Document:

Exhibit 10.1

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

This Executive Employment Agreement (this “Agreement”) is made by and between Nabors Industries Ltd. (together with its successors and assigns permitted under this Agreement, “Nabors Bermuda”), Nabors Industries, Inc. (together with its successors and assigns permitted under this Agreement, “Nabors Delaware”) (Nabors Bermuda and Nabors Delaware collectively referred to herein as “the Company”), and William Restrepo (the “Executive”), effective as of Executive’s first date of employment with the Company (the “Effective Date”).  In the event the Effective Date does not occur before April 15, 2014, this Agreement shall be null, void and of no effect.  Whenever there is a reference to an obligation of “Company” in this Agreement, that reference is to an obligation of Nabors Bermuda and Nabors Delaware jointly and severally, unless indicated otherwise.

 

W I T N E S S E T H

 

WHEREAS, the Board of Directors of the Company has previously determined that it is in the best interests of the Company and its shareholders to induce the employment of Executive for the long-term benefit of the Company; and

 

WHEREAS, the Company desires to employ Executive on the terms set forth below to provide services to the Company and its Affiliated companies, and Executive is willing to accept such employment and provide such services on the terms set forth in this Agreement; and

 

WHEREAS, the parties desire to enter into this Agreement to govern Executive’s employment with the Company, and to allocate between Nabors Bermuda and Nabors Delaware the various obligations to provide compensation to Executive.

 

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt and adequacy of which are mutually acknowledged, Nabors Bermuda, Nabors Delaware and Executive (individually a “Party” and collectively the “Parties”) agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1            “Affiliate” of a person or other entity shall mean a person or other entity that directly or indirectly controls, is controlled by, or is under common control with, the person or other entity specified. Fifty percent (50%) of the equity ownership shall conclusively establish control for purposes of this definition.

 

Section 1.2            “Annual Bonus” shall mean the amounts calculated as set forth in Section 3.1(b).

 

Section 1.3            “Base Salary” shall mean the salary provided for in Section 3.1(a) below or any increased salary granted to Executive pursuant to Section 3.1(a).

 

 

Section 1.4            “Business” shall mean (i) the operation and marketing of land drilling rigs, land workover and well-servicing rigs, and offshore platform workover and drilling rigs; (ii) the provision of a wide range of ancillary well-site services including engineering, construction, logistics, maintenance, well logging, directional drilling, pressure pumping,  rig instrumentation, data collection and other support services; and (iii) any other line of business if, at the time Executive’s employment with the Company is terminated, such other line of business for each of the previous three (3) fiscal years constituted at least twenty percent (20%) of the Company’s operating income; provided, however, that in no event shall the Business include the E&P, midstream, or manufacturing business; and provided, further, that no third-party entity shall be considered engaged in a Business unless at least twenty percent (20%) of its operating income during its preceding last full fiscal year was derived from such Business (it being understood that in no event can Executive exercise control over the day-to-day management of such Business on behalf of any third party).

 

Section 1.5            “Cause” shall mean a good faith determination by the Nabors Bermuda Board that one or more of the following events exists or has occurred:

 

(a)           a material act or acts of dishonesty or disloyalty by Executive which could or has materially and adversely affected the Company;

 

(b)           Executive’s material breach of any of his obligations under this Agreement which, if correctable, remains uncorrected for 90 days following written notice specifying such breach given to Executive by the Board of Directors;

 

(c)           Executive’s material breach of any of the Company’s personnel policies which, if correctable, remains uncorrected for 90 days following written notice specifying such breach given to Executive by the Board of Directors;

 

(d)           Executive’s gross negligence or willful misconduct in performance of the duties and services required of him pursuant to this Agreement, including any intentional acts of discrimination or harassment;

 

(e)           Executive’s conviction of any felony;

 

(f)            Executive’s conviction of any crime involving moral turpitude; or

 

(g)           Executive’s act or acts which are materially detrimental to the image or reputation of the Company or acts which did or could result in material financial loss to the Company.

 

Section 1.6            A “Change in Control” shall mean the occurrence of any one of the following events:

 

(a)                                 any “person,” as such term is used in Sections 3(a)(9), 13(d) and 14d(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), becomes a “beneficial owner,” as such term is used in Rule 13d-3 promulgated under the Exchange Act, of fifty percent (50%) or more of the Voting Stock of Nabors Bermuda;

 

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(b)                                 the Nabors Bermuda Board or the shareholders of Nabors Bermuda adopt any plan or proposal which would result directly or indirectly in the liquidation, transfer, sale or other disposal of all or substantially all of the assets of Nabors Bermuda;

 

(c)                                  all or substantially all of the assets or business of Nabors Bermuda are disposed of pursuant to a sale, merger, consolidation or other transaction;

 

(d)                                 Nabors Bermuda or a direct or indirect subsidiary of Nabors Bermuda combines with another company (regardless of which entity is the surviving one) or Nabors Bermuda or a direct or indirect subsidiary of Nabors Bermuda acquires stock or assets in a corporate transaction, but, in any of the preceding circumstances, immediately after the transaction, the shareholders of Nabors Bermuda immediately prior to the combination hold, directly or indirectly, fifty percent (50%) or less of the voting stock of the resulting company; or

 

(e)                                  a change in the composition of the Nabors Bermuda Board such that the “Continuing Directors” cease for any reason to constitute at least sixty-six and two-thirds percent (66 2/3%) of the Nabors Bermuda Board.  The “Continuing Directors” shall mean those members of the Nabors Bermuda Board who either: (x) were directors at the Effective Date of this Agreement; or (y) were elected by, or on the nomination or recommendation of, at least a three-quarters (3/4) majority (consisting of at least four (4) directors) of the Nabors Bermuda Board who were or become Continuing Directors.

 

Any other provision of this Section notwithstanding, the term Change in Control shall not include either of the following events undertaken at the election of Nabors Bermuda: (x) any transaction, the sole purpose of which is to change the place of Nabors Bermuda’s incorporation; or (y) a transaction in which the surviving corporation(s) are owned directly or indirectly by the stockholders of Nabors Bermuda immediately following such transaction in substantially the same proportions as their ownership of the common stock of Nabors Bermuda immediately preceding such transaction, provided that the surviving corporation expressly assumes this Agreement.

 

Section 1.7            “Code” or “Internal Revenue Code” shall mean the Internal Revenue Code of 1986, as amended, and final regulations promulgated thereunder.

 

Section 1.8            “Company Relationships” shall mean the relationships specified in Section 6.1 below.

 

Section 1.9            “Compensation Committee” shall mean the Compensation Committee of the Nabors Bermuda Board.

 

Section 1.10          “Confidential Information” shall mean the information specified in Section 6.1 below.

 

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Section 1.11          “Constructive Termination Without Cause” shall mean termination of Executive’s employment at his election as provided in Section 4.1(d) following the occurrence, without Executive’s written consent, of one or more of the following events (including in conjunction with a Change in Control):

 

(a)           the removal of Executive, other than for Cause, from the position of Chief Financial Officer of Nabors Bermuda or an equivalent position;

 

(b)           a material diminution in Executive’s duties or the assignment to Executive of duties which are materially inconsistent with his duties as the Chief Financial Officer of Nabors Bermuda, provided that any such alteration shall not constitute an event giving rise to a Constructive Termination Without Cause if Executive continues in the role of Chief Financial Officer reporting to the Chief Executive Officer or such other senior position as reasonably mutually agreed by the parties;

 

(c)           a reduction in Executive’s then current Base Salary unless such reduction is temporary, market-based, and applies substantially the same to all executive direct reports to the Chief Executive Officer;

 

(d)           the termination or material reduction of any executive benefit or perquisite enjoyed by him unless a plan or program providing substantially similar benefits or perquisites is substituted or unless such termination or reduction applies substantially the same to all executive direct reports to the Chief Executive Officer;

 

(e)           the failure to continue Executive’s participation in any incentive compensation plan unless a plan providing a substantially similar compensation is substituted or unless such termination or reduction applies substantially the same to all executive direct reports to the Chief Executive Officer;

 

(f)            the failure of Nabors Bermuda and Nabors Delaware to obtain the assumption in writing of their obligation to perform this Agreement by any successor (or, the ultimate parent of any successor where applicable) to all or substantially all of the assets of Nabors Bermuda within fifteen (15) days after a merger, consolidation, sale or similar transaction;

 

(g)           the failure of Nabors Bermuda and/or Nabors Delaware (or by any successor-in-interest) to perform, or the breach by Nabors Bermuda and/or Nabors Delaware (or by any successor-in-interest) of, any of their material obligations under this Agreement; or

 

(h)           the relocation of Executive’s office to a location more than fifty (50) miles from Houston, Texas.

 

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Notwithstanding the foregoing, Executive cannot terminate his employment hereunder for Constructive Termination Without Cause unless he (i) first notifies the Nabors Bermuda Board in writing of the event (or events) which Executive believes constitutes a basis for Constructive Termination Without Cause within thirty (30) days from the date of such event, and (ii) provides the Company with at least ninety (90) days to cure, correct or mitigate the event so that it either (1) does not constitute a basis for a Constructive Termination Without Cause hereunder or (2) Executive agrees, in writing, that after any such modification or accommodation made by the Company that such event shall not constitute a basis for Constructive Termination Without Cause hereunder.  Termination by Nabors Bermuda and/or Nabors Delaware due to Executive’s death or Disability, or for “Cause,” shall not constitute a basis for a Constructive Termination Without Cause as defined herein.

 

Section 1.12          “Disability” shall mean Executive’s physical or mental inability to perform substantially his duties and responsibilities under this Agreement, with or without reasonable accommodation, for a period of one hundred eighty (180) consecutive days or a period of one hundred eighty (180) days in any calendar year, as determined by an approved medical doctor.  For this purpose an approved medical doctor shall mean a medical doctor selected by the Compensation Committee and Executive.  If the Compensation Committee and Executive cannot agree on a medical doctor, they shall each select a medical doctor and the two doctors shall select another medical doctor who shall be the sole approved medical doctor for this purpose.

 

Section 1.13          “Expiration Date” shall mean the date specified in Section 2.1 below.

 

Section 1.14          “Extension Date” shall have the meaning ascribed to it in Section 2.1 below.

 

Section 1.15          “Fair Market Value” shall mean, as of the date of measurement, the average daily closing price of Nabors Bermuda shares as traded on the New York Stock Exchange on each of the twenty (20) business days prior to such date of measurement.

 

Section 1.16          “Nabors Bermuda” shall mean Nabors Industries Ltd.

 

Section 1.17          “Nabors Bermuda Board” shall mean the Board of Directors of Nabors Bermuda.

 

Section 1.18          “Nabors Delaware” shall mean Nabors Industries, Inc.

 

Section 1.19          “Nabors Delaware Board” shall mean the Board of Directors of Nabors Delaware.

 

Section 1.20          “Non-Competition Period” shall mean the period specified in Section 6.2(a) below.

 

Section 1.21          “Stock” shall mean the common stock of Nabors Bermuda, par value $0.001 per share.

 

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Section 1.22          “Subsidiary” of Nabors Bermuda or Nabors Delaware, as applicable, shall mean any corporation or other entity of which Nabors Bermuda or Nabors Delaware owns, directly or indirectly, fifty percent (50%) or more of the equity interest.

 

Section 1.23          “Term of Employment” shall mean the period specified in Section 2.1 below.

 

Section 1.24          “Voting Stock” shall mean capital stock of any class or classes, or partnership or other ownership interests, having the power to vote under ordinary circumstances, in the absence of contingencies, in the election of directors of Nabors Bermuda.

 

ARTICLE II
  EMPLOYMENT AND DUTIES

 

Section 2.1            Term of Employment.  The Company hereby employs Executive, and Executive hereby accepts such employment, for the period commencing as of the Effective Date and ending at the close of business on December 31, 2017 (such date, as may be extended from time to time pursuant to the terms hereof, the “Expiration Date”), provided that on December 31, 2017 and each successive December 31 that this Agreement remains in effect (each such date constituting an “Extension Date”), the Expiration Date shall be automatically extended for twelve (12) months unless either Executive or the Company shall have given written notice to the other at least three hundred and sixty-five (365) days prior to the Expiration Date or at least three hundred and sixty-five (365) days prior to the next upcoming Extension Date that such automatic extension shall not occur (“Agreement Expiration Notice”).  The term specified in the first sentence of this Section 2.1 is subject to earlier termination in accordance with Article IV of this Agreement.

 

Section 2.2            Duties of Employment.  During the Term of Employment, Executive shall be employed as the Chief Financial Officer of Nabors Bermuda and Nabors Delaware, and shall be responsible for the general management of the financial affairs of the Company and its Affiliates.  Executive, in carrying out his duties under this Agreement, shall report to the Chief Executive Officer of Nabors Bermuda.  Executive agrees to serve in the foregoing positions and to perform diligently and to the best of his abilities the duties and services consistent with his positions as are determined and directed by the Nabors Bermuda Board and Nabors Delaware Board, and the Chief Executive Officer.

 

Section 2.3            Duties of Fiduciary and of Loyalty. Executive acknowledges and agrees that, at all times during the employment relationship, Executive owes fiduciary duties to the Company, including, but not limited to, fiduciary duties of the highest loyalty, fidelity and allegiance, to act at all times in the best interests of the Company, to make full disclosure to the Company of all information that pertains to the Company’s business and interests, to do no act which would injure the Company’s business, its interests, or its reputation, and to refrain from using for Executive’s own benefit or for the benefit of others any information or opportunities pertaining to the Company’s business or interests that are entrusted to Executive or that he learned while employed by the Company. Executive acknowledges and agrees that, upon termination of the employment relationship, Executive shall continue to refrain from using for his own benefit or the benefit of others, or from disclosing to others, any information or opportunities pertaining to the Company’s business or interests that were entrusted to Executive during the employment relationship or that he learned while employed by the Company.

 

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Section 2.4            Conflict of Interest.  Executive agrees, during the period of his employment by the Company, to devote his full attention and time to the business and affairs of the Company and its Affiliates to discharge his responsibilities under this Agreement, and not to knowingly become involved in a material conflict of interest with the Company or its Affiliates, or upon discovery thereof, allow such a conflict to continue.  Moreover, Executive agrees that Executive shall disclose to the Nabors Bermuda Board and Nabors Delaware Board any facts which might involve such a material conflict of interest that has not been approved in writing by the Nabors Bermuda Board and Nabors Delaware Board.  The foregoing notwithstanding, the Parties recognize and agree that Executive may (i) serve on the boards of directors of a reasonable number of other corporations or the boards of a reasonable number of trade associations and/or charitable organizations, (ii) engage in charitable activities and community affairs, and (iii) manage his personal investments and affairs, to the extent that such activities do not conflict with the business and affairs of the Company or interfere with Executive’s performance of his duties and obligations hereunder.  For the avoidance of doubt, Executive may also continue at its current ownership percentage his passive investment in Coil Tubing Systems, LLC (the “Permitted Investment”).

 

Section 2.5            Maintenance of Equity Ownership.  Executive undertakes, absent financial hardship or exigencies, to maintain equity ownership in the form of Stock (restricted or unrestricted) and stock options (vested or unvested) with a minimum “acquisition value” of three (3) times his Base Salary.  In the case of Stock, “acquisition value” for this purpose shall mean the market closing price on the date of grant or purchase.  In the case of stock options, “acquisition value” shall mean the Black Scholes value of the stock options on the grant date for financial purposes.  In the event the aforesaid minimum is not met, the sole remedy for failing shall be that fifty percent (50%) of subsequent Annual Bonuses shall be paid in the form of equity until the minimum is met, subject to the terms of any applicable stock plan of the Company.  For the avoidance of doubt, this obligation will not continue following the occurrence of a Change in Control.

