Exhibit 10.5
Teton Energy Corporation 2005
Long-Term Incentive Plan
2006 Performance Share Unit Award
Agreement
You have been selected to be a
Participant in the Teton Energy Corporation 2005 Long-Term
Incentive Plan (the “Plan”), as specified
below:
Participant:
Date of Award:
Target Number of Performance
Share Units Awarded:
Base
Units; Stretch Target
Units
Performance Period:
1 January 2006
to 31
December 2008
Performance Measure:
Completion of acquisitions that
increase the Company’s asset base; Management’s
efficiency and effectiveness; Measurement of Teton’s stock
performance relative to a stock performance index of peers of the
Company, which index is compiled by an independent third party
based on the size and growth prospects of the Company (the
“Performance Measures”). The Performance Measures are
consolidated into a composite measure based on the relative
weighting of each component as a percentage of 100%. Performance
measures are based on the attainment of one, two, and three year
objectives.
THIS AWARD AGREEMENT, effective as
of the Date of Award set forth above, represents the award of
Performance Share Units by Teton Energy Corporation, a Delaware
corporation (the “Company”), to the Participant named
above, pursuant to the provisions of the Plan, which is attached as
Exhibit A, and pursuant to the plan administration document
(the “Plan Administration”), which is attached as
Exhibit B. The Plan and the Plan Administration provide a
complete description of the terms and conditions governing
Performance Share Units. If there is any inconsistency between the
terms of this Award Agreement and the terms of the Plan, the
Plan’s terms shall completely supersede and replace the
conflicting terms of this Award Agreement. All capitalized terms
shall have the meanings ascribed to them in the Plan, unless
specifically set forth otherwise herein. In consideration of the
mutual promises contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are
acknowledged, the parties hereto agree as follows:
1. Employment by the
Company . The Performance
Share Units granted hereunder are awarded on the condition that the
Participant remains employed by the Company from the Date of Award
through the end of the Performance Period, as specified above.
However, neither such condition nor the award of the Performance
Share Units shall impose upon the Company any obligation to retain
the Participant in its employ for any given period or upon any
specific terms of employment.
2. Earning Performance Share
Units . Subject to the
terms of the Plan and this Award Agreement, the Participant shall
be entitled to receive payment of the number and value of
Performance Share Units earned by the Participant over the
Performance Period, where the number of Performance Share Units is
determined as a function of the extent to which the corresponding
performance goals have been achieved.
3. Performance
Measures . The
Performance Measures under this Award Agreement shall be based on a
combination of Completion of acquisitions that increase the
Company’s asset base; Management’s efficiency and
effectiveness; Measurement of Teton’s stock performance
relative to a stock performance index of peers of the Company,
which index is compiled by an independent third party based on the
size and growth prospects of the Company. The Performance Measures
are consolidated into a composite measure based on the relative
weighting of each component as a percentage of 100%. Performance
measures are based on the attainment of one, two, and three year
objectives.
Achievement of the following targets
in 2006, 2007, and 2008 will entitle the Participant to payment of
the Target Number of Performance Share Units awarded as set forth
above, subject to other provisions of the Plan and this Award
Agreement:
Base Performance
Targets
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2006
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2007
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2008
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Composite Measurement
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100.00
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100.00
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100.00
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Achievement of the following targets
in 2006, 2007, and 2008 shall entitle the Participant to payment of
200% of the Target Number of Performance Share Units
awarded:
Stretch Performance
Targets
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2006
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2007
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2008
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Composite Measurement
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122.50
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121.50
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118.00
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Achievement of the following targets
in 2006, 2007, and 2008 shall entitle the Participant to payment of
50% of the Target Number of Performance Share Units
awarded:
Below Base Performance
Targets
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2006
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2007
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2008
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Composite Measurement
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50.00
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50.00
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50.00
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Achievement of less than the
aforementioned targets shall result in no payment of Performance
Share Units to the Participant under this Award
Agreement.
Achievement of results between
Performance Targets identified above shall entitle the Participant
to payment of the number of Performance Share Units interpolated
according to a performance achievement function defined by the
foregoing achievement levels. Such interpolation shall be made by
the Committee in its sole discretion and shall be
binding.
