exv10w7



 




EXHIBIT 10.7


NEWFIELD EXPLORATION COMPANY

AMENDED AND RESTATED 2003 INCENTIVE COMPENSATION PLAN




      This Amended and Restated 2003 Incentive Compensation (this “Plan”) of Newfield Exploration
Company (the “Company”) was adopted by the Board of the Company effective as of January 1, 2005.



Recitals:




      WHEREAS, effective for the Performance Period beginning on January 1, 1993, the Board adopted
the 1993 Plan, which plan had a purpose substantially similar to this Plan;



      WHEREAS, upon adoption of this Plan, the Board terminated the 1993 Plan effective as of
December 31, 2002;



      WHEREAS, notwithstanding such termination of the 1993 Plan, Awards were granted for the
Performance Period that ended on December 31, 2002 pursuant to and in accordance with the 1993
Plan;



      WHEREAS, except as specifically provided in this Plan, such termination of the 1993 Plan will
have no effect on unpaid Deferred Incentive Compensation Awards (as defined in, and granted
pursuant to, the 1993 Plan), which Awards will continue to be governed by the terms of the 1993
Plan;



      WHEREAS, in considering the termination of the 1993 Plan and the adoption of this Plan, the
Board took into account the value of the overriding royalty interests dedicated to the Employee
Incentive Override Pool (as defined in the 1993 Plan) under the 1993 Plan from and after the date
of termination of the 1993 Plan (the “1993 ORRI Value”) and determined that such value was
incorporated into this Plan;



      WHEREAS, effective January 1, 2005, the Board adopted Amendment No. 1 to this Plan to provide
for the termination of this Plan upon a change of control, to conform this Plan and the 1993 Plan
to recent legislation affecting deferred compensation arrangements and to amend this Plan and the
1993 Plan in other respects and amended and restated this Plan; and



      WHEREAS, in considering the amendment to this Plan to provide for its termination upon a
change of control, the Board took into account the remaining 1993 ORRI Value from and after the
adoption of such amendment and determined that such value has been incorporated into other plans
and benefits, including this Plan as amended and the Change of Control Severance Agreements to be
entered into with certain executives in connection with the amendment to this Plan and the Change
of Control Severance Plan for employees in general to be adopted in connection with the amendment
to this Plan;



      NOW, THEREFORE, in consideration of the foregoing and for the purpose described below, the
Board has adopted, effective as of the date first written above, the terms and provisions governing
this Plan as follows:



 








 







I.

Purpose




      This Plan is intended to provide a means whereby employees of the Company and its Subsidiaries
may develop a sense of proprietorship and personal involvement in the development and financial
success of the Company and its consolidated subsidiaries, to attract and retain employees of
outstanding competence and ability and to encourage them to remain with and devote their best
efforts to the business of the Company and its Subsidiaries, and to reward such employees for
outstanding performance, thereby advancing the interests of the Company and its stockholders.



II.

Definitions




      Where the following words and phrases appear in this Plan, they shall have the respective
meanings set forth below unless their context clearly indicates to the contrary:



      (a) “1993 Plan” means the Newfield Employee 1993 Incentive Compensation Plan, as amended.



      (b) “Adjusted Net Income” means, with respect to a particular Performance Period, the
consolidated net income of the Company and its Subsidiaries determined in accordance with generally
accepted accounting principles, except (i) without reduction for (A) income taxes and (B) Awards
granted or to be granted pursuant to this Plan (ii) without the effects of unrealized gains or
losses associated with SFAS No. 133 and (iii) as adjusted for extraordinary or other unusual items
and other items not contemplated at the time this Plan was adopted by the Board (such as changes in
generally accepted accounting principles, ceiling test writedowns and other non-recurring items) as
determined by the Committee in its sole discretion.



      (c) “Awards” means Current Awards and Deferred Awards.



      (d) “Board” means the Board of Directors of the Company.



      (e) “Cause” means (i) with respect to Awards granted prior to January 1, 2005, termination of
employment because of (A) conviction of a felony or of a misdemeanor involving moral turpitude
(which, through lapse of time or otherwise, is not subject to appeal); (B) willful refusal without
proper legal cause to perform the duties and responsibilities of the employee to the Company or any
Subsidiary; (C) willful conduct which the employee has reason to know is materially injurious to
the Company or Subsidiary; or (D) gross negligence or willful misconduct in the performance of the
employee’s duties and responsibilities with respect to the Company or any Subsidiary and (ii) with
respect to Awards granted on or after January 1, 2005, any termination of employment because of (A)
conviction of or entering of a plea of nolo contendre to a felony or a misdemeanor involving moral
turpitude; (B) willful refusal without proper legal cause to perform the duties and
responsibilities of the employee to the Company or any Subsidiary; (C) willful conduct which the
employee has reason to know is materially injurious to the Company or any Subsidiary; (D) gross
negligence or willful misconduct in the performance of the employee’s duties and responsibilities
with respect to the Company or any Subsidiary; or (E) material breach of any material policy of the
Company or any Subsidiary.



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      (f) “Change of Control” means the occurrence of any of the following events: (i) the Company
shall not be the surviving entity in any merger, consolidation or other reorganization (or survives
only as a subsidiary of an entity other than a previously wholly owned subsidiary of the Company);
(ii) the Company sells, leases or exchanges all or substantially all of its assets to any other
person or entity (other than a wholly owned subsidiary of the Company); (iii) the Company is to be
dissolved and liquidated; (iv) any person or entity, including a “group” as contemplated by Section
13(d)(3) of the Exchange Act, acquires or gains ownership or control (including, without
limitation, power to vote) of more than 50% of the outstanding shares of the Company’s voting stock
(based upon voting power); or (v) as a result of or in connection with a contested election of
directors, the persons who were directors of the Company before such election shall cease to
constitute a majority of the Board.