 

Section 2.6            Executive’s Other Obligations.  Executive represents to the Company that he does not have any obligations to or agreements with other persons or entities (regardless of whether Executive believes such obligations or agreements to be enforceable or valid) which may prevent him from performing his duties as stated in this Agreement.

 

ARTICLE III
  COMPENSATION AND BENEFITS

 

Section 3.1            Compensation.  Commencing on the Effective Date, and continuing during the Term of Employment, Nabors Bermuda and/or Nabors Delaware, as provided below, shall provide compensation to Executive in the following forms:

 

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(a)           Base Salary.  Nabors Bermuda and Nabors Delaware shall pay Executive an annualized base salary, payable in accordance with the regular payroll practices of the Company, of Six Hundred Fifty Thousand and 00/100 Dollars ($650,000), less applicable withholdings and authorized deductions (the “Base Salary”).  The Base Salary shall be reviewed no less frequently than annually for increase in the discretion of the Nabors Bermuda Board and the Compensation Committee.

 

(b)           Annual Bonus.  Executive shall participate in annual bonus programs as follows:

 

(i)            Executive shall be eligible to receive an annual bonus (“Annual Bonus”) not to exceed two hundred percent (200%) of Executive’s Base Salary, payable in cash based upon the achievement of one or more annual financial or nonfinancial performance goals, as determined by the Compensation Committee, which may include but are not limited to one or more of the following:  earnings per share; earnings before interest expense, provision for income taxes, and depreciation and amortization expense; health, safety and environmental performance; and other identifiable strategic or operational targets.  The annual performance goal(s) shall be established within the first ninety (90) days of the performance year; the target amount of such Annual Bonus, payable if the performance goal(s) is achieved, is one hundred percent (100%) of Executive’s Base Salary and a maximum target shall be set equal to two hundred percent (200%) of Executive’s Base Salary.

 

(ii)           Nabors Bermuda and Nabors Delaware shall pay each Annual Bonus not later than two and one-half (2-1/2) months after the end of the fiscal year to which such Annual Bonus relates.

 

(iii)          For the avoidance of doubt, so long as Executive’s employment has commenced as of April 15, 2014, he will be eligible for a full Annual Bonus for calendar 2014 (measured relative to Executive’s full Base Salary) based on the Company’s achievement of its 2014 goals.

 

(c)           Deferred Compensation.  Executive shall be entitled to participate in the Company’s deferred compensation programs on terms no less favorable than the Chief Executive Officer’s other direct reports.

 

(d)           Long Term Equity Awards — Total Shareholder Return.  During the Term of Employment, Executive shall be eligible to receive awards of restricted Stock that will vest based on the Total Shareholder Return (as defined below) of Nabors Bermuda relative to a peer group during a three-year performance cycle (each, a “TSR Award”).  Each TSR Award will be granted pursuant to an equity compensation plan of Nabors Bermuda in effect from time to time that has been approved by the shareholders of Nabors Bermuda, subject to the terms and conditions thereof and an award agreement to be entered into between Nabors Bermuda and Executive.  The number of shares of Stock subject to each TSR Award (the “TSR Shares”) that vest following the end of a Performance Cycle shall be determined as provided below.

 

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(i)            The number of TSR Shares that will vest following the end of a Performance Cycle if the performance goal(s) with respect to relative Total Shareholder Return set forth in the applicable award agreement are achieved at target levels (“Target Performance”) during such Performance Cycle will have an aggregate Fair Market Value equal to one hundred percent (100%) of Executive’s Base Salary on the first day of such Performance Cycle, and the number of TSR Shares that will vest following the end of a Performance Cycle if the performance goal(s) with respect to relative Total Shareholder Return set forth in the applicable award agreement are achieved at or above maximum levels during such Performance Cycle will have an aggregate Fair Market Value equal to two hundred percent (200%) of the number of TSR Shares that would vest if the performance goal(s) were achieved at Target Performance.

 

(ii)           The performance cycle with respect to each TSR Award will commence on January 1 of the calendar year in which such TSR Award is granted and will end on December 31 of the second calendar year following the calendar year in which such TSR Award is granted (the “Performance Cycle”).  By way of example, for 2014, the Performance Cycle shall be January 1, 2014 through December 31, 2016.

 

(iii)          Effective with the commencement of each Performance Cycle during the Term of Employment, Executive shall be awarded a number of TSR Shares with an aggregate Fair Market Value as of the date of grant equal to the quotient of (x) two (2) times Executive’s Base Salary as of the date of grant divided by (y) the Fair Market Value of a share of Stock as of the first trading day during such Performance Cycle, rounded to the nearest whole share.

 

(iv)          The Performance Peer Group shall initially consist of: Halliburton Company; Baker Hughes Incorporated; Ensco plc; Weatherford International Ltd.; Diamond Offshore Drilling, Inc.; Noble Corporation; Helmerich & Payne, Inc.; Rowan Companies plc; Superior Energy Services, Inc.; Patterson-UTI Energy, Inc.; Key Energy Services, Inc.; RPC, Inc.; National Oilwell Varco, Inc.; Transocean Ltd.; and Unit Corporation. The Compensation Committee, in consultation with the Chief Executive Officer, may revise the make-up of the Performance Peer Group during or at the conclusion of any Performance Cycle and may adjust the composition of the Performance Peer Group for future Performance Cycles in the event any of the companies cease to be publicly traded or in response to merger, consolidation, or divestiture activity amongst companies, available public reporting, or other events actually or potentially affecting the composition of the Performance Peer Group.

 

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(v)           As used herein, “Total Shareholder Return” means, as to Nabors Bermuda and each company in the Performance Peer Group with respect to a TSR Award, the difference between (x) the average closing share price for the thirty (30) consecutive trading days prior to the start of the applicable Performance Cycle and (y) the average closing share price for the last thirty (30) consecutive trading days in such Performance Cycle, as adjusted for dividends paid during such Performance Cycle.

 

(vi)          Within sixty (60) days following the end of the applicable Performance Cycle with respect to a TSR Award or as soon as administratively practicable thereafter (the “TSR Vesting Date”), the Compensation Committee shall evaluate the relative ranking of the Total Shareholder Return of Nabors Bermuda as compared to the Total Shareholder Return of the Performance Peer Group and determine the number of TSR Shares, if any, subject to such TSR Award that shall become vested (“Earned TSR Shares”) based on the achievement of the performance goal(s) with respect to relative Total Shareholder Return set forth in the applicable award agreement.  If, as of the applicable TSR Vesting Date, the Compensation Committee determines that less than the total number of TSR Shares subject to a TSR Award have become Earned TSR Shares, (x) neither Executive nor any of his heirs, beneficiaries, executors, administrators or other personal representatives shall have any further rights whatsoever in or with respect to any of the TSR Shares subject to such TSR Award that have not become Earned TSR Shares (the “Unearned TSR Shares”) and (y) the Unearned TSR Shares shall be forfeited to Nabors Bermuda without consideration.

 

(e)           Long-Term Equity Awards — Other Performance Criteria. During the Term of Employment, based on the achievement of one or more annual performance goals established by the Compensation Committee as set forth below, Executive shall also be eligible to receive awards of restricted Stock pursuant to an equity compensation plan of Nabors Bermuda in effect from time to time that has been approved by the shareholders of Nabors Bermuda, subject to the terms and conditions thereof and an award agreement to be entered into between Nabors Bermuda and Executive (each, a “Performance Award”).

 

(i)            The target number of shares of restricted Stock to be granted to Executive pursuant to a Performance Award (the “Performance Shares”) will have an aggregate Fair Market Value equal to one hundred percent (100%) of his Base Salary on the date of grant, and the maximum number of Performance Shares to be granted to Executive will have an aggregate Fair Market Value equal to two hundred percent (200%) of the target number of Performance Shares.

 

(ii)           Executive shall be eligible to receive Performance Shares upon the achievement of one or more annual financial or nonfinancial performance goals, as determined by the Compensation Committee, which may include but are not limited to one or more of the following:  earnings per share; earnings before interest expense, provision for income taxes, and depreciation and amortization expense; health, safety and environmental performance; and other identifiable strategic or operational targets.  The annual performance goal(s) shall be established before the end of the first ninety (90) days of the applicable performance year.  The performance goal(s) may be the same as or different than those established for purposes of the Annual Bonus.

 

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(iii)          The Compensation Committee shall determine the achievement of the applicable performance goal(s) within the first sixty (60) days after the end of the calendar year to which such goal(s) apply, provided that all necessary information is available within such period, or as soon thereafter as practicable, and notify Executive in writing as to the number of Performance Shares to be granted to him.  The number of Performance Shares granted shall be calculated at the end of the applicable performance year by determining the value of the award based upon the performance goal(s) achieved and dividing such amount by the Fair Market Value of a share of Stock as of the date the Performance Shares are granted (the “Performance Share Award Date”).  The grant of Performance Shares shall then be reflected in a restricted stock award agreement, which shall provide that the Performance Shares vest ratably over a three-year period from the date the Performance Shares are granted.

 

(f)            Equity Award.  On the Effective Date, Executive shall receive an award of a number of shares of restricted Stock with a value totaling Four Million, Nine Hundred Thousand and 00/100 Dollars ($4,900,000) from Nabors Bermuda pursuant to the 2013 Executive Stock Plan, which shall vest in four equal annual installments beginning on December 31, 2014.  The number of shares shall be determined based on the closing price of Nabors Bermuda shares as traded on the New York Stock Exchange on the Effective Date.

 

(g)           General. Executive shall be eligible to participate in other annual or incentive programs of the Company on the same basis as other senior-level executives of the Company, as the Nabors Bermuda Board or Compensation Committee deems appropriate.

 

(h)           Acceleration of Vesting in the Event of a Change in Control.  In the event of a Change in Control of Nabors Bermuda, Executive’s equity awards will be treated in a manner consistent with other executive direct reports to the Chief Executive Officer of the Company, and will not be required to be converted into equity of an acquirer or surviving corporation if such treatment is not required generally of other executive direct reports to the Chief Executive Officer.

 

Section 3.2            Benefits.  During the Term of Employment, Executive shall be afforded the following benefits as incidences of his employment:

 

(a)           Executive Benefit Programs.  Executive and, to the extent applicable, Executive’s family, dependents and beneficiaries, shall be allowed to participate, subject to applicable eligibility requirements, in all benefits, plans and programs, including improvements or modifications of the same, which are now, or may hereafter be, available to other executive direct reports to the Chief Executive Officer.  Such benefits,

 

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plans and programs may include, without limitation, pension, profit sharing, savings and other retirement plans or programs, medical, dental, hospitalization, short-term and long-term disability plans, life insurance plans, accidental death and dismemberment protection, travel accident insurance, and any other pension or retirement plans or programs and any other executive welfare benefit plans or programs that may be sponsored by the Company from time to time, including any plans that supplement the above-listed types of plans or programs, whether funded or unfunded.  Executive shall be entitled to participate on a basis no less favorable than the Chief Executive Officer’s other direct reports.  The Company shall not, however, by reason of this paragraph be obligated to institute, maintain, or refrain from changing, amending or discontinuing, any such benefit plan or program as it applies to Executive, so long as such changes are similarly applicable to all executive direct reports to the Chief Executive Officer.

 

(b)           Business and Entertainment Expenses.  Subject to the Company’s standard policies and procedures with respect to expense reimbursement as applied to its executive employees, Executive is authorized to incur reasonable and customary expenses in carrying out his duties and responsibilities under this Agreement, and the Company shall promptly reimburse him for all such business expenses incurred in connection with carrying out the business of the Company. All expenses reimbursed shall be subject to documentation and review in accordance with the Company’s policy; the Company shall have one (1) year from the close of the fiscal year in which the expenses were reimbursed to review such expenses and, thereafter, expenses reimbursed will be presumed conclusively to be reimbursable.

 

(c)           Other Expenses; Perquisites.  Executive shall be entitled to participate in the Company’s executive fringe benefits, if any, in accordance with the terms and conditions of such arrangements as are made available from time to time to executive direct reports of the Chief Executive Officer, including but not limited to a car allowance and payment of club membership dues in accordance with the Company’s policies and procedures.

 

(d)           Vacation.  Executive shall be entitled to five (5) weeks paid vacation per year.  Vacation shall be taken each fiscal year and shall not be carried forward thereafter without approval of the Nabors Bermuda Board.

 

ARTICLE IV

TERM AND TERMINATION OF EMPLOYMENT

 

Section 4.1            Termination of Employment Prior to Expiration Date.  Notwithstanding the provisions of Section 2.1 of this Agreement, this Agreement and Executive’s employment hereunder may be terminated prior to the Expiration Date in the following events:

 

(a)           upon Executive’s death;

 

(b)           upon Executive’s Disability, as defined in Article 1 of this Agreement;

 

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(c)           by the Company for Cause, as defined in Article 1 of this Agreement;

 

(d)           by Executive for Constructive Termination Without Cause, as defined in Article 1 of this Agreement;

 

(e)           by the Company for any reason not specified in Sections 4.1(a), 4.1(b) or 4.1(c) above; and

 

(f)            by Executive, upon written voluntary resignation by a notarized instrument signed personally by Executive to be delivered to the Chairman of the Compensation Committee of Nabors Bermuda, provided that thirty (30) days’ advance written notice is given.

 

Section 4.2            Post-Termination Obligations.  In the event of such termination, the provisions of Articles V through VIII hereof shall continue to apply in accordance with their terms.

 

ARTICLE V
  EFFECT OF TERMINATION ON COMPENSATION

 

Section 5.1            Termination of Employment upon Executive’s Death or Disability During Term of Employment.  In the event that Executive’s employment is terminated on the basis of the events described in Section 4.1(a) or 4.1(b), subject to the provisions of Section 7.2, Nabors Delaware shall pay or provide, as applicable, to Executive, Executive’s estate or his designated beneficiaries, as the case may be, within thirty (30) days of the occurrence of such event (or such earlier date as is provided below or required by applicable law), the following:

 

(a)           All stock options and restricted stock outstanding (including all outstanding Performance Shares, but excluding unvested TSR Shares), whether or not vested, shall become immediately and fully vested and transferable to the fullest extent possible at the time of termination, subject to any limitations set forth in the applicable award agreement(s) and plan(s) governing the award of such restricted stock;

 

(b)           Any amounts previously earned, accrued or owing to Executive under this Agreement but not yet paid, including any unpaid Annual Bonus for a completed fiscal year, a prorated portion of the Annual Bonus up to the date of termination, any earned but unpaid Base Salary, any outstanding expense reimbursements and any other compensation owed solely based upon the terms of this Agreement (but, for sake of clarity, not including any amounts owed pursuant to the terms of any employee benefit plan, program or agreement of Nabors Delaware, the payment of which shall be subject to the specific terms thereof) (for the further sake of clarity, cash compensation to be paid pursuant to Section 3.1(b)(ii) shall have any performance metrics pro-rated for the short period and those amounts for the shorter period shall be computed and considered as earned);

 

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(c)           All unvested TSR Shares shall become vested as if the performance goal(s) with respect to relative Total Shareholder Return set forth in the applicable award agreement were achieved at Target Performance.  The vesting restrictions on the TSR Shares shall lapse on the TSR Vesting Date following completion of the Performance Cycle to which such TSR Shares relate;

 

(d)           All deferred compensation amounts previously contributed to Executive’s accounts in non-qualified deferred compensation plans shall, to the fullest extent permissible under the plans, become fully vested and payable (to the extent consistent with Section 409A of the Code); and

 

(e)           Continued participation for Executive, if applicable, and Executive’s spouse and children to the extent they were covered at the date of termination in medical, dental and life insurance coverage until the earlier of (i) Executive, if applicable, or Executive’s spouse or children receives equivalent coverage and benefits under the plans and programs of a subsequent employer (such coverage and benefits to be determined on a coverage-by-coverage or benefit-by-benefit basis), (ii) three (3) years from the date of termination or (iii) the date of death of each of Executive and Executive’s spouse; provided, however, that, in the event of a termination upon Executive’s Disability, costs related to such continued participation shall be subject to the Fair Market Value Payment Requirement set forth in Section 7.2(f) below.

