EXHIBIT 10(b)
SANTA FE ENERGY RESOURCES, INC.
INCENTIVE COMPENSATION PLAN
(AS AMENDED DECEMBER 12, 1995)
I. OBJECTIVES
The objectives of the Incentive Compensation Plan (the "Plan") are:
To communicate and focus management's attention on
significant business goals.
To identify and reward superior performance.
To provide a competitive compensation package to
attract and retain high quality key employees.
The Plan is intended to encourage key management to achieve and surpass
Company, group and individual objectives through establishing annual
objectives, reviewing performance and awarding cash bonuses based on
the achievement of such objectives.
The purposes of the Plan are to achieve strong business performance,
equitable compensation and a staff of high quality, motivated key
employees.
II. ADMINISTRATION
The Plan shall be under the direction of the Compensation and Benefits
Committee ("Committee") of the Board of Directors of Santa Fe Energy
Resources, Inc. (the "Company").
However, the responsibility for ensuring that administrative procedures
are established for Plan operation, that the Plan is managed in a
timely and effective manner and that periodic analyses of the Plan's
effectiveness are undertaken shall be the duty of a Plan Administrator
appointed by the Committee, who need not be a member of the Committee.
The Plan Administrator shall report his findings, conclusions and
recommendations regarding the Plan's operation and effectiveness to the
Committee from time to time.
The Committee shall have such discretionary authority to administer the
Plan, to construe and interpret the Plan, to decide all questions of
eligibility, to determine the amount, manner and time of payment of any
benefits hereunder and to make all other determinations deemed
necessary or advisable for the administration of the Plan. The attached
Administrative Guidelines have been adopted by the Committee and may be
changed at any time by the Committee in its discretion.
III. ELIGIBILITY
Eligible employees under the Plan are those key employees of the
Company and its subsidiaries who may have a substantial impact on the
operating performance of the Company and its subsidiaries.
Employment positions eligible for participation in the Plan each Plan
Year, and the assigned levels of participation for such positions,
shall be determined by the Committee based upon the recommendation of
the Plan Administrator. However, the Committee may modify such
recommendations in any manner it deems appropriate.
IV. INCENTIVE OPPORTUNITIES
The incentive award opportunity with respect to an eligible employment
position shall be designed to reflect the overall impact of the
position on Company performance and to provide a total cash
compensation package for such position that is in line with key
competitors of the Company.
V. BASIS FOR DETERMINING THE INCENTIVE AWARD
The incentive award may be based upon a combination of Company,
operating unit and/or individual results, in the Committee's
discretion.
The combination of factors, and the respective weights, used in
determining the maximum award for an eligible position will be
established by the Committee on an annual basis. The maximum award with
respect to an eligible position shall be expressed as a percentage
(which shall not be less than 20% nor more than 100%) of the
participant's base salary at the beginning of the Plan year. The
percentage applicable to an eligible position shall be determined by
the Committee. A participant's basis of participation in the Plan will
be communicated to him in writing as early as possible in the Plan
year. However, incentive awards may be increased by up to 25% at the
discretion of the Committee or reduced or eliminated in certain
instances pursuant to Article VII and/or VIII.
VI. PERFORMANCE OBJECTIVES
Performance objectives are intended to support the strategic mission of
the Company and shall be:
Specific and based upon measurable results,
Challenging, but attainable, and
Tailored to each position.
The basis and amount of the incentive award to be provided for
different levels of performance will be established at the beginning of
the Plan Year for each participating position. A performance schedule
for each specific objective shall be established by the Committee to
indicate the award payable at varying levels of performance.
Performance objectives may be revised at any time by the Committee in
light of unanticipated or extraordinary events.
Specific objectives will be based primarily on the Company's business
plans and competitive levels of performance. For any specific
performance objective, the award payable (as a percent of the maximum)
for a given level on performance will be consistent throughout the
Plan.
The Committee will assign objectives, based upon the recommendation of
the Plan Administrator, which are appropriate to the managerial impact
of each participant's position. As appropriate, the individual
objectives may include divisional, district or combined operating unit
performance objectives.
Performance objectives may include, among others:
Pre-tax income and Cash Flow,
Operating Expenses Control,
Capital Spending Control,
Reserve Additions,
"Dry Hole Control",
Reservoir Management,
Prospect Development, and
Land Management.
VII. PERFORMANCE
Performance will be reviewed at appropriate intervals as financial and
operating results are available. At the end of each Plan Year, the
determination of the achievement of the objectives for such Plan Year
and the payment of awards earned will occur as soon as practicable
after the compilation of the year-end financial and operating results.
All financial and operating results will be reviewed by the Controller
of the Company and the achievement of all individual objectives shall
be approved by the President of the Company prior to the recommendation
to the Committee of the payment of awards by the Plan Administrator.
The Committee has the authority to approve all awards recommended for
payment.
At the discretion of the Committee, incentive awards, either
individually or collectively, may be increased, decreased, or
completely eliminated at any time during a Plan Year or after the end
of the Plan Year but before payment of the basis of the following
considerations:
Company performance relative to its
competitors,
Balancing of long-term versus
short-term considerations,
Handling of unforeseen opportunities
and obstacles, or
Individual professional conduct.
VIII. AWARD PAYMENTS
Payment of earned awards will be made as soon as possible after the
close of each Plan Year upon the approval of the Committee. Payments
will be subject to all applicable tax withholding requirements.
If a participant's employment terminates during a Plan Year, whether
voluntarily or involuntarily, the participant shall forfeit all rights
to any incentive award for the Plan Year, unless the Committee, in its
discretion, elects to pay all or a portion of the award. If a
participant voluntarily resigns after the Plan-Year end, but before
payout, the participant shall be entitled to the incentive award
payment, if any, he would be eligible to receive pursuant to Article
VII.
