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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
SANTA FE ENERGY RESOURCES, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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SANTA FE ENERGY RESOURCES, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of stockholders of Santa Fe Energy Resources, Inc. will
be held in the Ballroom of the Ritz Carlton Hotel, 1919 Briar Oaks Lane,
Houston, Texas, on Wednesday, May 10, 1995, at 10:00 a.m. for the following
purposes:
(A) To elect four directors;
(B) To approve the Santa Fe Energy Resources, Inc. 1990 Incentive Stock
Compensation Plan, Second Amendment and Restatement; and
(C) To ratify and approve the appointment of Price Waterhouse as
independent auditors for the fiscal year ending December 31, 1995; and
(D) To transact such other business as is properly brought before the
meeting.
Common and $.732 Series A Convertible Preferred stockholders of record at
the close of business on March 14, 1995 are entitled to notice of the meeting
and are entitled to vote at the meeting. A list of such stockholders will be
kept at the office of the Corporation at 1616 South Voss, Houston, Texas 77057,
for a period of ten days prior to the meeting.
By order of the Board of Directors.
MARK A. OLDER
Corporate Secretary
1616 South Voss
Houston, Texas 77057
March 21, 1995
YOUR VOTE IS IMPORTANT
PLEASE MARK, DATE, AND SIGN YOUR PROXY AND RETURN
IT PROMPTLY IN THE ENCLOSED ENVELOPE.
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SANTA FE ENERGY RESOURCES, INC.
1616 SOUTH VOSS
HOUSTON, TEXAS
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PROXY STATEMENT
MARCH 21, 1995
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ANNUAL MEETING OF STOCKHOLDERS, MAY 10, 1995
The annual meeting of stockholders of Santa Fe Energy Resources, Inc. (the
"Corporation") will be held on May 10, 1995, in Houston, Texas. The enclosed
proxy card is solicited by the Board of Directors of the Corporation, and your
execution and prompt return of the card is requested. Every common and $.732
Series A Convertible Preferred stockholder, regardless of the number of shares
held, should be represented at the annual meeting. Whether or not you expect to
be present at the meeting, please mark, sign and date the enclosed proxy card
and return it in the enclosed envelope. Any stockholder giving a proxy has the
right to revoke it. If you attend the meeting and wish to vote your shares in
person, you may do so at that time.
The shares represented by your proxy will be voted in accordance with the
specifications made on the proxy card. Unless otherwise directed, it is intended
that such shares will be voted:
(A) For the election to the Corporation's board of directors of the four
nominees named below; and
(B) For the approval of the Santa Fe Energy Resources, Inc. 1990 Incentive
Stock Compensation Plan, Second Amendment and Restatement; and
(C) For the ratification and approval of the appointment of Price
Waterhouse as independent auditors for the fiscal year ending December
31, 1995; and
(D) In accordance with the best judgment of the persons acting under the
proxy concerning other matters that are properly brought before the
meeting.
Common and $.732 Series A Convertible Preferred stockholders of record at
the close of business on March 14, 1995 are entitled to notice of the meeting
and are entitled to vote at the meeting in person or by proxy. Each share of
common stock of the Corporation is entitled to one vote and each share of $.732
Series A Convertible Preferred Stock is entitled to four-fifths of one vote.
Holders of the Corporation's Convertible Preferred Stock, 7% Series, are not
entitled to vote on the matters to be considered. At the close of business on
March 14, 1995, the Corporation had 90,234,037 shares of common stock and
10,700,000 shares of $.732 Series A Convertible Preferred Stock outstanding and
entitled to vote. The Corporation anticipates first sending this proxy statement
and the enclosed proxy card to stockholders on or about March 21, 1995.
ELECTION OF DIRECTORS
The number of directors of the Corporation, as determined by the Board
under Article Fifth of the Corporation's Restated Certificate of Incorporation,
is currently twelve. The terms of four present directors expire in 1995, and
four directors are to be elected at the 1995 annual meeting for a term of three
years. Directors hold office until the annual meeting for the year in which
their terms expire and until their successors are elected and qualify. The
nominees for whom the enclosed proxy is intended to be voted are set forth
below. It is not contemplated that any of these nominees will be unavailable for
election, but if such a situation should arise, the proxy will be voted in
accordance with the best judgment of the persons acting under it. The election
as directors of the persons nominated in this proxy statement will require the
vote of the holders of a majority of the shares entitled to vote and represented
in person or by proxy at a meeting at which a quorum is present. A holder of a
share shall be treated as being present at a meeting if the holder of such
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share is either present in person at the meeting or is represented at the
meeting by a valid proxy, whether the proxy is marked as casting a vote or
abstaining, is left blank or does not empower such proxy to vote with respect to
some or all matters to be voted upon at the meeting. In determining the number
of votes cast, shares abstaining from voting or not voted on a matter (including
elections) will not be treated as votes cast.
Unless otherwise indicated, each director listed below has served in his or
her present occupation for at least five years. The indicated periods of service
as a director of the Corporation include service during the time the Corporation
was a wholly owned subsidiary of Santa Fe Pacific Corporation ("SFP").
NOMINEES FOR ELECTION AS DIRECTORS TO BE ELECTED
FOR A TERM OF THREE YEARS ENDING IN 1998
FIRST
NAME, AGE AND ELECTED A
BUSINESS EXPERIENCE DIRECTOR
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MELVYN N. KLEIN, 53............................................................... 1993
Attorney and Counselor at Law; private investor; the sole stockholder of a
general partner in GKH Partners, L.P. Mr. Klein is also a principal of Questor
Management Company, and director of Itel Corporation, Bayou Steel Corporation
(specialty steel manufacturer) and Savoy Pictures Entertainment, Inc.
(distributor of motion pictures).
ROBERT D. KREBS, 52............................................................... 1985
Chairman, President and Chief Executive Officer of SFP since 1988. Prior to such
time, Mr. Krebs was President and Chief Operating Officer of SFP. Mr. Krebs is
also a director of SFP, Catellus Development Corporation, The Atchison, Topeka
and Santa Fe Railway Company, Santa Fe Pacific Pipelines, Inc., Santa Fe Pacific
Gold Corporation, Phelps Dodge Corporation and Northern Trust Corporation.
JAMES L. PAYNE, 58................................................................ 1986
Chairman of the Board, President and Chief Executive Officer of the Corporation
since June 1990. Mr. Payne was President of Santa Fe Energy Company, a
predecessor in interest of the Corporation from January 1986 to January 1990
when he became President of the Corporation. From 1982 to January 1986 Mr. Payne
was Senior Vice President -- Exploration and Land of Santa Fe Energy Company.
Mr. Payne is also a director of Pool Energy Services Co. (oilfield services) and
Hadson Corporation (natural gas transportation and marketing).
DAVID M. SCHULTE, 48.............................................................. 1994(1)
For the past five years, Managing Partner, Chilmark Partners, L.P. (investments)
and since July 1990, General Partner, ZC Limited Partnership, the General
Partner of Zell/Chilmark Fund, L.P. (investments). Mr. Schulte is also a
director of Broadway Stores, Inc., Revco D.S., Inc., Sealy Corporation and Jacor
Communications, Inc.
DIRECTORS CONTINUING IN OFFICE UNTIL 1996
ALLAN V. MARTINI, 67.............................................................. 1990
Retired Vice President Exploration/Production and director of Chevron
Corporation (petroleum operations) since August 1988. Mr. Martini served in that
position from July 1986 until his retirement.
MICHAEL A. MORPHY, 62............................................................. 1990
For the past five years, retired Chairman and Chief Executive Officer of
California Portland Cement Company. Mr. Morphy is also a director of Cyprus Amax
Minerals Co. and SFP.
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(1) Mr. Schulte was elected a director of the Corporation on February 18, 1994.
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FIRST
NAME, AGE AND ELECTED A
BUSINESS EXPERIENCE DIRECTOR
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KATHRYN D. WRISTON, 56............................................................ 1990
For the past five years, director of various corporations and organizations,
including Northwestern Mutual Life Insurance Company and a Trustee of the
Financial Accounting Foundation.
REUBEN F. RICHARDS, 65............................................................ 1992
Chairman of the Board, Terra Industries Inc. (agribusiness) since December 1982;
Chief Executive Officer thereof from December 1982 to May 1991 and President
thereof from July 1983 to May 1991; Chairman of the Board, Engelhard Corporation
(specialty chemicals and engineered materials) from May 1985 to December 1994;
Chairman of the Board, Minorco (U.S.A.) Inc. ("Minorco (USA)"), since May 1990
and Chief Executive Officer and President since February 1994. Mr. Richards is
also a director of Ecolab, Inc. (cleaning and sanitizing products), Engelhard
Corporation, Potlatch Corporation (forest products), and Minorco.
DIRECTORS CONTINUING IN OFFICE UNTIL 1997
ROD F. DAMMEYER, 54............................................................... 1990
President and a director since 1985 and Chief Executive Officer since 1993 of
Itel Corporation (holding company involved primarily in distribution of wiring
systems products.) Mr. Dammeyer is also a director of Falcon Building Products,
Inc., Antec Corporation, Lomas Financial Corporation, Jacor Communications,
Inc., Revco D.S., Inc., Capsure Holdings Corp. and the Vigoro Corporation and a
trustee of Van Kampen American Capital, Inc. Closed End Mutual Funds. In
addition, Mr. Dammeyer is President, Chief Executive Officer and a director of
Great American Management and Investment, Inc.
MARC J. SHAPIRO, 47............................................................... 1990
Chairman and Chief Executive Officer of Texas Commerce Bank National Association
("Texas Commerce Bank") (banking) since 1987, and a member of the Management
Committee of Chemical Banking Corporation since December 1991. Mr. Shapiro is
also a director of Browning-Ferris Industries and a trustee of Weingarten Realty
Investors.
WILLIAM E. GREEHEY, 58............................................................ 1991
Chairman of the Board, Chief Executive Officer and director of Valero Energy
Corporation (refining and marketing, gas transmission and processing) since
1983. Mr. Greehey is also a director of Weatherford International.
ROBERT F. VAGT, 48................................................................ 1992
Chairman of the Board, President, Chief Executive Officer and director of Global
Natural Resources Inc. (oil and gas exploration and production) since May 1992;
President and Chief Operating Officer of Adobe Resources Corporation ("Adobe")
(oil and gas exploration and production) from November 1990 to May 1992;
Executive Vice President of Adobe from August 1987 to October 1990; Senior Vice
President of Adobe from October 1985 to August 1987. Mr. Vagt is also a director
of First Albany Corporation (brokerage firm).
Certain Relations and Related Transactions. Since July 1, 1990, the
Corporation and Santa Fe Energy Partners, L.P. (the "Partnership") have entered
into agreements with Texas Commerce Bank providing for cash management, lending,
depository and other banking services in the normal course of business. The
Partnership, which was merged into the Corporation effective December 31, 1994,
was wholly owned by the Corporation. It was a Delaware limited partnership and
the Corporation was a Special Partner. Texas Commerce Bank also issued standby
letters of credit with various expiration dates for security and
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environmental requirements totaling $8,803,694 as of December 31, 1994. Texas
Commerce Bank is also the Trustee of the Corporation's Retirement Income Plan
and the trustee of the Corporation's Savings Investment Plan. Finally, effective
November 19, 1992, the Corporation in return for cash contributed certain oil
and gas interests to the Santa Fe Energy Trust which in turn issued Secure
Principal Energy Receipts(TM) evidencing an interest in the Trust and a United
States Treasury Obligation. Texas Commerce Bank is the trustee of the Trust and
acts as registrar and transfer agent of the Secure Principal Energy
Receipts.(TM) During 1994 the Corporation paid Texas Commerce Bank interest in
the amount of $259,230 for loans to the Corporation and the Partnership and fees
for various services in the amount of $293,170 (which does not include $58,342
paid from the Retirement Income Plan Trust). In addition, Mr. Shapiro, a
director of the Corporation, is Chairman and Chief Executive Officer of Texas
Commerce Bank. Mr. Shapiro has no direct or personal interest in these banking
arrangements. His interest arises only because of his positions as an officer of
Texas Commerce Bank and a director of the Corporation. Mr. Shapiro has abstained
from voting on any issues involving the relationships between the Corporation
and Texas Commerce Bank.
In the opinion of the Corporation, the fees paid to Texas Commerce Bank for
the services performed are normal and customary.
In connection with the distribution of shares of the Corporation's common
stock by SFP (and the initial distribution in December 1989 to SFP by one of
SFP's wholly owned subsidiaries of such shares) (collectively the "Spin-Off"),
the Corporation and SFP entered into an agreement to protect SFP from federal
and state income taxes, penalties and interest that would be incurred by SFP if
the Spin-Off was determined to be a taxable event resulting primarily from
actions taken by the Corporation during a one year period that ended on December
4, 1991. If the Corporation were required to make payments pursuant to the
agreement, such payments could have a material adverse effect on its financial
condition; however, the Corporation does not believe that it took any actions
during such one-year period that would have such an effect on the Spin-Off.
For periods prior to the date of the Spin-Off, the Corporation was included
in the consolidated federal income tax return filed by SFP as the common parent
for itself and its subsidiaries. Pursuant to the Agreement for the Allocation of
the Consolidated Federal Income Tax Liability Among the Members of the SFP
Affiliated Group and various state agreements for the allocation of tax
liability among the SFP Group (the "Tax Agreements") between SFP and its
subsidiaries, the Corporation has paid to SFP amounts approximating the federal
income tax liability and for years 1989 and 1990 the state income tax liability
it would have paid if it and its subsidiaries were members of separate
consolidated groups. These amounts were payable regardless of whether the SFP
consolidated group, as a whole, had any current federal or state income tax
liability. Pursuant to the Agreement Concerning Taxes between SFP and the
Corporation, after the Spin-Off additional payments to or refunds from SFP may
be made if there is an audit, carryover or similar adjustment subsequently made
that impacts the computation of amounts paid SFP as described above.
Mr. Krebs is Chairman, President and Chief Executive Officer of SFP. Mr.
Morphy is also a director of SFP. Neither of these individuals had a direct or
personal interest in the above described transactions. Their interest arises
only because of their positions as an officer and as a director in the case of
Mr. Krebs and as a director in the case of Mr. Morphy of SFP and as directors in
the Corporation.
Mr. Greehey is Chairman of the Board and Chief Executive Officer of Valero
Energy Company ("Valero"). During 1994 the Corporation purchased natural gas
from affiliates of Valero in arm's length transactions totaling $2,023,440. In
addition, an affiliate of Valero paid the Corporation $628,567 for compression
of natural gas. These fees were also determined on an arm's length basis. Mr.
Greehey did not have a direct or personal interest in the above transactions and
his interest arises only because of his position as an officer and director of
Valero and as a director of the Corporation.
