Exhibit 10.5
Teton Energy Corporation 2005
Long-Term Incentive Plan
2005 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:
July ,
2005
Target Number of Performance
Share Units
Awarded:
Base Units;
Stretch Target Units
Performance Period:
1 January 2005
to 31
December 2007
Performance Measure:
Production (MCF), Management
Efficiency and Effectiveness (“Management E&E”),
Reserves (bcf), Finding and Development/Exploration Costs
(“F&D/Exploration”), and the price of the
Company’s common stock (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 Production (MCF), Management Efficiency and
Effectiveness (“Management E&E”), Reserves (bcf),
Finding and Development/Exploration Costs
(“F&D/Exploration”), and the price of the
Company’s common stock. 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.
1
Achievement of the following targets
in 2005, 2006, and 2007 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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2005
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2006
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2007
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Composite Measurement
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100.00
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271.31
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397.30
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Achievement of the following targets
in 2005, 2006, and 2007 shall entitle the Participant to payment of
200% of the Target Number of Performance Share Units
awarded:
Stretch Performance
Targets
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2005
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2006
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2007
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Composite Measurement
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119.66
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410.42
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628.52
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Achievement of the following targets
in 2005, 2006, and 2007 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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2005
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2006
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2007
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Composite Measurement
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84.17
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203.29
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292.98
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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, and as reflected on the graphs
attached hereto. 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 2005 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 2006 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 2007 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 31 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 made on one of the Participant’s next
two regular paydays 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 or Board membership of 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 accordance with the Plan.
11. Tax
Withholding . The
Company shall have the power and the right to deduct or withhold,
or require the Participant or beneficiary to remit to the Company,
an amount sufficient to satisfy federal, state, and local taxes,
domestic or foreign, required by law or regulation to be
w
