EXHIBIT 10.2
PIONEER NATURAL RESOURCES COMPANY
2006 LONG TERM INCENTIVE PLAN
PERFORMANCE UNIT AWARD AGREEMENT
(INSERT DATE OF GRANT)
To: _______________________________
Pioneer Natural Resources Company, a Delaware corporation (the "Company"),
is pleased to grant you an award (the "Award") to receive an aggregate of
__________ performance units (each, a "Performance Unit") in respect of the
period January 1, 2007 through December 31, 2009 (the "Performance Period").
This award is subject to your acceptance of and agreement to all the applicable
terms, conditions and restrictions described in this Performance Unit Award
Agreement (the "Agreement") and the Pioneer Natural Resources Company 2006 Long
Term Incentive Plan (as it may be amended from time to time, the "Plan"). A copy
of the Plan is available upon request. Except as provided below, to the extent
that any provision of this Agreement conflicts with the expressly applicable
terms of the Plan, you acknowledge and agree that those terms of the Plan shall
control and, if necessary, the applicable provisions of this Agreement shall be
deemed amended so as to carry out the purpose and intent of the Plan. Terms that
have their initial letters capitalized, but that are not otherwise defined in
this Agreement, shall have the meanings given to them in the Plan in effect as
of the date of this Agreement.
This Agreement sets forth the terms of the agreement between you and the
Company with respect to the Performance Units. By accepting this Agreement, you
agree to be bound by all of the terms hereof.
1. Overview of Performance Units.
(a) Performance Units Generally. Each Performance Unit represents a
contractual right to receive one share of the Company's common stock (the
"Common Stock"), subject to the terms and conditions of this Agreement; provided
that, based on the relative achievement against each Performance Objective (as
defined below), the number of shares of Common Stock that may be deliverable
hereunder in respect of the Performance Units may range from 0% to 250% of the
number of Performance Units stated in the preamble to this Agreement (such
stated number of Performance Units hereafter called the "Initial Performance
Units"). Your right to receive Common Stock in respect of Performance Units is
generally contingent, in whole or in part, upon (i) the achievement of the
performance objective outlined in Section 2 below (the "Performance Objective")
and (ii) except as provided in Section 4 or Section 5, your continued employment
with the Company or one of its Subsidiaries through the end of the Performance
Period.
(b) Dividend Equivalents. With respect to each outstanding Performance
Unit, the Company shall credit a book entry account with an amount equal to the
amount of any cash dividend paid on one share of Common Stock. The amount
credited to such book entry account shall be payable to you at the same time or
times, and subject to the same terms and conditions as are applicable to, your
Performance Units; provided that, if more than the Initial Performance Units
shall become payable in accordance with this Agreement, the maximum amount
payable in respect of such dividend equivalents shall be the amount credited to
your book entry account. Dividends and distributions payable on Common Stock
other than in cash will be addressed in accordance with Section 8 hereof.
2. Total Shareholder Return Objective. The Performance Objective with
respect to the Initial Performance Units is based on Total Shareholder Return.
Total Shareholder Return shall mean, as to the Company and each of the Peer
Companies (as defined below), the annualized rate of return shareholders receive
through stock price changes and the assumed reinvestment of dividends paid over
the Performance Period. Dividends per share paid other than in the form of cash
shall have a value equal to the amount of such dividends reported by the issuer
to its shareholders for purposes of Federal income taxation. For purposes of
determining the Total Shareholder Return for the Company and each of the Peer
Companies, the change in the price of the Company's Common Stock and of the
common stock of each Peer Company, as the case may be, shall be based upon the
average of the closing stock prices of the Company and such Peer Company on each
trading day in the 60-day period preceding each of the start (the "Initial
Value") and the end (the "Closing Value") of the Performance Period. The Initial
Value of the Common Stock to be used to determine Total Shareholder Return over
the Performance Period is $41.78 per share. Achievement with respect to this
Performance Objective shall be determined based on the Company's relative
ranking in respect of the Performance Period with regard to Total Shareholder
Return as compared to Total Shareholder Return of the Peer Companies, and shall
be determined in accordance with the applicable table as set forth in Appendix A
hereto. The applicable table shall be determined based on the number of Peer
Companies for the Performance Period. A company shall be a "Peer Company" if it
(i) is one of the companies listed on Appendix A hereto and (ii) has a class of
common equity securities listed to trade under Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), during each day of the
Performance Period. The number of Performance Units, if any, determined to be
earned pursuant to the applicable table under Appendix A shall be referred to
"Earned Performance Units".