Mr. Payne is also a director of Pool Energy Services Co. ("Pool") which
provides various oilfield services. During 1994 the Corporation paid Pool
subsidiaries $6,845,592 for services performed on properties operated by the
Corporation. In the opinion of the Corporation, the amounts paid for services
performed by Pool were competitive and were normal and customary in the
industry. In addition, Mr. Payne and Mr. Rosinski, Senior Vice President --
Administration of the Corporation, are directors of Hadson Corporation
("Hadson"). In December 1993 the Corporation completed a transaction with Hadson
under the
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terms of which the Corporation sold the common stock of Adobe Gas Pipeline
Company, a wholly-owned subsidiary, to Hadson in exchange for Hadson 11.25%
preferred stock with a face value of $52 million and 40% of Hadson's common
stock. In addition, the Corporation signed a seven-year gas sales contract under
the terms of which Hadson will market substantially all of the Corporation's
domestic natural gas production on terms which the Corporation believes are
"arms length." In 1994 affiliates of Hadson purchased natural gas from the
Corporation pursuant to such gas sales contract totaling $99,248,318. In
addition, the Corporation purchased natural gas from Hadson affiliates in arm's
length transactions totaling $18,523,660. Mr. Payne did not have a direct or
personal interest in the above transactions and his interest arises only because
of his position as an officer and director of the Corporation and as a director
of Pool and Hadson. Mr. Rosinski did not have a direct or personal interest in
the above transactions involving Hadson and his interest arises only because of
his position as an officer of the Corporation and as a director of Hadson.
Other Information Concerning Directors. In 1994, the Board met six times,
and each member of the Board as it was composed at the time attended at least
75% of the total number of meetings of the Board and the total number of
meetings held by all committees of the Board on which he or she served.
Directors Compensation. Directors who are not employees of the Corporation
or its subsidiaries receive an annual retainer fee of $24,000, a fee of $1,000
for each meeting of the Board attended, and a fee of $1,000 (an additional
$2,000 annual retainer for the committee chairman) for each committee meeting
attended plus expenses for each Board or committee meeting attended. In
September 1992 the Stockholders approved the 1990 Incentive Stock Compensation
Plan, as amended (the "Stock Plan"). Pursuant to the Stock Plan, non-employee
directors owning less than 25,000 shares of the Corporation's common stock
receive 37.5 percent of their annual retainer in shares of the Corporation's
common stock based on the Fair Market Value (as defined in the Stock Plan) on
the date of grant (the date of the Annual Meeting of Stockholders). In May 1994
each director except Messrs. Payne, Krebs, Klein and Schulte received 1,021
shares of common stock with a six month restriction period during which it could
not be transferred.
Board Committees. The Board has established Audit, Compensation and
Benefits, Finance, Nominating and Pension Committees. Following are the members
of each committee and brief descriptions of the functions of the Board
Committees. All committee chairmen are non-employee directors.
The members of the Audit Committee are Rod F. Dammeyer (Chairman), Kathryn
D. Wriston, Marc J. Shapiro and Melvyn N. Klein. The principal functions of the
Audit Committee, which met three times in 1994, include overseeing the
performance and reviewing the scope of the audit function of independent
accountants. The Audit Committee also reviews, among other things, audit plans
and procedures, the Corporation's policies with respect to conflicts of interest
and the prohibition on the use of corporate funds or assets for improper
purposes, changes in accounting policies, and the use of independent accountants
for non-audit services.
The members of the Compensation and Benefits Committee are William E.
Greehey (Chairman), Rod F. Dammeyer, Michael A. Morphy and Reuben F. Richards.
The principal function of the Compensation and Benefits Committee, which met
three times in 1994, is to administer all executive compensation and benefit
plans of the Corporation. Members of the Compensation and Benefits Committee are
not eligible to participate in any benefit plans of the Corporation that they
administer except the Stock Plan pursuant to which grants may be made only as
described above.
The members of the Nominating Committee are Robert F. Vagt (Chairman),
Kathryn D. Wriston, Allan V. Martini and James L. Payne. The Nominating
Committee, which met once in 1994, receives recommendations for review and
evaluates the qualifications of and selects and recommends to the Board of
Directors, nominees for election as Directors. The Nominating Committee will
consider nominees recommended by stockholders. Any such recommendation, together
with the nominee's qualifications and consent to be considered as a nominee,
should be sent in writing to the Secretary of the Corporation not less than 30
days nor more than 60 days prior to the annual meeting.
The members of the Finance Committee are Robert F. Vagt (Chairman), Melvyn
N. Klein, Allan V. Martini, Reuben F. Richards and David M. Schulte. The Finance
Committee, which met four times in 1994,
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reviews capital expenditures of the Corporation and makes recommendations
concerning such expenditures to the Board of Directors.
The members of the Pension Committee are Michael A. Morphy (Chairman),
James L. Payne, Robert D. Krebs and Allan V. Martini. The duties of the Pension
Committee, which met once in 1994, include reviewing the actions of the Pension
Administration and Pension Investment Committees which are composed of the
Corporation's employees, making recommendations to the Board of Directors
concerning future membership of such committees and such other recommendations
as may be necessary or appropriate, and recommending to the Board of Directors
substantive amendments to the Corporation's retirement plan which do not change
benefit levels.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the best of the Corporation's knowledge, the following persons are the
only persons who are beneficial owners of more than five percent of the
Corporation's common stock, Convertible Preferred Stock, 7% Series, or $.732
Series A Convertible Preferred Stock:
NUMBER OF
NUMBER OF SHARES OF
SHARES OF $.732
NUMBER OF CONVERTIBLE SERIES A
SHARES OF PREFERRED CONVERTIBLE
COMMON PERCENT OF STOCK, PERCENT OF PREFERRED PERCENT OF
NAME AND ADDRESS STOCK(1) CLASS 7% SERIES CLASS STOCK CLASS
- ------------------------------------ ---------- ---------- ---------------- ---------- ----------- ----------
HC Associates(2).................... 10,211,078 11.3% 0 0% 0 0%
200 West Madison Street
27th Floor
Chicago, Illinois 60606
Itel Corporation(3)................. 8,064,005 9.0% 0 0% 0 0%
Two North Riverside Plaza
Chicago, Illinois 60606
Minorco (U.S.A.) Inc.(4)............ 8,712,327 9.7% 0 0% 0 0%
One DTC
5251 DTC Parkway
Suite 700
Englewood, Colorado 80111
Spears, Benzak, Salomon &
Farrell(5)........................ 8,690,789 9.6% 220,628 4.0% 0 0%
45 Rockefeller Plaza
New York, New York 10111
Beverly Marie Pevehouse............. -- -- 520,937 10.4% 0 0%
300 W. Texas
Suite 601
Midland, Texas 79701
Texas Commerce Bank, Trustee for the
B.J. Pevehouse Marital Trust........ -- -- 644,336 12.9% 0 0%
P.O. Box 10966
Midland, Texas 79702
Merrill Lynch & Co., Inc.(6)........ 8,330,249 9.2% 64,219 1.0% 457,596 4%
World Financial Center, North
Tower
250 Vesey Street
New York, NY 10281
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(1) Each holder has claimed sole voting and investment power concerning these
shares except as noted below.
(2) As reported at February 1, 1994, HC Associates, a Delaware general
partnership ("HC") is the owner of 10,211,078 shares (approximately 11.4
percent) of the common stock of the Corporation. HC was organized in
December 1992 for the purpose of, among other things, acquiring, holding,
selling, exchanging and otherwise dealing with shares of the Corporation's
common stock. The partners of HC (and their respective initial percentage
interests in HC) are GKH Investments, L.P. (the "Fund") (47.257861
percent), GKH Partners, L.P., as nominee for GKH Private Limited (1.786745
percent), Zell/Chilmark Fund, L.P. (49.044606 percent), Ernest H. Cockrell
Texas Testamentary Trust (.955394 percent) and Carol Cockrell Jennings
Texas Testamentary Trust (.955395 percent). The sole general partner of the
Fund, a Delaware limited partnership is GKH Partners, L.P. ("GKH"), a
Delaware limited partnership. Pursuant to a management agreement, GKH
manages assets on behalf of GKH Private Limited ("GKHLP"). The number of
shares described above do not include 39,100 shares of common stock
acquired in September 1994 by GKH on behalf of GKHLP and the Fund. The
general
(Notes continued on following page)
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partners of GKH are JAKK Holding Corp., a Nevada corporation ("JAKK"), DWL
Lumber Corporation, a Delaware corporation ("DWL"); and HGM Associates
Limited Partnership, an Illinois limited partnership ("HGMLP"). The sole
general partner of HGMLP is HGM Corporation, a Nevada corporation ("HGM").
Melvyn N. Klein is the sole director and stockholder of JAKK and serves as
its president, treasurer and secretary. Mr. Klein disclaims beneficial
ownership of the shares of common stock owned by HC, GKH, GKHLP and the
Fund. Dan W. Lufkin is president, director and sole stockholder, Craigh
Leonard is secretary and a director and Douglas J. McBride is assistant
secretary and a director of DWL. Jay A. Pritzker is a director and Chairman
of the Board, Thomas J. Pritzker is president and a director, Glen Miller
is vice president and treasurer and Harold S. Handelsman is vice president
and secretary of HGM.
The sole general partner of Zell/Chilmark Fund, a Delaware limited
partnership ("Zell/Chilmark") is ZC Limited Partnership, an Illinois
limited partnership ("ZC Limited"). No limited partner in Zell/Chilmark
acts as a general partner or has control over Zell/Chilmark. The sole
general partner of ZC Limited is ZC Partnership, a Delaware general
partnership ("ZC"). ZC's partners are ZC, Inc., an Illinois corporation
("ZCI") and CZ Inc., a Delaware corporation ("CZI"). The terms of the
partnership agreements of ZC Limited and ZC give the shareholders of ZCI
and CZI indirect control over ZC Limited and therefore, ultimately,
Zell/Chilmark. Samuel Zell is the sole director and president, Donald W.
Phillips is vice president, Sheli Z. Rosenberg is vice president and
secretary and Arthur A. Greenberg is vice president and treasurer of ZC,
Inc. David M. Schulte is sole director and sole shareholder, president,
secretary and treasurer, Joel S. Friedland is vice president and assistant
secretary, Matt Rosenburg is vice president and assistant secretary of CZ
Inc. Mr. Schulte and Mr. Zell disclaim beneficial ownership of the common
stock owned by HC.
Melvyn N. Klein, President and sole stockholder of JAKK serves as a
director of Itel. Additionally, Samuel Zell, President and sole director of
ZC, Inc. which may be deemed to control a partner of HC Associates, is
Chairman of the Board, and may be deemed to be a principal stockholder, of
Itel. Itel beneficially owns 8,064,005 shares of the Corporation's common
stock. Itel is not a partner of HC Associates, and there are no contracts,
arrangements or understandings between HC Associates and Itel with respect
to any securities of the Corporation and HC Associates, as well as Messrs.
Zell and Klein, disclaims beneficial ownership of the shares of common
stock beneficially owned by Itel.
(3) At February 17, 1994, Samuel Zell and Anne Lurie, by virtue of their
positions as trustees and beneficiaries of trusts, and Sheli Rosenberg by
virtue of her position as co-trustee of one of the trusts might be deemed
to be beneficial owners of approximately 26% of Itel's outstanding common
stock. Mr. Zell, Mrs. Lurie and Mrs. Rosenberg might be considered to be
controlling persons of Itel and, accordingly, might be deemed to own
beneficially the Corporation's common stock described above. Mr. Zell, Mrs.
Lurie and Mrs. Rosenberg have disclaimed beneficial ownership of the
Corporation's common stock held by Itel.
(4) All the shares of the Corporation's common stock owned by Minorco (USA) are
held subject to the Stock Ownership and Registration Rights Agreement,
dated December 10, 1991 and effective as of May 19, 1992 among Minorco and
Minorco (USA) and the Corporation (the "Minorco Agreement"). Pursuant to
the terms of the Minorco Agreement, the Corporation has agreed to register,
after May 19, 1993, for resale under the Securities Act and applicable
state securities laws any of the Corporation's common stock owned by
Minorco (or its affiliates) which Minorco elects to sell. Such registration
rights with respect to the Corporation's common stock are subject to
certain specified restrictions. The Corporation is obligated to pay all
expenses incidental to such registration, excluding underwriting discounts
and commissions. In addition, Minorco and Minorco (USA) agreed not to sell,
transfer any beneficial interest in, hypothecate or otherwise dispose of
any of the Corporation's common stock or any other of the Corporation's
voting securities, except pursuant to (i) a sale in connection with a
tender offer which, if successfully completed, would result in such tender
offeror beneficially owning a majority of the outstanding shares of the
Corporation's common stock, (ii) a sale at any time that a person
unaffiliated with Minorco beneficially owns at least 40% of the outstanding
shares of the Corporation's common
(Notes continued on following page)
8
11
stock, or (iii) after May 19, 1993, a proposed sale, transfer,
hypothecation or disposition which occurs pursuant to (A) an underwritten
offering, registered under the Securities Act, provided that the
underwriters of such offering undertake to effect a broad distribution in
which no person will purchase from the underwriters, to the knowledge of
such underwriters, more than 5% of the Corporation's voting securities
outstanding as of the date of the closing of such offering, (B) an
underwritten offering of securities convertible into the Corporation's
common stock, registered under the Securities Act, provided that the
underwriters of such offering undertake to effect a broad distribution in
which no person will purchase from the underwriters, to the knowledge of
such underwriters, securities convertible into more than 5% of the
Corporation's voting securities outstanding as of the date of the closing
of such offering, (C) a pro rata rights offering or pro rata distribution
to all holders of Minorco or to all holders of Minorco (USA), (D) a
transaction completed pursuant to Rule 144 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under the
Securities Act, (E) any sale where (I) counsel to the seller delivers an
opinion that the seller is not an affiliate of the Corporation and that
such sale may be effected without registration under the Securities Act,
(II) in the case of a private sale, to the seller's knowledge, after giving
effect to such transaction and as a result thereof, no person will own more
than 5% of the outstanding voting securities of the Corporation and (III)
in the case of a sale other than a private sale, to the seller's knowledge,
no person will purchase in such transaction more than 5% of the outstanding
voting securities of the Corporation, (F) a pledge of or the granting of a
security interest in such shares of the Corporation's common stock to an
institutional lender to secure a bona fide financial obligation, (G) any
divestiture of the Corporation's common stock required by legislation,
court decree or governmental order or demand and (H) a transfer of the
Corporation's common stock among Minorco, Minorco (USA) or any other
majority owned Minorco subsidiary. The Minorco Agreement also provides
that, during the term thereof, Minorco and Minorco (USA) agree not (i) to
become participants in a proxy solicitation in respect of any voting
securities of the Corporation or (ii) to join or permit any entity under
Minorco's control to join a group for the purpose of acquiring, holding or
disposing of voting securities of the Corporation within the meaning of the
Securities Exchange Act of 1934 (except a group consisting solely of
Minorco and its subsidiaries). The foregoing restrictions do not limit the
right of Minorco, Minorco (USA) or Minorco's other majority owned
subsidiaries to vote their voting securities of the Corporation as they, in
their sole discretion, shall determine. Under the Minorco Agreement,
Minorco and Minorco (USA) jointly have the right to designate a member to
the Corporation's Board of Directors for so long as they beneficially own
at least 8% of the Corporation's outstanding voting securities. The Minorco
Agreement expires on the first to occur of (i) the year 2002 or (ii) the
date on which Minorco and Minorco (USA) no longer own any voting securities
of the Corporation.