In the event that the Base
Performance Targets for 2006 are achieved, 20% of the Target
Performance Share Units shall vest and be paid out to the
Participant. In the event that the Base Performance Targets for
2007 are achieved, 30% of the Target Performance Share Units shall
vest and be paid out to the Participant. In the event that the Base
Performance Targets for 2008 are achieved, the balance or 50% of
the Target Performance Shares Units shall vest and be paid out to
the Participant. Stretch targets, if achieved, will be paid out
according to the same schedule.
4. Form and Timing of
Payment of Performance Share Units . Payment of earned Performance Share Units
shall be made as soon as practicable but in no event after
March 15 of the calendar year following the calendar year of
the close of the applicable Performance Period. Subject to the
Plan, the Committee, as that term is defined in the Plan, has
authorized that the future payment of any earned Performance Share
Units shall be made 100% in Shares. The Company will withhold from
any such payout Shares having a value equivalent to the amount
needed to satisfy the minimum statutory tax withholding
requirements of the Company or its Subsidiary in the appropriate
taxing jurisdiction.
5. Voting Rights and
Dividends . During the
Performance Period and until the date of payment of Performance
Share Units as provided for in Section 4, the Participant will
not have voting rights with respect to the Performance Share Units.
During the Performance Period and until and including the date of
payment of Performance Share Units as provided in Section 4,
the Participant shall receive all dividends, dividend equivalents
and other distributions paid with respect to the number of shares
of Common Stock of the Company equal to the number of Performance
Share Units granted under this Award. Any such payment of dividend,
dividend equivalent or other distribution will be held in escrow
and granted to Participant upon the attainment of applicable
targets and vesting of shares. Amounts to be credited to such
escrow shall be credited within 15 calendar days following the
specified record date.
2
6. Termination of Employment Due
to Death, Disability, or Retirement . In the event the employment of a Participant
is terminated by reason of death, Disability, or Retirement (as
such terms are defined in the Plan) during the Performance Period,
the Participant or the Participant’s beneficiary or estate,
as the case may be, shall be entitled to receive a prorated
payment of the Performance Share Units. The prorated payment shall
be determined by the Committee, in its discretion, based on the
number of full months of the Participant’s employment during
the Performance Period, in relation to the total number of months
in the Performance Period, and shall further be adjusted based on
the achievement of the pre-established performance goals set forth
in Section 3.
Payment of Performance Share Units
shall be made at the time specified by the Committee in its
discretion. Notwithstanding the foregoing, with respect to a
Participant who retires during the Performance Period, payments
shall be made at the same time as payments are made to Participants
who did not terminate employment during the applicable Performance
Period as set forth in Section 4.
7. Termination of Employment for
Other Reasons . In the
event that the Participant terminates employment with the Company
for any reason other than those reasons set forth in
Section 6, or in the event that the Company terminates the
employment of the Participant with or without cause, all
Performance Share Units awarded to the Participant under this Award
Agreement shall be forfeited by the Participant to the Company;
provided, however, that in the event of a termination of the
employment of the Participant by the Company without cause, the
Committee, in its discretion, may waive such automatic
forfeiture provision and pay out on a pro rata basis in accordance
with Section 6.
8. Change in Control
. In the event of a Change in
Control as defined in the Plan, during the Performance Period, the
Target Number of Performance Share Units shall become payable in
full and such payment shall be made within twenty-five (25)
calendar days following the date of the Change in Control. The
Committee, in its discretion, may make such payment of the
Target Number of Performance Share Units in the form of cash
or in shares (or in a combination thereof). The number of Shares to
be issued, if any, shall be equal to the number of earned
Performance Share Units designated by the Committee to be paid in
Shares. The amount of cash to be paid if any shall be equal to the
Fair Market Value, as defined in the Plan, of a share of the Common
Stock of the Company as of the date of the Change in Control
multiplied by the number of Performance Share Units designated by
the Committee to be paid in cash.
9. Nontransferability
. Performance Share 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. Further, except as otherwise determined
by the Committee and provided in this Award Agreement, a
Participant’s rights under the Plan shall be exercisable
during the Participant’s lifetime only by the Participant or
the Participant’s legal representative.
10. Adjustments in Authorized
Shares . The Committee
shall have the sole discretion to adjust the number of Performance
Share Units awarded pursuant to this Award Agreement, in
