Document:

Exhibit 10.5

SM ENERGY COMPANY

AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN

June 10, 2011

 

ARTICLE I

ESTABLISHMENT AND PURPOSE

 

1.1           Establishment.  SM Energy Company, a Delaware corporation (the “Company”), has established this employee stock purchase plan for employees of the Company or any Subsidiary Corporation (defined below), who are providing material services to the Company, which shall be known as the SM ENERGY COMPANY EMPLOYEE STOCK PURCHASE PLAN (the “Plan”).

 

1.2           Purpose.  The purpose of the Plan is to enhance stockholder value by attracting, retaining and motivating employees of the Company and of any Subsidiary Corporation by providing them with a means to acquire a proprietary interest in the Company’s success.

 

ARTICLE II

DEFINITIONS

 

2.1           Account.  “Account” shall mean the account maintained by the Plan Administrator consisting of payroll deductions with respect to such Participant as adjusted for amounts used to purchase Stock and distributions to the Participant.

 

2.2           Authorization.  “Authorization” is defined in Section 3.4.

 

2.3           Base Pay.  “Base Pay” shall mean regular straight-time earnings excluding payments for overtime, shift premium, bonuses and other special payments, commissions and other incentive payments and as further defined in Section 8.1.

 

2.4           Board.  “Board” shall mean the Board of Directors of the Company.

 

2.5           Code.  “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

2.6           Employee.  “Employee” shall mean any person who is customarily employed on a full-time or part-time basis by the Company or a Subsidiary Corporation and is regularly scheduled to work more than 20 hours per week.

 

2.7           Offering.  “Offering” shall mean a semi-annual offering of the Company’s Stock as further described in Section 6.1.

 

2.8           Offering Commencement Date and Offering Termination Date.  “Offering Commencement Date” and “Offering Termination Date” are defined in Section 6.1.

 

2.9           Offering Period.  “Offering Period” is defined in Section 6.1.

 

2.10         Option.  “Option” shall mean a Participant’s right to purchase Stock of the Company as of each Offering Termination Date for each Offering with the accumulated payroll deductions in the Participant’s Account.

 

2.11         Participant.  “Participant” shall mean an Employee who becomes a Participant by completing an authorization for payroll deduction under Section 3.4.

 

2.12         Plan Administrator.  “Plan Administrator” shall mean the Vice President—Human Resources or such other person as may be designated from time to time by the Board of the Company.

 

2.13         Stock.  “Stock” shall mean shares of the Company’s common stock subject to this Plan.

 

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2.14         Subsidiary Corporation.  “Subsidiary Corporation” shall mean any present or future corporation, which (i) would be a “subsidiary corporation” of SM Energy Company as that term is defined in Section 424 of the Code and (ii) is designated by the Committee as a participating subsidiary corporation whose employees may become Participants in the Plan.

 

ARTICLE III

ELIGIBILITY AND PARTICIPATION

 

3.1           Initial Eligibility.  Any Employee shall be eligible to participate in Offerings under the Plan that commence on or after the first Offering Commencement Date occurring after the Employee’s commencement of employment with the Company or a Subsidiary Corporation.

 

3.2           Leave of Absence.  For purposes of participation in the Plan, a person on leave of absence shall be deemed to be an Employee until his or her employment with the Company or a Subsidiary Corporation otherwise terminates.

 

3.3           Restrictions on Participation.  Notwithstanding any provisions of the Plan to the contrary, no Employee shall be granted an Option,

 

(a)           if, immediately after the grant, such Employee would own Stock or hold outstanding Options to purchase Stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company (for purposes of this paragraph, the rules of Section 424(d) of the Code shall apply in determining stock ownership of any Employee);

 

(b)           which permits his or her rights to purchase Stock under all employee stock purchase plans of the Company to accrue at a rate that exceeds $25,000 in fair market value of the Stock (determined at the time such option is granted) for each calendar year in which such Option is outstanding; or

 

(c)           which permits an Employee to purchase in excess of 2,500 shares in such Offering.