 

For the purpose of avoiding confusion, payments under this Section 5.1 shall only be made in the event of Executive’s death or Disability during the Term of Employment.

 

Section 5.2            Termination of Employment by Executive for Constructive Termination Without Cause; or by the Company Without Cause.  In the event that Executive’s employment is terminated on the basis of the events described in Section 4.1(d) or Section 4.1(e), subject to the provisions of Section 7.2, Nabors Delaware shall pay or provide, as applicable, to Executive (or his estate or his designated beneficiaries, as the case may be), within thirty (30) days, after the occurrence of such event (or such earlier date provided below), the following:

 

(a)           Two Point Nine Nine (2.99) times the average of the Base Salary and Annual Bonus paid to Executive during each of the last three completed fiscal years (if Executive has been employed less than three completed fiscal years, the then current Base Salary and target Annual Bonus shall be used for the years not employed);

 

(b)           All stock options and restricted stock outstanding (including all outstanding Performance Shares, but excluding unvested TSR Shares), whether or not vested, shall become immediately and fully vested and transferable to the fullest extent possible at the time of termination, subject to any limitations set forth in the applicable award agreement(s) and plan(s) governing the award of such restricted stock;

 

(c)           All unvested TSR Shares shall become vested as if the performance goal(s) with respect to relative Total Shareholder Return set forth in the applicable award agreement were achieved at Target Performance.  The vesting restrictions on the TSR Shares will lapse on the TSR Vesting Date following completion of the Performance Cycle to which such TSR Shares relate;

 

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(d)           Any amounts previously earned, accrued or owing to Executive under this Agreement but not yet paid, including any unpaid Annual Bonus for a completed fiscal year, a prorated portion of the Annual Bonus up to the date of termination, any earned but unpaid Base Salary, any outstanding expense reimbursements and any other compensation owed solely based upon the terms of this Agreement (but, for sake of clarity, not including any amounts owed pursuant to the terms of any employee benefit plan, program or agreement of Nabors Delaware, the payment of which shall be subject to the specific terms thereof) (for the further sake of clarity, cash compensation to be paid pursuant to Section 3.1(b)(ii) shall have any performance metrics pro-rated for the short period and those amounts for the shorter period shall be computed and considered as earned);

 

(e)           All deferred compensation amounts previously contributed to Executive’s accounts in non-qualified deferred compensation plans shall, to the fullest extent permissible under the plans, become fully vested and payable (to the extent allowed by Section 409A of the Code); and

 

(f)            Continued participation for Executive and, if he is married on the date of termination, his spouse and children,  to the extent that they were covered at the date of termination, in medical, dental and life insurance coverage until the earlier of (i) Executive or his spouse receives equivalent coverage and benefits under the plans and programs of a subsequent employer (such coverage and benefits to be determined on a coverage-by-coverage or benefit-by-benefit basis), (ii) three (3) years from the date of termination or (iii) the date of each of Executive or Executive’s spouse to die; provided, however, that costs related to such continued participation shall be subject to the Fair Market Value Payment Requirement set forth in Section 7.2(f) below.

 

Section 5.3            Termination of Employment by Company For Cause or by Written Voluntary Resignation of Executive. In the event Executive’s employment is terminated on the basis of events described in Section 4.1(c) or Section 4.1(f), subject to the provisions of Section 7.2, Nabors Delaware shall pay or provide, as applicable, to Executive, within (60) days, upon occurrence of such event (or earlier to the extent required by law or provided below), the following:

 

(a)           Base Salary through the date of the termination;

 

(b)           Executive shall forfeit any TSR Shares awarded pursuant to Section 3.1(d) to the extent the restrictions on those shares have not lapsed as of the date Executive’s employment is terminated; and Executive shall not be eligible to receive any Performance Shares in respect of any unearned Performance Awards awarded pursuant to Section 3.1(e);

 

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(c)           Any amounts previously earned, accrued or owing to Executive but not yet paid, including a prorated portion of the Annual Bonus up to the date of termination or resignation for the year in which termination or resignation occurs, any earned but unpaid Base Salary, any outstanding expense reimbursements and any other compensation owed solely based upon the terms of this Agreement (but, for sake of clarity, not including any amounts owed pursuant to the terms of any employee benefit plan, program or agreement of Nabors Delaware, the payment of which shall be subject to the specific terms thereof) (for the further sake of clarity, cash compensation to be paid pursuant to Section 3.1(b)(ii) shall have any performance metrics pro-rated for the short period and those amounts for the shorter period shall be computed and considered as earned); and

 

(d)           Other or additional benefits in accordance with applicable plans of programs of Nabors Delaware in effect at the time of termination.

 

Section 5.4            Termination of Employment After Expiration of Agreement.  In the event Executive remains employed beyond the Expiration Date, and in the event that Executive’s employment is thereafter terminated on the basis of the events described in Section 4.1(a), Section 4.1(b), Section 4.1(d) or Section 4.1(e), in each case determined as if the Expiration Date had not yet occurred, then subject to the provisions of Section 7.2, Nabors Delaware shall pay or provide, as applicable, to Executive (or his estate or his designated beneficiaries, as the case may be), within thirty (30) days of the occurrence of such event (or such earlier date as is provided below or required by applicable law), the following:

 

(a)           All stock options and restricted stock outstanding (including all outstanding Performance Shares, but excluding unvested TSR Shares) as of the date of the Agreement Expiration Notice, whether or not vested, shall become immediately and fully vested and transferable to the fullest extent possible at the time of termination, subject to any limitations set forth in the applicable award agreement(s) and plan(s) governing the award of such restricted stock;

 

(b)           All unvested TSR Shares outstanding as of the date of the Agreement Expiration Notice shall become vested as if the performance goal(s) with respect to relative Total Shareholder Return set forth in the applicable award agreement were achieved at Target Performance.  The vesting restrictions on the TSR Shares shall lapse on the TSR Vesting Date following completion of the Performance Cycle to which such TSR Shares relate;

 

(c)           All deferred compensation amounts previously contributed to Executive’s accounts in non-qualified deferred compensation plans as of the date of the Agreement Expiration Notice shall, to the fullest extent permissible under the plans, become fully vested and payable (to the extent consistent with Section 409A of the Code); and

 

(d)           Continued participation for Executive, if applicable, and Executive’s spouse and children to the extent they were covered at the date of termination in medical, dental and life insurance coverage until the earlier of (i) Executive, if applicable, or Executive’s spouse or children receives equivalent coverage and benefits under the plans 

 

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and programs of a subsequent employer (such coverage and benefits to be determined on a coverage-by-coverage or benefit-by-benefit basis), (ii) three (3) years from the date of termination or (iii) the date of death of each of Executive and Executive’s spouse; provided, however, that, in the event of a termination upon Executive’s Disability, costs related to such continued participation shall be subject to the Fair Market Value Payment Requirement set forth in Section 7.2(f) below.

 

Section 5.5            No Mitigation; No Offset. In the event of any termination of employment under Article IV, Executive shall be under no obligation to seek other employment and there shall be no offset against amounts due Executive under this Agreement on account of any remuneration attributable to any subsequent employment that he may obtain except as specifically provided in this Article V.

 

Section 5.6            Nature of Payments. Any amounts due under this Article V are in the nature of severance payments considered to be reasonable by Nabors Delaware and are not in the nature of a penalty. Nabors Bermuda hereby guarantees the payment obligations of Nabors Delaware pursuant to Sections 5.1 through 5.4.

 

ARTICLE VI
  CONFIDENTIAL INFORMATION, NON-COMPETITION, NON-SOLICITATION

 

Section 6.1            Confidential Information; Non-Disclosure.

 

(a)           Company Provided Access to Confidential Information and Company Relationships.  In exchange for Executive’s promises made in this Agreement, the Company promises that it will provide Executive access to the Company’s confidential information including, without limitation, information pertaining to the Company’s past, current and future business plans, corporate opportunities, operations, acquisition, merger or sale strategies, production, marketing, cost and pricing structure, margins, profitability, operation or production procedures or results, partners, partnership or other business arrangements or agreements with third parties, customers, customer sales volumes, customer contracts, books, records and documents, technical information, equipment, services and processes (collectively, “Confidential Information”).  The Company also shall provide to Executive access to and the opportunity to develop business relationships with the Company’s customers, clients, vendors and partners with whom the Company has developed goodwill and to which Executive would not otherwise have access (collectively, “Company Relationships”).

 

(b)           Value of Confidential Information and Access to Company Relationships; Non-Disclosure.  Executive acknowledges that the business of the Company is highly competitive and that the Confidential Information and opportunity to develop relationships with customers, clients, vendors and business partners promised by the Company are valuable, special, and unique assets of the Company which the Company uses in its business to obtain a competitive advantage over its competitors which do not know or use this information.  Executive further acknowledges that protection of the Confidential Information and Company Relationships against unauthorized disclosure

 

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and use is of critical importance to the Company in maintaining its competitive position.  Accordingly, Executive hereby agrees that he will not, at any time during employment or for a two (2) year period after the termination of employment, make any unauthorized disclosure of any Confidential Information or make any use thereof or of Company Relationships, except for the benefit of, and on behalf of, the Company, except (i) as such disclosure or use may be required in connection with his work as an executive of the Company, or (ii) when required to do so by a court of law, by any governmental agency having supervisory authority over the business of the Company or by any administrative or legislative body (including a committee thereof) with apparent jurisdiction to order him to divulge, disclose or make accessible such information or as otherwise needed pursuant to appropriate legal proceedings including for Executive to enforce any rights or remedies under this Agreement; provided, however, that no trade secret or proprietary or confidential information shall be required to be treated as such to the extent such portions of such information are or become generally available to the public other than as a result of a disclosure by Executive or other Company representative bound by and contrary to the terms of an agreement or duty of confidentiality.

 

(c)           Third-Party Information.  Executive acknowledges that, as a result of his employment, he will have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, clients, vendors, suppliers, partners, joint venturers, business partners and the like, of the Company.  Executive agrees to preserve and protect the confidentiality of such third-party confidential information and trade secrets to the same extent, and on the same basis, as the Confidential Information.

 

(d)           Return of Documents and Electronic Data.  All written or electronic or other data or materials, records and other documents made by, or coming into the possession of, Executive which contain or disclose the Confidential Information and/or Company Relationships shall be and remain the property of the Company.  Upon request, and in any event without request upon termination of Executive’s employment, for any reason, he promptly shall deliver the same, and all copies, derivatives and extracts thereof, to the Company.

 

(e)           Breach of this Article.  Executive understands and agrees that the restrictions in this Section 6.1 do not terminate when Executive’s employment under this Agreement terminates.  Executive understands and agrees that such restrictions may limit his ability to engage in a business similar to the Company’s business in a position similar to his position with the Company because such a position would inevitably and unavoidably require him to disclose the Confidential Information and Company Relationships protected herein, but acknowledges that he will receive sufficient monetary and other consideration from the Company hereunder to justify such restriction.  Executive acknowledges that money damages would not be sufficient remedy for any breach of this Section 6.1 by Executive, and the Company shall be entitled to seek to enforce the provisions of this Section 6.1 through specific performance and injunctive relief as remedies for such breach or any threatened breach.  Such remedies shall not be deemed the exclusive remedies for a breach of this Section 6.1, but shall be in addition to all remedies available at law or in equity to the Company including, without limitation, the recovery of damages from Executive and his agents involved in such breach.

 

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Section 6.2            Non-Competition; Non-Solicitation.

 

(a)           The restrictive covenants contained in this Section 6.2 are supported by consideration to Executive from Nabors Bermuda and Nabors Delaware as specified in this Agreement, including, but not limited to, the consideration provided in Section 5.1(a), 5.2(a) and 6.1 of this Agreement.  In exchange for the consideration specified herein and as a material incentive for Nabors Bermuda and Nabors Delaware to enter into this Agreement, and to enforce Executive’s obligations under Section 6.1 hereof, Executive hereby agrees that, in the event his employment is terminated pursuant to Sections 4.1(b), (c), (d), (e) or (f), he will not for the period commencing on the date of termination of his employment and continuing until the expiration of two (2) years (the “Non-Competition Period”), directly or indirectly, for himself or for others, anywhere in the world where the Company or its Affiliates conduct Business, make use of Company Relationships, or, engage, directly or indirectly, in any activity, work, business, or investment related to the Business, including any attempted or actual activity as a principal, investor, employee, officer, director, shareholder, consultant, independent contractor, partner, joint venturer, manager, representative, agent, or broker in the Business of any third party; provided, however, that Executive’s investment interest (i) of less than five percent (5%) in any publicly-traded company and (ii) in the Permitted Investment shall in all events be permitted.

 

The foregoing shall not prohibit: (x) Executive from owning investments of less than five percent (5%) in stock, bonds or other securities of any entity that is engaged in the Business, provided such investment is passive and Executive does not exercise control over the day to day management of such business; (y) Executive from working for or providing services to an investment fund or other investment entity with ownership interests in a company that is engaged in the Business, provided Executive is not actively involved in the management of the competing company; or (z)  Executive’s continued participation in those activities in which he is engaged on the date hereof or on the date of termination of his employment and which have been disclosed to Nabors Bermuda or Nabors Delaware and which have been approved in writing by the Nabors Bermuda Board or Nabors Delaware Board.

 

(b)           During the Non-Competition Period, Executive shall not, on his own behalf or on behalf of any other person, partnership, entity, association, or corporation, solicit any current or former employee of the Company or in any other manner attempt directly or indirectly to influence, induce, or encourage any employee of the Company to leave the employment of the Company, nor shall Executive use or disclose to any person, partnership, entity, association, or corporation any information concerning the names, addresses or personal telephone numbers of any employees of the Company.

 

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(c)           Executive understands that the foregoing restrictions may limit his ability to engage in a business similar to the business of Nabors Bermuda and Nabors Delaware for the Non-Competition Period, but acknowledges that he will receive sufficient monetary and other consideration from the Company hereunder to justify such restriction. Executive acknowledges that money damages would not be sufficient remedy for any breach of this Section 6.2 by Executive, and that the Company shall be entitled to seek specific performance and injunctive relief as remedies for such breach or any threatened breach.  Such remedies shall not be deemed the exclusive remedies for a breach of this Section 6.2, but shall be in addition to all remedies available at law or in equity to the Company.