In the discretion of the Committee and the election of the participant
- made irrevocably prior to the beginning of the applicable Plan Year -
all or a portion of an incentive award for a Plan Year may be deferred
until termination of employment or immediately prior to termination of
employment. The methods of deferment and subsequent payment shall be
determined by the Committee.
IX. COMMUNICATIONS
The effectiveness of the Plan depends upon participants fully
understanding the purpose of the Plan, the performance objectives and
the administration of the Plan. It shall be the responsibility of the
Plan Administrator to ensure that all aspects of the Plan are presented
to and understood by the participants.
X. CHANGE IN CONTROL
A "Change in Control" shall be deemed to have occurred if:
a) any "person," as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than Santa Fe Pacific Corporation ("SFP"), any trustee or
other fiduciary holding securities under an employee benefit plan of
SFP, or any company owned, directly or indirectly, by the
stockholders of SFP in substantially the same proportions as their
ownership of stock of SFP), is or becomes the "beneficial Owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of SFP representing 25% or more of the
combined voting power of SFP's then outstanding securities;
b) during any period of two consecutive years (not including any period
prior to the effective date of this provision), individuals who at
the beginning of such period constitute the Board of Directors of
SFP, and any new director (other than a director designated by a
person who has entered into an agreement with SFP to effect a
transaction described in clause (a), (c) or (d) of this definition)
whose election by the Board of Directors of SFP or nomination for
election by SFP's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute at least a majority thereof;
c) the stockholders of SFP approve a merger or consolidation of SFP
with any other company other than (i) a merger or consolidation
which would result in the voting securities of SFP outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities
of the surviving entity) more than 80% of the combined voting power
of the voting securities of SFP (or such surviving entity)
outstanding immediately after such merger or consolidation, or (ii)
a merger or consolidation effected to implement a recapitalization
of SFP (or similar transaction) in which no "person" (as hereinabove
defined) acquires more than 25% of the combined voting power of
SFP's then outstanding securities; or
d) the stockholders of SFP adopt a plan of complete liquidation of SFP
or approve an agreement for the sale or disposition by the Company
of all or substantially all of SFP's assets. For purposes of this
clause (d), the term "the sale or disposition by SFP of all or
substantially all of SFP's assets" shall mean a sale or other
disposition transaction or series of related transactions involving
assets of SFP or of any direct or indirect subsidiary of SFP
(including the stock of any direct or indirect subsidiary of SFP) in
which the value of the assets or stock being sold or otherwise
disposed of (as measured by the purchase price being paid therefor
or by such other method as the Board of Directors of SFP determines
is appropriate in a case where there is no readily ascertainable
purchase price) constitutes more than two-thirds of the fair market
value of SFP (as hereinafter defined). For purposes of the preceding
sentence, the "fair market value of SFP" shall be the aggregate
market value of the outstanding shares of common stock of SFP (on a
fully diluted basis) plus the aggregate market value of SFP's other
outstanding equity securities. The aggregate market value of the
shares of common stock of SFP shall be determined by multiplying the
number of shares of SFP's common stock (on a fully diluted basis)
outstanding on the date of the execution and delivery of a
definitive agreement with respect to the transaction or series of
related transactions (the "Transaction Date") by the average closing
price of the shares of common stock of SFP for the ten trading days
immediately preceding the Transaction Date. The aggregate market
value of any other equity securities of SFP shall be determined in a
manner similar to that prescribed in the immediately preceding
sentence for determining the aggregate market value of the shares of
common stock of SFP or by such other method as the Board of
Directors of SFP shall determine is appropriate.
e) if SFP ceases to own 70% of the combined voting power of the then
outstanding voting securities of the Company, the term "Company"
shall be substituted for SFP as used in this definition of "Change
in Control. Further, notwithstanding anything herein to the
contrary, a pro-rata distribution by SFP to its stockholders of its
interest in such voting securities of the Company shall not
constitute a Change in Control.
In the event that a Change in Control occurs, the performance
objectives established pursuant to Section V hereof for the year during
which the Change in Control occurred shall be deemed to have been met
in full at the maximum performance level so established, and each
participant shall be entitled to receive a bonus in respect of the year
in which such Change in Control occurs; provided, however, that if a
participant's employment is terminated prior to December 31 of such
year, such participant shall be entitled to a prorated bonus, the
amount of which shall be determined by multiplying the bonus which he
would have been entitled had he remained employed until December 31 by
a fraction, the numerator of which is the number of days in such year
through the date of the participant's termination of employment, and
the denominator of which is 365.
XI. TERMINATION OR AMENDMENT
The Plan may be terminated or amended at any time by the Board of
Directors of the Company.
XII. EFFECTIVE DATE
This Plan is effective as of January 1, 1990.
ATTACHMENT A
ADMINISTRATIVE GUIDELINES
1. An employee's participation in the Plan will be based upon the
calendar months in which the employee held a position eligible for
participation during a Plan Year.
2. The employee must be in an eligible position on the 1st day of the
month in order to participate in the Plan for that month.
3. Except as provided for in the Plan, an employee must be on the
active payroll on the last day of the Plan Year in order to
participate for any portion that year.
4. If a participant transfers between eligible positions under the Plan
during the Plan Year, his/her participation will be based on full
months of participation in each position at the participation levels
established for each position.
5. New hires or employees who first assume an eligible position on
October 1st or later in a given Plan Year are not eligible for
participation in that Plan Year.
6. Nothing contained in these Administrative Guidelines will take
precedence over specific decisions rendered by the Committee
concerning eligibility, participation, or other Plan administration
policies and practices.