 

3.4           Commencement and Automatic Continuation of Participation.  An Employee who meets the requirements of Section 3.1 may become a Participant by completing an authorization for a payroll deduction on the form provided by the Company (an “Authorization”) and filing it with the Plan Administrator on or before the date set for such purpose by the Plan Administrator, which date shall be prior to the Offering Commencement Date for the Offering (as such terms are defined below).  Payroll deductions for a Participant shall commence on the applicable Offering Commencement Date when his or her Authorization becomes effective.  With respect to Offerings under the Plan commencing on or after July 1, 2011, each Participant in the immediately preceding Offering who continues to be an Employee and eligible to participate in the Plan shall automatically be deemed to be a Participant in the next Offering using the same Authorization and corresponding payroll deduction level as was in effect for the immediately preceding Offering, unless the Participant has filed a new Authorization for the next Offering in accordance with Sections 3.4, 7.1, and 7.3 (in which case such new Authorization shall apply to the next Offering), or unless the Participant terminates his or her participation in accordance with Article X or withdraws his or her accumulated payroll deductions in accordance with Section 9.2.  Payroll deductions for a Participant shall continue until the Participant terminates his or her participation in accordance with Article X.

 

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ARTICLE IV

ADMINISTRATION

 

4.1           Administration.  The Board shall be responsible for administering the Plan and appointing the Plan Administrator.

 

(a)           The Board is authorized to interpret the Plan; to prescribe, amend, and rescind rules and regulations relating to the Plan; to provide for conditions and assurances deemed necessary or advisable to protect the interests of the Company with respect to the Plan; and to make all other determinations necessary or advisable for the administration of the Plan.  Determinations, interpretations, or other actions made or taken by the Board with respect to the Plan and Options granted under the Plan shall be final and binding and conclusive for all purposes and upon all persons.

 

(b)           At the discretion of the Board the Plan may be administered by a Committee of two or more non-employee Directors appointed by the Board (the “Committee”).  The Committee shall have full power and authority, subject to the limitations of the Plan and any limitations imposed by the Board, to construe, interpret and administer the Plan and to make determinations which shall be final, conclusive and binding upon all persons, including any persons having any interests in any Options which may be granted under the Plan, or Stock purchased under the Plan.

 

(c)           Where a Committee has been created by the Board pursuant to this Article IV, references in the Plan to actions to be taken by the Board shall be deemed to refer to the Committee as well, except where limited by the Plan or by the Board.

 

(d)           No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Option granted under it.

 

ARTICLE V

STOCK SUBJECT TO THE PLAN

 

5.1           Number.  The maximum number of shares of Stock which shall be issued under the Plan, subject to adjustment upon changes in capitalization of the Company as provided in Section 5.2, shall be an aggregate of 2,000,000 shares, which number of shares reflects the 500,000 shares originally authorized under the Plan, as adjusted pursuant to Section 5.2 to reflect the two shares-for-one share forward stock split effected in the form of a stock dividend to stockholders of record on August 21, 2000, and the two shares-for-one share forward stock split effected in the form of a stock dividend to stockholders of record on March 21, 2005.  If the total number of shares of Stock for which Options are exercised on any Offering Termination Date in accordance with this Article V exceeds the maximum number of shares of Stock remaining in the Plan, the Company shall make a pro rata allocation of the shares available for delivery and distribution in as nearly a uniform manner as shall be practicable and as it shall determine to be equitable, and the balance of payroll deductions credited to the Account of each Participant under the Plan shall be returned to him or her as promptly as possible.

 

5.2           Adjustment in Capitalization.  In the event of any change in the outstanding shares of Stock of the Company by reason of a stock dividend or split, recapitalization, reclassification, or other similar capital change, the aggregate number of shares of Stock set forth in Section 5.1 and the number of shares of Stock set forth in Section 3.3(c) shall be appropriately adjusted by the Board, whose determination shall be conclusive.  In any such case, the number and kind of shares of Stock that are subject to any Option and the Option price per share shall be proportionately and appropriately adjusted without any change in the aggregate Option price to be paid therefor upon exercise of the Option.