 

(d)           It is expressly understood and agreed that Nabors Bermuda, Nabors Delaware and Executive consider the restrictions contained in this Section 6.2 to be reasonable and necessary for the purposes of preserving and protecting the Confidential Information, Company Relationships, goodwill, and legitimate business and economic interests of Nabors Bermuda and Nabors Delaware.  Nevertheless, if any of the aforesaid restrictions is found by a court having jurisdiction to be unreasonable, over broad as to geographic area, time, scope of activity restrained, or otherwise unenforceable, the Parties intend for the restrictions therein set forth to be modified by such court so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced.

 

Section 6.3            Inventions and Discoveries.  Executive irrevocably agrees to promptly and freely disclose to the Company, in writing, and Executive agrees to assign and hereby does assign to the Company, all rights, title and interest worldwide in any and all ideas, conceptions, inventions, improvements, and discoveries, whether patentable or not, which are conceived or made by Executive, solely or jointly with another, during the period of his employment by the Company (whether during business hours or otherwise and whether on the Company’s premises or otherwise) and which are related to the business or activities of the Company (including, without limitation, all such information relating to the Company’s past, current and future business plans, corporate opportunities, operations, acquisition, merger or sale strategies, production, product development, product names and marks, marketing, cost and pricing structure, margins, profitability, operation or production procedures or results, partners, partnership or other business arrangements or agreements with third parties, customers, customer sales volumes, customer contracts, books, records and documents, technical information, equipment, services and processes).  Moreover, all drawings, memoranda, notes, records, files correspondence, drawings, manuals, models, specifications, computer programs, maps and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, and inventions are and shall be the sole and exclusive property of the Company.  Executive agrees that, whenever requested to do so by the Company, he shall assist in the preparation of any document that the Company shall deem necessary and shall execute any and all applications, assignments or other instruments that the Company shall deem necessary, in its sole discretion, to apply for and obtain protection, including patent protection, for such ideas, conceptions, inventions, improvements and discoveries in all countries of the world.  The obligations in the preceding sentence shall continue beyond the termination of Executive’s employment regardless of the reason for such termination.

 

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Section 6.4            Copyrights.  If during Executive’s employment by the Company, Executive creates any original work of authorship (each, a “Work”) fixed in any tangible medium of expression which is the subject matter of copyright (e.g., written presentations, computer programs, videotapes, drawings, maps, models, manuals or brochures) relating to the Company’s business, products, or services, whether a Work is created solely by Executive or jointly with others, the Company shall be deemed the author of a Work if the Work is prepared by Executive in the scope of his employment; or, if the Work is not prepared by Executive within the scope of his employment but is specially ordered by the Company as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation or as an instructional text, then the Work shall be considered to be a work made for hire and the Company shall be the author of the Work.  In the event a Work is not prepared by Executive within the scope of his employment or is not deemed to be a work made for hire, then Executive hereby agrees to assign, and by these presents, does assign, to the Company all of Executive’s worldwide right, title and interest in and to such Work and all rights of copyright therein. Both during the period of Executive’s employment by the Company and thereafter, Executive agrees to assist the Company and its nominee, at any time, in the protection of the Company’s worldwide right, title and interest in and to the work and all rights of copyright therein, including, but not limited to, the execution of all formal assignment documents requested by the Company or its nominee and the execution of all lawful oaths and applications for registration of copyright in the United States and foreign countries.

 

Section 6.5            Prior Inventions or Work by Executive.  Executive represents that he has not heretofore made any invention or discovery or prepared any work which is related to the Company’s business or could be used by the Company and

 

(a)           which is the subject matter of another person or entity’s copyright, proprietary or other rights; or

 

(b)           which he wishes to exclude from the provisions of Section 6.1 and Section 6.2 hereof.

 

ARTICLE VII
  MISCELLANEOUS

 

Section 7.1            Director and Officer Insurance; Indemnification.  Nabors Bermuda and Nabors Delaware agree to continue and maintain a directors and officers’ liability insurance policy covering Executive to the extent Nabors Bermuda and Nabors Delaware provide such coverage for their other executive officers.  On the Effective Date, Executive, Nabors Bermuda and Nabors Delaware will enter into an indemnification agreement in the form customarily used by the Company.

 

Section 7.2            Application of Section 409A of the Code.

 

(a)           General.  To the extent applicable, it is intended that this Agreement comply with the provisions of Section 409A of the Code, so as to prevent inclusion in gross income of any amounts payable or benefits provided hereunder in a taxable year that is prior to the taxable year or years in which such amounts or benefits would otherwise actually be distributed, provided or

 

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otherwise made available to Executive.  This Agreement shall be construed, administered, and governed in a manner consistent with this intent and the following provisions of this Section 7.2 shall, with respect to timing of payments owed under this Agreement, control over any contrary provisions of the Agreement.  Nothing in this Section 7.2 shall reduce or diminish the amounts otherwise owed under this Agreement.

 

(b)           Delayed Payment Restriction. Notwithstanding any provision in this Agreement to the contrary, if any payment or benefit provided for herein or pursuant to any other agreement or plan of the Company to which Executive is entitled to any payment or benefit would be subject to additional taxes and interest under Section 409A of the Code if Executive’s receipt of such payment or benefit is not delayed until the Section 409A Payment Date, then such payment or benefit shall not be provided to Executive (or Executive’s estate, if applicable) until the Section 409A Payment Date (and, at that time, Executive shall also receive interest thereon from the date such payment or benefit would have been provided in the absence of this paragraph until the date of receipt of such payment or benefit at the short term applicable federal rate as in effect as of the termination date).  The payment and benefit delay requirement described in this paragraph (the “Delayed Payment Restriction”) shall not apply to any payment or benefit otherwise described in the first sentence of this paragraph if another provision of this Agreement is intended to cause Executive’s receipt of such payment or benefit to satisfy the requirements of Section 409A(a)(2)(B)(i) of the Code.  For purposes of this Agreement, “Section 409A Payment Date” shall mean the earlier of (1) the date of Executive’s death or (2) the date which is six (6) months after the date of termination of Executive’s employment with the Company.

 

(c)           Separation from Service.  Amounts payable hereunder upon Executive’s termination or severance of employment with the Company that constitute deferred compensation under Section 409A of the Code shall be paid upon Executive’s “separation from service” within the meaning of Section 409A of the Code.

 

(d)           Separate Payments and Benefits.  Any rights to payments and benefits under this Agreement shall be treated as rights to separate payments for purposes of Section 409A of the Code.

 

(e)           Reimbursements and In-Kind Benefits.  All reimbursements and in-kind benefits provided under this Agreement that constitute nonqualified deferred compensation under Section 409A of the Code, including, without limitation, continued medical, dental and life coverages, indemnification rights (but only to the extent such rights exceed the indemnification rights that are exempt from Section 409A of the Code), Company advance of any non-indemnifiable expenses, Company-paid Independent Counsel, expenses of adjudication of indemnification and reimbursement rights disputes, and expenses for resolution of Disputes shall be made or provided in accordance with the requirements of Section 409A of the Code, including, where applicable, the requirements that:

 

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(i)            any reimbursement for expenses incurred or provision of in-kind benefits is during the lifetime of Executive and/or the lifetime of Executive’s spouse, if applicable or such shorter period of time as is provided with respect to each particular right to reimbursement in-kind benefits pursuant to the preceding provisions of this Agreement;

 

(ii)           the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year (except as otherwise permitted under the regulations promulgated pursuant to Section 409A of the Code for reimbursement arrangements that are subject to Section 105(b) of the Code (relating to medical care reimbursements));

 

(iii)          the reimbursement of an eligible expense will be made on or before the last day of the next full calendar year following the year in which the expense is incurred; and

 

(iv)          the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

 

With respect to any rights to reimbursements or in-kind benefits that are triggered by Executive’s separation from service and are subject to Section 409A of the Code, except any in-kind benefits to which the Fair Market Value Payment Requirement applies, such reimbursements or in-kind benefits shall also be subject to the Delayed Payment Restriction to the extent applicable under Section 7.2(b).

 

(f)            Fair Market Value Payment Requirement.  To the extent that any benefits required to be continued pursuant to Section 5.1(e) (but only in the event of Executive’s  termination in the event of his Disability) or 5.2(f) that are provided to Executive and his spouse during the first six (6) months following Executive’s termination of employment have an aggregate value in excess of the applicable dollar amount under Section 402(g)(1)(B) of the Code for the year in which such termination occurs, Executive shall pay to the Company, at the time such benefits are provided, the fair market value of such benefits (such payment obligation of Executive, the “Fair Market Value Payment Requirement”) and the Company shall reimburse Executive (with interest thereon at the short term applicable federal rate in effect as of the termination date)  for any such payment(s) not later than the fifth (5th) day following the expiration of such six (6) month period.

 

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(g)           Period of Payment.  In the event that a payment under this Agreement is due within a period of time following a stated event, Executive shall not be permitted, directly or indirectly, to designate the taxable year of payment.

 

(h)           Restricted Stock Dividends.  Notwithstanding anything to the contrary in any agreement relating to awards of  restricted stock, any dividends relating to shares of restricted stock that are subject to vesting requirements shall be paid by the fifteenth (15th) day of the third (3rd) month following the date that the right to such dividends vests.

 

(i)            References to Section 409A.  References in this Agreement to Section 409A of the Code include both that section of the Code itself and any regulations and authoritative guidance promulgated thereunder.

 

Section 7.3            Section 457A of the Code.  Notwithstanding that both Nabors Delaware and Nabors Bermuda are parties to this Agreement, certain portions of Executive’s compensation provided under this Agreement, as specifically identified within the provisions of this Agreement (including, without limitation, all compensation that may be provided pursuant to Article V of this Agreement) (the “Nabors Delaware Compensation”), are solely provided by Nabors Delaware as compensation for Executive’s services to Nabors Delaware, with the intent that Nabors Delaware be the sole “sponsor” of such compensation within the meaning of Section 457A of the Code and the authoritative guidance promulgated thereunder.  The Nabors Delaware Compensation shall be solely the obligation of Nabors Delaware and Nabors Bermuda shall not be obligated to provide, nor shall it be the guarantor of or otherwise responsible for, any of the Nabors Delaware Compensation.  Further, notwithstanding anything to the contrary in Section 3.1(c), Section 3.1(f), Section 3.2(a) or Section 3.2(d), any compensation that would potentially be subject to Section 457A of the Code were such compensation to be provided by Nabors Bermuda or any entity that is a nonqualified entity within the meaning of Section 457A of the Code shall be provided solely by Nabors Delaware and, if necessary to support an allocation of such compensation to Nabors Delaware for U.S. federal income tax principles, Nabors Bermuda shall be allocated and become obligated to provide a portion of compensation otherwise payable by Nabors Delaware under this Agreement that does not constitute nonqualified deferred compensation within the meaning of Section 457A of the Code, which has a value equal to the value of the benefit that Nabors Bermuda would otherwise have provided. Nabors Delaware and Nabors Bermuda shall cooperate to conform the allocation for tax purposes of the compensation payable pursuant to this Agreement to the intent described in this Section 7.3.

 

Section 7.4            Assignability; Binding Nature.  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of Executive), and assigns.  No rights or obligations of Nabors Bermuda or Nabors Delaware under this Agreement may be assigned or transferred by Nabors Bermuda or Nabors Delaware except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which Nabors Bermuda and/or Nabors Delaware, as applicable, is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of Nabors Bermuda or Nabors Delaware, provided that the assignee or transferee is the successor to all or substantially all of the assets of Nabors Bermuda or Nabors Delaware, as applicable, and such assignee or transferee assumes the liabilities, obligations and duties of Nabors Bermuda and Nabors Delaware, as

 

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contained in this Agreement, by written contract.  Nabors Bermuda and Nabors Delaware each further agree that, in the event of a sale of assets or liquidation as described in the preceding sentence, they shall each take whatever action they legally can in order to cause such assignee or transferee to expressly assume the liabilities, obligations and duties of each of Nabors Bermuda and Nabors Delaware hereunder.  No rights or obligations of Executive under this Agreement may be assigned or transferred by Executive other than his rights to compensation and benefits.

 

Section 7.5            Representation.  Each of Nabors Bermuda and Nabors Delaware represent and warrant that it is fully authorized and empowered to enter into this Agreement and that the performance of its obligations under this Agreement will not violate any agreement between it or and any other person, firm or organization. Executive represents that no agreement between him and any other person, firm or organization would be violated by the performance of his obligations under this Agreement.

 

Section 7.6            Entire Agreement.  This Agreement contains the entire understanding and agreement between the Parties concerning the subject matter hereof and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the Parties with respect thereto. This Agreement hereby amends and replaces the Amended Employment Agreement.

 

Section 7.7            Amendment or Waiver.  No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by Executive and an authorized officer of each of Nabors Bermuda and Nabors Delaware. No waiver by either Party of any breach by the other Party of any condition or provision contained in this Agreement to be performed by such other Party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time. Any waiver must be in writing and signed by Executive or an authorized officer of each of Nabors Bermuda and Nabors Delaware, as the case may be.

 

Section 7.8            Severability.  In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.

 

Section 7.9            Survivorship.  The respective rights and obligations of the Parties hereunder shall survive any termination of this Agreement pursuant to their terms.  For the avoidance of doubt, no termination of Executive’s employment and no termination of this Agreement shall affect Executive or the obligation of the Company under Sections 4.2, Section 7.1 or Section 7.12 hereof.

 

Section 7.10          Beneficiaries/References.  Executive shall be entitled, to the extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following Executive’s death by giving the Company written notice thereof. In the event of Executive’s death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative.

 

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Section 7.11          Governing Law/Jurisdiction.  This Agreement shall be governed by and construed and interpreted in accordance with the laws of Delaware without reference to principles of conflict of laws.

 

Section 7.12          Resolution of Disputes.  Any disputes arising under or in connection with this Agreement (including any action by Executive to enforce compliance or specific performance with respect to this Agreement) shall at the election of Executive or the Company, be resolved by binding arbitration, to be held in Houston, Texas in accordance with the rules and procedures of the American Arbitration Association before three (3) arbitrators.  Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.  Nothing herein shall preclude either party from seeking provisional remedies in aid of arbitration, such as a temporary restraining order or preliminary injunction, from a court of competent jurisdiction.  Costs of the arbitration or litigation, including, without limitation, reasonable attorneys’ fees of both Parties, shall be borne equally by the Company and Executive.  Pending the resolution of any arbitration or court proceeding, the Company shall continue payment of all amounts due Executive under this Agreement consistent with past practice and all benefits to which Executive is entitled at the time the dispute arises.

 

Section 7.13          Notices.  Any notice given to a Party shall be in writing and shall be deemed to have been given when delivered personally or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the Party concerned at the address indicated below or to such changed address as such Party may subsequently give such notice of:

 

If to Nabors Bermuda:

 

Nabors Industries Ltd.

P.O. Box HM3349
 Hamilton, HMPX

Bermuda
 Attention: Secretary

 

If to Nabors Delaware:

 

Nabors Industries, Inc.
 515 West Greens Road, Suite 1200
 Houston, Texas 77067
 Attention: Secretary

 

If to Executive:

 

Mr. William Restrepo
 c/o Executive’s current home address

as reflected in Executive’s personnel file

 

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Section 7.14          Headings.  The headings of the sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement. All uses of the words “including” or “include” shall be deemed to be followed by the words “without limitation.”