Minorco (USA) is involved in mining and natural resource-related activities
in North America. Minorco (USA) is indirectly wholly owned by Minorco, a
company incorporated under the laws of Luxembourg as a societe anonyme.
Minorco is an international natural resources company with operations in
gold, base metals, industrial minerals, paper and packaging and
agribusiness. Minorco's address is 9 rue Sainte Zithe, L-2763 Luxembourg
City, Grand Duchy of Luxembourg. The capital stock of Minorco is owned in
part as follows: approximately 43%, directly or through subsidiaries, by
Anglo American Corporation of South Africa Limited ("Anglo American"), a
publicly held mining and finance company, approximately 23%, directly or
through subsidiaries, by De Beers Centenary AG ("Centenary"), a publicly
held Swiss diamond mining and investment company and approximately 3% by
Anglo American Gold Investment Company Limited ("Amgold"), a publicly held
mining investment company. Approximately 39% of the capital stock of Anglo
American is owned, directly or through subsidiaries, by De Beers
Consolidated Mines Limited ("De Beers"), a publicly held diamond mining and
investment company. Approximately 29% of the capital stock of Centenary and
approximately 33% of the capital stock of De Beers is owned, directly or
through subsidiaries, by Anglo American. De Beers owns approximately 9% of
Centenary. Approximately 50% of the capital stock of Amgold is owned,
directly or through subsidiaries, by Anglo American.
(Notes continued on following page)
9
12
Mr. Nicholas F. Oppenheimer, Deputy Chairman and a director of Anglo
American, Centenary, De Beers, Chairman and a director of Amgold, and a
director of Minorco, and Mr. Henry R. Slack, a director of Minorco (USA),
Chief Executive, President and a director of Minorco and a director of
Anglo American, have indirect partial interests in approximately 7% of the
outstanding shares of Minorco, approximately 8% of the outstanding shares
of Anglo American and less than one percent of the outstanding shares of
Amgold. Mr. Reuben Richards, a director of the Corporation, beneficially
owns 1,000 Minorco Ordinary Shares, constituting less than one percent of
the outstanding shares of Minorco. Mr. Richards is Chairman of the Board,
Chief Executive Officer and President of Minorco USA and a director of
Minorco.
(5) As reported to the Corporation on February 7, 1995, Spears, Benzak, Salomon
& Farrell ("Spears, Benzak") was the beneficial owner of 8,690,789 shares
(approximately 9.7%) of the common stock and 220,628 shares (approximately
4%) of the Convertible Preferred Stock, 7% Series, of the Corporation as of
such date. Spears, Benzak, a New York partnership, is an Investment Advisor
registered under Section 203 of the Investment Advisors Act of 1940. Unless
otherwise required by law or contract, Spears, Benzak has no power to vote
or direct the vote of such stock and shares the power to dispose or direct
the disposition of such stock with various customers for whom the shares
were purchased, but in each case the customer has the ultimate power to
dispose and may at any time revoke Spears, Benzak's authority to dispose. A
variety of individuals, groups and corporations for whom Spears, Benzak
serves as investment advisor have rights to dividends and proceeds of these
shares.
(6) As reported at February 10, 1995, Merrill Lynch & Co., Inc., a Delaware
corporation ("ML & Co."), Merrill Lynch Group, Inc., a Delaware corporation
("ML Group"), whose address is World Financial Center, North Tower, 250
Vesey Street, New York, N.Y. 10281, and Princeton Services, Inc., a
Delaware corporation ("PSI"), whose address is 800 Scudders Mill Road,
Plainsboro, N.J. 08536, are parent holding companies pursuant to Section
240, 13d-1(b)(1)(ii)(G) of the Securities Exchange Act of 1934 (the
"Exchange Act"). The relevant subsidiaries of ML & Co. are Merrill Lynch
Pierce, Fenner & Smith Incorporated, a Delaware corporation ("MLPF&S"), ML
Group and PSI, which is a general partner of Merrill Lynch Asset
Management, L. P. (d/b/a) Merrill Lynch Asset Management ("MLAM"), whose
address is 800 Scudders Mill Road, Plainsboro, N.J. 08536. The relevant
subsidiary of Merrill Lynch Group is PSI.
ML Group, a wholly owned direct subsidiary of ML & Co., may be deemed to be
the beneficial owner of 9.2% of the shares of the Corporation's common
stock, 1% of the Convertible Preferred Stock, 7% Series and 4% of the $.732
Series A Convertible Preferred Stock by virtue of its control of its
wholly-owned subsidiary, PSI.
PSI, a wholly owned direct subsidiary of ML Group, may be deemed to be the
beneficial owner of 9.2% of the shares of the Corporation's common stock,
1% of the Convertible Preferred Stock, 7% Series and 4% of the $.732 Series
A Convertible Preferred Stock by virtue of its being the general partner of
MLAM.
MLAM, a Delaware limited partnership, is an investment advisor registered
under Section 203 of the Investment Advisors Act of 1940. MLAM may be
deemed to be the beneficial owner of 9.2% of the shares of the
Corporation's common stock, 1% of the Convertible Preferred Stock, 7%
Series and 4% of the $.732 Series A Convertible Preferred Stock as a result
of acting as investment adviser to investment companies registered under
Section 8 of the Investment Company Act of 1940. One registered investment
company advised by MLAM, Merrill Lynch Growth Fund for Investment &
Retirement (the "Fund"), whose address is 800 Scudders Mill Road,
Plainsboro, N.J. 08536, is the beneficial owner of 7.2% of the shares of
the Corporation's common stock.
MLPF&S, a wholly owned direct subsidiary of ML & Co. and a broker-dealer
registered pursuant to the Exchange Act is the beneficial owner of less
than 5 percent of the common stock of the Corporation.
Finally, certain Merrill Lynch trust companies, each of which is a
wholly-owned subsidiary of ML Group and a bank as defined in Section
3(a)(6) of the Exchange Act, may be deemed to be the beneficial owners of
certain of the securities reported above. Pursuant to Section 240, 13d-4 of
the Exchange Act,
(Notes continued on following page)
10
13
ML & Co., ML Group, MLPF&S, the Merrill Lynch trust companies, PSI, MLAM,
and the Fund disclaim beneficial ownership of the securities of the
Corporation and the reporting of the above information shall not be
construed as an admission that any such entity is, for the purposes of
Section 13(d) or 13(g) of the Exchange Act, the beneficial owner of any
securities of the Corporation, other than, in the case of ML & Co. and
MLPF&S, securities of the Corporation held by MLPF&S in proprietary
accounts.
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the amount of common stock beneficially
owned as of February 1, 1995 (January 1, 1995 for shares held in the
Corporation's Savings Investment Plan) by each of the directors, by each of the
executive officers, and by all directors and executive officers as a group.
Unless otherwise noted, each of the named persons and members of the group has
sole voting and investment power with respect to the shares shown. No individual
listed below beneficially owns one percent or more of the Corporation's
outstanding common stock. In addition, no individual listed below beneficially
owns any shares of Convertible Preferred Stock, 7% Series, or $.732 Series A
Convertible Preferred Stock.
SHARES
NAME OF DIRECTOR, OWNED PERCENT
EXECUTIVE OFFICER OR GROUP BENEFICIALLY OF CLASS
------------------------------------------------------ --------- ---------
Rod F. Dammeyer(1).................................... 0 --
William E. Greehey.................................... 23,806 --
Melvyn N. Klein(2).................................... 60 --
Robert D. Krebs....................................... 38,181 --
Allan V. Martini...................................... 5,966 --
Michael A. Morphy..................................... 8,825 --
Reuben F. Richards.................................... 4,446 --
David M. Schulte(3)................................... 0 --
Marc J. Shapiro....................................... 9,766 --
Robert F. Vagt........................................ 12,128 --
Kathryn D. Wriston.................................... 4,688 --
James L. Payne(4)..................................... 544,554 --
Jerry L. Bridwell(5).................................. 232,883 --
Hugh L. Boyt(6)....................................... 148,681 --
Michael J. Rosinski(7)................................ 53,170 --
John R. Womack(8)..................................... 126,767 --
Directors and Executive Officers as a Group(9)........ 1,611,687 1.79
- ------------
(1) See "Security Ownership of Certain Beneficial Owners" for a description of
ownership of the Corporation's common stock by Mr. Dammeyer's employer,
Itel.
(2) See "Security Ownership of Certain Beneficial Owners" for a description of
ownership of the Corporation's common stock by HC Associates and Itel. Mr.
Klein is the sole stockholder of one of the general partners in GKH
Partners, L.P., the general partner of GKH Investments, L.P. and the
nominee for GKH Private Limited. Mr. Klein is also a director of Itel.
(3) See "Security Ownership of Certain Beneficial Owners" for a description of
ownership of the Corporation's common stock by HC Associates. Mr. Schulte
is Managing Partner of Chilmark Partners, L.P. and General Partner of ZC
Limited Partnership, the General Partner of Zell/Chilmark Fund, L.P.
(4) Mr. Payne's common stock ownership includes 44,882 shares arising from
participation in the Corporation's Savings Investment Plan as of January 1,
1995 and 381,223 shares which could be received upon the exercise of
options within 60 days. The weighted average exercise price of such options
is $15.58.
(Notes continued on following page)
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14
(5) Mr. Bridwell's common stock ownership includes 34,918 shares arising from
participation in the Corporation's Savings Investment Plan as of January 1,
1995 and 158,839 shares which could be received upon the exercise of
options within 60 days. The weighted average exercise price of such options
is $16.43.
(6) Mr. Boyt's common stock ownership includes 4,697 shares arising from
participation in the Corporation's Savings Investment Plan as of January 1,
1995 and 110,245 shares which could be received upon the exercise of
options within 60 days. The weighted average exercise price of such options
is $13.58.
(7) Mr. Rosinski's common stock ownership includes 3,809 shares arising from
participation in the Corporation's Savings Investment Plan as of January 1,
1995 and 26,666 shares which could be received upon the exercise of options
within 60 days. The exercise price of such options is $9.5625.
(8) Mr. Womack's common stock ownership includes 8,908 shares arising from
participation in the Corporation's Savings Investment Plan as of January 1,
1995 and 107,034 shares which could be received upon the exercise of
options within 60 days. The weighted average exercise price of such options
is $16.88.
(9) The common stock ownership described includes 122,632 shares arising from
participation in the Corporation's Savings Investment Plan as of January 1,
1995 and 1,063,184 shares which could be received upon the exercise of
options within 60 days.
REPORT OF THE COMPENSATION AND BENEFITS COMMITTEE
The Compensation and Benefits Committee (the "Committee") has been
chartered by the Board to review salaries and other compensation of officers,
including Mr. Payne, the Corporation's Chief Executive Officer, and key
employees on an annual basis. Following review, the Committee submits
recommendations to the Board regarding such salaries and compensation. In
addition, the Committee selects officers and key employees for participation in
incentive compensation plans, establishes performance goals for those officers
and key employees who participate in such plans and reviews and monitors
benefits under all employee plans of the Corporation.
Compensation Policies for Executive Officers
The Corporation's policy is to pay executive officers and other key
employees at or somewhat below its peer group base salary while providing the
opportunity for additional compensation through the Incentive Compensation Plan
(the "ICP Plan") and the 1990 Incentive Stock Compensation Plan (the "Stock
Compensation Plan"). The performance graph on page 17 utilizes a group of
independent oil and natural gas companies (including the Corporation) developed
by an investment banking institution. The peer group used for compensation
purposes includes those companies from such group which the Committee believes
approximate the Corporation's size and asset mix. Total compensation therefore
encompasses a blend of cash and short and long term incentives which the
Corporation believes is competitive.
The objectives of the ICP Plan are to communicate and focus management's
attention on significant business goals, to identify and reward superior
performance and to provide a competitive compensation package to attract and
retain high quality key employees. Goals are established, which if met at the
target objective, will result in the executive officer being paid 50 percent of
the maximum amount for which the individual is eligible. This target payment
plus base salary results in the intended annual compensation for the individual.
All executive officers participate in the ICP Plan with maximum payout
percentages (before the possible adjustment discussed below) of base salary
ranging from 80 percent for Mr. Payne through 50 percent for all other executive
officers. Payout maximums reflect the amount of compensation which the
Corporation believes should be at risk for the individual. Therefore, while Mr.
Payne's base compensation is lower than the peer group average, if the ICP Plan
goals are met he is afforded the opportunity to increase his total annual
compensation. The Committee may increase or decrease the ultimate award by 25
percent at its discretion.
The goals established for 1994 were based upon discretionary cash flow per
share, production, reserve replacement and the performance of the Corporation's
common stock as compared to the peer group shown in
12
15
the table on page 17 as it was constituted on January 1, 1994. The awards were
subject to reduction by 50 percent in the event the Corporation failed to
achieve net income to common shareholders. Discretionary cash flow per share is
defined as net cash provided by operating activities before changes in operating
assets and liabilities minus exploration dry hole costs plus total exploration
expense minus capitalized interest minus preferred dividends divided by the
average number of common shares outstanding. Each goal was weighed equally and
with the exception of stock performance was compared against profit plan
projections. The discretionary cash flow and reserve replacement goals were met,
the production goal was met at 98.5 percent and the stock performance goal was
met at 50 percent producing an overall payout of 84 percent. The Corporation
achieved net income to common shareholders and therefore the awards were not
subject to reduction. Payment was made one half in cash and one half in Bonus
Stock awarded pursuant to the Stock Compensation Plan.
In addition to the above described cash and stock payments, the executive
officers and key employees are eligible to participate in grants made under the
Stock Compensation Plan. This plan is designed to align the interests of the
participants with the short and long term goals of the Corporation through
equity ownership. Its main objective is to encourage superior performance by
employees by providing incentive compensation commensurate and competitive with
that provided by other companies. In order to further the identity of interest
of Corporation employees with that of its stockholders, all forms of
compensation under the Stock Compensation Plan relate to the Corporation's
common stock. In 1992, grants of Restricted Stock were made to the executive
officers, including Mr. Payne. One half of the award vested in 1993 and the
remaining one half vested in 1994. The executive officers, including Mr. Payne,
received salary increases effective January 1, 1994 for the reasons and
utilizing the factors discussed below under the heading "Chief Executive Officer
Compensation". No additional increases were made during 1994.
In December 1994, the Committee granted a total of 743,000 nonqualified
stock options to four executive officers not listed in the following
Compensation Table as well as 117 key employees. Neither Mr. Payne nor the other
individuals listed in the Compensation Table received option grants in 1994.