 

5.3           Transfer Restrictions on Certain Shares.  Shares of Stock issued under the Plan with respect to Offerings under the Plan commencing on or after January 1, 2010, and prior to July 1, 2011, may not be disposed of by sale, pledge, or any other transfer for a period of six months following the Offering Termination Date upon which such shares are deemed to have been acquired pursuant to Section 9.1, and shares of Stock issued under the Plan with respect to Offerings under the Plan commencing prior to January 1, 2010, and on or after July 1, 2001, may not be disposed of by sale, pledge, or any other transfer for a period of eighteen months following the Offering

 

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Termination Date upon which such shares are deemed to have been acquired pursuant to Section 9.1, except that in any case such shares of Stock may be sold at any time following the death of the Participant or upon the disability of the Participant.  For this purpose, a Participant shall be considered disabled if he or she is unable to perform any substantial portion of the duties for which he or she is employed by the Company for a period of 90 days.  The Company may require that an employee furnish reasonable medical evidence establishing the disability of such employee.  Notwithstanding the foregoing, shares of Stock may be transferred, without consideration, pursuant to the laws of descent and distribution and for customary estate planning purposes and such shares of Stock shall, in the hands of the transferee, continue to be bound by the restrictions set forth in this Section 5.3.  In addition, the foregoing transfer restrictions shall not apply to shares of Stock issued under the Plan with respect to Offerings under the Plan commencing on or after July 1, 2011, and a Participant may sell or otherwise transfer any shares of Stock purchased in such Offerings at any time that the Participant chooses, subject to compliance with securities laws.

 

5.4           Legend.  The Company may take any steps to restrict the sale of shares of Stock issued to a Participant under this Plan as it determines to be necessary to enforce any applicable restrictions on transfer of such shares of Stock under this Plan, including, without limitation, affixing a legend restricting the sale of the Stock on any certificate therefor.

 

ARTICLE VI

OFFERINGS

 

6.1           Semi-Annual Offerings.  The Plan will be implemented by semi-annual offerings of the Company’s Stock (the “Offerings”) commencing on January 1 and July 1 of such year and terminating on June 30 and December 31 of such year, respectively.  The first Offering shall commence on January 1, 1998 and, unless all shares of Stock in the Plan shall have been purchased prior thereto, the last Offering shall commence on July 1, 2017.

 

As used in the Plan, “Offering Commencement Date” means the January 1 or July 1, as the case may be, on which the particular Offering begins; “Offering Termination Date” means the June 30 or December 31, as the case may be, on which the particular Offering terminates; and “Offering Period” means the period between any Offering Commencement Date and the corresponding Offering Termination Date.

 

ARTICLE VII

PAYROLL DEDUCTIONS

 

7.1           Amount of Deduction.  At the time a Participant files his or her authorization for payroll deduction, deductions shall be made from his or her Base Pay in accordance with such authorization on each payday that falls on or after the Offering Commencement Date and on or before the Offering Termination Date during the time he or she is a Participant at the rate of not less than 1% and not more than 15% of his or her Base Pay during the Offering.  If a Participant completed an Authorization for a prior Offering and participated in the immediately preceding Offering, then the level of payroll deductions in place for such immediately preceding Offering pursuant to such Authorization shall remain in effect for the next Offering, unless the Participant elects to terminate his or her participation in the next Offering or files a new Authorization in accordance with Sections 3.4 and 7.3 in which the Participant elects to change the level of payroll deductions for the next Offering, in which case such new Authorization shall apply to the next Offering.  In the case of a part-time hourly Employee, such Employee’s Base Pay during an Offering shall be determined by multiplying such Employee’s hourly rate of Base Pay during the Offering by the number of regularly scheduled hours of work for such Employee during such Offering.

 

7.2           Participant’s Account.  All payroll deductions made for a Participant shall be credited to his or her Account under the Plan.  A Participant may not make any separate cash payment into such Account.

 

7.3           Changes in Payroll Deductions.  A Participant may discontinue his or her participation in the Plan as provided in Article X, or on one occasion only during each Offering Period may elect to decrease the percentage of Base Pay of his or her contributions to his or her Account by filing with the Plan Administrator a new payroll deduction authorization, but no other change can be made during an Offering Period.