 

Section 7.15          Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.  The Agreement shall not be considered a valid Agreement until it has been acknowledged by the Corporate Secretary of Nabors Bermuda.

 

Section 7.16          Withholding of Taxes and Other Items. The Company may withhold from any compensation or benefits payable under this Agreement all federal, state, city or other taxes as may be required pursuant to any law or governmental regulation or ruling.

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the Effective Date.

 

	
 
    	
NABORS   INDUSTRIES LTD.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Mark D. Andrews
    
	
 
    	
 
    	
Name:   
    	
Mark   D. Andrews
    
	
 
    	
 
    	
Its:
    	
Corporate   Secretary
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
NABORS   INDUSTRIES, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Anthony G. Petrello
    
	
 
    	
 
    	
Name:   
    	
Anthony   G. Petrello
    
	
 
    	
 
    	
Its:
    	
Chairman,   President & Chief Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
EXECUTIVE
    
	
 
    	
 
    
	
 
    	
/s/   William Restrepo
    
	
 
    	
William   Restrepo
    

 

27Exhibit 4.3

 

SM ENERGY COMPANY

EQUITY INCENTIVE COMPENSATION PLAN

As Amended as of May 22, 2013

 

ARTICLE 1.
 ESTABLISHMENT, PURPOSE AND DURATION

 

1.1                               Establishment.  SM Energy Company, a Delaware corporation (the “Company”), has established an equity incentive compensation plan formerly known as the 2006 Equity Incentive Compensation Plan (the “Plan”), originally adopted effective May 17, 2006. On March 26, 2009, the Plan was renamed as the Equity Incentive Compensation Plan. The Plan permits the grant of Restricted Stock, Restricted Stock Units, Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Performance Shares, Performance Units and Stock Based Awards. The Plan as amended and restated herein will become effective upon its approval by the Company’s stockholders on May 22, 2013 (the “Effective Date”) and shall remain in effect as provided in Section 1.3 hereof.

 

1.2                               Purpose.  The purpose of the Plan is to promote the success and enhance the value of the Company by linking the personal interests of the Participants to those of the Company’s stockholders, and by providing Participants with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to attract, motivate, and retain the services of Participants upon whose judgment, interest, and special effort the success of the Company is substantially dependent.

 

1.3                               Duration.  The Plan commenced as of May 17, 2006, as set forth in Section 1.1 hereof, and shall remain in effect, subject to the right of the Committee or the Board to amend or terminate the Plan at any time pursuant to Article XIV hereof, until the earlier of (i) the tenth anniversary of the Effective Date, or (ii) when all Shares subject to the Plan have been purchased or acquired according to the Plan’s provisions. Any previously granted Awards under this Plan which remain outstanding as of the date of expiration or other termination of the Plan shall not be affected by such expiration or other termination and shall continue in effect in accordance with their respective terms.

 

1.4                               Successor Plan.  This Plan shall serve as the successor to the St. Mary Land & Exploration Company Stock Option Plan, the St. Mary Land & Exploration Company Incentive Stock Option Plan, the St. Mary Land & Exploration Company Restricted Stock Plan, and the St. Mary Land & Exploration Company Non-Employee Director Stock Compensation Plan (collectively, the “Predecessor Plans”), and no further grants or awards shall be made under the Predecessor Plans from and after May 17, 2006. Each outstanding grant or award under a Predecessor Plan immediately prior to May 17, 2006 shall continue to be governed solely by the terms and conditions of the applicable Predecessor Plan and the instruments evidencing such grant or award, and, except as otherwise expressly provided herein or by the Committee, no provision of this Plan shall affect or otherwise modify the rights or obligations of holders of such outstanding grants or awards under the Predecessor Plans. Any Shares reserved for issuance under the Predecessor Plans in excess of the number of Shares as to which grants or awards have 

 

1

 

been made thereunder shall be transferred into this Plan as of May 17, 2006 and shall become available for Awards under this Plan. Any Shares related to grants or awards made under the Predecessor Plans that after May 17, 2006 may lapse, expire, terminate, or are cancelled, are settled in cash in lieu of common stock, are tendered (either by actual delivery or attestation) to pay the option price, or are used to satisfy any tax withholding requirements shall be deemed to be available for issuance or reissuance under Section 4.1 of this Plan.

 

ARTICLE 2.
 DEFINITIONS AND CONSTRUCTION

 

2.1                               Definitions.  Whenever used herein, the following terms shall have the respective meanings set forth below, unless the context clearly requires otherwise, and when such meaning is intended the term shall be capitalized.

 

(a)                                 “Affiliate” shall have the meaning given to such term in Rule 12b-2 under the Exchange Act, with reference to the Company, and shall also include any corporation, partnership, joint venture, limited liability company or other entity in which the Company owns, directly or indirectly, at least 50 percent of the total combined voting power of such corporation or of the capital interest or profits interest of such partnership or other entity.

 

(b)                                 “Award” means, individually or collectively, a grant or award under this Plan of Restricted Stock, Restricted Stock Units, NQSOs, ISOs, SARs, Performance Shares, Performance Units or Stock Based Awards, in each case subject to the terms of this Plan.

 

(c)                                  “Award Agreement” means either (i) a written agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to Awards granted under this Plan; or (ii) a written statement issued by the Company to a Participant describing the terms and provisions of such Award. All Award Agreements shall be deemed to incorporate the provisions of the Plan. An Award Agreement need not be identical to other Award Agreements either in form or substance.  An Award Agreement may be transmitted electronically to the Participant in the discretion of the Company.

 

(d)                                 “Board” or “Board of Directors” means the Board of Directors of the Company.

 

(e)                                  “Change of Control” shall mean any of the following events:

 

(i)                                     (A)                               The acquisition by any individual or entity (a “Person”) or Persons acting as a group of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50 percent of either (1) the then value of the outstanding shares of common stock of the Company, or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors.

 

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(B)                               For purposes of paragraph (A), Persons will not be considered to be acting as a group solely because they purchase or own stock of the same corporation at the same time, or as a result of the same public offering. However, Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company. If a Person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. For purposes of determining stock ownership, see (e)(iv) below.

 

(ii)                                  A majority of members of the Board is replaced during any 12 month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election; or

 

(iii)                               (A)                               Any one Person, or more than one Person acting as a group (as determined in (e)(iii)(C) below), acquires (or has acquired during the 12 month period ending on the date of the most recent acquisition by such Person or Persons) assets from the Company that have a total gross fair market value equal to or more than 50 percent of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

 

(B)                               A transfer of assets by the Company is not treated as a change in the ownership of such assets if the assets are transferred to—

 

(1)                                 A stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock;

 

(2)                                 An entity, 50 percent or more of the total value or voting power of which is owned, directly or indirectly, by the Company;

 

(3)                                 A Person, or more than one Person acting as a group, that owns, directly or indirectly, 50 percent or more of the total value or voting power of all the outstanding stock of the Company; or

 

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(4)                                 An entity, at least 50 percent of the total value or voting power of which is owned, directly or indirectly, by a Person described in (e)(iii)(B)(3). For purposes of this paragraph (e)(iii)(B) and except as otherwise provided, a Person’s status is determined immediately after the transfer of the assets. For example, a transfer to a corporation in which the Company has no ownership interest before the transaction, but which is a majority owned subsidiary of the Company after the transaction, is not treated as a change in the ownership of the assets of the Company.

 

(C)                               Persons will not be considered to be acting as a group for purposes of this paragraph (e)(iii) solely because they purchase assets of the Company at the same time. However, Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of assets, or similar business transaction with the Company. If a Person, including an entity shareholder, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only to the extent of the ownership in that corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

 

(D)                               For purposes of determining stock ownership, see (e)(iv) below.

 

(iv)                              For purposes of determining whether there has been a Change of Control, Section 318(a) of the Code applies to determine stock ownership. Stock underlying a vested option is considered owned by the individual who holds the vested option (and the stock underlying an unvested option is not considered owned by the individual who holds the unvested option). For purposes of the preceding sentence, however, if a vested option is exercisable for stock that is not substantially vested (as defined by §§1.83-3(b) and (j) of the income tax regulations promulgated by the Internal Revenue Service), the stock underlying the option is not treated as owned by the individual who holds the option.

 

(f)                                   “Change of Control Price” means the highest per share price for Shares offered in conjunction with any transaction resulting in a Change of Control (as determined in good faith by the Committee if any part of the offered price is payable other than in cash) or, in the case of a Change of Control occurring solely by reason of a change in the composition of the Board, the highest Fair Market Value of the Shares on any of the 30 trading days immediately preceding the date on which a Change of Control occurs.

 

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(g)                                  “Change of Control Termination” has the meaning set forth in Section 13.2 hereof.

 

(h)                                 “Code” means the Internal Revenue Code of 1986, as amended.

 

(i)                                     “Committee” means the Compensation Committee of the Board of Directors, or any other duly authorized committee of the Board appointed by the Board to administer the Plan. The Committee shall be comprised of two or more directors, and each member of the Committee shall be a Non-Employee Director, an “outside director” within the meaning of the regulations under Section 162(m) of the Code, and an “independent director” for purposes of the rules and regulations of the New York Stock Exchange (“NYSE”) (or such other principal securities market on which the Shares are traded).

 

(j)                                    “Company” means SM Energy Company, a Delaware corporation, and any successor thereto as provided in Article XVII hereof.

 

(k)                                 “Covered Employee” means an Employee who is, or who the Committee expects to become, a “covered employee” within the meaning of Section 162(m) of the Code.

 

(l)                                     “Director” means any individual who is a member of the Board of Directors of the Company.

 

(m)                             “Dividend Equivalent” means a right with respect to an Award to receive cash, Shares or other property equal in value and form to dividends declared by the Board and paid with respect to outstanding Shares. Dividend Equivalents shall not apply to Options or Stock Appreciation Rights, and shall not apply to any other type of Award unless specifically provided for in the Award Agreement, and if specifically provided for in the Award Agreement shall be subject to such terms and conditions set forth in the Award Agreement as the Committee shall determine.  Dividend Equivalents credited in connection with Performance Units or Restricted Stock Units that vest based on the achievement of performance goals will be subject to restrictions and risk of forfeiture to the same extent as the underlying Award.

 

(n)                                 “Employee” means any employee of the Company or an Affiliate. Directors who are not otherwise employed by the Company or an Affiliate shall not be considered Employees under this Plan.

 

(o)                                 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(p)                                 “Fair Market Value” or “FMV” means a value or price that is based on the opening, closing, actual, high, low or average selling prices per Share on the NYSE or other established stock exchange (or exchanges) on the applicable date, the preceding trading day, the next succeeding trading day, or an average of trading days, as determined by the Committee in its discretion. Such definition(s) of FMV may differ depending on whether FMV is in reference to the grant, exercise, vesting,

 

5

 

settlement or payout of an Award. If Shares are not traded on an established stock exchange, FMV shall be determined by the Committee based on objective criteria.

 

(q)                                 “Fiscal Year” means the year commencing on January 1 and ending on December 31, or such other fiscal year period as approved by the Board.

 

(r)                                    “Freestanding SAR” means a SAR that is not a Tandem SAR, as described in Article VIII herein.

 

(s)                                   “Grant Price” means the price against which the amount payable is determined upon exercise of a SAR.

 

(t)                                    “Incentive Stock Option” or “ISO” means an Option to purchase Shares granted under Article VII herein and that is designated as an Incentive Stock Option and is intended to meet the requirements of Section 422 of the Code, or any successor provision.

 

(u)                                 “Non-Employee Director” means a Director who meets the definition of a “Non-Employee Director” set forth in Rule 16b-3(b)(3) under the Exchange Act, or any successor definition adopted by the Securities and Exchange Commission.

 

(v)                                 “Nonqualified Stock Option” or “NQSO” means an Option to purchase Shares granted under Article VII herein, which is not intended to be an Incentive Stock Option or which otherwise does not meet the requirements for an ISO.

 

(w)                               “Option” means the conditional right to purchase Shares at a stated Option Price for a specified period of time in the form of an Incentive Stock Option or a Nonqualified Stock Option subject to the terms of this Plan.

 

(x)                                 “Option Price” means the price at which a Share may be purchased by a Participant pursuant to an Option, as determined by the Committee.

 

(y)                                 “Participant” means a participant holding an outstanding Award granted under the Plan.

 

(z)                                  “Performance Based Compensation” means compensation under an Award that is granted in order to provide remuneration 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.

 

(aa)                          “Performance Goal” means a performance criterion selected by the Committee for a particular Award for purposes of Article XI based on one or more Performance Measures.

 

(bb)                          “Performance Measures” mean measures as described in Article XI, the attainment of one or more of which shall, as determined by the Committee, determine the vesting, monetization, or value of an Award to a Covered Employee that is designated to qualify as Performance Based Compensation.

 

6

 

(cc)                            “Performance Period” means the period of time, which shall not be shorter than 12 months, during which the assigned performance criteria must be met in order to determine the degree of payout and/or vesting with respect to an Award of Performance Shares or Performance Units.

 

(dd)                          “Performance Share” means an Award granted under Article IX herein, denominated in Shares, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.

 

(ee)                            “Performance Unit” means an Award granted under Article IX herein, denominated in units, which may be valued by reference to a designated amount of property other than Shares, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.

 

(ff)                              “Plan” means this Equity Incentive Compensation Plan, as it may be amended from time to time.

 

(gg)                            “Restricted Stock” means an Award under Article VI of Shares that may be subject to certain restrictions and to a risk of forfeiture as set forth in the Award Agreement.

 

(hh)                          “Restricted Stock Unit” means an Award under Article VI that is valued by reference to a Share, which value may be paid by delivery of Shares or cash or a combination thereof upon settlement of the Award, subject to the specific terms and conditions of the Award as set forth in the Award Agreement.

 

(ii)                                  “Securities Act” means the Securities Act of 1933, as amended.

 

(jj)                                “Shares” means shares of common stock of the Company, $0.01 par value per share.

 

(kk)                          “Stock Appreciation Right” or “SAR” means the conditional right to receive the difference between the FMV of a Share on the date of exercise over the Grant Price, pursuant to the terms of Article VIII herein.

 

(ll)                                  “Stock Based Award” means an equity based or equity related Award granted pursuant to the terms of Article X herein.

 

(mm)                  “Substitute Award” means Awards granted or Shares issued by the Company in assumption of or in substitution or exchange for Awards previously granted or the right or obligation to make future Awards, in each case by a company acquired by the Company or any Affiliate, or a company with which the Company or any Affiliate combines.

 

(nn)                          “Tandem SAR” means a SAR that the Committee specifies pursuant to Article VIII herein is granted in connection with a related Option, the exercise of which SAR shall require forfeiture of the right to purchase a Share under the related 

 

7

 

Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly be cancelled), or a SAR that is granted in tandem with an Option but the exercise of such Option does not cancel the SAR, but rather results in the exercise of the related SAR. Regardless of whether an Option is granted coincident with a SAR, a SAR is not a Tandem SAR unless so specified by the Committee at the time of grant.

 

2.2                               Construction.  Captions and titles contained herein are for convenience of reference only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, any definition of any term herein in the singular also shall include the plural.

 

ARTICLE 3.
 ADMINISTRATION

 

3.1                               General.  The Committee shall be responsible for administering the Plan. The Committee may employ attorneys, consultants, accountants, agents, and other individuals, any of whom may be an Employee, and the Committee, the Company, and the Company’s officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee shall be final, conclusive, and binding upon the Participants, the Company, and all other interested parties. No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award granted under the Plan.