These grants, which are subject to the approval of the shareholders at the 1995
Annual Meeting of additional shares subject to the Stock Compensation Plan (see
"Approval of the Santa Fe Energy Resources, Inc. 1990 Incentive Stock
Compensation Plan, Second Amendment and Restatement," below) were made at market
value on the date of grant and vest one-third per year over three years. Stock
option awards are made pursuant to consistent guidelines designed to approximate
average award levels for comparable positions among the peer group used in the
performance graph on page 17 and additional exploration and production companies
with which the Corporation competes for executive employees. The awards are also
designed to achieve a desired mix of stock option awards relative to other
compensation elements consistent with the Corporation's compensation strategy.
Individual awards are adjusted from established guidelines based on an
assessment of each executive's relative past and expected future contribution as
determined by Mr. Payne and the Committee. Comparisons of market data used to
establish guidelines are based both on the market value of shares subject to
individual option awards as a percent of base salary and, on an aggregate basis,
shares subject to cumulative options outstanding as a percent of the
Corporation's total common shares outstanding. The guidelines establish a
continuous cycle for the grant of options to executive officers.
Chief Executive Officer Compensation
In December 1993, with the assistance of the Hay Group, the Committee
reviewed the overall compensation provided executives of a selected group of oil
and gas exploration companies of equivalent size and capitalization. In keeping
with the Corporation's policy that total target compensation be at the average
or somewhat below the average rate paid by the peer group, the Committee
determined that Mr. Payne's annual salary should be adjusted to $406,000
effective January 1, 1994. In lieu of a more significant salary increase, Mr.
Payne was granted 300,000 nonqualified stock options with a strike price of
$9.5625 which was above the $8.625 per share market price at the time of grant.
The options grant was not based upon the stock option guidelines utilized for
grants made in the normal two year cycle since it was intended in part to be a
substitute for current compensation.
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16
The options do not become exercisable until a five year period has elapsed
from the grant date and then only as to 50 percent of the grant. The remaining
options become exercisable as to a cumulative 75 percent of the grant after six
years and as to a cumulative 100 percent after seven years. The options may be
exercised on an accelerated basis in the event the price of the Corporation's
stock rises significantly during the three year period following the grant. This
grant of stock options was intended to align Mr. Payne's compensation with the
long term goals of the Corporation. Mr. Payne did not receive additional
compensation increases in 1994.
As noted above, the Committee retained the ability to increase or decrease
individual payments made under the ICP Plan at its discretion in the event it
believed events warranted. A significant restructuring was completed in 1994
which in the opinion of the Committee made the achievement of the performance
attained more difficult. As a result the Committee exercised its discretion and
increased Mr. Payne's ICP Plan payment to a 92.4 percent payout.
Section 162(m) of the Internal Revenue Code of 1986, as amended
The Committee is reviewing the implications of the $1 million pay cap rules
set forth in Section 162(m) of the Internal Revenue Code of 1986, as amended,
and intends to take the steps it deems appropriate to insure compensation
policies comply therewith.
COMPENSATION AND BENEFITS COMMITTEE
William E. Greehey, Chairman
Rod F. Dammeyer
Michael A. Morphy
Reuben F. Richards
Compensation Committee Interlocks and Insider Participants
No member of the Compensation and Benefits Committee was an officer or
employee of the Corporation in 1992, 1993 or 1994. Mr. Greehey is Chairman of
the Board and Chief Executive Officer of Valero. During 1994 the Corporation
purchased natural gas from affiliates of Valero in arm's length transactions
totaling $2,023,440. In addition, an affiliate of Valero paid the Corporation
$628,567 for compression of natural gas. These fees were also determined on an
arm's length basis. Mr. Greehey did not have a direct or personal interest in
the above transactions and his interest arises only because of his position as
an officer and director of Valero and as a director of the Corporation.
Mr. Morphy is a director of SFP. In connection with the distribution of
shares of the Corporation's common stock by SFP (and the initial distribution in
December 1989 to SFP by one of SFP's wholly owned subsidiaries of such shares)
(collectively the "Spin-Off"), the Corporation and SFP entered into an agreement
to protect SFP from federal and state income taxes, penalties and interest that
would be incurred by SFP if the Spin-Off was determined to be a taxable event
resulting primarily from actions taken by the Corporation during a one year
period that ended on December 4, 1991. If the Corporation were required to make
payments pursuant to the agreement, such payments could have a material adverse
effect on its financial condition; however, the Corporation does not believe
that it took any actions during such one-year period that would have such an
effect on the Spin-Off.
For periods prior to the date of the Spin-Off, the Corporation was included
in the consolidated federal income tax return filed by SFP as the common parent
for itself and its subsidiaries. Pursuant to the Agreement for the Allocation of
the Consolidated Federal Income Tax Liability Among the Members of the SFP
Affiliated Group and various state agreements for the allocation of tax
liability among the SFP Group (the "Tax Agreements") between SFP and its
subsidiaries, the Corporation paid to SFP an amount approximating the federal
income tax liability and for years 1989 and 1990 the state income tax liability
it would have paid if it and its subsidiaries were members of separate
consolidated groups. These amounts were payable regardless of whether the SFP
consolidated group, as a whole, had any current federal or state income tax
liability. Pursuant to the Agreement Concerning Taxes between SFP and the
Corporation, after the Spin-Off additional
14
17
payments to or refunds from SFP may be made if there is an audit, carryover or
similar adjustment subsequently made that impacts the computation of amounts
paid SFP as described above.
Mr. Morphy has no direct or personal interest in the above described
transaction. His interest arises only because of his position as a director of
SFP and as a director of the Corporation.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
ANNUAL COMPENSATION -------------------------------
--------------------- RESTRICTED SECURITIES ALL OTHER
NAME AND SALARY STOCK AWARDS UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR $ BONUS $(1) $(2) OPTIONS/SARS # $(3)
- ------------------------------- ---- ------- ---------- ------------- --------------- -------------
James L. Payne 1994 406,000 300,000 -- -- 18,983
Chairman of the Board 1993 380,000 185,440 -- 300,000 13,358
Chief Executive Officer 1992 380,000 297,669 43,130 125,000 11,850
and President
Hugh L. Boyt 1994 204,308 102,971 -- -- 10,489
Senior Vice President -- 1993 190,000 69,540 -- 100,000 11,025
Production 1992 171,250 99,539 20,026 45,000 9,045
Jerry L. Bridwell 1994 199,440 100,518 -- -- 10,295
Senior Vice President 1993 190,000 69,540 -- 100,000 11,400
Exploration and Land 1992 190,000 99,750 20,026 45,000 10,252
Michael J. Rosinski 1994 192,900 97,222 -- -- 9,912
Vice President and 1993 180,000 65,880 -- 100,000 7,345
Chief Financial Officer 1992(4) 60,000 36,000 18,981 40,000 291
John R. Womack 1994 170,160 85,761 -- -- 7,890
Vice President -- 1993 155,000 56,730 -- 100,000 9,299
Business Development 1992 155,000 82,537 16,340 35,000 8,372
- ---------------
(1) The bonus amounts shown, while determined on a cash basis, were actually
paid partially in shares of the Corporation's common stock pursuant to the
Stock Compensation Plan. For 1992, Messrs. Payne, Boyt, Bridwell, Rosinski
and Womack received 22,971, 7,692, 7,824, 2,771 and 6,459 shares,
respectively. For 1993, Messrs. Payne, Boyt, Bridwell, Rosinski and Womack
received 10,092, 3,785, 3,785, 3,586 and 3,088 shares, respectively. For
1994, Messrs. Payne, Boyt, Bridwell, Rosinski and Womack received 17,911,
6,148, 6,002, 5,805 and 5,121 shares, respectively.
(2) The value of Restricted Stock awarded in September 1992 resulted from the
grant to Messrs. Payne, Boyt, Bridwell, Rosinski and Womack of 4,540, 2,108,
2,108, 1,998 and 1,720 shares respectively. The restrictions lapsed as to
one-half of the shares in September 1993 and as to the other one-half in
September 1994. None of these individuals held Restricted Stock on December
31, 1994.
(3) Amounts shown reflect matches made by the Corporation for employee
contributions to the Santa Fe Energy Resources, Inc. Savings Investment Plan
as well as the performance match. (See "Benefit Plans -- Savings Plan" for a
description of the Savings Investment Plan and the performance match.) The
performance match is contributed in the year following the performance and
therefore total amounts shown for 1992, 1993 and 1994 include the match made
for 1991, 1992 and 1993 results, respectively. The Corporation made a
performance match in March 1995 for 1994 results for Messrs. Payne, Boyt,
Bridwell, Rosinski and Womack in the amount of $2,520 for each individual.
In addition, amounts shown for 1994 also include the match made by the
Corporation relating to deferrals under the Deferred Compensation Plan. (See
"Benefit Plan -- Savings Plan" for a description of the Deferred
Compensation Plan.) These amounts are also subject to the performance match
outlined in the Savings Investment Plan. In March 1995 the Corporation
allocated to accounts maintained by Messrs. Payne, Boyt, Bridwell, Rosinski
and Womack $4,300, $912, $830, $720, and $0, respectively as a performance
match.
(4) Mr. Rosinski was first employed by the Corporation on September 1, 1992.
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AGGREGATED OPTION/SAR EXERCISES IN 1994 AND
1994 YEAR END OPTION/SAR VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS/SARS AT OPTIONS/SARS AT
ON YEAR END 1994 YEAR END 1994
EXERCISES EXERCISABLE/ EXERCISABLE/
NAME DURING 1994 UNEXERCISABLE UNEXERCISABLE(1)
- --------------------------------------- ----------- ---------------- ---------------
(#) (#) $
James L. Payne......................... -0- 381,223/341,667 0/0
Hugh L. Boyt........................... -0- 110,245/115,000 0/0
Jerry L. Bridwell...................... -0- 158,839/115,000 0/0
Michael J. Rosinski.................... -0- 26,666/113,334 0/0
John R. Womack......................... -0- 107,034/111,666 0/0
- ------------
(1) None of the unexercised options are "in-the-money", as all the various
option exercise prices exceed the $8.00 per share closing price of the
Corporation's common stock at December 30, 1994.
16
19
PERFORMANCE GRAPH
The following performance graph compares the performance of the
Corporation's common stock to the S&P 500 Index and to an index composed of 22
Independent Oil and Gas Companies selected by Goldman, Sachs & Co. from time to
time.(1) Although Goldman, Sachs & Co. does not represent that these companies
comprise a "peer group," the Corporation believes that its asset base and
operations are best compared to this group and that they are its peers.
The Corporation first became publicly held on March 16, 1990 through an
initial public offering by SFP of approximately 18 percent of the Corporation's
common stock. The indices described below assume that the value of the
investment in the Corporation's common stock was $100 at the time of the initial
public offering and the value of the investment in each of the other indices was
$100 at February 28, 1990 and that all dividends were reinvested.
COMPARISON OF 45 MONTH CUMULATIVE TOTAL RETURN* AMONG
SANTA FE ENERGY RESOURCES INC., THE S & P 500 INDEX AND A PEER GROUP
SANTA FE EN-
MEASUREMENT PERIOD ERGY RE-
(FISCAL YEAR COVERED) SOURCES S & P 500 PEER GROUP
3/90 100 100 100
1990 86 100 88
1991 51 131 78
1992 50 141 90
1993 54 155 107
1994 46 157 95
* $100 invested on 03/09/90 in stock or on 02/28/90 in index -- including
reinvestment of dividends. Fiscal year ending December 31.
(1) This group of companies, which includes the Corporation, also currently
includes Anadarko Petroleum Corp., Apache Corp., Burlington Resources,
Cabot Oil & Gas, Devon Energy, Enron Oil & Gas, Gerrity Oil & Gas,
Louisiana Land & Exploration, Maxus Energy Corp., Mitchell Energy &
Development, Murphy Oil Corp., Noble Affiliates, Inc. Oryx Energy Co.,
Parker & Parsley Petroleum, Pennzoil Co., Plains Petroleum Company, Pogo
Producing Company, Seagull Energy Corp., Union Texas Petroleum Holdings,
Inc., Vintage Petroleum and Wainoco Oil Corp. Due to activities such as
reorganizations and mergers, additions and deletions are made to the group
from time to time.
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BENEFIT PLANS
The Corporation maintains a 401(k) savings plan and a retirement income
plan. In addition, the Corporation has entered into employment agreements with
certain officers and key employees and maintains a severance program for all
full-time salaried employees. These plans and agreements are briefly described
below.
Savings Plan. The Corporation has adopted the Santa Fe Energy Resources
Retirement and Savings Plan, which became operative and was restated and renamed
the Santa Fe Energy Resources Savings Investment Plan, effective November 1,
1990 (the "Savings Investment Plan"). The Savings Investment Plan offers
eligible employees an opportunity to make long-term investments on a regular
basis through salary contributions, which are supplemented by matching employer
contributions. Substantially all salaried employees are eligible to participate
on the first day of the month after their date of hire. The Corporation will
match up to 4% of an employee's compensation and the employee's contribution
could not exceed $9,240 in 1994. The limit amount is indexed each year to
reflect cost-of-living increases but was not increased in 1995.
In addition to the employer match described above, at the end of each
fiscal year, the Corporation's performance is evaluated using the same
performance measures used in the ICP Plan. If the performance meets or exceeds
the goals for that year, participants will receive up to another fifty cents on
each regular matching dollar contributed by the Corporation. The regular
employer matching contributions as well as the performance match are made in the
Corporation's common stock. The goals were 84 percent met in 1994 and a partial
performance match was made in March 1995.
The Savings Investment Plan is intended to qualify as a Section 401(k) cash
or deferred compensation arrangement whereby an employee's contributions and the
employer's matching contributions are not subject to federal income taxes at the
time of the contribution to the Savings Investment Plan, and the Savings
Investment Plan is subject to the restrictions imposed by the Code. Investment
alternatives to which contributions may be allocated by the participants include
a fixed income fund, an equities fund, a balanced fund, a growth equity fund and
a fund which is invested in the Corporation's common stock.
The Corporation also maintains a supplemental deferred compensation
arrangement whereby employees earning in excess of $92,400 per year are allowed
to defer all or a portion of their salary until any future year or retirement.
These amounts are not matched by the Corporation. Employees earning in excess of
$150,000 per year may also defer up to 4 percent of such excess and the amount
will be matched by the Corporation. The amount contributed is also subject to
the performance match described above in the Savings Investment Plan. All
amounts are contributed in cash and earn interest at the rate paid on the fixed
income fund of the Savings Investment Plan.
Retirement Plans. The Corporation has adopted the Santa Fe Energy Resources
Retirement Income Plan, a qualified defined benefit plan for substantially all
salaried employees (the "Retirement Plan"), and the Santa Fe Energy Resources
Supplemental Requirement Plan (the "Nonqualified Plan"). The Nonqualified Plan
will pay benefits to Retirement Plan participants where the Retirement Plan
formula produces a benefit to members in excess of limits imposed by ERISA law
and applicable government regulations. It also includes amounts deferred under
the Santa Fe Energy Resources, Inc. Deferred Compensation Plan as pensionable
compensation. Benefits which have accrued to the Corporation's participants
under the Santa Fe Pacific Retirement Plan ('SFP Retirement Plan") are protected
under the Retirement Plan. Total approximate benefits under both the Retirement
Plan and supplemental plan are shown below for selected compensation levels and
years of service. As of December 31, 1994, Messrs. Payne, Boyt, Bridwell,
Rosinski, and Womack were credited with 12.8, 11.2, 20.9, 2.3 and 12 years of
service under the plans, respectively.
