Exhibit 10(a)
SANTA FE ENERGY RESOURCES, INC.
INCENTIVE COMPENSATION PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1999)
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 of 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 or 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 on 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 award 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:
(i) 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 a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any affiliate, or any corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly of securities of the
Company representing 25% or more of the combined voting power of the
Company's then outstanding securities;
(ii) during any period of two consecutive years (not including any period
prior to the effective date of the amended and restated Plan),
individuals who at the beginning of such period constitute the Board of
Directors of the Company, and any new director (other than a director
designated by a person who has entered into an agreement with the Company
to effect a transaction described in clause (i), (iii) or (iv) of this
Section) whose election by the Board of Directors of the Company or
nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds 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 (hereinafter referred
to as "Continuing Directors"), cease for any reason to constitute at
least a majority thereof;
(iii) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 65% of the combined voting power of the voting
securities of the Company (or such surviving entity) outstanding
immediately after such merger or consolidation; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets. For
purposes of this clause (iv), the term "the sale or disposition by the
Company of all or substantially all of the Company's assets" shall mean a
sale or other disposition transaction or series of related transactions
involving assets of the Company or of any direct or indirect subsidiary of
the Company (including the stock of any direct or indirect subsidiary of
the Company) 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 the Company
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 the Company" (as hereinafter defined). For purposes
of the
preceding sentence, the "fair market value of the Company" shall be the
aggregate market value of the Company's outstanding common stock (on a
fully diluted basis) plus the aggregate market value of the Company's
other outstanding equity securities. The aggregate market value of the
Company's common stock shall be determined by multiplying the number of
shares of the Company'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 for the
Company's common stock for the ten trading days immediately preceding the
Transaction Date. The aggregate market value of any other equity
securities of the Company shall be determined in a manner similar to that
prescribed in the immediately preceding sentence for determining the
aggregate market value of the Company's common stock or by such other
method as the Board of Directors of the Company shall determine is
appropriate. However, notwithstanding anything in this clause (iv) to the
contrary, a spinoff or distribution of the stock of a subsidiary of the
Company to those persons who were stockholders of the Company immediately
prior to such spinoff or distribution in substantially the same proportion
as their ownership of Company stock immediately prior to such spinoff or
distribution shall not constitute a "sale or disposition by the Company of
all or substantially all of the Company's assets."
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. TERMINATIONS OR AMENDMENT
The Plan may be terminated or amended at any time by Board of Directors of
the Company.
XII. EFFECTIVE DATE
This Plan was originally effective as of January 1, 1990, and is now
amended and restated as of January 1, 1999.
ATTACHMENT A
ADMINISTRATIVE GUIDELINES
1. An employees 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 of 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.