EXHIBIT 10.13
PERFORMANCE INCENTIVE PLAN
SPECIFICATIONS
Medallion Production Company
April 1992
Hewitt Associates
MEDALLION PRODUCTION COMPANY
PERFORMANCE INCENTIVE PLAN SPECIFICATIONS
- --------------------------------------------------------------------------------
Plan Purposes: . Focus the efforts of all key employees primarily
- -------------- on performance criteria that can be quantitatively
measured and that meet the Company's (and
InterCoast's) expectations.
. Encourage teamwork and cooperation in the
achievement of the Company's goals.
. Recognize differences in the performance of
Individual participants.
Plan Year: The fiscal year (January through December).
- ----------
Participants: Those individuals recommended by the President of
- ------------- InterCoast Energy Company and approved by the
Compensation Committee.
Compensation Those individuals appointed by the InterCoast Board
- ------------ of Directors to comprise the Compensation Committee.
Committee: The Committee will be responsible for plan
- ---------- administration.
Award . Participating positions will be grouped by
- ----- incentive award categories.
Opportunities:
- -------------- . Each incentive category will have a target award
level assigned to it.
-1-
Award -- The target award will be paid if a stated
- ----- performance goal(s) is achieved.
Opportunities:
- -------------- -- Minimum and maximum performance/
(continued) award levels will be built around the
target performance/award levels.
. The incentive categories, with their respective
award opportunities, are set forth below:
Award Opportunity
(as % of Salary)
Incentive ------------------------------
Category Minimum Target Maximum
--------- ------- ------ -------
A 15.0% 30.0% 60.0%
B 10.0% 20.0% 40.0%
Category A will initially contain the President
and Executive Vice President positions.
Category B shall initially include the following
positions:
-- Vice President-Finance
-- Vice President-Land
-- Director-Acquisitions and Programs
-- President, MGM Gas Marketing
-2-
Performance/ . Each participant's award opportunity will be
- ------------ segmented into two components as illustrated
Award below.
- -----
Components:
- -----------
Weighting of Award
Opportunity/Performance Factors
-------------------------------
Individual
Medallion Participant
Goals Goals/Evaluation
-------------------------------
75% 25%
. One component's performance will not directly
affect the portion of the award opportunity
earnable from another one, except as noted below
in the "Threshold Corporate Performance"
requirement.
. The Medallion component shall consist of a
financial criterion (operating income) and
nonfinancial objectives. The financial criterion
will comprise 50% of the Medallion Goals
component.
. A participant's final award amount will be
determined as the sum of the awards earned based
on the performance of his pertinent award
components.
Threshold If a threshold level of performance established for
- --------- the financial criterion (operating income) of the
Corporate Company-wide component is not achieved, no part of
- --------- the incentive opportunity otherwise earned
Performance:
- ------------
-3-
Threshold through other Company-wide objectives or under the
- --------- Individual Goals/Evaluation component will be paid.
Corporate Threshold performance shall be a level that is set
- --------- moderately below the minimum established for
Performance: Corporate financial performance (i.e., the minimum
- ------------ will be established as 85% of the target performance
(continued) goal, and the threshold will be set at 65% of
target).
Performance . Normally, up to five performance criteria will be
- ----------- established for the nonfinancial objectives.
Criteria: Examples of such criteria are:
- ---------
-- Reserves added
-- Number of new drilling prospects
-- Success ratio on prospects
-- Acquisition of outside participants for
drilling programs
. Target, minimum, and maximum performance levels
will be established for each of the performance
criteria. These performance levels will coincide
-----------
with the target, minimum, and maximum award levels
-----
referred to previously. These performance levels,
together with the weighting of each of the
performance criteria, will be established prior to
each plan year, approved by the Compensation
Committee, and will be set forth in an Appendix
that will be attached to these plan
specifications.
-4-
Performance Interpolated performance/reward levels will be
- ----------- established on a straight-line basis between each
Criteria: of the above performance/reward levels. If actual
- --------- performance falls below the minimum level set
(continued) forth for the particular performance criterion,
the portion of the award related to that
performance criterion will be forfeited in its
entirety.
. Individual performance will be evaluated based on
an overall assessment of the participant's
personal contributions during the particular plan
year.