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PENSION PLAN TABLE
AVERAGE YEARS OF SERVICE
YEARLY ----------------------------------------------------------------
COMPENSATION 15 20 25 30 35
------------------------ -------- -------- -------- -------- --------
$125,000............... $ 22,000 $ 29,000 $ 36,000 $ 55,000 $ 64,000
$150,000............... $ 27,000 $ 35,000 $ 44,000 $ 66,000 $ 77,000
$175,000............... $ 31,000 $ 42,000 $ 52,000 $ 78,000 $ 91,000
$200,000............... $ 36,000 $ 48,000 $ 60,000 $ 90,000 $104,000
$225,000............... $ 40,000 $ 54,000 $ 67,000 $101,000 $118,000
$250,000............... $ 45,000 $ 60,000 $ 75,000 $113,000 $132,000
$300,000............... $ 54,000 $ 73,000 $ 91,000 $136,000 $159,000
$400,000............... $ 73,000 $ 97,000 $122,000 $183,000 $213,000
$450,000............... $ 82,000 $110,000 $137,000 $206,000 $240,000
$500,000............... $ 92,000 $122,000 $153,000 $229,000 $267,000
$600,000............... $110,000 $147,000 $184,000 $276,000 $321,000
Benefit figures shown are amounts payable based on a straight life annuity
assuming retirement by the participant at age 62 in 1994 without a joint
survivorship provision. The benefits listed in the above table are not subject
to any deduction for social security or other offset amounts.
Benefits under the plans are computed based on a participant's total
compensation during this period of covered employment, for the 60 consecutive
months during the ten-year period immediately prior to the termination of his
covered employment for which his total compensation is the highest, divided by
60. If a participant has not received compensation for 60 consecutive months
during such ten-year period, his compensation shall equal the total of his
compensation for the longest period of consecutive months during such ten-year
period divided by the total number of months of compensation so considered.
Compensation recognized under the plans is the total basic compensation,
including any elective salary deferral amounts excluded form income pursuant to
Section 125 or 402 of the code, plus overtime, shift differentials and bonuses
(whether cash or stock) paid pursuant to recurring bonus programs, including
compensation deferred under the Santa Fe Energy Resources, Inc. Deferred
Compensation Plan, but excluding any special or extraordinary bonuses and any
other items of compensation. A participant's basic compensation is the regular
rate of pay specified for his position and does not include automobile
allowances, imputed income under any group term life insurance program, moving
expense or other reimbursements, fringe benefits, or similar items.
The pension compensation therefore differs from the compensation listed in
the Summary Compensation Table in several respects. Pension compensation is
based on average compensation as explained above. It does not include restricted
stock awards, stock options,and other compensation in the "All Other
Compensation" column (i.e., employer matching contributions to the Savings
Investment Plan and the performance match). It also does not include special or
extraordinary bonuses.
The pension compensation of officers whose pension compensation differs
from the compensation contained in the Summary Compensation Table on page 15 is
listed below:
PENSION COMPENSATION
NAME (FINAL AVERAGE PAY)
---------------------------------------------------- --------------------
James L. Payne...................................... $607,700
Hugh L. Boyt........................................ $249,000
Jerry Bridwell...................................... $275,400
Michael Rosinski.................................... $270,900
John R. Womack...................................... $230,200
Employment Agreements. The Corporation has entered into employment
agreements ("Employment Agreements") covering 9 current employees of the
Corporation (including each of the individuals named in
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the Cash Compensation Table except Mr. Rosinski). The Employment Agreements are
intended to encourage such employees to remain in the employ of the Corporation.
The initial term of 8 of the 9 Employment Agreements expired on December 31,
1990 and, on January 1, 1991 and beginning on each January 1st thereafter, is
automatically extended for additional one-year periods, unless by September 30
of any year the Corporation gives notice that the Employment Agreement will not
be so extended. The term of the Employment Agreement, however, is automatically
extended for a minimum period of 24 months following a Change in Control. Such a
Change in Control occurred due to the merger with Adobe. One agreement was
entered into effective January 4, 1995 for an individual not listed in the Cash
Compensation Table. The initial term will expire December 31, 1996 and beginning
on each January 1st thereafter, is automatically extended for additional
one-year periods, unless by September 30 of any year the Corporation gives
notice that the Employment Agreement will not be so extended. The Agreement is
automatically extended for a minimum period of 24 months following a Change in
Control. This individual's Employment Agreement was not effected by the merger
with Adobe.
In the event that following Change in Control (and during the term of the
Employment Agreement) employment is terminated by the employee for "Good Reason"
or the employee is involuntarily terminated by the Corporation other than for
"Cause" (as those terms are defined in the Employment Agreements), the
Employment Agreements provide for: (a) a lump sum payment equal to two years'
base salary; (b) the maximum bonus possible under the ICP Plan; (c) a lapse of
restrictions on any outstanding Restricted Stock grants and full payout of
related Phantom Units; (d) a cash payment for each outstanding option equal to
the amount by which the "fair market value" (as defined in the Employment
Agreement) of a share of the Corporation's common stock on the date of
termination exceeds the exercise price of the option; and (e) life, disability
and health benefits for a period of up to 24 months. The payments and benefits
provided in clauses (b), (c), (d) and (e) above are payable pursuant to the
Employment Agreement only to the extent they are not paid out under the terms of
any other plan of the Corporation. The payments and benefits provided by these
Employment Agreements are further limited to the extent that the value thereof,
when aggregated with certain other payments or benefits, would exceed (i) 2.99
times the "base amount" as defined in Section 280G of the Internal Revenue Code
(the "base amount" approximating the average of five years' compensation
preceding a Change in Control) plus (ii) the value of all health and life
insurance benefits and the earned portion of any award or benefit previously
granted, unless the employee would receive a greater net after-tax benefit if
such payments and benefits were reduced so that no excise tax would be payable.
Without giving effect to such limitation, the estimated value of the payments
and benefits that Messrs. Payne, Boyt, Bridwell, and Womack and all executive
officers as a group including these individuals would be entitled to receive if
a qualifying termination occurred on February 1, 1995 is $1,160,425, $551,761,
$534,370, $458,817 and $4,868,772, respectively.
Severance Program. The Corporation has adopted a Severance Program for all
full-time, salaried employees who are terminated by the Corporation or
terminated or constructively terminated by an acquiring company, other than for
Cause (as defined in the Severance Program). However, following a Change in
Control (defined substantially the same as in the Stock Compensation Plan), an
executive officer or key employee who has entered into an Employment Agreement
is not eligible to receive duplicate benefits under the Employment Agreement and
the Severance Program. As noted above, the merger of Adobe with the Corporation
constituted a Change of Control. A participant in the Severance Program is
generally entitled to an amount of up to one year's pay based upon a
participant's age, length of service and highest rate of base salary in effect
during the 24-month period preceding his termination, provided that the
aggregate of such payment does not exceed two times the participant's actual
salary for the 12-month period preceding the date of termination. In addition, a
participant is entitled to continuation of health and life insurance benefits
for two years.
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APPROVAL OF THE SANTA FE ENERGY RESOURCES, INC.
1990 INCENTIVE STOCK COMPENSATION PLAN,
SECOND AMENDMENT AND RESTATEMENT
A proposal will be presented at the annual meeting to approve the Santa Fe
Energy Resources, Inc. 1990 Incentive Stock Compensation Plan, Second Amendment
and Restatement (the "Amended and Restated Stock Plan") which was adopted by the
Board of Directors on February 17, 1995, subject to stockholder approval. The
Amended and Restated Stock Plan will become effective only upon its approval by
the stockholders and the event such approval is not granted, the terms of the
Stock Compensation Plan approved by the shareholders on September 16, 1992 will
remain in effect. A summary of the material provisions which differ from the
Stock Compensation Plan as it currently exists is set forth below. The
affirmative vote of a majority of the votes cast at the meeting, in person or by
proxy, is required for approval of the Amended and Restated Stock Plan.
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDED AND RESTATED
STOCK PLAN
The Stock Compensation Plan, as amended and restated, was approved by the
stockholders on September 16, 1992 and authorized the issuance of up to
5,000,000 shares of the Corporation's common stock pursuant to Non-Qualified
Stock Options ("NQSO's"), Incentive Stock Options ("ISO's"), Stock Appreciation
Rights ("SAR's"), Limited Stock Appreciation Rights ("LSAR's"), Phantom Units,
Restricted Stock or Bonus Stock. The 1990 Incentive Stock Compensation Plan,
Second Amendment and Restatement, would authorize an additional 2,500,000 shares
(497,971 shares are currently available for grants out of the original and
restated amount of 5,000,000 shares) for a total of 7,500,000 shares reserved
for issuance. The Compensation and Benefits Committee granted a total of 743,000
NQSO's in December 1994 subject to the approval of the Amended and Restated
Stock Plan at the 1995 Annual Meeting of Shareholders.
The Amended and Restated Stock Plan, would limit the amount of Restricted
Stock that may be granted after January 1, 1995 to 500,000 shares. Shares of
common stock which are tendered to the Corporation or withheld by the
Corporation from an award as payment of the exercise price of an award or in
satisfaction of any tax withholding obligation (other than ISO's) may again be
subject to an award. No employee may receive in any calendar year an award or
awards of options and/or SAR's with respect to more than 1,000,000 shares of
common stock nor may the employee receive Phantom Unit awards with respect to
more than 500,000 shares of common stock.
The Compensation and Benefits Committee shall, at the time shares of
Restricted Stock or Phantom Units are granted designate the Restricted Period
(as defined in the Plan) and the performance goals, if any, of the Corporation
with respect to such award. Such goals must be achieved (and certified by the
Committee) in order for a participant to receive the unrestricted shares or
value for the Phantom Units at the designated time. Any Restricted Stock or
Phantom Unit award which is intended to meet the requirements of Section 162(m)
of the Code, the performance goal or goals for such award shall be with respect
to one or more of the following: Earnings per share; earnings before interest,
taxes, depreciation and amortization expenses ("EBITDA"); earnings before
interest and taxes ("EBIT"); EBITDA, EBIT or earnings before taxes and unusual
or nonrecurring items as measured either against the annual budget or as a ratio
to revenue; market share; sales, costs; return on equity; operating cash flow;
production volumes compared to plan or prior years; reserves added;
discretionary cash flow; return on net capital employed and/or stock price
performance. The goals can be applied, where appropriate, with respect to an
individual, a business unit or the Corporation as a whole and need not be based
on increases or positive results, but can be based on maintaining the status quo
or limiting economic losses, for example. Which goals to use with respect to
such award, the weighing of the goals if more than one is used, and whether the
goal is to be measured against a Corporation established budget or target, an
index or a peer group of companies, shall also be determined by the Committee at
the time of the grant of the award.
Finally, the Committee shall have the authority to pay in shares of common
stock all or any portion of the cash amounts payable under any other
compensation program of the Corporation, but not exceeding $2 million with
respect to any employee during any calendar year.
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24
The foregoing summary of the Amended and Restated Plan, is subject to the
provisions of the Second Amendment and Restatement which is included as Appendix
A to this proxy statement.
INDEPENDENT PUBLIC ACCOUNTANTS
Price Waterhouse served as the independent public accountant for the
Corporation in 1994 and has been appointed the Corporation's independent
accountant for 1995. Representatives of Price Waterhouse will be present at the
annual meeting with the opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions. The stockholders are
requested to ratify and approve the appointment of Price Waterhouse as
independent auditors for 1995.
OTHER BUSINESS
The Board knows of no business that will come before the meeting except
that indicated above. However, if any other matters are properly brought before
the meeting, it is intended that the persons acting under the proxy will vote
thereunder in accordance with their best judgment.
COST OF PROXY SOLICITATION
The cost of preparing, assembling and mailing this proxy material will be
borne by the Corporation. In addition to solicitation by mail, solicitations may
be made by regular employees of the Corporation or by paid solicitors in person
or by telephone or telegraph. Arrangements may be made with brokerage houses,
custodians, nominees and fiduciaries to send proxy material to their principals
and the Corporation will reimburse them for their expense in so doing.
STOCKHOLDER PROPOSALS
In accordance with the proxy rules of the Securities and Exchange
Commission, proposals by stockholders intended for inclusion in the proxy
material solicited by the Corporation for the 1996 annual meeting must be
received at the Corporation's executive offices no later than November 29, 1995;
provided, however, that if the date of the 1996 annual meeting is scheduled to
be held prior to April 10, 1996 or later than June 10, 1996, the proposals are
then required to be received by the Corporation within a reasonable time before
its solicitation is made.
By order of the Board of Directors.
MARK A. OLDER
Corporate Secretary
March 21, 1995
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APPENDIX A
SANTA FE ENERGY RESOURCES, INC.
1990 INCENTIVE STOCK COMPENSATION PLAN
(SECOND AMENDMENT AND RESTATEMENT)
STATEMENT OF PURPOSE
One purpose of the Santa Fe Energy Resources, Inc. 1990 Incentive Stock
Compensation Plan (the "Plan") is to encourage superior performance by
employees, by allowing the Board of Directors of Santa Fe Energy Resources, Inc.
("SFER") to award several forms of incentive compensation to employees of the
Company. By providing incentive compensation commensurate and competitive with
that provided by other companies, the Plan should also assist SFER in attracting
and retaining the services of qualified and capable employees.
In order to further the identity of interest of employees with the
stockholders of SFER, all of the forms of compensation under the Plan relate to
SFER Common Stock. Employees' success in enhancing stockholder value will
translate directly into an enhanced benefit for the employee.
An additional purpose of the Plan is to encourage the Directors to own
shares of the Company's stock and thereby to align their interests more closely
with the interests of the other stockholders of SFER, to encourage the highest
level of Director performance by providing the Directors with a direct interest
in SFER's attainment of its financial goals, and to provide a financial
incentive that will help attract and retain the most qualified Directors.
I. DEFINITIONS
Unless the context indicates otherwise, the following terms have the
meanings set forth below:
"Acceleration Date" means the earliest date on which any of the
following events shall first have occurred: (i) the acquisition described
in clause (a) of the definition of "Change in Control" contained in this
Section I, (ii) the change in the composition of the Board of Directors
described in clause (b) of such definition or (iii) the stockholder
approval or adoption described in clause (c) or (d) of such definition.
"Award" means a grant of Options, Restricted Stock, Phantom Units,
Bonus Stock or Stock Appreciation Rights pursuant to the Plan.
"Board" means the Board of Directors of SFER.
"Bonus Stock" means Common Stock, which is not subject to a Restricted
Period, awarded by the Committee pursuant to the Plan.