3. Conversion of Performance Units; Delivery of Performance Units. Unless
an earlier date applies pursuant to Section 4(a), Section 5(c) or Section 6,
payment in respect of Earned Performance Units shall be made not later than
March 15 of the year following the year in which the Performance Period ends.
Unless otherwise determined by the Committee, all payments in respect of Earned
Performance Units shall be made in freely transferable shares of Common Stock;
provided, however, that if and to the extent that the reservation of the power
to settle (as opposed to the act of settling) Performance Units in cash instead
of shares would result in an additional financial accounting charge for the
Company, the Committee shall not have the right to settle such Performance Units
other than in the form of Common Stock (or, if applicable, stock of a Successor
Corporation (as defined in Section 5)). Neither this Section 3 nor any action
taken pursuant to or in accordance with this Section 3 shall be construed to
create a trust of any kind. Any shares of Common Stock issued to you pursuant to
this Agreement in settlement of
Earned Performance Units shall be in book entry form registered in your name.
Any fractional Earned Performance Units shall be rounded up to the nearest whole
share of Common Stock.
4. Termination of Employment.
(a) Death or Disability. In the event that your employment with the Company
or a Subsidiary terminates during the Performance Period due to your death or
Disability (as such term is defined in the Severance Agreement between you and
the Company or one of its subsidiaries), you shall be deemed to have earned a
number of Performance Units equal to the product of (i) and (ii), where (i) and
(ii) are:
(i) the Initial Performance Units;
(ii) a fraction (the "Pro-Ration Fraction"), (A) the numerator of which is
the number of full months (counting the month in which your
termination of employment occurs as a full month) during the
Performance Period during which you were employed and (B) the
denominator of which is 36.
Distribution of shares of Common Stock in respect of the Performance Units
determined to be earned by reason of this Section 4(a) shall be made not later
than 75 days following your death or Disability and shall be in full and
complete satisfaction of all of your rights (and the rights of any person who
derives his, her or its rights from you) under this Agreement.
(b) Normal Retirement. In the event that your employment with the Company
and each of its Subsidiaries by which you are employed terminates during the
Performance Period due to your retirement at or after having attained age 60,
you shall be deemed to have earned, as of the end of the Performance Period,
that number of Performance Units equal to the product of (i) the number of
Earned Performance Units that you would have earned in accordance with Section 2
had you remained employed through the end of the Performance Period multiplied
by (ii) the Pro-Ration Fraction. Any portion of the Performance Units that
cannot become earned and payable in accordance with the preceding sentence shall
terminate and automatically be cancelled as of the date of your termination of
employment. Any portion of your Performance Units that is eligible to be earned
pursuant to first sentence of this subparagraph (b), but is not earned as of the
end of the Performance Period, shall terminate and be canceled upon the
expiration of such Performance Period.
(c) Termination Without Cause or Termination For Good Reason. In the event
that your employment with the Company and each of its Subsidiaries by which you
are employed is terminated during the Performance Period (x) by the Company and
such Subsidiaries and such termination is not a Termination for Cause or (y) by
you and such termination is a Termination for Good Reason (as each such term is
defined in the Severance Agreement between you and the Company or one of its
subsidiaries), then notwithstanding the terms of any such Severance Agreement
you shall be deemed to have earned, as of the end of the Performance Period, the
number of Earned Performance Units that you would have earned in accordance with
Section 2 had you remained employed through the end of the Performance Period.
Any portion of your Performance Units that is eligible to be earned pursuant to
the preceding sentence, but is not
earned as of the end of the Performance Period, shall terminate and be canceled
upon the expiration of such Performance Period.