 

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7.4           Leave of Absence.  If a Participant goes on a leave of absence, such Participant shall have the right to elect either: (a) to withdraw the balance in his or her Account pursuant to Section 9.2 or (b) to remain a Participant in the Plan authorizing deductions to be made from payments by the Company to the Participant during such leave of absence, if any.

 

ARTICLE VIII

GRANTING OF OPTION

 

8.1           Number of Option Shares.  On the Commencement Date of each Offering, a Participant shall be deemed to have been granted an Option to purchase shares of the Stock of the Company equal to (i) that percentage of the Employee’s Base Pay that he or she has elected to have withheld (but not in any case less than 1% or more than 15%) multiplied by (ii) the Employee’s Base Pay during the period of the Offering (iii) divided by the lesser of (A) 85% of the market value of Stock on the applicable Offering Commencement Date or (B) 85% of the market value of each share of Stock on the applicable Offering Termination Date.  The market value of the Stock shall be determined as provided in paragraphs (a) and (b) of Section 8.2 below.  An Employee’s Base Pay during the applicable Offering Period shall be determined by multiplying his or her normal weekly Base Pay rate (as adjusted during the Offering Period) by 26 or the hourly rate by 1,040; provided that, in the case of a part-time hourly Employee, the Employee’s Base Pay during the period of an Offering shall be determined by multiplying such Employee’s hourly Base Pay rate by the number of regularly scheduled hours of work for such Employee during such Offering.

 

8.2           Option Price.  The option price of each share of Stock purchased with payroll deductions made during such Offering for a Participant therein shall be the lower of:

 

(a)           85% of the closing price of the Stock on the Offering Commencement Date or the nearest prior business day on which trading occurred on the New York Stock Exchange (“NYSE”); or

 

(b)           85% of the closing price of the Stock on the Offering Termination Date or the nearest prior business day on which trading occurred on the NYSE.

 

If the Stock of the Company is not listed for trading on the NYSE on any of the aforesaid dates for which closing prices of the Stock are to be determined, then reference shall be made to the fair market value of the Stock on that date, as determined on such basis as shall be established or specified for that purpose by the Board.

 

ARTICLE IX

EXERCISE OF OPTION

 

9.1           Automatic Exercise.  A Participant’s Option for the purchase of Stock with payroll deductions made during any Offering will be deemed to have been exercised automatically on the Offering Termination Date applicable to such Offering for the purchase of the number of full shares of Stock that the accumulated payroll deductions in his or her Account at that time will purchase at the applicable Option price (but not in excess of the number of shares of Stock for which Options have been granted to the Participant pursuant to Section 8.1, in which case such excess accumulated payroll deductions will be returned to the Participant following the Offering Termination Date without interest).

 

9.2           Withdrawal of Account.  By written notice to the Plan Administrator, at any time prior to the Offering Termination Date applicable to any Offering, a Participant may elect to withdraw all, but not less than all, of the accumulated payroll deductions in his or her Account at such time.

 

9.3           Fractional Shares.  Fractional shares will not be issued under the Plan, and any accumulated payroll deductions that would have been used to purchase fractional shares will be retained in the Participant’s Account and applied to the purchase of shares of Stock in the next Offering, unless the Participant has elected to terminate his or her participation in the next Offering or is otherwise ineligible to participate in the next Offering, in which case such remaining accumulated payroll deductions will be promptly returned to the Participant, without interest.

 

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9.4           Transferability of Option.  During a Participant’s lifetime, Options held by such Participant shall be exercisable only by that Participant.

 

9.5           Delivery of Stock.  As promptly as practicable after the Offering Termination Date of each Offering, the Company will deliver to each Participant, as appropriate, the Stock purchased upon exercise of his or her Option.