"Cause" means (a) the willful and continued failure by the Participant
to substantially perform his duties with the Company (other than any such
failure resulting from his incapacity due to physical or mental illness),
or (b) the willful engaging by the Participant in conduct which is
demonstrably and materially injurious to the Company, monetarily or
otherwise. For purposes of this definition, no act, or failure to act,
shall be deemed "willful" unless done, or omitted to be done, by the
Participant not in good faith and without reasonable belief that his action
or omission was in the best interest of the Company.
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 any trustee or other fiduciary
holding securities under an employee benefit plan of SFER or
any company owned, directly or indirectly, by the stockholders
of SFER in substantially the same proportions as their
ownership of stock of SFER, is or becomes the "beneficial
owner" (as defined in Rule
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13d-3 under the Exchange Act), directly or indirectly, of
securities of SFER representing 25% or more of the combined
voting power of SFER'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 SFER, and any new director (other than a
director designated by a person who has entered into an
agreement with SFER to effect a transaction described in clause
(a), (c) or (d) of this definition) whose election by the Board
of Directors of SFER or nomination for election by SFER'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 SFER approve a merger or consolidation of
SFER with any other company other than (i) a merger or
consolidation which would result in the voting securities of
SFER 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 SFER (or such surviving entity) outstanding immediately
after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of SFER
(or similar transaction) in which no "person" (as hereinabove
defined) acquires more than 25% of the combined voting power of
SFER's then outstanding securities; or
(d) the stockholders of SFER adopt a plan of complete liquidation
of SFER or approve an agreement for the sale or disposition by
SFER of all or substantially all of SFER's assets. For purposes
of this clause (d), the term "the sale or disposition by SFER
of all or substantially all of SFER's assets" shall mean a sale
or other disposition transaction or series of related
transactions involving assets of SFER or of any direct or
indirect subsidiary of SFER (including the stock of any direct
or indirect subsidiary of SFER) 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 SFER 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 SFER (as hereinafter defined). For purposes of
the preceding sentence, the "fair market value of SFER" shall
be the aggregate market value of the outstanding shares of
common stock of SFER (on a fully diluted basis) plus the
aggregate market value of SFER's other outstanding equity
securities. The aggregate market value of the shares of common
stock of SFER shall be determined by multiplying the number of
shares of SFER'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 SFER for the ten
trading days immediately preceding the Transaction Date. The
aggregate market value of any other equity securities of SFER
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 SFER or
by such other method as the Board shall determine is
appropriate.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation and Benefits Committee of the
Board.
"Common Stock" means the common stock, $0.01 par value, of SFER.
"Company" means collectively SFER and all companies in which SFER
owns, directly or indirectly, more than 50% of the voting stock.
"Director" means a member of the Board who is not also an employee of
the Company.
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27
"Disability" means the inability of a Participant to continue to
perform the duties of his or her employment with the Company or as a member
of the Board, as the case may be, as determined by the Committee.
"Fair Market Value" shall mean the value per share equal to the Market
Price as of the date of determination unless, with respect to an Award to a
key employee, the Board or the Committee shall, in good faith and using any
fair and reasonable means selected in its discretion, determine another
value to be used for such purpose.
"Grant Date" as used with respect to a particular Award means the date
as of which such Award is granted pursuant to the Plan.
"Option" means an option to purchase shares of Common Stock granted by
the Committee pursuant to the Plan, which may be designated as either an
"Incentive Stock Option" or a "Non-Qualified Stock Option."
"Incentive Stock Option" means an option that is intended to qualify
as an Incentive Stock Option as described in Section 422 of the Code.
"Limited Right" means a Stock Appreciation Right that is exercisable
only as set forth in Section XIV of the Plan.
"Market Price" means the average of the daily closing prices per share
of the Common Stock for the 10 consecutive trading days immediately
preceding the day as of which "Market Price" is being determined. The
closing price for each day shall be the last sale price regular way or, in
case no such sale takes place on such day, the average of the closing bid
and asked prices regular way, in either case on the New York Stock
Exchange, or, if shares of the Common Stock are not listed or admitted to
trading on the New York Stock Exchange, on the principal national
securities exchange on which the shares are listed or admitted to trading,
or if the shares are not so listed or admitted to trading, the average of
the highest reported bid and lowest reported asked prices as furnished by
the National Association of Securities Dealers, Inc., through NASDAQ, or
through a similar organization if NASDAQ is no longer reporting such
information. If shares of Common Stock are not listed or admitted to
trading on any exchange or quoted through NASDAQ or any similar
organization, the "Market Price" shall be determined by the Board in good
faith using any fair and reasonable means selected in its discretion.
"Non-Qualified Stock Option" means an option granted pursuant to the
Plan, other than an Incentive Stock Option.
"Participant" means any key employee of the Company or Director who
has an Award outstanding under the Plan.
"Phantom Unit" means a right to receive upon the achievement of
specified performance goals a payment from the Company in an amount equal
to a specified percentage of the Fair Market Value of a share of Common
Stock on the date on which such right becomes payable.
"Plan" means the Santa Fe Energy Resources, Inc. 1990 Incentive Stock
Compensation Plan as set forth herein and as may be amended from time to
time.
"Related LSAR Option" means an Option outstanding under the Plan with
respect to which a Limited Right is granted pursuant to Section XIV.
"Restricted Period" means the period of time for which Restricted
Stock and/or Phantom Units are subject to forfeiture pursuant to the Plan
or during which Options and Stock Appreciation Rights are not exercisable.
"Restricted Stock" means Common Stock subject to a Restricted Period
which is granted pursuant to the Plan.
"Retirement" means an Employee's leaving the employment of the
Company, other than for Cause, after his early retirement date as defined
in the Company's tax-qualified retirement plan, or predecessor
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28
plan, under which the Participant is entitled to the immediate receipt of a
benefit thereunder. With respect to a Director, "Retirement" means ceasing
to be a member of the Board on or after reaching age 65.
"Stock Appreciation Right" means the right, granted by the Committee
pursuant to the Plan, to receive a payment equal to the increase in the
Fair Market Value of a share of Common Stock subsequent to the Grant Date
of such Award.
II. STOCK AND PHANTOM UNITS SUBJECT TO THE PLAN
Subject to adjustment as provided in the Plan, the maximum aggregate number
of shares of Common Stock with respect to which Options, Restricted Stock, Bonus
Stock, Phantom Units and Stock Appreciation Rights may be granted from time to
time under the Plan is 7,500,000; provided, however, no more than 500,000 shares
of Common Stock shall be issued after January 1, 1995 as Restricted Stock. The
Common Stock issued under the Plan may be either previously authorized but
unissued shares or treasury shares acquired by SFER. In the event that any Award
expires, lapses, is forfeited or otherwise terminates, any shares of Common
Stock allocable to the terminated portion of such Award may again be made
subject to an Award under the Plan. Further, to the extent an Award is paid in
cash, rather than in Common Stock, or shares of Common Stock are tendered to the
Company, or withheld by the Company from an Award, as payment of the exercise
price of an Award or in satisfaction of any Company tax withholding obligation,
such shares of Common Stock may again be made subject to an Award (other than
Incentive Stock Options) under the Plan.
III. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee. The members of the
Committee shall not be eligible to participate in the Plan, except as provided
in Section XVIII, concerning automatic grants of Restricted Stock to Directors.
The Committee shall select from time to time those employees to be granted
Awards under the Plan. The Committee shall also determine the terms and
provisions of Awards, which need not be identical. The Committee shall grant all
Awards. The Committee shall construe the Plan, prescribe and rescind rules and
regulations relating to the Plan and make all other determinations deemed
necessary or advisable for the administration of the Plan, subject to the
limitations of Section XXII.
IV. ELIGIBILITY
Subject to the discretion of the Committee, all officers and other key
employees of the Company who have responsibility for the growth and
profitability of the Company are eligible to receive Awards under the Plan;
provided, however, no employee may receive in any calendar year an Award or
Awards of Options and/or Stock Appreciation Rights with respect to more than
1,000,000 shares of Common Stock. Directors shall automatically participate in
the Plan as provided in Section XVIII.
V. OPTIONS
The Committee may, from time to time and subject to the provisions of the
Plan, grant Awards of Options to employees of the Company to purchase shares of
Common Stock. Any Options granted may be designated as either Incentive Stock
Options or as Non-Qualified Stock Options, or the Committee may designate a
portion of an Award as "Incentive Stock Options" and the remaining portion as
"Non-Qualified Stock Options." Any portion of an Award that is not designated as
"Incentive Stock Options" shall be "Non-Qualified Stock Options" and shall not
be subject to the requirements of Section VI of the Plan.
The purchase price of the Common Stock subject to any Options shall be
determined by the Committee, but, with respect to a Non-Qualified Stock Option,
may not be less than 50% of the Fair Market Value of the Common Stock on the
Grant Date. Such price shall be subject to adjustment as provided in Section
XIII of the Plan.
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Options shall not be exercisable prior to the date that is six months after
the Grant Date. In addition, the Committee may include in each agreement
evidencing the Option grant a provision stating that the Option granted therein
may not be exercised in whole or in part for an additional period(s) of time
specified in such agreement, and may further limit the exercisability of the
Option in such manner as the Committee deems appropriate, including, without
limitation, the achievement of performance goals. The Committee may, in its
discretion, at any time and from time-to-time accelerate the exercisability of
all or part of any Option.
The period of any Option, which is the time period during which the Option
may be exercised, shall be determined by the Committee and shall not extend more
than ten years after the Grant Date.
Options shall not be transferable other than by will or the laws of descent
and distribution and during the Participant's lifetime shall be exercisable only
by the Participant.
Termination for Cause, as defined in Section I, shall result in forfeiture
of all outstanding Options. Termination by the Company for any reason other than
Cause (including terminations pursuant to formal severance programs sponsored by
the Company or an affiliate), or terminations by reason of death, Disability or
Retirement, shall result in a lapse of all or a proportion of the Restricted
Period applicable to any outstanding Award as set forth in Section XI.
A person electing to exercise an Option shall give written notice of such
election to the Company in such form as the Committee may require. Upon exercise
of an Option, the full option purchase price for the shares with respect to
which the Option is being exercised shall be payable to the Company (i) in cash
or by check payable and acceptable to the Company or (ii) subject to the
approval of the Committee, (a) by tendering to the Company shares of Common
Stock owned by such person having an aggregate Fair Market Value as of the date
of exercise and tender that is not greater than the full option purchase price
for the shares with respect to which the Option is being exercised and by paying
any remaining amount of the option purchase price as provided in (i) above
(provided that the Committee may, upon confirming that such person owns the
number of additional shares being tendered, authorize the issuance of a new
certificate for the number of shares being acquired pursuant to the exercise of
the Option less the number of shares being tendered upon the exercise and return
to such person (or not require surrender of) the certificate for the shares
being tendered upon the exercise) or (b) by such person delivering to the
Company a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company cash or a check
payable and acceptable to the Company to pay the option purchase price; provided
that in the event such person chooses to pay the option purchase price as
provided in (ii)(b) above, such person and the broker shall comply with such
procedures and enter into such agreements of indemnity and other agreements as
the Committee shall prescribe as a condition of such payment procedure. Payment
instruments will be received subject to collection.
Notwithstanding any other provision in the Plan, if a Change in Control
occurs while unexercised Options, and Stock Appreciation Rights relating
thereto, remain outstanding under the Plan, then from and after the Acceleration
Date, all Options and Stock Appreciation Rights shall be exercisable in full,
whether or not otherwise exercisable; provided, however, that no Option or Stock
Appreciation Right shall become exercisable by reason of this paragraph to the
extent that such acceleration of exercisability, when aggregated with other
payments or benefits to the Participant pursuant to this Plan or any other plan,
arrangement or agreement with the Company, any person whose actions result in a
Change in Control or any person affiliated with the Company or such person,
would, as determined by tax counsel selected by the Company, result in "Excess
Parachute Payments" (as defined below) equal to or greater than three times the
"base amount" as defined in Section 280G of the Code. "Excess Parachute
Payments" shall mean "parachute payments" as defined in Section 280G of the Code
other than (1) health and life insurance benefits and (2) payments attributable
to any award, benefit or other compensation plan or program based upon the
number of full or fractional months of any restricted period (relating thereto)
which has elapsed prior to the date of the Change in Control. Furthermore, such
payments or benefits provided to a Participant under this Plan shall be reduced
to the extent necessary so that no portion thereof shall be subject to the
excise tax imposed by Section 4999 of the Code, but only if, by reason of such
reduction, the Participant's net after tax benefit shall exceed the net after
tax benefit if such reduction were not made. "Net after tax benefit" shall mean
the sum of (i) all
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payments and benefits which a Participant receives or is then entitled to
receive from the Company that would constitute a "parachute payment" within the
meaning of Section 280G of the Code, less (ii) the amount of federal income
taxes payable with respect to the payments and benefits described in (i) above
calculated at the maximum marginal income tax rate for each year in which such
payments and benefits shall be paid to the Participant (based upon the rate for
such year as set forth in the Code at the time of the first payment of the
foregoing), less (iii) the amount of excise taxes imposed with respect to the
payments and benefits described in (i) above by Section 4999 of the Code.
VI. INCENTIVE STOCK OPTIONS
An Option designated by the Committee as an "Incentive Stock Option" is
intended to qualify as an "incentive stock option" within the meaning of Section
422 of the Code and shall satisfy, in addition to the conditions of Section V,
the conditions set forth in this Section VI.
The purchase price of the Common Stock subject to an Incentive Stock Option
shall be the greater of the Fair Market Value of the Common Stock on the Grant
Date or the "fair market value" of the Common Stock as such term is used for
purposes for Section 422(b)(4) of the Code.
An Incentive Stock Option shall not be granted to an employee who, on the
Grant Date, owns stock possessing more than ten percent of the total combined
voting power of all classes of stock of SFER, or of its parent or subsidiary
corporations.
VII. RESTRICTED STOCK
The Committee may, from time to time and subject to the provisions of the
Plan, grant Awards of Restricted Stock to employees of the Company; provided,
however, no employee may receive in any calendar year Restricted Stock Awards
with respect to more than 500,000 shares of Common Stock.
The Committee shall, at the time shares of Restricted Stock are granted,
designate the Restricted Period and the performance goals, if any, of the
Company with respect to such Award. Such goals must be achieved (and certified
by the Committee) in order for a Participant to receive the unrestricted shares
of Common Stock at the designated time.
With respect to any Restricted Stock Award that is intended to meet the
requirements of Section 162(m) of the Code, the performance goal or goals for
such Award shall be with respect to one or more of the following: earnings per
share; earnings before interest, taxes, depreciation and amortization expenses
("EBITDA"); earnings before interest and taxes ("EBIT"); EBITDA, EBIT or
earnings before taxes and unusual or nonrecurring items as measured either
against the annual budget or as a ratio to revenue; market share; sales; costs;
return on equity; operating cash flow; production volumes compared to plan or
prior years; reserves added; discretionary cash flow; return on net capital
employed and/or stock price performance. The goals can be applied, where
appropriate, with respect to an individual, a business unit or the Company as a
whole and need not be based on increases or positive results, but can be based
on maintaining the status quo or limiting economic losses, for example. Which
goals to use with respect to such Award, the weighting of the goals if more than
one is used, and whether the goal is to be measured against a
Company-established budget or target, an index or a peer group of companies,
shall also be determined by the Committee at the time of grant of the Award.