(d) Other Termination of Employment. Unless otherwise determined by the
Committee at or after grant, in the event that your employment with the Company
or a Subsidiary terminates prior to the end of the Performance Period for any
reason other than those listed in Section 4(a), 4(b) or 4(c), all of your
Performance Units shall terminate and automatically be canceled upon such
termination of employment.
5. Change of Control. Notwithstanding the provisions of Section 1 through
Section 4 hereof or the terms of any Change of Control Agreement between you and
the Company or a Subsidiary (a "CIC Agreement"), if you have been continuously
employed from the grant specified above until the date that the Change of
Control occurs (the "Change of Control Date") or you are treated, for purposes
of such CIC Agreement, to have remained in employment through the Change of
Control Date, upon the occurrence of a Change of Control your rights in respect
of the Performance Units shall be determined as provided in Section 5(a). If
your employment shall have terminated prior to the Change of Control Date, but
at least some of your Performance Units remain outstanding pursuant to Section
4(b) or Section 4(c), your rights in respect of your outstanding Performance
Units shall be determined as provided in Section 5(b).
(a) If a Change of Control occurs, you will be issued a number of shares of
Common Stock equal to the number of Performance Units that would have become
Earned Performance Units in accordance with the provisions of Section 2 assuming
that:
(i) the Performance Period ended on the Change of Control Date and
(ii) the determination of whether, and to what extent, the Performance
Objective is achieved, is based on actual performance against the
stated performance criteria through the Change of Control Date.
(b) If your employment terminated prior to the Change of Control Date, but
some or all of your Performance Units are still outstanding on such date
pursuant to Section 4(b) or 4(c), then, you shall receive a number of shares of
Common Stock equal to the product of (A) the number of shares of Common Stock
that would have been issued to you in respect to the Initial Performance Units,
determined as though Section 5(a) was applicable to you times (B) the Pro-Ration
Fraction.
(c) Any shares of Common Stock issuable pursuant to this Section 5 shall be
issued immediately following (and not later than) 5 business days after the
Change of Control Date and shall be fully earned and freely transferable as of
the date of the Change of Control. Notwithstanding anything else contained in
this Section 5 to the contrary, if the Change of Control involves a merger,
reclassification, reorganization or other similar transaction pursuant to which
the Common Stock is exchanged for stock of the surviving corporation in such
merger, the successor to the corporation or the direct or indirect parent of
such a corporation (collectively, the "Successor Corporation"), then you shall
receive, instead of each share of Common Stock otherwise deliverable hereunder,
the same consideration (whether stock, cash or other property) payable or
distributable in such transaction in respect of a share of Common
Stock. Any property distributed pursuant to this Section 5(c), whether in shares
of the Successor Corporation or otherwise, shall in all cases be freely
transferable without any restriction (other than any such restriction that may
be imposed at applicable law), and any securities issued hereunder shall be
registered to trade under the 1934 Act, and shall have been registered under the
Securities Act of 1933, as amended (the "1933 Act").
(d) Notwithstanding anything else contained in this Section 5 to the
contrary, the Committee may elect, at its sole discretion by resolution adopted
prior to the Change of Control Date, to satisfy your rights in respect of the
Performance Units (as determined pursuant to the foregoing provisions of this
Section 5), in whole or in part, by making a cash payment to you within 5
business days of the Change of Control Date in respect of all such Performance
Units or such portion of such Performance Units as the Committee shall
determine. Any cash payment for any Performance Unit shall be equal to the Fair
Market Value of the number of shares of Common Stock into which it would
convert, determined on the Change of Control Date.
6. Nontransferability of Awards. The Performance Units granted hereunder
may not be sold, transferred, pledged, assigned, encumbered or otherwise
alienated or hypothecated, other than by will or by the laws of descent and
distribution. Following your death, any shares distributable (or cash payable)
in respect of Performance Units will be delivered or paid, at the time specified
in Section 3 or, if applicable, Section 4 or Section 5, to your beneficiary in
accordance with, and subject to, the terms and conditions hereof and of the
Plan.