 

ARTICLE X

WITHDRAWAL

 

10.1         In General.  As indicated in Section 9.2, a Participant may withdraw payroll deductions credited to his or her Account under the Plan at any time by giving written notice to the Plan Administrator of the Company.  All of the Participant’s payroll deductions credited to his or her Account will be paid to him or her promptly after receipt of his or her notice of withdrawal, and no further payroll deductions will be made from his or her pay during such Offering.  The Company may, at its option, treat any attempt to borrow by an Employee on the security of his or her accumulated payroll deductions as an election, under Section 9.2, to withdraw such deductions.

 

10.2         Effect on Subsequent Participation.  A Participant’s withdrawal from any Offering will not have any effect upon his or her eligibility to participate in any succeeding Offering or in any similar plan that may hereafter be adopted by the Company; provided, however, following any such withdrawal, such Participant must complete a new Authorization in accordance with Section 3.4 to participate in any subsequent Offering.

 

10.3         Termination of Employment.  Upon termination of the Participant’s employment for any reason, including retirement (but excluding death while in the employ of the Company) prior to the Offering Termination Date, the payroll deductions credited to his or her Account will be returned to him or her.

 

10.4         Termination of Employment Due to Death.  Upon termination of the Participant’s employment because of his or her death, his or her beneficiary as defined in Section 19.1, or if none is designated, his or her estate, shall have the right to elect by written notice given to the Plan Administrator of the Company prior to the earlier of the Offering Termination Date or the expiration of a period of 60 days commencing with the date of the death of the Participant either:

 

(a)           to withdraw all of the payroll deductions credited to the Participant’s Account under the Plan, or

 

(b)           to exercise the Participant’s Option for the purchase of Stock on the Offering Termination Date next following the date of the Participant’s death for the purchase of the number of full shares of Stock which the accumulated payroll deductions in the Participant’s Account at the date of the Participant’s death will purchase at the applicable option price, and any excess in such Account will be returned to said beneficiary, without interest.

 

In the event that no such written notice of election shall be duly received by the office of the Plan Administrator of the Company, the beneficiary shall automatically be deemed to have elected, pursuant to paragraph (b), to exercise the Participant’s Option.

 

10.5         Leave of Absence.  A Participant on leave of absence shall, subject to the election made by such Participant pursuant to Section 7.4, continue to be a Participant in the Plan so long as such Participant remains an Employee.

 

ARTICLE XI

INTEREST

 

11.1         Payment of Interest.  No interest will be paid or allowed on any money paid into the Plan or credited to the Account of any Participant, including money which is distributed to an Employee or his or her beneficiary pursuant to any provision of this Plan.

 

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ARTICLE XII

NO RIGHT TO EMPLOYMENT

 

Nothing in the Plan shall interfere with or limit in any way the right of the Company or a Subsidiary Corporation to terminate any Employee’s employment at any time, nor confer upon any Employee any right to continue in the employ of the Company or a Subsidiary Corporation.

 

ARTICLE XIII

AMENDMENT, MODIFICATION, AND

TERMINATION OF THE PLAN

 

The Board may at any time terminate and from time to time may amend or modify the Plan.  Any amendment or modification of the Plan by the Board may be accomplished without approval of the stockholders of the Company, except in the event that stockholder approval of such amendment or modification is required by any law or regulation governing the Company.

 

No amendment, modification, or termination of the Plan shall in any manner adversely affect any outstanding Option under the Plan without the consent of the Participant holding the Option.

 

ARTICLE XIV

ACQUISITION, MERGER OR LIQUIDATION

 

14.1         Acquisition.

 

(a)           In the event that an Acquisition occurs with respect to the Company, the Company may, but shall not be required to, cancel an Offering and all Options outstanding as of the effective date of such Acquisition, whether or not such Options are then exercisable. In that event, the payroll deductions credited to the Account of each Participant shall be returned to him or her.  If the Company does not elect to cancel the Offering, such Offering shall terminate on the day immediately prior to the effective date of the Acquisition and such date shall be considered the Offering Termination Date for the Offering.

