EXHIBIT
10.4
ST. MARY LAND & EXPLORATION
COMPANY
PERFORMANCE SHARE AWARD
AGREEMENT
This Performance Share Award Agreement (the
“Agreement”) is made effective as
of [Award
Date] 1
(the “Award Date”) by
and between St. Mary Land & Exploration Company, a Delaware
corporation (the “Company”), and the undersigned person
(the “Participant”) to whom performance shares have
been awarded pursuant to the Company’s long term incentive
program (“LTIP”) under the St. Mary Land &
Exploration Company 2006 Equity Incentive Compensation Plan, as
amended (the “Plan”).
Pursuant to the terms of the Plan and this
Agreement, as of the Award Date the Company has made an award (the
“Award”) to the Participant of [Amount] performance
shares (the “Performance Shares”) upon the terms and
conditions set forth below. The performance period for
the Performance Shares shall be the three-year period set forth in
the Performance Share Award Notice attached hereto (the
“Performance Period”). Capitalized terms
used but not defined in this Agreement shall have the meanings
given to them in the Plan.
1. Performance
Shares . The Performance Shares represent the right
to receive, upon the settlement of the Award pursuant to Section 4
hereof after the completion of the Performance Period, a number of
shares (the “Shares”) of the Company’s common
stock, $.01 par value per share (the “Common Stock”),
that will be calculated as set forth in Section 2 below based on
the extent to which the Company’s Performance Criteria (as
defined in Section 2) have been achieved and the extent to which
the Performance Shares have vested. Such actual number
of Shares that may be issued upon settlement of the Award may be
from zero (0) to two (2.0) times the number of Performance Shares
granted on the Award Date. The number of Performance
Shares set forth herein may be referred to as the
“target” number of Shares.
2. Determination
of Number of Shares Earned .
(a) Performance
Criteria . The actual number of Shares that may be
earned under the Award and issued upon settlement of the Award
after completion of the Performance Period shall be based upon the
Company’s achievement of performance criteria (the
“Performance Criteria”) established by the Compensation
Committee of the Board of Directors of the Company (the
“Committee”) for the Performance Period in accordance
with the terms of the Plan and as set forth below and reflected in
the payout matrix (the “Payout Matrix”) attached as
Appendix A hereto and discussed further in subsection (d)
hereof. The Performance Criteria for the calculation of
the actual number of Shares to be issued upon settlement of the
Award as reflected in the Payout Matrix are based on a combination
of (i) the absolute measure of the cumulative total shareholder
return (“TSR”) and associated Compound Annual Growth
Rate (“CAGR”) of the
1 Items in brackets are features that may
vary among individual awards.
Company for the Performance Period, and (ii) the
relative measure of the Company’s TSR and CAGR for the
Performance Period compared with the cumulative TSR and CAGR of the
Peer Companies (as defined below) for the Performance Period as
reflected in the St. Mary Performance Share Plan Peer Group Custom
Index (the “Custom Index”) to be specifically prepared
by Standard & Poor’s, a division of The McGraw-Hill
Companies, Inc. (“S&P”), for the purpose of
administering the LTIP.
(b) Calculation of
TSR and CAGR . The TSR and CAGR of the Company and
the Peer Companies for the Performance Period shall be calculated
in accordance with the methodology utilized by S&P with respect
to the Custom Index.
(c) Peer Companies
and Custom Index . The “Peer Companies”
to be reflected in the Custom Index shall consist of the
constituents of the Oil & Gas Exploration & Production GIC
Sub-Industry Group in the S&P SmallCap 600 Index and the
S&P MidCap 400 Index, excluding the Company. The
Custom Index will be equal weighted, and will be adjusted to
include the dividend payments of the constituents of the Custom
Index. The Custom Index will be rebalanced on a
quarterly basis, and will also be rebalanced whenever there are
additions and deletions to the S&P SmallCap 600 and the S&P
MidCap 400 indices. The Custom Index is the exclusive
property of S&P. The Company has contracted with
S&P to maintain and calculate the Custom
Index. S&P shall have no liability for any errors or
omissions in calculating the Custom Index.
