compensation, the Committee may
make such payments without satisfying the requirements of Section 162(m) of
the Code.


 


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This
Cash Bonus Plan, as amended, was adopted by the Board of Directors of SM Energy
Company on July 30, 2010.


 


	
   

  	
  SM
  ENERGY COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  ANTHONY J. BEST

  
	
   

  	
   

  	
  President
  and Chief Executive Officer

  



 


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