7. Beneficiary Designation. You may from time to time name any beneficiary
or beneficiaries (who may be named contingently or successively) to whom shall
be delivered or paid under this Agreement following your death any shares that
are distributable or cash payable hereunder in respect of your Performance Units
at the time specified in Section 3 or, if applicable, Section 4 or Section 5.
Each designation will revoke all prior designations, shall be in a form
prescribed by the Committee, and will be effective only when filed in writing
with the Committee during your lifetime. In the absence of any such effective
designation, shares issuable in connection with your death shall be paid by your
surviving spouse, if any, or otherwise to your estate.
8. Adjustments in Respect of Performance Units. In the event of any common
stock dividend or common stock split, recapitalization (including, but not
limited to, the payment of an extraordinary dividend), merger, consolidation,
combination, spin-off, distribution of assets to stockholders (other than cash
dividends), exchange of shares, or other similar corporate change with regard to
the Company or any Peer Company, appropriate adjustments shall be made by the
Committee to the Initial Value of the corresponding common stock, and, if any
such event occurs with respect to the Company, in the aggregate number of
Performance Units subject to this Agreement. The Committee's determination with
respect to any such adjustment shall be conclusive.
9. Effect of Settlement. Upon conversion into shares of Common Stock (or
Successor Corporation common stock) pursuant to Section 3 or Section 5, a cash
settlement of your rights, at the election of the Committee at its sole
discretion pursuant to Section 3 or Section 5(d), or a combination of the
issuance of Common Stock and the payment of cash in accordance with any
applicable provisions of this Agreement, all of your Performance Units subject
to the
Award shall be cancelled and terminated. If and to the extent that you are still
employed at the end of the Performance Period, and none of your Performance
Units shall have become earned in accordance with the terms of this Agreement,
all such Performance Units subject to the Award shall be cancelled and
terminated.
10. Furnish Information. You agree to furnish to the Company all
information requested by the Company to enable it to comply with any reporting
or other requirements imposed upon the Company by or under any applicable
statute or regulation.
11. Remedies. The parties to this Agreement shall be entitled to recover
from each other reasonable attorneys' fees incurred in connection with the
enforcement of the terms and provisions of this Agreement whether by an action
to enforce specific performance or for damages for its breach or otherwise.
12. Information Confidential. As partial consideration for the granting of
the Award hereunder, you hereby agree with the Company that you will keep
confidential all information and knowledge, except that which has been disclosed
in any public filings required by law, that you have relating to the terms and
conditions of this Agreement; provided, however, that such information may be
disclosed as required by law and may be given in confidence to your spouse, tax
and financial advisors, or to a financial institution to the extent that such
information is necessary to secure a loan. In the event any breach of this
promise comes to the attention of the Company, it shall take into consideration
that breach in determining whether to recommend the grant of any future similar
award to you, as a factor militating against the advisability of granting any
such future award to you.
13. Payment of Taxes. The Company may from time to time require you to pay
to the Company (or the Company's Subsidiary if you are an employee of a
Subsidiary of the Company) the amount that the Company deems necessary to
satisfy the Company's or its Subsidiary's current or future obligation to
withhold federal, state or local income or other taxes that you incur as a
result of the Award. With respect to any required tax withholding, unless
another arrangement is permitted by the Company in its discretion, the Company
shall withhold from the shares of Common Stock to be issued to you the number of
shares necessary to satisfy the Company's obligation to withhold taxes, that
determination to be based on the shares' Fair Market Value, as defined in the
Plan, at the time as of which such determination is made. In the event the
Company subsequently determines that the aggregate Fair Market Value, as defined
in the Plan, of any shares of Common Stock withheld as payment of any tax
withholding obligation is insufficient to discharge that tax withholding
obligation, then you shall pay to the Company, immediately upon the Company's
request, the amount of that deficiency.
14. Right of the Company and Subsidiaries to Terminate Employment. Nothing
contained in this Agreement shall confer upon you the right to continue in the
employ of the Company or any Subsidiary of the Company, or interfere in any way
with the rights of the Company or any Subsidiary of the Company to terminate
your employment at any time.