 

(b)           For purposes of this section, an “Acquisition” shall mean any transaction in which substantially all of the Company’s assets are acquired or in which a controlling amount of the Company’s outstanding shares are acquired, in each case by a single person or entity or an affiliated group of persons and entities.  For purposes of this section, a controlling amount shall mean more than fifty percent of the issued and outstanding shares of Stock of the Company.  The Company shall have the above option to cancel an Offering and all Options regardless of how the Acquisition is effectuated, whether by direct purchase, through a merger or similar corporate transaction, or otherwise.

 

(c)           Where the Company does not exercise its option to terminate an Offering and all Options under this Section 14.1, the remaining provisions of this Article XIV shall apply, to the extent applicable.

 

14.2         Merger or Consolidation.  If the Company shall be the surviving corporation in any merger or consolidation, any Offering shall pertain to and apply to the securities to which a holder of the number of shares of Stock subject to the Option would have been entitled in such merger or consolidation, provided that the Company shall not be considered the surviving corporation for purposes hereof if the Company is the survivor of a reverse triangular merger.

 

14.3         Other Transactions.  A dissolution or a liquidation of the Company or a merger or consolidation in which the Company is not the surviving corporation (the Company shall not be considered the surviving corporation for purposes hereof if the Company is the survivor of a reverse triangular merger) shall cause every Offering outstanding hereunder to terminate as of the effective date of such dissolution, liquidation, merger or consolidation. In that event, the payroll deductions credited to the Account of each Participant shall be returned to him or her.

 

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ARTICLE XV

SECURITIES REGISTRATION

 

15.1         Securities Registration.  In the event that the Company shall deem it necessary or desirable to register under the Securities Act of 1933, as amended, or any other applicable statute, any Options or any Stock with respect to which an Option may be or shall have been granted or exercised, or to qualify any such Options or Stock under the Securities Act of 1933, as amended, or any other statute, then the Participant shall cooperate with the Company and take such action as is necessary to permit registration or qualification of such Options or Stock.

 

15.2         Representations.  Unless the Company has determined that the following representation is unnecessary, each person participating in an Offering may be required by the Company, as a condition to the issuance of the shares of Stock pursuant to such Offering to make a representation in writing (i) that he or she is acquiring such shares for his or her own account for investment and not with a view to, or for sale in connection with, the distribution of any part thereof within the meaning of the Securities Act of 1933, and (ii) that before any transfer in connection with the resale of such shares, he or she will obtain the written opinion of counsel for the Company, or other counsel acceptable to the Company, that such shares may be transferred without registration thereof.  The Company may also require that the certificates representing such shares contain legends reflecting the foregoing.  To the extent permitted by law, including the Securities Act of 1933, nothing herein, except for the transfer restrictions set forth in Section 5.3 (to the extent that they remain applicable), shall restrict the right of a Participant to sell the shares received in an open market transaction.

 

ARTICLE XVI

TAX WITHHOLDING

 

Whenever shares of Stock are to be issued pursuant to an Offering, the Company shall have the power to require the recipient of the Stock to remit to the Company an amount sufficient to satisfy federal, state, and local withholding tax requirements, if any.

 

ARTICLE XVII

INDEMNIFICATION

 

To the extent permitted by law, each person who is or shall have been a member of the Board or the Committee and the Plan Administrator shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf.  The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s certificate of incorporation or bylaws, as a matter of law, or otherwise, or any power that the Company or a Subsidiary Corporation may have to indemnify them or hold them harmless.

 

ARTICLE XVIII

REQUIREMENTS OF LAW

 

18.1         Requirements of Law.  The granting of Options pursuant to an Offering and the issuance of shares of Stock upon the exercise of an Option shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

 

18.2         Governing Law.  The Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Colorado.

 

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ARTICLE XIX

MISCELLANEOUS

 

19.1         Designation of Beneficiary.  A Participant may file a written designation of a beneficiary who is to receive any Stock or cash.  Such designation of beneficiary may be changed by the Participant at any time by written notice to the Plan Administrator of the Company.  Upon the death of a Participant and upon receipt by the Company of proof of identity and existence at the Participant’s death of a beneficiary validly designated by him or her under the Plan, the Company shall deliver such Stock or cash to such beneficiary.  In the event of the death of a Participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Participant’s death, the Company shall deliver such Stock or cash to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such Stock or cash to the spouse or to any one or more dependents of the Participant as the Company may designate.  No beneficiary shall, prior to the death of the Participant by whom he or she has been designated, acquire any interest in the Stock or cash credited to the Participant under the Plan.