Each certificate representing Restricted Stock awarded under the Plan shall
be registered in the name of the Participant and, during the Restricted Period,
shall be left on deposit with the Company with a stock power endorsed in blank.
Participants shall have the right to receive dividends paid on their Restricted
Stock and to vote such shares. Restricted Stock may not be sold, pledged,
assigned, transferred or encumbered during the Restricted Period other than by
will or the laws of descent and distribution.
Termination for Cause, as defined in Section I, shall result in forfeiture
of all outstanding Restricted Stock. Termination by the Company for any reason
other than Cause (including terminations pursuant to formal severance programs
sponsored by the Company or an affiliate), or termination by reason of death,
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Disability or Retirement, shall result in a lapse on all or a portion of the
Restricted Period applicable to any outstanding Award as set forth in Section
XI.
Notwithstanding any other provisions in the Plan, if a Change in Control
occurs while any shares of Restricted Stock remain subject to restrictions
relating thereto, then from and after the Acceleration Date, (1) all such
restrictions and all Restricted Periods shall lapse and (2) no later than the
fifth day following the Acceleration Date, any Restricted Stock theretofore
granted a Participant shall be delivered to the Participant; provided, however,
that no restriction or Restricted Period shall lapse or payment or benefit shall
be made by reason of this paragraph to the extent that such lapse or payment or
benefit, when aggregated with other payments or benefits to the Participant
pursuant to this Plan or any other plan, arrangement or agreement with the
Company, any person whose actions result in a Change in Control or any person
affiliated with the Company or such person, would, as determined by tax counsel
selected by the Company, result in Excess Parachute Payments equal to or greater
than three times the "base amount" as defined in Section 280G of the Code.
"Excess Parachute Payments" shall mean "parachute payments" as defined in
Section 280G of the Code other than (1) health and life insurance benefits and
(2) payments attributable to any award, benefit or other compensation plan or
program based upon the number of full or fractional months of any restricted
period (relating thereto) which has elapsed prior to the date of the Change in
Control. Furthermore, such payments or benefit provided to a Participant under
this Plan shall be reduced to the extent necessary so that no portion thereof
shall be subject to the excise tax imposed by Section 4999 of the Code, but only
if, by reason of such reduction, the Participant's net after tax benefit shall
exceed the net after tax benefit if such reduction were not made. "Net after tax
benefit" shall have the meaning prescribed in Section V.
VIII. STOCK APPRECIATION RIGHTS
The Committee may, from time to time and subject to the provisions of the
Plan, grant Awards of Stock Appreciation Rights to employees of the Company
subject to the limitation in Section II. An Award of Stock Appreciation Rights,
in the Committee's discretion, may or may not be made in tandem with the grant
of an Option, and need not be granted at the same time as the Option grant to be
made in tandem with the Option grant.
The period of any Stock Appreciation Right, which is the time period during
which the Stock Appreciation Right may be exercised, shall be determined by the
Committee and shall not extend more than ten years after the Grant Date or, if
in tandem with an Option, the period of such Option.
Stock Appreciation Rights shall not be transferable other than by will or
the laws of descent and distribution and during the Participant's lifetime shall
be exercisable only by the Participant.
Termination for Cause, as defined in Section I, shall result in forfeiture
of all outstanding Stock Appreciation Rights. Termination by the Company for any
reason other than Cause (including terminations pursuant to formal severance
programs sponsored by the Company or an affiliated company), or termination by
reason of death, Disability or Retirement, shall result in a lapse on all or a
portion of the Restricted Period applicable to any outstanding Award as set
forth in Section XI.
Subject to any restrictions or conditions imposed by the Committee, upon
the exercise of a Stock Appreciation Right, the Company shall pay the amount, if
any, by which the Fair Market Value of a share of Common Stock on the date of
exercise exceeds the Fair Market Value of a share of Common Stock on the Grant
Date. The amount payable by the Company upon the exercise of a Stock
Appreciation Right may be paid in cash or in shares of Common Stock or in any
combination thereof as the Committee, in its sole discretion, shall determine,
but no fractional shares shall be issuable pursuant to any Stock Appreciation
Right.
A person electing to exercise a Stock Appreciation Right shall give written
notice of such election to the Company in such form as the Committee may
require. The exercise of Stock Appreciation Rights or Options granted in tandem
will result in an equal reduction in the number of corresponding Options or
Stock Appreciation Rights which were granted in tandem with such Stock
Appreciation Rights and Options.
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The Change in Control provisions in Section V, concerning Options and Stock
Appreciation Rights granted in tandem with an Option, shall also apply to Stock
Appreciation Rights that are not granted in tandem with Options.
IX. PHANTOM UNITS
The Committee may, from time to time and subject to the provisions of the
Plan, grant Awards of Phantom Units to employees of the Company; provided,
however, no employee may receive in any calendar year Phantom Unit Awards with
respect to more than 500,000 shares of Common Stock. Phantom Units may not be
sold, pledged, assigned, transferred or encumbered during the Restricted Period,
other than by will or the laws of descent and distribution.
The Committee shall, at the time Phantom Units are granted, designate the
Restricted Period and the performance goals, if any, of the Company with respect
to such Award. Such goals must be achieved (and certified by the Committee) in
order for a Participant to receive the value of the Phantom Units at the
designated time. To the extent earned in accordance with this Section and the
grant of such Award, all such Phantom Units must be paid as soon as practicable
following the end of the Restricted Period in cash or in shares of Common Stock
or in any combination thereof as the Committee, in its sole discretion shall
determine, but no fractional shares shall be issuable pursuant to any Phantom
Unit.
With respect to any Phantom Unit Award that is intended to meet the
requirements of Section 162(m) of the Code, the performance goal or goals for
such Award shall be with respect to one or more of the following: earnings per
share; earnings before interest, taxes, depreciation and amortization expenses
("EBITDA"); earnings before interest and taxes ("EBIT"); EBITDA, EBIT or
earnings before taxes and unusual or nonrecurring items as measured either
against the annual budget or as a ratio to revenue; market share; sales; costs;
return on equity; operating cash flow; production volumes compared to plan or
prior years; reserves added; discretionary cash flow; return on net capital
employed and/or stock price performance. The goals can be applied, where
appropriate, with respect to an individual, a business unit or the Company as a
whole and need not be based on increases or positive results, but can be based
on maintaining the status quo or limiting economic losses, for example. Which
goals to use with respect to such Award, the weighting of the goals if more than
one is used, and whether the goal is to be measured against a
Company-established budget or target, an index or a peer group of companies,
shall also be determined by the Committee at the time of grant of the Award.
At the discretion of the Committee, Phantom Units may at any time be
converted into Non-Qualified Stock Options, Bonus Stock or shares of Restricted
Stock or any combination thereof having a value, as determined in the good faith
judgment of the Committee, substantially equal to the value of the Phantom Units
so converted.
Termination for Cause, as defined in Section I, shall result in forfeiture
of all outstanding Phantom Units. Termination by the Company for any reason
other than Cause (including terminations pursuant to formal severance programs
sponsored by the Company or an affiliate), or termination by reason of death,
Disability or Retirement, shall result in a lapse on all or a proportion of the
Restricted Period applicable to any outstanding Award as set forth in Section
XI.
Notwithstanding any other provisions in the Plan, if a Change in Control
occurs while any Phantom Units remain outstanding, then from and after the
Acceleration Date, (1) all designated goals shall be deemed to have been met and
(2) no later than the fifth day following the Acceleration Date, the full value
of all such Phantom Units shall be paid to the Participant in cash; provided,
however, that no payment or benefit shall be made by reason of this paragraph to
the extent that such payment or benefit, when aggregated with other payments or
benefits to the Participant pursuant to this Plan or any other plan, arrangement
or agreement with the Company, any person whose actions result in a Change in
Control or any person affiliated with the Company or such person, would, as
determined by tax counsel selected by the Company, result in Excess Parachute
Payments equal to or greater than three times the "base amount" as defined in
Section 280G of the Code. "Excess Parachute Payments" shall mean "parachute
payments" as defined in Section 280G of the Code other than (1) health and life
insurance benefits and (2) payments attributable to any award, benefit or
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other compensation plan or program based upon the number of full or fractional
months of any restricted period (relating thereto) which has elapsed prior to
the date of the Change in Control. Furthermore, such payments or benefit
provided to a Participant under this Plan shall be reduced to the extent
necessary so that no portion thereof shall be subject to the excise tax imposed
by Section 4999 of the Code, but only if, by reason of such reduction, the
Participant's net after tax benefit shall exceed the net after tax benefit if
such reduction were not made. "Net after tax benefit" shall have the meaning
prescribed in Section V.
X. CONTINUED EMPLOYMENT
Participation in the Plan shall confer no rights to continued employment
with the Company, nor shall it restrict the rights of the Company to terminate a
Participant's employment relationship at any time.
XI. TERMINATION OF EMPLOYMENT
In the event of a Participant's termination of employment with the Company
by reason of death, the Restricted Period shall lapse on all of the
Participant's outstanding Awards.
In the event of a Participant's termination of employment with the Company
by reason of Disability, Retirement or by the Company for any reason other than
Cause, a portion of all of the Participant's outstanding Awards shall be
immediately forfeited to the extent not then otherwise vested. The portion of an
Award forfeited shall be a fraction, the denominator of which is the total
number of months of any Restricted Period applicable to the Award (rounded up to
the nearest whole month) and the numerator of which is the number of months
remaining in such Restricted Period (rounded up to the nearest whole month) as
of the termination of employment.
Unless the Committee directs the acceleration of the payment of that
portion of an Award of Phantom Units or Restricted Stock that is not
automatically forfeited as provided above upon the Participant's termination of
employment, such Phantom Units and Restricted Stock shall be payable or issued,
as the case may be, at the end of the Restricted Period applicable to such
Awards, but only to the extent otherwise payable pursuant to the Award Agreement
evidencing such Phantom Units or Restricted Stock, e.g., the goals, if any, for
such Award are achieved. Any such Awards not payable or earned at the end of
such Restricted Period, as provided above, shall be forfeited at such time.
Phantom Units and Restricted Stock upon which the Restricted Period lapse
as provided above shall be paid or issued to the Participant or, in the case of
death prior to such payment or issuance, to the Participant's designated
beneficiary, or in the absence of such designation, to the person to whom the
Participant's rights pass by will or the laws of descent and distribution.
Options and Stock Appreciation Rights which are or become exercisable at
the time of a Participant's termination of employment with the Company by reason
of Disability, Retirement or any reason other than Cause, may be exercised by
the Participant within three months following such termination of employment but
not after the expiration of the period of the Option or Stock Appreciation
Right. Options and Stock Appreciation Rights which are or become exercisable at
the time of a Participant's termination of employment with the Company by reason
of death, may be exercised by the Participant's designated beneficiary, or in
the absence of such designation, by the person to whom the Participant's rights
pass by will or the laws of descent and distribution at any time within one year
after the Participant's death but not after the expiration of the period of the
Option or Stock Appreciation Right. Options and Stock Appreciation Rights that
do not become exercisable as provided above, or that are not otherwise vested,
shall be forfeited.
In the event of a Participant's termination of employment with the Company
for any reason other than as provided above, all Awards not otherwise vested or
earned as of the date of such termination of employment shall be forfeited.
If a Participant's employer ceases to be a part of the Company as defined
in Section I, such Participant shall be deemed to have been involuntarily
terminated by the Company (other than for Cause) as of the date the
Participant's employer so ceased to be a company of which more than 50% of the
voting stock is owned directly or indirectly by SFER.
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Notwithstanding the foregoing however, the Committee may determine that
termination of employment by reasons of any other special circumstances not set
forth above shall not terminate an Award or a portion thereof.
XII. AWARD AGREEMENT
Each employee granted an Award pursuant to the Plan shall sign an Award
Agreement which signifies the offer of the Award by the Company and the
acceptance of the Award by the employee in accordance with the terms of the
Award and the provisions of the Plan. Each Award Agreement shall reflect the
terms and conditions of the Award.
XIII. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of a change in the capitalization of SFER due to a stock
split, stock dividend, recapitalization, merger, consolidation, combination, or
similar event, the aggregate shares subject to the Plan and the terms of any
existing Awards shall be adjusted by the Committee to reflect such change.
XIV. LIMITED STOCK APPRECIATION RIGHTS
(a) The Committee shall have authority to grant a Limited Right to the
holder of any Option with respect to all or some of the shares of Common Stock
covered by such Option. A Limited Right may be granted either at the time of
grant of the Related LSAR Option or any time thereafter during its term. A
Limited Right may be exercised only during the sixty-day period beginning on an
Acceleration Date. Each Limited Right shall be exercisable only if, and to the
extent that, the Related LSAR Option is exercisable. Notwithstanding the
provisions of the two immediately preceding sentences, no Limited Right may be
exercised by a holder who is subject to Section 16 of the Exchange Act until the
expiration of six months from the date of grant of the Limited Right. Upon the
exercise of a Limited Right, the Related LSAR Option (and any tandem Stock
Appreciation Right) shall cease to be exercisable to the extent of the shares of
Common Stock with respect to which such Limited Right is exercised, but shall be
considered to have been exercised to that extent for purposes of determining the
number of shares of Common Stock available for the grant of further Options,
Stock Appreciation Rights and Limited Rights pursuant to this Plan. Upon the
exercise or termination of a Related LSAR Option, the Limited Right with respect
to such Related LSAR Options shall terminate to the extent of the shares of
Common Stock with respect to which the Related LSAR Option was exercised or
terminated.
(b) Upon the exercise of a Limited Right, the holder thereof shall receive
in cash whichever of the following amounts is applicable:
(i) in the case of an exercise of Limited Rights by reason of an
acquisition of Common Stock described in clause (a) of the
definition of Change in Control contained in Section I hereof, an
amount equal to the Acquisition Spread (as defined in Subsection
(d) hereof);
(ii) in the case of an exercise of Limited Rights by reason of the
change in composition of the Board of Directors described in
clause (b) of the definition of Change in Control contained in
Section I hereof, an amount equal to the Spread (as defined in
Subsection (g) hereof); or
(iii) in the case of an exercise of Limited Rights by reason of
stockholder approval of an agreement or adoption of a plan
described in clause (c) or (d) of the definition of Change in
Control contained in Section I hereof, an amount equal to the
Merger Spread (as defined in Subsection (f) hereof).