 

3.2                               Authority of the Committee.  The Committee shall have full and exclusive discretionary power to (i) interpret the terms and the intent of the Plan, any Award and any Award Agreement or other agreement ancillary to or in connection with the Plan, (ii) determine eligibility for Awards and select those who will become Participants in the Plan, (iii) adopt such rules, regulations, and guidelines for administering the Plan as the Committee may deem necessary or proper, (iv) provide for conditions and assurances deemed necessary or advisable to protect the interests of the Company with respect to the Plan and (v) make all other determinations necessary or advisable for the administration of the Plan. Such authority shall include, but not be limited to, selecting Award recipients, establishing all Award terms and conditions and, subject to Article XIV, adopting modifications, amendments or subplans to the Plan or any Award Agreement. Subject to the terms and provisions of the Plan, the Committee shall have complete discretion in determining the nature, terms, conditions and amount of each Award. In making such determinations, the Committee may take into account the nature of services rendered by the recipient of the Award, such person’s present and potential contributions to the Company and such other factors as the Committee in its discretion shall deem relevant.

 

3.3                               Delegation.  The Committee may delegate to one or more of its members any of the Committee’s administrative duties or powers as it may deem advisable; provided, however, that any such delegation shall not be inconsistent with the provisions of Rule 16b-3 under the Exchange Act or Section 162(m) of the Code as to actions to be taken by the Committee in connection therewith.  In addition, the Committee may delegate to the 

 

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Chief Executive Officer of the Company the power to grant Restricted Stock Units to non-executive employees in an amount not to exceed $1,000,000 in any one year.

 

ARTICLE 4.
 SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS

 

4.1                               Total Number of Shares Available for Awards.  Subject to adjustment as provided in Section 4.2 herein, the total number of Shares hereby made available and reserved for issuance to Participants pursuant to Awards granted under the Plan shall be 10,700,000, plus any remaining Shares available for issuance under the Predecessor Plans as set forth in Section 1.4 (with such total number of Shares, including such adjustment and remaining Shares, to be referred to as the “Total Share Authorization”). Any Shares issued in connection with an Option or SAR shall be counted against the Total Share Authorization limit as one Share for every one Share issued. Any Shares issued pursuant to Awards granted on or before May 20, 2009 in connection with an Award other than an Option or SAR shall be counted against the Total Share Authorization limit as two Shares for every one Share issued. Any Shares issued pursuant to Awards granted after May 20, 2009 but before May 22, 2013 in connection with an Award other than an Option or SAR shall be counted against the Total Share Authorization limit as 1.43 Shares for every one Share issued. Any Shares issued pursuant to Awards granted after May 22, 2013 in connection with any Award shall be counted against the Total Share Authorization limit as one Share for every one Share issued.  The maximum aggregate number of Shares that may be issued through Nonqualified Stock Options shall be equal to the Total Share Authorization. The maximum aggregate number of Shares that may be issued through Incentive Stock Options shall be 10,700,000.

 

Any Awards that are not settled in Shares shall not be counted against the Total Share Authorization limit. Any Shares related to Awards (or after May 17, 2006, awards granted or issued under the Predecessor Plans) which (i) terminate by expiration, forfeiture, cancellation or otherwise without the issuance of such Shares, (ii) are settled in cash either in lieu of Shares or otherwise, or (iii) are exchanged with the Committee’s approval for Awards not involving Shares, shall be available again for issuance under the Plan. In addition, if the Option Price of any Option granted under the Plan or the tax withholding requirement with respect to any Award granted under the Plan is satisfied by tendering Shares to the Company (by either actual delivery or by attestation), or if a SAR is exercised, only the number of Shares issued, net of the Shares tendered, if any, will be deemed delivered for purposes of determining the maximum number of Shares available for issuance under the Plan; provided, however, that from and after May 21, 2008 and until May 22, 2013, Shares tendered as full or partial payment to the Company of the Option Price upon exercise of Options granted under this Plan, Shares reserved for issuance upon grant of SARs, to the extent the number of reserved Shares exceeds the number of Shares actually issued upon exercise of the SARs, and Shares withheld by, or otherwise remitted to, the Company to satisfy a Participant’s tax withholding obligations with respect to any Award granted under this Plan, shall not become available again for issuance under this Plan. The Shares available for issuance under the Plan may be authorized and unissued Shares or treasury Shares. Unless and until the Committee determines that an Award to a Covered Employee shall not be designed to qualify as Performance Based Compensation, 

 

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the following limits (“Award Limits”) shall apply to grants of Awards to Covered Employees under the Plan:

 

(a)                                 Restricted Stock/Restricted Units.  The maximum aggregate number of Shares that may be granted in the form of Restricted Stock/Restricted Stock Units in any one Fiscal Year to any one Participant shall be 100,000.

 

(b)                                 Options and SARS.  The maximum aggregate number of Shares that may be granted in the form of Options or SARs in any one Fiscal Year to any one Participant shall be 200,000.

 

(c)                                  Performance Shares/Performance Units.  The maximum aggregate Award of Performance Shares or Performance Units that a Participant may receive in any one Fiscal Year shall be 200,000 Shares, and the maximum value of Performance Units that a Participant may receive with respect to Awards in any one Fiscal Year shall be a value of $5,000,000 determined as of the date of vesting or payout, as applicable.

 

(d)                                 Stock Based Awards.  The maximum aggregate grant with respect to Stock Based Awards in any one Fiscal Year to any one Participant shall be 200,000.

 

4.2                               Adjustments in Authorized Shares.  In the event of any corporate event or transaction (including, but not limited to, a change in the Shares of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, stock dividend, extraordinary or special dividend, stock split, reverse stock split, split up, spin off, other distribution of stock or property of the Company, combination of securities, exchange of securities, dividend in kind, or other like change in capital structure or distribution (other than normal cash dividends) to the stockholders of the Company, or any similar corporate event or transaction, the Committee, in order to prevent dilution or enlargement of Participants’ rights under the Plan, shall make or provide for appropriate proportionate substitutions or adjustments, as applicable, to the number and kind of Shares that may be issued under the Plan, the number and kind of Shares subject to outstanding Awards, the Option Price or Grant Price applicable to outstanding Awards, the application and computation of any Dividend Equivalents that may be provided for in Award Agreements, the Award Limits, and any other value determinations applicable to outstanding Awards or to this Plan. Such adjustments shall be made automatically, without the necessity of Committee action, on the customary and appropriate arithmetical basis, in the case of any stock split, including a stock split effected by means of a stock dividend, and in the case of any other dividend paid in Shares, and shall be made in the discretion of the Committee with respect to other corporate events or transactions. The Committee, in its sole discretion, may also make other appropriate adjustments in the terms of any Awards under the Plan to reflect, or related to, such changes or distributions and may modify any other terms of outstanding Awards, including modifications of performance criteria and changes in the length of Performance Periods, as are equitably necessary to prevent dilution or enlargement of Participant’s rights under the Plan that otherwise would result from such corporate event or transaction. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under the Plan. Subject to the provisions of Article XIII and

 

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any applicable law or regulatory requirement, without affecting the number of Shares reserved or available hereunder, the Committee may authorize the issuance, assumption, substitution or conversion of Awards under this Plan in connection with any such corporate event or transaction upon such terms and conditions as it may deem appropriate. In addition, the Committee may amend the Plan, or adopt supplements to the Plan, in such manner as it deems appropriate to provide for such issuance, assumption, substitution or conversion as provided in the previous sentence.

 

4.3                               Substitute Awards.  Substitute Awards shall not reduce the Shares authorized for grant under the Plan or the applicable Award Limits, nor shall Shares subject to a Substitute Award again be available for Awards under the Plan as provided in Section 4.1 above.  Additionally, in the event that a company acquired by the Company or any Affiliate or with which the Company or any Affiliate combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not Employees or Directors prior to such acquisition or combination.

 

ARTICLE 5.
 ELIGIBILITY AND PARTICIPATION

 

5.1                               Eligibility.  All Employees and members of the Board of the Company and of any Affiliate of the Company shall be eligible to participate in the Plan and be granted Awards under the Plan.

 

5.2                               Actual Participation.  Subject to the provisions of the Plan, the Committee may from time to time, in its sole discretion, select from among persons eligible to participate in the Plan those to whom Awards shall be granted under the Plan, and shall determine in its discretion the nature, terms, conditions, and amount of each Award.

 

ARTICLE 6.
 RESTRICTED STOCK AND RESTRICTED STOCK UNITS

 

6.1                               Grant of Restricted Stock or Restricted Stock Units.  Subject to the terms and conditions of the Plan, the Committee, at any time and from time to time, in its discretion may grant Shares of Restricted Stock and/or Restricted Stock Units to Participants in such amounts and upon such terms as the Committee shall determine.

 

(a)                                 Restricted Stock.

 

(i)                                     Nature of Restricted Stock.  Restricted Stock may be issued for services rendered with any or no additional purchase price as shall be 

 

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determined by the Committee in its discretion, and may be subject to certain restrictions and to a risk of forfeiture as set forth in the Award Agreement. A Participant to whom Shares of Restricted Stock are issued shall have all of the rights of ownership with respect to the Shares subject to such Restricted Stock Award, including the right to vote the same and receive any dividends paid thereon; subject, however, to the terms, conditions and restrictions contained in this Plan and in the applicable Award Agreement.

 

(ii)                                  Forfeiture and Vesting.  A Restricted Stock Award Agreement may provide for forfeiture of the Restricted Stock upon termination of the Participant’s employment or other relationship with the Company or nonperformance of specified performance goals or measures established by the Committee. A Restricted Stock Award Agreement may also provide for (i) vesting periods which require the passage of time and/or the occurrence of events in order for the Restricted Stock to vest and become no longer subject to forfeiture and (ii) holding periods during which the Restricted Stock may not be sold or otherwise transferred.

 

(iii)                               Delivery of Shares and Settlement.  Upon an Award of Restricted Stock, the Company shall deliver to the Participant the Shares subject to the Award (which Shares may be delivered in book-entry or certificated form), and such Shares shall be evidenced with an appropriate legend referring to or setting forth the applicable restrictions to which such Shares are subject (by means of appropriate stop-transfer orders on Shares credited to book-entry accounts or by means of appropriate legends on Shares that have been certificated). After the Shares are no longer subject to such restrictions, the Company shall, in accordance with the terms and conditions of the Award Agreement and upon the request of the Participant and the surrender by the Participant of any certificated Shares, settle the completed Restricted Stock Award by providing the Participant with Shares with such restrictions removed.

 

(b)                                 Restricted Stock Units.

 

(i)                                     Nature of Restricted Stock Units; Accounts.  Each Restricted Stock Unit awarded shall represent a right for one Share to be delivered upon settlement of the Award, which right shall be subject to a risk of forfeiture and cancellation and to the other terms and conditions set forth in the Plan and the Award Agreement. The Company shall establish and maintain a Participant account to record Restricted Stock Units and transactions and events affecting such units. Restricted Stock Units and other items reflected in the account will represent only bookkeeping entries by the Company to evidence unfunded obligations of the Company.

 

(ii)                                  Deferral Period and Settlement Date.  Restricted Stock Units (if not previously cancelled or forfeited) shall be settled on the date or dates set forth in the Award Agreement. In addition, unless otherwise determined by the Committee, if the Committee reasonably determines that any 

 

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settlement of Restricted Stock Units would result in payment of compensation to a Participant which is not deductible by the Company under Section 162(m) of the Code, such settlement shall be deferred, subject to compliance with Section 409A of the Code as referred to in Article XX herein, to the extent necessary to avoid payment of such nondeductible compensation, with such deferral continuing only until such date as settlement can be effected without loss of deductibility by the Company under Section 162(m) of the Code.

 

(iii)                               Cancellation and Vesting.  A Restricted Stock Unit Award Agreement may provide for cancellation of the Restricted Stock Units upon termination of the Participant’s employment or other relationship with the Company or nonperformance of specified performance goals or measures established by the Committee. A Restricted Stock Unit Award Agreement may also provide for vesting periods which require the passage of time and/or the occurrence of events in order for the Restricted Stock Units to vest and become no longer subject to cancellation.

 

(iv)                              Dividend Equivalents.  Restricted Stock Units shall not be credited with Dividend Equivalents unless specifically provided for in the Award Agreement, and then only upon such terms and conditions as set forth in the Award Agreement.

 

(v)                                 Settlement and Delivery of Shares.  Settlement of a Restricted Stock Unit Award shall be made in accordance with the terms and conditions of the applicable Award Agreement. A Restricted Stock Unit Award Agreement may provide that settlement 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. Upon the settlement of a Restricted Stock Unit Award, the Company shall deliver to the Participant the number of Shares issued to the Participant in settlement of the Award (which Shares may be delivered in book-entry or certificated form).

 

6.2                               Restricted Stock and Restricted Stock Unit Award Agreements.  Each Restricted Stock and Restricted Stock Unit Award shall be evidenced by an Award Agreement which shall set forth the terms and conditions of such Award, including the number of Shares to which the Award relates, the date or dates upon which such Award shall vest and the circumstances (including termination of employment or failure to satisfy one or more restrictive covenants or other ongoing obligations) under which the Award shall not vest, the time and manner of settlement of the Award, such transfer restrictions which the Committee may impose, and any other terms or conditions which the Committee may impose.

 

(a)                                 If not otherwise specified by the Committee, the following terms and conditions shall apply to Restricted Stock and Restricted Stock Units awarded under the Plan:

 

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(i)                                     Vesting.  An Award of Restricted Stock or Restricted Stock Units shall vest pursuant to a vesting schedule as determined by the Committee, which vesting schedule may provide that (A) an Award held by a Participant who retires from employment with the Company after having both reached the age of sixty and completed twelve years of service with the Company shall continue to vest in accordance with the vesting schedule set forth in the applicable Award Agreement notwithstanding the termination of the Participant’s employment with the Company, provided that prior to full vesting of the Award such Participant does not after such retirement become employed on a full time basis by a competitor of the Company prior to reaching age sixty-five, and (B) an Award held by a Non-Employee Director of the Company who resigns from the Board after completing at least five years of service to the Company as a Non-Employee Director shall become fully vested.

 

(ii)                                  Termination.  An outstanding Award of Restricted Stock that has not vested or an outstanding Award of Restricted Stock Units that has not been settled shall be cancelled upon the Company’s termination of the employment of the Participant for cause.

 

(iii)                               Acceleration.  An outstanding Award of Restricted Stock or Restricted Stock Units shall become fully vested and settled irrespective of its other provisions upon termination of the Participant’s employment with the Company or Affiliate because of death, disability or normal retirement upon reaching the age of sixty-five.

 

(iv)                              Transferability.  An outstanding Award of Restricted Stock or Restricted Stock Units that has not vested and been settled or is otherwise restricted by the terms of the Award Agreement as to transferability shall not be transferable by the Participant, and the Participant shall not be permitted to sell, transfer, pledge or otherwise encumber such Award or the Shares issuable in settlement thereof, other than (A) to the person or persons to whom the Participant’s rights under such Award pass by will or the laws of descent and distribution, (B) to the spouse or the descendants of the Participant or to trusts for such persons to whom or which the Participant may transfer such Award, (C) to the legal representative of any of the foregoing, or (D) pursuant to a qualified domestic relations order as defined under Section 414(p) of the Code or similar order or agreement 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. If an Award is transferred to any person to whom a transfer of the Award is permitted, the transferee shall remain subject to all of the vesting conditions to which the Award is subject. Any such transfer shall be made only in compliance with the Securities Act and the requirements therefor as set forth by the Company.