 

19.2         Transferability.  Neither payroll deductions credited to a Participant’s Account nor any rights with regard to the exercise of an Option or to receive Stock under the Plan may be assigned, transferred, pledged, or otherwise disposed of in any way by the Participant other than by will or the laws of descent and distribution or as provided in Section 19.1.  Any such attempted assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds in accordance with Section 9.2.

 

19.3         Use of Funds.  All payroll deductions received or held by the Company under this Plan may be used by the Company for any corporate purpose and the Company shall not be obligated to segregate such payroll deductions.

 

19.4         Effect of Plan.  The provisions of the Plan shall, in accordance with its terms, be binding upon, and inure to the benefit of, all successors of each Employee in the Plan, including, without limitation, such Employee’s estate and the executors, administrators or trustees thereof, heirs and legatees, and any receiver, trustee in bankruptcy or representative of creditors of such Employee.

 

ARTICLE XX

EFFECTIVE DATE OF PLAN

 

The Plan shall be effective on January 1, 1998.

 

THIS EMPLOYEE STOCK PURCHASE PLAN was adopted on September 18, 1997, by the Board of Directors of SM Energy Company, then named St. Mary Land & Exploration Company, to be effective upon adoption, and has been subsequently amended by the Board of Directors of the Company on February 27, 2001, February 18, 2005, September 25, 2009, December 30, 2009, July 30, 2010, and March 31, 2011.

 

The Plan was approved by the Company’s stockholders at the Company’s 1998 annual meeting of stockholders.

 

	
 
    	
SM ENERGY COMPANY
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ ANTHONY J. BEST
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
Chief Executive Officer and President
    

 

9Exhibit 10.6

 

SM ENERGY COMPANY

 

PERFORMANCE STOCK UNIT AWARD AGREEMENT

 

This Performance Stock Unit Award Agreement (the “Agreement”) is made effective as of July 1, 2011 (the “Award Date”), by and between SM Energy Company, a Delaware corporation (the “Company”), and [Name](the “Participant”) to whom performance stock units have been awarded 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 [Number] performance stock units (the “Performance Units”).  Capitalized terms used but not defined in this Agreement shall have the meanings given to them in the Plan.

 

ARTICLE I

 

PERFORMANCE UNITS

 

1.1           Performance Units and Performance Period.  The Performance Units represent the right to receive, upon the payment of the Performance Units 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 Units 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 Units may be from zero (0) to two (2.0) times the number of Performance Units granted on the Award Date.  The number of Performance Units granted herein may be referred to as the “target” number of Shares.  The performance period (the “Performance Period”) for the Performance Units shall be the three-year period beginning on July 1, 2011 and ending on June 30, 2014.

 

1.2           Determination of Number of Shares Earned.

 

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

 

(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 Units to determine the actual number of Shares to be issued upon payment of the vested Performance Units 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 Units shall be calculated as the number of Performance Units 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 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.

 

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1.3           Vesting of Performance Units.

 

(a)           Vesting.  Subject to the provisions contained herein, the Performance Units shall vest over the Performance Period as follows (the “PSU Vesting Schedule”):

 

1/7th (approximately 14.3%) on July 1, 2012

2/7ths (approximately 28.6%) on July 1, 2013

4/7ths (approximately 57.1%) on July 1, 2014

 

In addition, the Performance Units may become fully vested or be forfeited under certain circumstances specified in this Agreement.  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 Units pursuant to the PSU Vesting Schedule, the Participant shall forfeit the remaining unvested Performance Units under the Award, except as otherwise provided in this Section 1.3 and Section 1.6.