15. No Liability for Good Faith Determinations. Neither the Company nor the
members of the Board and the Committee shall be liable for any act, omission or
determination
taken or made in good faith with respect to this Agreement or the Performance
Units granted hereunder.
16. No Guarantee of Interests. The Board and the Company do not guarantee
the Common Stock of the Company from loss or depreciation.
17. Company Records. Records of the Company or its Subsidiaries regarding
your period of employment, termination of employment and the reason therefor,
leaves of absence, re-employment, and other matters shall be conclusive for all
purposes hereunder, unless determined by the Company to be incorrect.
18. Severability. If any provision of this Agreement is held to be illegal
or invalid for any reason, the illegality or invalidity shall not affect the
remaining provisions hereof, but such provision shall be fully severable and
this Agreement shall be construed and enforced as if the illegal or invalid
provision had never been included herein.
19. Notices. Whenever any notice is required or permitted hereunder, such
notice must be in writing and personally delivered or sent by mail. Any such
notice required or permitted to be delivered hereunder shall be deemed to be
delivered on the date on which it is personally delivered, or, whether actually
received or not, on the third Business Day after it is deposited in the United
States mail, certified or registered, postage prepaid, addressed to the person
who is to receive it at the address which such person has theretofore specified
by written notice delivered in accordance herewith. The Company or you may
change, at any time and from time to time, by written notice to the other, the
address which it or he had previously specified for receiving notices.
The Company and you agree that any notices shall be given to the Company or
to you at the following addresses:
Company: Pioneer Natural Resources Company
Attn: Corporate Secretary
5205 N. O'Connor Boulevard, Suite 200
Irving, Texas 75039-3746
Holder: At your current address as shown in the Company's records.
20. Waiver of Notice. Any person entitled to notice hereunder may waive
such notice in writing.
21. Successor. This Agreement shall be binding upon you, your legal
representatives, heirs, legatees and distributees, and upon the Company, its
successors and assigns.
22. Headings The titles and headings of Sections are included for
convenience of reference only and are not to be considered in construction of
the provisions hereof.
23. Governing Law. All questions arising with respect to the provisions of
this Agreement shall be determined by application of the laws of the State of
Delaware except to the extent Delaware law is preempted by federal law. The
obligation of the Company to sell and deliver Common Stock hereunder is subject
to applicable laws and to the approval of any governmental authority required in
connection with the authorization, issuance, sale, or delivery of such Common
Stock.
24. Execution of Receipts and Releases. Any payment of cash or any issuance
or transfer of shares of Common Stock or other property to you, or to your legal
representative, heir, legatee or distributee, in accordance with the provisions
hereof, shall, to the extent thereof, be in full satisfaction of all claims of
such Persons hereunder. The Company may require you or your legal
representative, heir, legatee or distributee, as a condition precedent to such
payment or issuance, to execute a release and receipt therefor in such form as
it shall determine.
25. Amendment. This Agreement may be amended at any time unilaterally by
the Company provided that such amendment is consistent with all applicable laws,
including Section 409A of the Code, and does not reduce any rights or benefits
you have accrued pursuant to this Agreement. This Agreement may also be amended
in any manner consistent with all applicable laws, including Section 409A of the
Code, by a written consent executed by you and a duly authorized representative
of the Company.
26. The Plan. This Agreement is subject to all the terms, conditions,
limitations and restrictions contained in the Plan; provided, however, that
notwithstanding anything to the contrary herein, any provision of this Agreement
that is inconsistent with the provisions of Section 9(c), (e), and (f) of the
Plan shall control over such provisions of the Plan.
27. Agreement Respecting Securities Act of 1933. You represent and agree
that you will not sell the Common Stock that may be issued to you pursuant to
your Performance Units except pursuant to an effective registration statement
under the 1933 Act or pursuant to an exemption from registration under the 1933
Act (including Rule 144).