 

(b)                                 The Committee shall be free to specify terms and conditions other than and in addition to those set forth above, in its discretion.

 

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ARTICLE 7.
 STOCK OPTIONS

 

7.1                               Grant of Options.  Subject to the terms and conditions of the Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time, as shall be determined by the Committee in its discretion. ISOs may be granted only to Employees of the Company or a parent or subsidiary corporation of the Company within the meaning of Section 424 of the Code, and no ISOs may be granted more than 10 years after the adoption of the Plan by the Board.

 

7.2                               Award Agreement.  Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option relates, the conditions upon which an Option shall become vested and exercisable, and any other terms and conditions as the Committee shall determine. The Award Agreement shall also specify whether the Option is intended to be an ISO or a NQSO.

 

7.3                               Option Price.  The Option Price for each grant of an Option under this Plan shall be determined by the Committee and shall be specified in the Award Agreement. The Option Price for an Option, whether issued as an ISO or an NQSO, shall be not less than 100 percent of the FMV of the underlying Shares on the date of grant; provided, however, that the Option Price for an ISO granted to a person who at the time of grant owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or of any of its Affiliates (a “Significant Stockholder”) shall be not less than 110 percent of the Fair Market Value of the underlying Shares as of the date of grant.

 

7.4                               Duration of Options.  Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant; provided however, that no Option shall be exercisable later than the tenth anniversary date of its grant, and provided further that no ISO granted to a Significant Stockholder shall be exercisable after the expiration of five years from the date of grant.

 

7.5                               Exercise of Options.  Options shall be exercisable at such times and on the  such events, and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant. Options shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified by or acceptable to the Committee, or by complying with any alternative procedures which may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, and accompanied by full payment for the Shares. Upon exercise of any Option, the Option Price shall be payable to the Company in full either: (a) in cash or its equivalent; (b) by tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate FMV at the time of exercise equal to the total Option Price; (c) by a combination of (a) and (b); or (d) by any other method approved or accepted by the Committee in its sole discretion and subject to such rules and regulations as the Committee may establish. Subject to Section 7.6 and any governing rules or regulations, as soon as practicable after 

 

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receipt of a notification of exercise and full payment for the Shares, the Company shall cause to be delivered to the Participant Share certificates or evidence of book entry Shares in an appropriate amount based upon the number of Shares purchased under the Option(s).

 

7.6                               Restrictions on Share Transferability.  The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under the Plan as it may deem advisable, including, without limitation, requiring the Participant to hold the Shares acquired pursuant to exercise for a specified period of time, or restrictions under applicable laws or under the requirements of any stock exchange or market upon which such Shares are listed and/or traded.

 

7.7                               Termination of Employment.  Each Participant’s Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following the termination of the Participant’s employment or other relationship with the Company or Affiliates. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Options granted under the Plan, and may reflect distinctions based on the reasons for termination.

 

7.8                               Nontransferability of Options.

 

(a)                                 Incentive Stock Options.  No ISO granted under the Plan may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. In addition, all ISOs granted to a Participant under the Plan shall be exercisable during such Participant’s lifetime only by such Participant.

 

(b)                                 Nonqualified Stock Options.  Except as otherwise provided in a Participant’s Award Agreement at the time of grant or thereafter by the Committee, a NQSO granted under the Plan may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. In addition, except as otherwise provided in a Participant’s Award Agreement at the time of grant or thereafter by the Committee, all NQSOs granted to a Participant under the Plan shall be exercisable during such Participant’s lifetime only by such Participant.

 

(c)                                  Notification of Disqualifying Disposition.  The Participant to whom an ISO is granted shall notify the Company upon the disposition of Shares issued pursuant to the exercise of an ISO or Shares received as a dividend on ISO stock. The Company shall use such information to determine whether a disqualifying disposition as described in Section 421(b) of the Code has occurred.

 

7.9                               $100,000 Annual ISO Limitation.  To the extent that the aggregate Fair Market Value of Shares (determined as of the time the ISOs with respect to such Shares are granted) with respect to which ISOs are exercisable for the first time by any Participant during any calendar year (under this Plan and all other plans of the Company and any Affiliate) exceeds $100,000, such ISOs shall be treated as NQSOs. The foregoing provisions shall be applied by taking ISOs into account in the order in which they were granted.

 

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ARTICLE 8.
 STOCK APPRECIATION RIGHTS

 

8.1                               Grant of SARs.  Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time and upon such terms as shall be determined by the Committee in its discretion. The Committee may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SARs. The SAR Grant Price for each grant of a Freestanding SAR shall be determined by the Committee and shall be specified in the Award Agreement. The SAR Grant Price for each Freestanding SAR may include a Grant Price based on 100 percent of the FMV of the underlying Share on the date of grant or a Grant Price that is set at a premium to the FMV of the underlying Share on the date of grant. The SAR Grant Price for each Freestanding SAR shall not be less than FMV of the underlying Share on the date of grant. The Grant Price of Tandem SARs shall be equal to the Option Price of the related Option.

 

8.2                               SAR Agreement.  Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant Price, the term of the SAR, and any such other provisions as the Committee shall determine.

 

8.3                               Term of SAR.  The term of a SAR granted under the Plan shall be determined by the Committee in its sole discretion, and except as determined otherwise by the Committee and specified in the SAR Award Agreement, no SAR shall be exercisable later than the tenth anniversary date of its grant.

 

8.4                               Exercise of Freestanding SARs.  Freestanding SARs may be exercised upon whatever terms and conditions that the Committee in its sole discretion imposes.

 

8.5                               Exercise of Tandem SARs.  Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable. Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (a) the Tandem SAR will expire no later than the expiration of the underlying ISO; (b) the value of the payout with respect to the Tandem SAR may be for no more than 100 percent of the difference between the Option Price of the underlying ISO and the FMV of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised; and (c) the Tandem SAR may be exercised only when the FMV of the Shares subject to the ISO exceeds the Option Price of the ISO.

 

8.6                               Payment of SAR Amount.  Upon the exercise of a SAR, a Participant shall be entitled to receive payment from the Company in an amount representing the difference between the FMV of the underlying Share on the date of exercise over the Grant Price. At the discretion of the Committee, the payment upon SAR exercise may be in cash, Shares of equivalent value (based on the FMV on the date of exercise of the SAR, as defined in the Award Agreement or otherwise defined by the Committee thereafter), in some combination thereof, or in any other form approved by the Committee in its sole discretion. The Committee’s determination regarding the form of SAR payout shall be set forth or reserved for later determination in the Award Agreement for the grant of the SAR.

 

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8.7                               Termination of Employment.  Each Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following the termination of the Participant’s employment or other relationship with the Company or Affiliates. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all SARs issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.

 

8.8                               Nontransferability of SARs.  Except as otherwise provided in a Participant’s Award Agreement at the time of grant or thereafter by the Committee, a SAR granted under the Plan may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. In addition, except as otherwise provided in a Participant’s Award Agreement at the time of grant or thereafter by the Committee, all SARs granted to a Participant under the Plan shall be exercisable during such Participant’s lifetime only by such Participant.

 

8.9                               Other Restrictions.  Without limiting the generality of any other provision of this Plan, the Committee may impose such other conditions and/or restrictions on any Shares received upon exercise of a SAR granted pursuant to the Plan as it may deem advisable. This includes, but is not limited to, requiring the Participant to hold the Shares received upon exercise of a SAR for a specified period of time.

 

ARTICLE 9.
 PERFORMANCE SHARES AND PERFORMANCE UNITS

 

9.1                               Grant of Performance Shares and Performance Units.  Subject to the terms and conditions of the Plan, the Committee, at any time and from time to time, may grant Performance Shares and/or Performance Units to Participants in such amounts and upon such terms as the Committee shall determine.

 

9.2                               Value of Performance Shares and Performance Units.  Each Performance Share and Performance Unit shall have an initial value that is established by the Committee at the time of grant. The Committee shall in its discretion set performance criteria for a Performance Period which, depending on the extent to which the performance criteria are met, will determine, in the manner established by the Committee and set forth in the Award Agreement, the value and/or amount of each Performance Share or Performance Unit that will be paid to the Participant.

 

9.3                               Earnings of Performance Shares and Performance Units.  Subject to the terms of this Plan and the applicable Award Agreement, after the applicable Performance Period has ended, the holder of Performance Shares and/or Performance Units shall be entitled to receive, to the extent that the Performance Shares or Performance Units have vested, if applicable, a payout of the value and/or amount of Performance Shares and/or Performance Units, determined as a function of the extent to which the corresponding performance criteria have been achieved. The Committee may in its discretion require the Participant to hold the Shares or other property received pursuant to such Award for a specified period of time.

 

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9.4                               Form and Timing of Payment of Performance Shares and Performance Units.  Payment of earned Performance Shares and Performance Units shall be made in accordance with the terms and conditions of the applicable Award Agreement. A Performance Share or Performance Unit Award Agreement may provide that payment may be made, to the extent that the Performance Share or Performance Unit has vested and the performance criteria are met, solely through the issuance of Shares earned upon the expiration of the applicable Performance Period, and that the Participant may elect to satisfy the Participant’s tax withholding obligation with respect to the Award by having the Company withhold Shares or other property or by the Participant surrendering Shares or other property to the Company with a FMV on or near the tax withholding date equal to the tax withholding obligation. Upon the payment in the form of Shares of a Performance Share or Performance Unit Award, the Company shall deliver to the Participant the number of Shares issued to the Participant in payment of the Award (which Shares may be delivered in book-entry or certificated form).

 

9.5                               Dividends and Other Distributions.  Dividends and other distributions declared by the Board and paid with respect to outstanding Shares shall only be paid with respect to Performance Share and Performance Unit Awards for Shares that have been issued by the Company in payment of such Awards to the extent that the Awards have vested and upon the expiration of the applicable Performance Periods for the Awards. Performance Shares and Performance Units shall not be credited with Dividend Equivalents unless specifically provided for in the Award Agreement, and then only upon such terms and conditions as set forth in the Award Agreement.

 

9.6                               Vesting and Termination of Employment.  Each Award Agreement shall set forth the extent to which the Award shall vest, which may be pursuant to a vesting schedule as determined by the Committee, and the extent to which the Participant shall have the right to retain Performance Shares and/or Performance Units following the termination of the Participant’s employment or other relationship with the Company or an Affiliate. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Performance Shares and Performance Units issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.

 

9.7                               Nontransferability of Performance Shares and Performance Units.  Except as otherwise provided in a Participant’s Award Agreement at the time of grant or thereafter by the Committee, Performance Shares and Performance Units may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. In addition, except as otherwise provided in a Participant’s Award Agreement at the time of grant or thereafter by the Committee, a Participant’s rights with respect to Performance Shares and Performance Units shall inure during such Participant’s lifetime only to such Participant.

 

ARTICLE 10.
 STOCK BASED AWARDS

 

10.1                        Stock Based Awards.  Subject to the terms and conditions of the Plan, the Committee, at any time and from time to time, may grant other types of equity based or equity related Awards not described by the other terms of the Plan (including the grant or 

 

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offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions, including, but not limited to, conditions based on the satisfaction of performance criteria or the satisfaction of such obligations as the Committee shall determine. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares.

 

10.2                        Termination of Employment.  Each Award Agreement shall set forth the extent to which the Participant shall have the right to receive Stock Based Awards following the termination of the Participant’s employment or other relationship with the Company or Affiliates. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Stock Based Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.

 

10.3                        Nontransferability of Stock Based Awards.  Except as otherwise provided in a Participant’s Award Agreement at the time of grant or thereafter by the Committee, Stock Based Awards may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. In addition, except as otherwise provided in a Participant’s Award Agreement at the time of grant or thereafter by the Committee, a Participant’s rights with respect to Stock Based Awards shall inure during such Participant’s lifetime only to such Participant.

 

ARTICLE 11.
 PERFORMANCE MEASURES

 

Notwithstanding any other terms of this Plan, the vesting, payment obligation or value (as determined by the Committee) of each Award other than an Option or SAR that, at the time of grant, 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 an Award (which may be expressed in terms of a class of individuals) and the Performance Goal(s) applicable to such Awards 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 Award shall be payable unless the Committee certifies in writing, by resolution or otherwise, that the Performance Goal(s) applicable to the Award were satisfied. In no case may the Committee increase the value of an Award of 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 in this Article XI, the Performance Goal(s) upon which the payment or vesting of an Award 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);

 

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

 

(i)                                     Other specific unusual or nonrecurring events;

 

(j)                                    Foreign exchange gains and losses; and

 

(k)                                 A change in the Company’s fiscal year.

 

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 Affiliates 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 shall also have the authority to provide in Award Agreements for accelerated vesting of an Award based on the achievement of Performance Goal(s).

 

The Committee may provide in any Award Agreement 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 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 Awards to Covered Employees, they shall be prescribed in a form that meets the requirements of Section 162(m) of the Code for deductibility.

 

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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 grant Awards to Covered Employees that shall not qualify as Performance Based Compensation, the Committee may make such grants without satisfying the requirements of Section 162(m) of the Code.

 

ARTICLE 12.
 RIGHTS OF PERSONS ELIGIBLE TO PARTICIPATE

 

12.1                        Employment.  Nothing in the Plan or an Award Agreement shall interfere with or limit in any way the right of the Company or an Affiliate to terminate any Participant’s employment, consulting or other service relationship with the Company or an Affiliate at any time, nor confer upon any Participant any right to continue in the capacity in which he or she is employed or otherwise serves the Company or an Affiliate. Neither an Award nor any benefits arising under this Plan shall constitute part of an employment or service contract between a Participant and the Company or an Affiliate, and, accordingly, subject to the terms of this Plan, this Plan may be terminated, amended or modified at any time in the sole and exclusive discretion of the Committee without giving rise to liability on the part of the Company or an Affiliate for severance payments or otherwise, except as provided in this Plan.

 

For purposes of the Plan, unless otherwise provided by the Committee, transfer of employment of a Participant between the Company and an Affiliate or among Affiliates, shall not be deemed a termination of employment. The Committee may provide in a Participant’s Award Agreement or otherwise the conditions under which a transfer of employment to an entity that is spun off from the Company or an Affiliate shall not be deemed a termination of employment for purposes of an Award.

 

12.2                        Participation.  No Employee or other person eligible to participate in the Plan shall have the right to be selected to receive an Award. No person selected to receive an Award shall have the right to be selected to receive a future Award or, if selected to receive a future Award, the right to receive such future Award on terms and conditions identical or in proportion in any way to any prior Award.

 

12.3                        Rights as a Stockholder.  A Participant shall have none of the rights of a stockholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.