 

(b)           Continued Vesting Upon Early Retirement.  The Performance Units shall, notwithstanding any other provisions of this Section 1.3, continue to vest according to the PSU 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 Units or the Participant’s reaching the age of sixty-five (65).  Any such continued vesting of the Performance Units pursuant to this Section 1.3(b) will not result in an acceleration of the PSU Payment Date (as defined in Section 1.4), since the number of Shares earned from the Performance Units shall be calculated after the completion of the Performance Period.

 

(c)           Acceleration Upon Death, Total Disability or Normal Retirement.  The Performance Units 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 Units pursuant to this Section 1.3(c) will not result in an acceleration of the PSU Payment Date, since the number of Shares earned from the Performance Units 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 Units 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 prior to the completion of the Performance Period for cause, which term is specifically not capitalized as such term is in Section 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.

 

1.4           Payment of Performance Units.  Following the last day of the Performance Period and prior to the payment of the earned and vested Performance Units on or about the PSU 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 Units to determine the number of Shares (the “Earned Shares”), if any, to be issued to the Participant in payment of the Performance Units.  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 Units on or about July 3, 2014 (the “PSU Payment Date”).  Upon the payment of the Performance Units, 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 Units.  The Earned Shares shall not be subject to any holding or transfer restrictions after payment of the Performance Units.

 

1.5           Transfer Restrictions for Unpaid Performance Units.  Performance Units 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 Units or the Shares issuable in payment thereof, other than (i) to the person or persons to whom the Participant’s rights under such Performance 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 Performance 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 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.

 

1.6           Change of Control Termination.

 

(a)           Vesting upon Change of Control Termination.  Notwithstanding any other provision of this Agreement, the Performance Units shall become fully vested upon a Change of Control Termination.  For purposes of this Agreement, a “Change of

 

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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) prior to the normal completion of vesting of the Performance Units at the end of the Performance Period.  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.  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”).

 

(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 Units 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 Units 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 Units to calculate the number of Earned Shares, if any, that the Participant is entitled to in payment of the Performance Units.  In the event of a Change of Control Termination, any Earned Shares shall be paid to the Participant in payment of the Performance Units 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 2.11 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 Units under this

 

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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

 

GENERAL PROVISIONS

 

2.1           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.

 

2.2           No Dividend Equivalents or Stockholder Rights Until Shares Issued.  The Performance 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 Units until such time as Shares, if any, have been issued by the Company to the Participant in payment of the Performance Units.  Until the Performance Units are paid or terminated, they will represent only bookkeeping entries by the Company to evidence unfunded and unsecured obligations of the Company.

 

2.3           Notices.  Any notice to the Participant 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.

 

2.4           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 Units, and the Plan.

 

2.5           Resolution of Disputes.  Any dispute or disagreement that 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.

 

2.6           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.

 

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

 

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2.8           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.

 

2.9           Vesting Dates and Payment Dates.  In the event that any vesting date, payment date, or any other measurement date with respect to this Award does not fall on a normal business day, such date shall be deemed to occur on the next following normal business day.

 

2.10         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 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.

 

2.11         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 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 payment would otherwise occur during the Section 409A Six-Month Waiting Period, until the expiration of the Section 409A Six-Month Waiting Period.

 

2.12         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

 

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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 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.

 

2.13         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.

 

2.14         Receipt of Award and Related Documents.  The Participant hereby acknowledges the receipt, either directly or electronically, of the Award, a copy of the Plan, and a prospectus for the Plan.

 

2.15         Execution and Counterparts.  This Agreement may be executed in counterparts.  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.

 

*     *     *     *     *

 

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

 

 

COMPANY:

 

SM ENERGY COMPANY,

a Delaware corporation

 

 

	
By:
    	
 
    	
 
    
	
 
    	
 
    
	
Printed   Name:  John R. Monark
    	
 
    
	
 
    	
 
    
	
Title:    Vice President, Human Resources
    	
 
    
	
 
    	
 
    
	
Date   Signed:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
PARTICIPANT:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Signature:
    	
 
    	
 
    
	
 
    	
 
    
	
Printed   Name:  NAME
    	
 
    
					

 

9

 

APPENDIX A

 

PAYOUT MATRIX FOR PERFORMANCE UNITS

 

 

A-1

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