This assessment will take into account the
individual's personal goals, and his/her
contribution to the organization's team
environment and cooperative effort.
. Responsibility for determining the earned amount
of the Individual Goals/ Evaluation portion of a
participant's award opportunity will be assigned
as follows:
Participant Rater Reviewer
------------- -------------- ---------------
President President InterCoast
(Medallion) (InterCoast) Compensation
Committee
All Others President President
(Medallion) (InterCoast)
-5-
Performance The joint determination of the rater and reviewer
- ----------- will assign an earn-out percentage of between 0%
Criteria: and 200% of the Individual Goals/Evaluation
- --------- portion of the participant's award opportunity.
(continued)
Performance/ A participant's final award will be calculated as the
- ------------ sum of the amounts earned from each of the
Reward Levels: performance/reward opportunities, each independent
- -------------- from the others. However, in no event will any award
---
be payable unless Medallion's operating income
threshold is met. The table below illustrates the
performance/reward relationship for an Incentive
Category B participant, assuming two Medallion
performance criteria weighted equally and an overall
evaluation of Individual performance.
Individual
Medallion Goals (75%) (25%)
--------------------------------------- --------------
Perf./ Operat. Award Award Goals/
Reward Income Oppty. Oppty. Eval. Award
Levels (000) (50%) Reserves Added (50%) Perf. Oppty.
------ ------ ------ -------------- ------ ------ ------
Maximum $1,800 15.0% xxx 15.0% yyy 10.0%
Target $1,000 7.5% xx 7.5% yy 5.0%
Minimum $850 3.75% x 3.75% y 2.5%
Threshold $650 0 ----- ABOVE AWARDS AVAILABLE -----
Below less than $650 ----- NO AWARDS AVAILABLE -----
Threshold
-6-
Performance/ For example, if the actual operating income
- ------------ performance were $850,000 (i.e., the minimum) and
Reward Levels: actual 1992 reserves added were at maximum and the
- -------------- Individual Goals/ Evaluation was yy (i.e., target),
(continued) the participant's award (as a percent of salary)
would be:
Final Operating Reserves Individual
Award = Income + Added + Evaluation
----- --------- -------- ----------
23.75% = 3.75% + 15.0% + 5.0%
Note that if actual operating income were $650,000,
the participant would not earn an award tied to this
financial criterion but would be eligible for the
portion of the award tied to the "reserves added"
criterion and the portion related to the Individual
Goals/Evaluation (i.e., 20% = 0% + 15% + 5%).
However, if Company operating income were below
$650,000, no award would be payable from either the
Company-wide or the Individual component.
The Effect of Note that, in comparing actual performance against
- ------------- the performance goals, the President (InterCoast),
Extraordinary with the approval of the Compensation Committee, may
- ------------- exclude from such comparison any extraordinary gains,
Items: losses, charges, or credits which appear on the
- ------ Company's books and records as it deems appropriate.
An extraordinary item may
-7-
The Effect of include, without limitating the generality of the
- ------------- foregoing, an item in the Company's financial
Extraordinary statements reflecting an accounting rule, tax law,
- ------------- or major legislative change not taken into
Items: consideration in the establishment of the performance
- ------ goals. In addition, the impact of a material dislo-
(continued) cation in the U.S. economy or a substantive change in
Medallion's business plans also may be deemed to be
such an extraordinary item.
Termination . If the participant's employment is terminated
- ----------- during a plan year for reason of death,
of Employment: disability, or normal or early retirement, a
- -------------- tentative award will be calculated (at year-end)
as if the participant had remained employed as of
the end of the plan year. The final award will be
calculated by multiplying the tentative award by a
proration factor. The proration factor will be
equal to the number of full weeks of employment
divided by fifty-two.
. If a participant's employment is terminated during
a plan year for any other reason, an incentive
award normally will not be paid. However, the
President, with the approval of the Compensation
Committee, may exercise discretion in this matter.
-8-
Form and Timing . All awards will be paid in cash and will be
- --------------- subject to applicable withholdings.
of Payments:
- ------------ . Payment of the full value of the final award will
follow the release of audited results after the
end of the plan year in which it is earned, but no
later than April 1.