Notwithstanding the foregoing provisions of this Section XIV(b), (i) in the
case of a Limited Right granted in respect of an Incentive Stock Option, the
holder may not receive an amount in excess of the maximum amount that will
enable such option to continue to qualify as an Incentive Stock Option, and (ii)
no payment shall occur by reason of this Section XIV(b) to the extent that such
payment, when aggregated with other payments or benefits to the Participant,
would as determined by tax counsel selected by the Company, result in an Excess
Parachute Payment equal to or greater than three times the "base amount" as
defined in
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Section 280G of the Code. Furthermore, such payments or benefits provided to a
Participant under this Plan shall be reduced to the extent necessary so that no
portion thereof shall be subject to the excise tax imposed by Section 4999 of
the Code, but only if, by reason of such reduction, the Participant's net after
tax benefit shall exceed the net after tax benefit if such reduction were not
made. "Net after tax benefit" shall have the meaning prescribed in Section V.
(c) The term "Acquisition Price Per Share" as used in this Section XIV
shall mean, with respect to the exercise of any Limited Right by reason of an
acquisition of Common Stock described in clause (a) of the definition of Change
in Control contained in Section I, the highest Fair Market Value per share of
Common Stock during the sixty-day period ending on the date the Limited Right is
exercised.
(d) The term "Acquisition Spread" as used in this Section XIV shall mean an
amount equal to the product obtained by multiplying (i) the excess of (A) the
Acquisition Price Per Share over (B) the price per share of Common Stock at
which the Related LSAR Option is exercisable, by (ii) the number of shares of
Common Stock with respect to which such Limited Right is being exercised.
(e) The term "Merger Price Per Share" as used in this Section XIV shall
mean, with respect to the exercise of any Limited Right by reason of stockholder
approval of an agreement or adoption of a plan described in clause (c) or (d) of
the definition of Change in Control contained in Section I, the greater of (i)
the fixed or formula price for the acquisition of shares of Common Stock
specified in such agreement or adoption, if such fixed or formula price is
determinable on the date on which such Limited Right is exercised, and (ii) the
highest Fair Market Value per share of Common Stock during the sixty-day period
ending on the date on which such Limited Right is exercised.
(f) The term "Merger Spread" as used in this Section XIV shall mean an
amount equal to the product obtained by multiplying (i) the excess of (A) the
Merger Price Per Share over (B) the price per share of Common Stock at which the
Related LSAR Option is exercisable, by (ii) the number of shares of Common Stock
with respect to which such Limited Right is being exercised.
(g) The term "Spread" as used in this Section XIV shall mean, with respect
to the exercise of any Limited Right by reason of a change in the composition of
the Board described in clause (b) of the definition of Change in Control
contained in Section I, an amount equal to the product obtained by multiplying
(i) the excess of (A) the highest Fair Market Value per share of Common Stock
during the sixty-day period ending on the date the Limited Right is exercised
over (B) the price per share of Common Stock at which the Related LSAR Option is
exercisable, by (ii) the number of shares of Common Stock with respect to which
the Limited Right is being exercised.
(h) A Limited Right shall not be transferable except by will or by the laws
of descent and distribution. During the lifetime of a Participant, the Limited
Right shall be exercisable only by such Participant or by the Participant's
guardian or legal representative.
(i) Each Limited Right shall be granted on such terms and conditions not
inconsistent with the Plan as the Committee may determine.
(j) To exercise a Limited Right, the Participant shall (i) give written
notice thereof to the Committee in form satisfactory to the Committee specifying
the number of shares of Common Stock with respect to which the Limited Right is
being exercised, and (ii) if requested by the Committee, deliver the option
agreement to the Committee, who shall endorse thereon a notation of such
exercise and return the option agreement to the Participant. The date of
exercise of a Limited Right that is validly exercised shall be deemed to be the
date on which there shall have been delivered the instruments referred to in the
first sentence of this paragraph (j).
(k) The Company intends that this Section XIV shall comply with the
requirements of Rule 16b-3 and any future rules promulgated in substitution
therefor ("the Rule") under the Exchange Act during the term of the Plan. Should
any provision of this Section XIV not be necessary to comply with the
requirements of the Rule or should any additional provisions be necessary for
this Section XIV to comply with the requirements of the Rule, the Board may
amend the Plan to add to or modify the provisions of the Plan accordingly.
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XV. BONUS STOCK
The Committee may, from time to time and subject to the provision of the
Plan, grant Awards of Bonus Stock to employees of the Company. In addition, the
Committee shall have the authority to pay in shares of Common Stock all or any
portion of the cash amounts payable under any other compensation program of the
Company, but not exceeding $2 million with respect to any employee during any
calendar year.
XVI. EMPLOYEE'S AGREEMENT
If, at the time of the exercise of any Option or Stock Appreciation Right
or Award of Restricted Stock or Bonus Stock, in the opinion of counsel for the
Company, it is necessary or desirable, in order to comply with any then
applicable laws or regulations relating to the sale of securities, for the
individual exercising the Option or Stock Appreciation Right or receiving the
Restricted Stock or Bonus Stock to agree to hold any shares issued to the
individual for investment and without intention to resell or distribute the same
and for the individual to agree to dispose of such shares only in compliance
with such laws and regulations, the individual will, upon the request of the
Company, execute and deliver to the Company a further agreement to such effect.
XVII. WITHHOLDING FOR TAXES
Any cash payment under the Plan shall be reduced by any amounts required to
be withheld or paid with respect thereto under all present or future federal,
state and local taxes and other laws and regulations that may be in effect as of
the date of each such payment ("Tax Amounts"). Any issuance of Common Stock
pursuant to the exercise of an Option or other distribution of Common Stock
under the Plan shall not be made until appropriate arrangements have been made
for the payment of any amounts that may be required to be withheld or paid with
respect thereto. Such arrangements may, at the discretion of the Committee,
include allowing the Participant to tender to the Company shares of Common Stock
owned by the Participant, or to request the Company to withhold a portion of the
shares of Common Stock being acquired pursuant to the exercise or otherwise
distributed to the Participant, which have a Fair Market Value per share as of
the date of such Award exercise, tender or withholding that is not greater than
the sum of all Tax Amounts, together with payment of any remaining portion of
all Tax Amounts in cash or by check payable and acceptable to the Company.
XVIII. AUTOMATIC DIRECTOR AWARDS
Beginning with the 1992 annual meeting of the stockholders of SFER, and on
each annual stockholders' meeting date thereafter, except as provided below,
each Director shall receive 37.5% of the value of his annual retainer fee for
serving as Director for such year then commencing paid in the form of a
Restricted Stock Award. The total number of shares of Common Stock included in
each such Restricted Stock Award shall be determined by dividing the amount of
the Director's annual retainer fee that is to be paid in Common Stock by the
Fair Market Value of a share of Common Stock on such Grant Date. In no event,
however, shall SFER be required to issue a fractional share and whenever a
fractional share of Common Stock would otherwise be required to be issued, an
amount in lieu thereof shall be paid in cash based upon the Fair Market Value of
such fractional share.
The Restricted Period shall lapse on an Award of Restricted Stock granted
pursuant to this Section XVIII upon the earlier of the date that is six months
and one day after the Grant Date, the Director's death, Retirement, or
Disability or the occurrence of a Change in Control. If a Director ceases to be
a member of the Board during a Restricted Period for any reason other than
death, Disability or Retirement, the Restricted Stock subject to such Restricted
Period shall be forfeited.
Each certificate representing Restricted Stock awarded hereunder shall be
registered in the name of the Director and, during the Restricted Period, shall
be left on deposit with SFER with a stock power endorsed in blank. Directors
shall have the right to receive dividends paid on their Restricted Stock and to
vote such shares. Restricted Stock may not be sold, pledged, assigned,
transferred or encumbered during the Restricted Period other than by will or the
laws of descent and distribution.
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37
Notwithstanding the foregoing, any Director who immediately prior to the
relevant Grant Date owns, directly or indirectly, a beneficial interest in
25,000 or more shares of Common Stock shall receive his annual retainer fee paid
solely in cash and not partly in the form of a Restricted Stock Award as
provided above.
XIX. DESIGNATION OF BENEFICIARY
Each Participant to whom an Award has been made under this Plan may
designate a beneficiary or beneficiaries (which beneficiary may be an entity
other than a natural person) to exercise any rights or receive any payment that
under the terms of such Award may become exercisable or payable on or after the
Participant's death. At any time, and from time to time, any such designation
may be changed or canceled by the Participant without the consent of any such
beneficiary. Any such designation, change or cancellation must be on a form
provided for that purpose by the Committee and shall not be effective until
received by the Committee. If no beneficiary has been named by a deceased
Participant, or the designated beneficiaries have predeceased the Participant,
the beneficiary shall be the Participant's estate. If a Participant designates
more than one beneficiary, any such exercise or payment under this Plan shall be
made in equal shares unless the Participant has designated otherwise, in which
case the exercise or payment shall be made in the shares designated by the
Participant.
XX. PREEMPTION BY APPLICABLE LAWS AND REGULATIONS
Anything in the Plan or any agreement entered into pursuant to the Plan to
the contrary notwithstanding, if, at any time specified herein or therein for
the making of any determination, the issuance or other distribution of shares of
Common Stock, the payment of consideration to an employee as a result of the
exercise of any Stock Appreciation Right or Limited Right, or the payment of any
Phantom Units, as the case may be, any law, regulation or requirement of any
governmental authority having jurisdiction in the premises shall require either
the Company or the Participant (or the Participant's beneficiary), as the case
may be, to take any action in connection with any such determination, the shares
then to be issued or distributed, or such payment, the issue or distribution of
such shares or the making of such determination or payment, as the case may be,
shall be deferred until such action shall have been taken.
XXI. EFFECTIVE DATE AND DURATION OF PLAN
This Plan amendment and restatement shall become effective upon its
approval by the stockholders of SFER. Unless previously terminated by the Board,
the Plan shall terminate on the tenth anniversary of its approval by the
stockholders; provided, however, that such termination shall not terminate any
Award then outstanding. No Awards shall be made pursuant to this Plan after
December 31, 1999.
XXII. TERMINATION AND AMENDMENT
The Board may suspend, terminate, modify or amend the Plan, provided that
any amendment that would increase the aggregate number of shares which may be
issued under the Plan or materially modify the requirements as to eligibility
for participation in the Plan, shall be subject to the approval of SFER's
stockholders, except that any such increase or modification that may result from
adjustments authorized by Section XIII does not require such approval; provided,
further, that no amendment or modification shall be made to Section XVIII more
than once every six months, other than to comport with changes in the Code or
the Employee Retirement Income Security Act of 1974, as amended, or rules
promulgated thereunder. No suspension, termination, modification or amendment of
the Plan may terminate a Participant's existing Award or materially adversely
affect a Participant's rights under such Award.
XXIII. MISCELLANEOUS
(a) Nothing contained in the Plan shall be construed as conferring upon any
employee the right to continue in the employ of the Company.
(b) An employee shall have no rights as a stockholder with respect to
shares covered by such employee's Option, Stock Appreciation Rights or
Restricted Stock award until the date of the issuance of shares to the
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38
employee pursuant thereto. No adjustment will be made for dividends or other
distributions or rights for which the record date is prior to the date of such
issuance. An employee shall have no rights as a stockholder with respect to any
award of Phantom Units under the Plan.
(c) Nothing contained in the Plan shall be construed as giving any
employee, such employee's beneficiaries or any other person any equity or other
interest of any kind in any assets of the Company or creating a trust of any
kind or a fiduciary relationship of any kind between the Company and any such
person.
(d) Nothing contained in the Plan shall be construed to prevent the Company
from taking any corporate action that is deemed by the Company to be appropriate
or in its best interest, whether or not such action would have an adverse effect
on the Plan or any award made under the Plan. No employee, beneficiary or other
person shall have any claim against the Company as a result of any such action.
(e) Neither an employee nor an employee's beneficiary shall have the power
or right to sell, exchange, pledge, transfer, assign or otherwise encumber or
dispose of such employee's or beneficiary's interest arising under the Plan or
in any Award received under the Plan; nor shall such interest be subject to
seizure for the payment of an employee's or beneficiary's debts, judgments,
alimony, or separate maintenance or be transferable by operation of law in the
event of an employee's or beneficiary's bankruptcy or insolvency and to the
extent any such interest arising under the Plan or Award received under the Plan
is awarded to a spouse pursuant to any divorce proceeding, such interest shall
be deemed to be terminated and forfeited notwithstanding any vesting provisions
or other terms herein or in the agreement evidencing such award.
(f) All rights and obligations under the Plan shall be governed by, and the
Plan shall be construed in accordance with, the laws of the State of Texas
without regard to the principles of conflicts of laws. Titles and headings to
Sections herein are for purposes of reference only, and shall in no way limit,
define or otherwise affect the meaning or interpretation of any provisions of
the Plan.
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39
SANTA FE ENERGY RESOURCES, INC.
P PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING ON MAY 10, 1995
R
The undersigned hereby constitutes and apponts Allan V. Martini, Michael
O A. Morphy and Kathryn D. Wriston and each of them, his true and lawful
agents and proxies with full power of substitution in each, to represent
X the undersigned at the Annual Meeting of Stockholders of Santa Fe Energy
Resources, Inc. to be held in the Ballroom of the Ritz Carlton Hotel, 1919
Y Briar Oaks Lane, Houston, Texas on Tuesday, May 10, 1995 at 10:00 a.m.,
and at any adjournments thereof, on all matters coming before said
meeting.
Proposal 1--Election of Directors. Nominees:
Melvyn N. Klein, Robert D. Krebs, James L. Payne and
David M. Schulte.
Proposal 2--To approve the Santa Fe Energy Resources, Inc. 1990 Incentive
Stock Compensation Plan, Second Amendment and Restatement.
Proposal 3--To ratify and approve the appointment of Price Waterhouse as
independent auditors for the fiscal year ending December 31,
1995.
YOU ARE ENCOURGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOX,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WICH TO VOTE IN
ACCORDANCE WITH THE BOARDD OF DIRECTORS' RECOMMENDATIONS. THE PROXY
COMMITTEE CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
THIS CARD PROVIDES VOTING INSTRUCTIONS FOR SHARES HELD FOR THE BENEFIT OF
COMPANY EMPLOYEES IN THE SANTA FE ENERGY RESOURCES SAVING INVESTMENT PLAN.
* * * * *
* SEE REVERSE *
* SIDE *
* * * * *
40
/X/ PLEASE MARK YOUR 9349
VOTES AS IN THIS
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ELECTION OF DIRECTORS AND
FOR PROPOSALS 2 AND 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
1. Election of Directors. (see reverse)
FOR WITHHELD
/ / / /
For, except vote withheld from the following nominee(s):
_________________________________________________________________________
2. Approval of the Santa Fe Energy Resources, Inc. 1990 Incentive Stock
Compensation Plan, Second Amendment and Restatement.
FOR AGAINST ABSTAIN
/ / / / / /
3. Approval of independent accountants.
FOR AGAINST ABSTAIN
/ / / / / /
Note: Please sign exactly as name appears on this card. Joint owners should
each sign personally. Corporation proxies should be signed by an authorized
officer. Executors, administrators, trustees, etc. should so indicate when
signing.
DATE ______________________________, 1995
_________________________________________
_________________________________________
SIGNATURE(S)