28. No Shareholder Rights. The Performance Units granted pursuant to this
Agreement do not and shall not entitle you to any rights as a shareholder of
Common Stock until
such time as you receive shares of Common Stock pursuant to this Agreement. Your
rights with respect to the Performance Units shall remain forfeitable at all
times prior to the date on which rights become earned in accordance with this
Agreement.
If you accept this Performance Unit Award Agreement and agree to its terms
and conditions, please so confirm by signing and returning the duplicate of this
Agreement enclosed for that purpose.
Very Truly Yours,
PIONEER NATURAL RESOURCES COMPANY
By:______________________________
Name:____________________________
Title:___________________________
Date: ___________________________
ACKNOWLEDGED AND AGREED:
By: _____________________________
Name: _____________________________
Appendix A
Determination of Performance Units Earned
Peer Companies:
Apache Corporation Plains Exploration and Production Company
Chesapeake Energy Corporation Pogo Producing Company
Cimarex Energy Co. Quicksilver Resources Inc.
EOG Resources, Inc. Range Resources Corporation
Newfield Exploration Company XTO Energy Inc.
Noble Energy, Inc.
In addition, if and solely to the extent that at the end of the Performance
Period the number of companies listed above that qualify as Peer Companies is
less than seven, then such number of the following additional companies
(selected in the order presented below) as is necessary to have seven Peer
Companies shall be treated as though Peer Companies for the entire Performance
Period, provided that each such additional company satisfies the requirement to
be a Peer Company throughout the Performance Period. If, after adding all
eligible alternative companies, the number of companies qualifying as Peer
Companies for the Performance Period is less than seven, the Committee shall, in
good faith, determine the percentage of the Performance Units earned in a manner
consistent with the requirements to qualify the Performance Units as
performance-based compensation exempt from the limitations imposed by Section
162(m) of the Internal Revenue Code of 1986, as amended.
Alternate Peer Companies: Forest Oil Corporation
Southwestern Energy Company
Ultra Petroleum Corp.
11 Peer Companies 10 Peer Companies 9 Peer Companies 8 Peer Companies 7 Peer Companies
Percentage of Percentage of Percentage of Percentage of Percentage of
Rank Initial Initial Initial Initial Initial
Against Performance Performance Performance Performance Performance
Peers Units Earned Units Earned Units Earned Units Earned Units Earned
-------- -------------- -------------- -------------- -------------- --------------
1 250% 250% 250% 250% 250%
2 200% 200% 200% 200% 200%
3 175% 175% 170% 166% 155%
4 150% 150% 140% 133% 110%
5 125% 125% 110% 100% 70%
6 110% 100% 80% 65% 30%
7 75% 75% 50% 30% 0%
8 50% 50% 25% 0% 0%
9 25% 25% 0% 0%
10 0% 0% 0%
11 0% 0%
12 0%
Schedule I
The document to which this Schedule I is attached is the form of
Performance Unit Award Agreement between the Company and each of Scott D.
Sheffield and Timothy L. Dove.
The form of Performance Unit Award Agreement between the Company and its
other executive officers varies from this Exhibit 10.2 by modifying Section 4(c)
to provide, in its entirety, the following:
(c) Termination Without Cause or Termination For Good Reason. In the event
that your employment with the Company and each of its Subsidiaries by which you
are employed is terminated during the Performance Period (x) by the Company and
such Subsidiaries and such termination is not a Termination for Cause or (y) by
you and such termination is a Termination for Good Reason (as each such term is
defined in the Severance Agreement between you and the Company or one of its
subsidiaries), you shall be deemed to have earned, as of the end of the
Performance Period, that number of Performance Units equal to the product of (i)
the number of Earned Performance Units that you would have earned in accordance
with Section 2 had you remained employed through the end of the Performance
Period multiplied by (ii) the Pro-Ration Fraction. Any portion of the
Performance Units that cannot become earned and payable in accordance with the
preceding sentence shall terminate and automatically be cancelled as of the date
of your termination of employment. Any portion of your Performance Units that is
eligible to be earned pursuant to the second preceding sentence, but is not
earned as of the end of the Performance Period, shall terminate and be canceled
upon the expiration of such Performance Period.