-9-
Medallion Production Company
Performance Incentive Plan
April 1992
Addendum - January 1994
Issues:
- -------
. Going beyond the maximum award opportunity for a performance criteria
and receiving no incremental incentive award is inconsistent with the
desire to encourage ever increasing performance effort.
. However, an uncapped incentive award may cause an imbalance in effort
whereby undue focus is placed on one performance criteria at the
expense of other criteria.
Purpose:
- --------
Encourage increasing performance effort after the maximum award
opportunity for a performance criteria is attained while assuring a
minimum performance level for all criteria.
Mega-Maximum
- ------------
Award Opportunity:
- ------------------
A mega-maximum award opportunity will be established for each
performance criteria.
. The mega-maximum award opportunity will be established as three times
the increment between the target and maximum award opportunities.
. Mega-maximum awards will be reduced by the target percentage award
for any performance criteria that does not meet minimum. Examples of
the mega-maximum award opportunity are:
Performance Goal
1. Operating Income $(000) Award %
---------------- ---------------- ----------
Mega-Maximum 22,000 45.00
Maximum 12,000 22.50
Target 7,000 11.25
Minimum 5,000 5.63
2. Exploratory Drilling
--------------------
Mega-Maximum 5,000 11.27
Maximum 3,000 5.63
Target 2,000 2.81
Minimum 1,000 1.41
-2-
Actual Results
--------------
Normal Mega-Maximum
$(000) Award % Actual %
-------- ------- -------------
Operating Income 15,000 22.50 6.75/1/
Exploratory Drilling 500 - 0 - (2.81)
----- ------
Total 22.50 3.94
- --------------------
/1/ $3,000/$10,000 x 22.5%
Medallion Production Company
Performance Incentive Plan
April 1992
Addendum - March 1994
Issue
- -----
It is the desire to have all Medallion employees focus their efforts on
attainment of the Company's goals and objectives and to compensate employees
according to actual results achieved.
Incentive Categories
- --------------------
In this regard, the Medallion Performance Incentive Plan is amended to establish
incentive categories to include employees not presently included in the plan.
With this amendment the incentive categories and participants for the 1994 plan
year are as follows:
=======================================================
Award Opportunity
=======================================================
Incentive
Category Minimum Target Maximum
=======================================================
1 15.0% 30.0% 60.0%
2 10.0% 20.0% 40.0%
3* 5.0% 10.0% 20.0%
4* 2.0% 4.0% 8.0%
-------------------------------------------------------
* Categories 3 and 4 are not be eligible for the
---
"Mega-Maximum" awards. Category 4 is based totally
on corporate performance whereas Categories 1, 2 and
3 are based 75% on corporate performance and 25%
individual performance.
=======================================================
Participants
- ------------
The participants, by category, for the 1994 plan year are hereby established as
follows:
-2-
============================================================================================
Category Individual Position
============================================================================================
1 Bill Warnock, Jr. President
--------------------------------------------------------------------------------------------
2 Brian Cantrell Vice President - Finance
--------------------------------------------------------------------------------------------
Dave Chandler Director, Acquisitions
--------------------------------------------------------------------------------------------
Gene Daley Sr. Vice President - Exploration
--------------------------------------------------------------------------------------------
Chris Girouard Vice President - Land
--------------------------------------------------------------------------------------------
Dave Harber V.P. - Engineering & Acquisitions
--------------------------------------------------------------------------------------------
Cam Stiernberg Sr. V.P. - Operations
--------------------------------------------------------------------------------------------
Dan Williams President, InterCoast Gas Services
--------------------------------------------------------------------------------------------
3 Chris Treml Landman
--------------------------------------------------------------------------------------------
Ed Rothenay Production Foreman
--------------------------------------------------------------------------------------------
4 All other Madallion Various
employees employed as
of 1/1/94
--------------------------------------------------------------------------------------------
APPROVED:
/s/ Stanley J. Bright 3-14-94
- -------------------------- ------------------------
Stanley J. Bright Date
/s/ Lance E. Cooper 3-14-94
- ------------------------- -------------------------
Lance E. Cooper Date
/s/ Howard R. Poe 3-16-94
- ------------------------- --------------------------
Howard R. Poe Date