(d) Payout
Matrix . The Payout Matrix attached as Appendix A
hereto sets forth the possible multipliers, which range from zero
percent (0%) to two hundred percent (200%), which may be applied to
the number of vested Performance Shares to determine the actual
number of Shares to be issued under this Award upon settlement of
the Award after the completion of the Performance
Period. The final multiplier (the “Final
Multiplier”) shall be determined by the Committee after the
completion of the Performance Period based on the two variables
that comprise the Performance Criteria, related to (i) the
Company’s TSR and CAGR for the Performance Period, and (ii)
the Peer Companies’ TSR and CAGR for the Performance Period
as reflected in the Custom Index. The number of Shares,
if any, that shall be issued to the Participant upon settlement of
this Award shall be calculated as the number of Performance Shares
that have vested in accordance with Section 3 or Section 6 hereof,
multiplied by the Final Multiplier, as determined by the Committee
in accordance with the Payout Matrix. There shall be no
rounding of variables or extrapolation of variables between data
points within the Payout Matrix, and the data point for which the
associated variables equal or exceed the target variables for such
data point, but do not result in qualification for another higher
data point, shall be utilized with respect to the Final
Multiplier. Any fractional Shares which would otherwise
result from application of the Final Multiplier shall be rounded up
to the nearest whole share of Common Stock.
3. Vesting of
Performance Shares .
2
(a) Vesting
. Subject to the provisions contained herein, the
Performance Shares shall vest over the Performance Period as set
forth in the vesting schedule contained in the attached Performance
Share Award Notice (the “Vesting
Schedule”). As of the Award Date, the Participant
is an employee of the Company or a subsidiary
thereof. If the Participant ceases to be an employee of
the Company or a subsidiary thereof prior to the vesting of all of
the Performance Shares pursuant to the Vesting Schedule, the
Participant shall forfeit the remaining unvested Performance Shares
under the Award, except as otherwise provided in this Section 3 and
Section 6.
(b) Continued
Vesting Upon Early Retirement . The Performance
Shares shall, notwithstanding any other provisions of this Section
3, continue to vest according to the Vesting Schedule after the
termination of the Participant’s employment with the Company
or a subsidiary thereof if (i) such termination is the result of
the Participant’s retirement from the Company or a subsidiary
thereof upon the Participant’s having both reached the age of
sixty (60) and completed twelve (12) years of service with the
Company or a subsidiary thereof, and (ii) the Participant does not
after such early retirement become employed on a full-time basis by
a competitor of the Company prior to the earlier of the settlement
of this Award or the Participant’s reaching the age of
sixty-five (65). Any such continued vesting of the
Performance Shares pursuant to this Section 3(b) will not result in
an acceleration of the Settlement Date (as defined below), since
the number of Shares earned under this Award shall be calculated
after the completion of the Performance Period.
(c) Acceleration
Upon Death, Total Disability or Normal Retirement
. The Performance Shares shall become fully vested,
notwithstanding any other provisions of this Section 3, upon
termination of the Participant’s employment with the Company
or a subsidiary thereof because of death, total disability or
retirement upon reaching the Company’s normal retirement age
of sixty-five (65). Any such acceleration of the vesting
of the Performance Shares pursuant to this Section 3(c) will not
result in an acceleration of the Settlement Date (as defined
below), since the number of Shares earned under this Award shall be
calculated after the completion of the Performance
Period. For purposes of this Agreement, a “total
disability” shall mean a medically determinable physical or
mental impairment that can be expected to result in death or can be
expected to last for a continuous period of not less than 12
months, by reason of which the Participant is unable to engage in
any substantial gainful activity or is receiving income replacement
benefits for a period of not less than three months under an
accident and health plan covering employees of the
Company.
(d) Termination for
Cause . Notwithstanding any other provisions of this
Section 3, the Participant shall forfeit all Performance Shares
under this Award upon the termination of the employment of the
Participant by the Company or a subsidiary thereof for Cause (as
defined below) prior to the completion of the Performance
Period.
4. Settlement of
Performance Shares . Following the last day of the
Performance Period and prior to the Settlement Date (as defined
below), the Committee shall determine, and
3
certify in
writing to the extent deemed necessary or advisable or as required
to comply with Section 162(m) of the Internal Revenue Code of 1986,
as amended (the “Code”), (i) the extent
to which the Performance Criteria have been achieved over the
Performance Period, and (ii) the Final Multiplier. The
Final Multiplier shall then be applied to the number of vested
Performance Shares to determine the number of Shares (the
“Earned Shares”), if any, to be issued to the
Participant in settlement of the Award. The
determination of the Earned Shares by the Committee shall be
binding on the Participant and conclusive for all
purposes. The Earned Shares, if any, shall be issued to
the Participant in settlement of the Award on or about the
settlement date set forth in the attached Performance Share Award
Notice (the &ldqu