 

ARTICLE 13.
 CHANGE OF CONTROL

 

13.1                        Accelerated Vesting and Payment Applicable to Awards Granted prior to May 21, 2008.  Subject to the provisions of Section 13.3 or as otherwise provided in the Award Agreement, for Awards granted prior to May 21, 2008, in the event of a Change of Control, unless otherwise specifically prohibited by law or the rules and regulations of a national securities exchange on which Shares are listed or traded:

 

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(a)                                 Any vesting period requirements and other restrictions imposed on Restricted Stock or Restricted Stock Units shall lapse, and Restricted Stock Units shall be immediately payable;

 

(b)                                 Any and all Options and SARs granted hereunder shall become immediately exercisable;

 

(c)                                  The target payout opportunities attainable under all outstanding Awards of performance based Restricted Stock and performance based Restricted Stock Units, Performance Shares and Performance Units (including but not limited to Awards intended to be Performance Based Compensation) shall be deemed to have been fully earned based on targeted performance being attained as of the effective date of the Change of Control, and:

 

(i)                                     The vesting of all Awards denominated in Shares shall be accelerated as of the effective date of the Change of Control, and shall be paid out to Participants within 30 days following the effective date of the Change of Control; and

 

(ii)                                  Awards denominated in cash shall be paid to Participants in cash within 30 days following the effective date of the Change of Control;

 

(d)                                 Upon a Change of Control, unless otherwise specifically provided in a written agreement entered into between the Participant and the Company or an Affiliate, the Committee shall immediately cause all other Stock Based Awards to vest and be paid out as determined by the Committee; and

 

(e)                                  The Committee shall have the discretion to unilaterally determine that all outstanding Awards shall be cancelled upon a Change of Control, and that the value of such Awards, as determined by the Committee in accordance with the terms of the Plan and the Award Agreements, shall be paid out in cash in an amount based on the Change of Control Price within a reasonable time subsequent to the Change of Control; provided, however, that no such payment shall be made on account of an ISO using a value higher than the FMV of the underlying Shares on the date of settlement.

 

13.2                        Accelerated Vesting and Payment Applicable to Awards Granted on or after May 21, 2008.  Subject to the provisions of Section 13.3 or as otherwise provided in the Award Agreement, for Awards granted on or after May 21, 2008 and prior to a Change of Control, in the event that a Change of Control occurs and a Participant’s employment with the Company is subsequently terminated without Cause (as defined in such Participant’s Award Agreement) or the Participant terminates his or her employment with the Company for Good Reason (as defined in such Participant’s Award Agreement) within 30 months of the Change of Control (a “Change of Control Termination”), unless otherwise specifically prohibited by law or the rules and regulations of a national securities exchange on which Shares are listed or traded, with respect to such Awards granted to such Participant:

 

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(a)                                 Any vesting period requirements and other restrictions imposed on Restricted Stock or Restricted Stock Units shall lapse, and Restricted Stock Units shall be immediately payable;

 

(b)                                 Any and all Options and SARs granted hereunder shall become immediately exercisable;

 

(c)                                  The target payout opportunities attainable under all outstanding Awards of performance based Restricted Stock and performance based Restricted Stock Units, Performance Shares and Performance Units (including but not limited to Awards intended to be Performance Based Compensation) shall be deemed to have been fully earned based on measured performance as of the effective date of the Change of Control, and:

 

(i)                                     The vesting of all Awards denominated in Shares shall be accelerated as of the effective date of the Change of Control Termination, and shall be paid out to such Participant within 30 days following the effective date of the Change of Control Termination; and

 

(ii)                                  Awards denominated in cash shall be paid to Participants in cash within 30 days following the effective date of the Change of Control Termination;

 

(d)                                 Upon a Change of Control Termination, unless otherwise specifically provided in a written agreement entered into between the Participant and the Company or an Affiliate, the Committee shall immediately cause all other Stock Based Awards to vest and be paid out as determined by the Committee; and

 

(e)                                  The Committee shall have the discretion to unilaterally determine that all outstanding Awards shall be cancelled upon a Change of Control Termination, and that the value of such Awards, as determined by the Committee in accordance with the terms of the Plan and the Award Agreements, shall be paid out in cash in an amount determined by the Committee, in accordance with the terms of the Plan and the Award Agreements, within a reasonable time subsequent to the Change of Control Termination; provided, however, that no such payment shall be made on account of an ISO using a value higher than the FMV of the underlying Shares on the date of settlement.

 

In the event that the existence of the foregoing provisions, even if a Change of Control and a Change of Control Termination do not occur, would result in an Award to a Covered Employee designed to qualify as Performance Based Compensation to not so qualify, the Committee shall have the discretion to adopt for such Award such provisions as shall satisfy the requirements of Section 162(m) of the Code.

 

13.3                        Alternative Awards.  Notwithstanding Sections 13.1 and 13.2, no cancellation, acceleration of vesting, lapsing of restrictions, payment of an Award, cash settlement, or other payment shall occur with respect to any Award if the Committee reasonably determines in good faith prior to the occurrence of a Change of Control, that 

 

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such Award shall be honored or assumed, or new rights substituted therefor (with such honored, assumed or substituted Award hereinafter referred to as an “Alternative Award”) by any successor to the Company or an Affiliate as described in Article XVII; provided, however, that any such Alternative Award must:

 

(a)                                 Be based on stock which is traded on an established U.S. securities market, or that the Committee reasonably believes will be so traded within 60 days after the Change of Control;

 

(b)                                 Provide such Participant with rights and entitlements substantially equivalent to or more favorable than the rights, terms, and conditions applicable under such Award, including, but not limited to, an identical or more favorable exercise or vesting schedule and identical or more favorable timing and methods of payment; and

 

(c)                                  Have substantially equivalent economic value to such Award (determined at the time of the Change of Control).

 

ARTICLE 14.
 AMENDMENT AND TERMINATION OF THE PLAN

 

14.1                        Amendment, Modification, Suspension, and Termination.  The Committee or the Board may, at any time and from time to time, alter, amend, modify, suspend or terminate the Plan in whole or in part; provided, however, that:

 

(a)                                 Consistent with the provisions of Section 4.2 and except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding Awards may not be amended to reduce the Option Price of outstanding Options or the Grant Price of outstanding SARs or cancel outstanding Options or SARs in exchange for cash, other Awards or Options or SARs with an Option Price or Grant Price that is less than the Option Price or Grant Price of the original Options or SARs without stockholder approval.

 

(b)                                 No amendment or modification which would increase the total number of Shares available for issuance under the Plan or the total number of shares available for ISOs under the Plan shall be effective unless approved by the stockholders of the Company.

 

(c)                                  To the extent necessary under any applicable law, regulation, or securities exchange or market requirement, no amendment or modification shall be effective unless approved by the stockholders of the Company in accordance with the applicable law, regulation, or securities exchange or market requirement.

 

14.2                        Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events.  The Committee may make adjustments in the terms and conditions of, and the criteria provided in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.2 hereof) affecting the 

 

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Company or the financial statements of the Company, or in recognition of changes in applicable laws, regulations or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Awards and the Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on all Participants under the Plan. To the extent such adjustments affect Awards to Covered Employees intended to be Performance Based Compensation, they shall be prescribed in a form that meets the requirements of Section 162(m) of the Code for deductibility.

 

14.3                        No Impairment of Outstanding Awards.  Notwithstanding any other provision of the Plan to the contrary, no amendment, modification, suspension or termination of the Plan shall in any manner adversely affect in any material way any outstanding Award previously granted under the Plan without the written consent of the Participant holding such Award.

 

ARTICLE 15.
 SECURITIES REGISTRATION

 

15.1                        Securities Registration.  In the event that the Company shall deem it necessary or desirable to register under the Securities Act, or any other applicable statute, any Awards or any Shares with respect to which an Award may be or shall have been granted, or to qualify any such Awards or Shares under the Securities Act or any other statute, then the affected Participants shall cooperate with the Company and take such action as is necessary to permit registration or qualification of such Awards or Shares.

 

15.2                        Representations.  Unless the Company determines that the following representation is unnecessary, each person receiving an Award under the Plan may be required by the Company, as a condition to the issuance of Shares pursuant to the Award, to make a representation in writing that (i) 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, and (ii) before any transfer in connection with the resale of such Shares, an exemption from registration of such transaction under the Securities Act shall be established to the satisfaction of the Company. The Company may also require that any certificates or book-entry accounts for such Shares contain restrictive legends or stop-transfer orders reflecting the foregoing.

 

ARTICLE 16.
 TAX WITHHOLDING

 

In connection with Awards granted under the Plan, the Company and any Affiliate shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company or any Affiliate, amounts sufficient to satisfy any federal, state and local withholding tax requirements with respect to any taxable event as a result of the Plan and Awards granted under the Plan. The Committee may provide for Participants to satisfy withholding requirements by having the Company withhold Shares or the Participant making other arrangements, in either case on such conditions as the Committee specifies. The Company may in its discretion make loans to Participants of funds sufficient to satisfy 

 

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any such withholding tax requirements, provided that any such loan shall comply with all applicable laws, rules and regulations and no such loan shall be made to a Director or executive officer of the Company in violation of Section 13(k) of the Exchange Act, as adopted pursuant to Section 402 of the Sarbanes-Oxley Act of 2002. The Company and any Affiliate shall have the right to require that any recipient or permitted transferee of an Award under the Plan who is not an Employee shall be responsible for the payment of all amounts required to satisfy all federal, state, and local withholding taxes applicable to such persons with respect to such Award.

 

ARTICLE 17.
 SUCCESSORS

 

Any obligations of the Company or an Affiliate under the Plan with respect to Awards granted hereunder, shall be binding on any successor to the Company or Affiliate, respectively, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business and/or assets of the Company or Affiliate, as applicable.

 

ARTICLE 18.
 INDEMNIFICATION

 

To the extent permitted by law, each person who is or shall have been a member of the Board or the Committee, or an officer or employee who assists in administering the Plan, 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 that 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 an Affiliate may have to indemnify them or hold them harmless.

 

ARTICLE 19.
 GENERAL PROVISIONS

 

19.1                        Forfeiture Events.  Without limiting in any way the generality of the Committee’s power to specify any terms and conditions of an Award consistent with law, the Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but not be limited to, failure to accept the terms of the Award Agreement, termination of employment under certain or all circumstances, violation of material Company and 

 

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Affiliate policies, breach of noncompetition, confidentiality, nonsolicitation, noninterference, corporate property protection or other agreements that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company or Affiliates.

 

19.2                        Evidence of Restrictions.  The certificates or book-entry accounts for Shares issued under the Plan may include or be subject to any legend or stop-transfer order that the Committee deems appropriate to reflect any restrictions on transfer of such Shares.

 

19.3                        Delivery of Title.  The Company shall have no obligation to issue or deliver evidence of title for Shares issued under the Plan prior to:

 

(a)                                 Obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and

 

(b)                                 Completion of any registration or other qualification of the Shares under any applicable federal or state law or ruling of any governmental body that the Company determines to be necessary or advisable, and the listing or approval for trading of such Shares on any applicable securities exchange or market.

 

19.4                        Uncertificated Shares.  Where the Plan provides for the issuance of stock certificates to evidence the issuance or transfer of Shares, such Shares may be evidenced on an uncertificated basis to the extent not prohibited by applicable law or stock exchange rules.

 

19.5                        Unfunded Plan.  Participants shall have no right, title or interest whatsoever in or to any investments that the Company or an Affiliate may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company or an Affiliate and any Participant, beneficiary, legal representative or any other person. Awards shall be general unsecured obligations of the Company, except that if an Affiliate executes an Award Agreement instead of the Company, the Award shall be a general unsecured obligation of the Affiliate and not an obligation of the Company. To the extent that any individual acquires a right to receive payments from the Company or an Affiliate, such right shall be no greater than the right of an unsecured general creditor of the Company or Affiliate, as applicable. All payments to be made hereunder shall be paid from the general funds of the Company or Affiliate, as applicable, and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan. The Plan is not intended to be subject to the Employee Retirement Income Security Act of 1974.

 

19.6                        No Fractional Shares.  No fractional Shares shall be issued or delivered pursuant to the Plan or any Award Agreement. In the event that any fractional Shares would otherwise result from the application of the terms of an Award, the Company shall instead pay cash in lieu of fractional Shares on such basis as the Committee may determine in its discretion.

 

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19.7                        Other Compensation and Benefit Plans.  Nothing in this Plan shall be construed to limit the right of the Company or an Affiliate to establish other compensation or benefit plans, programs, policies or arrangements. Except as may be otherwise specifically stated in any other benefit plan, policy, program or arrangement, no Award shall be treated as compensation for purposes of calculating a Participant’s rights under any such other plan, policy, program or arrangement.

 

19.8                        No Constraint on Corporate Action.  Nothing in this Plan shall be construed to (i) limit, impair or otherwise affect the Company’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell or transfer all or any part of its business or assets, or (ii) limit the right or power of the Company or an Affiliate to take any action which such entity deems to be necessary or appropriate.

 

19.9                        Severability.  In the event that any provision of the Plan shall be held to be illegal or invalid for any reason, the illegality or invalidity thereof shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

 

19.10                 Requirements of Law.  The granting of Awards and the issuance of Shares pursuant to an Award shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or securities exchanges or markets as may be required. The Company or an Affiliate shall receive the consideration required by law for the issuance of Awards under the Plan. The inability of the Company or an Affiliate to obtain authority from any regulatory body having jurisdiction, which authority is necessary for the lawful issuance and sale of any Shares hereunder, shall relieve the Company or Affiliate of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

 

19.11                 Governing Law.  The Plan and all Award Agreements hereunder shall be construed in accordance with and governed by the laws of the State of Colorado, excluding any conflicts or choice of law principles which might otherwise result in construction or interpretation of the Plan or an Award Agreement under the substantive law of another jurisdiction.

 

19.12                 Recovery of Compensation in Connection with Financial Restatement. Notwithstanding any other provision of this Plan or any applicable Award Agreement to the contrary, if the Board determines that the Company is required to restate its financial statements due to material noncompliance with any financial reporting requirement under the law, whether such noncompliance is the result of misconduct or other circumstances, a Participant will be required to reimburse the Company for any amounts earned or payable with respect to an Award to the extent required by and otherwise in accordance with applicable law and any Company policies. Without limiting the foregoing, all Awards granted or other compensation paid by the Company under the Plan will be subject to any compensation recapture policies required by applicable law (including the Sarbanes-Oxley Act of 2002) or that are established by the Board or the Committee from time to time, in their respective sole discretion, including any clawback policy adopted or implemented by the Board or Committee in respect of the Dodd-Frank Wall Street Reform and Consumer 

 

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Protection Act of 2010 and such regulations as are promulgated thereunder from time to time to the extent required therein and the implementing regulations.

 

ARTICLE 20.
 SECTION 409A OF THE CODE

 

Awards issued under the Plan are intended to be exempt from or comply with Section 409A of the Code, and, accordingly, to the maximum extent permitted, the Plan and each Award shall be interpreted and administered in accordance with that intent. Notwithstanding anything to the contrary in the Plan or any Award Agreement, to the extent required to avoid accelerated taxation and tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six (6) month period immediately following the Participant’s termination of service shall instead be paid on the first payroll date after the six-month anniversary of the Participant’s separation from service (or the Participant’s death, if earlier). Nothing in the Plan or any Award Agreement will be construed to impose on either the Company or the Committee any obligation to take any action to prevent the assessment of any excise tax or penalty on any Participant under Section 409A of the Code and neither the Company nor the Committee will have any liability to any Participant for such tax or penalty.

 

This Equity Incentive Compensation Plan, as amended, was adopted by the Board of Directors of SM Energy Company on March 28, 2013 subject to approval of the Company’s stockholders effective May 22, 2013.

 

 

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