      (g) “Code” means the Internal Revenue Code of 1986, as amended.



      (h) “Committee” means the Compensation Committee of the Board.



      (i) “Company” means Newfield Exploration Company and its successors.



      (j) “Current Award” means an Award granted to an Eligible Employee pursuant to Article V that
is payable on or before the March 1 following the Performance Period.



      (k) “Deferred Award” means an Award granted to an Eligible Employee pursuant to Article V the
payment of which is deferred and subject to forfeiture as provided in Article VII.



      (l) “Deferred Award Account” means the account maintained on the books of the Company for each
employee who has been granted a Deferred Award under this Plan.



      (m) “Designated Rate” means simple interest at an initial rate per annum equal to 6%. Each
February, beginning February 2004, the Committee may, in its sole discretion, set a different rate
that shall be effective beginning on the March 1 immediately following such determination and shall
remain in effect until such time as the Committee sets a different rate pursuant this sentence.



      (n) “Effective Date” means January 1, 2003.



      (o) “Eligible Employee” means, with respect to a particular Performance Period, each employee
of the Company or a Subsidiary who was (i) employed by the Company or a Subsidiary on both October
1 and December 31 of such Performance Period and (ii) recommended by the Chief Executive Officer of
the Company to receive an Award.



      (p) “Exchange Act” means the Securities Exchange Act of 1934, as amended.



      (q) “Final Financial Information” means, with respect to a particular Performance Period, the
financial information filed by the Company with the Securities and Exchange Commission pursuant to
the Exchange Act with respect to such Performance Period.



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      (r) “Grandfathered Employee” means an employee who (i) commenced employment with the Company
prior to January 1, 1993 and (ii) has been continually employed by the Company or a Subsidiary
since such date.



      (s) “Incentive Pool” means the aggregate amount to be awarded with respect to a particular
Performance Period as determined pursuant to Article IV.



      (t) “Participation Agreement” means an agreement by and between the Company and a third party
that defines terms on which the party participates in one or more of the Company’s exploration and
acquisition activities if such agreement provides for Overriding Royalty Interests, as defined
therein, or with the approval of the Committee, some other promote or financial consideration, to
fund the Incentive Pool.



      (u) “Performance Period” means any calendar year beginning on or after January 1, 2003.



      (v) “Plan” means the 2003 Incentive Compensation Plan, as amended from time to time.



      (w) “Redetermined Incentive Pool” means, with respect to a particular Performance Period, (i)
if the Committee used financial information other than Final Financial Information to determine the
Incentive Pool for such Performance Period, the amount the Incentive Pool would have been if the
Committee had used Final Financial Information to determine the Incentive Pool for such Performance
Period and (ii) if the Committee used Final Financial Information to determine the Incentive Pool
for such Performance Period, the amount the Incentive Pool as so determined.



      (x) “Retiring Employee” means any employee whose employment with the Company is being
terminated by reason of retirement if such employee is at such time qualified for benefits under
the Company’s early retirement program.



      (y) “SFAS No. 133” means SFAS No. 133, “Accounting for Derivative Instruments and Hedging
Activities,” as amended (i) by SFAS No. 137, “Accounting for Derivative Instruments and Hedging
Activities – Deferral of the Effective Date of FASB Statement No. 133, an amendment of FASB
Statement No. 133,” (ii) by SFAS No. 138, “Accounting for Certain Derivative Instruments and
Certain Hedging Activities, an amendment of FASB Statement No. 133,” and (iii) from time to time
after the Effective Date.



      (z) “Subsidiary” means any entity that is consolidated with the Company for financial
accounting purposes in accordance with generally accepted accounting principles.



III.

Administration of Plan




      This Plan shall be administered by the Committee. The Committee is authorized to interpret
this Plan and may from time to time adopt such rules and regulations, consistent with the
provisions of this Plan, as it may deem advisable to carry out this Plan. All determinations



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made by the Committee under this Plan, and all interpretations of this Plan by the Committee,
shall be final and binding on all interested parties.




IV.

Determination of Incentive Pool




      (a) The amount of the Incentive Pool for a particular Performance Period shall be equal to:




     (i) 5% of Adjusted Net Income for the Performance Period; plus




     (ii) an amount equal to the revenues or other amounts that have been designated for the
Incentive Pool pursuant to each Participation Agreement; plus




     (iii) the amount of any Deferred Awards forfeited during the Performance Period pursuant to
paragraph (b) of Article VII; plus




     (iv) the amount of any Deferred Incentive Compensation Awards (as defined in the 1993 Plan)
forfeited pursuant to Article VIII of the 1993 Plan after December 31, 2002; plus




     (v) the amount, if any, by which the Redetermined Incentive Pool for the immediately preceding
Performance Period exceeded the aggregate amount of Awards granted with respect to such immediately
preceding Performance Period; minus




     (vi) in the discretion of the Committee, the amount (or any portion thereof) by which the
aggregate amount of Awards granted with respect to any previous Performance Period exceeded the
amount of the Redetermined Incentive Pool for such Performance Period, but only if any such amount
has not previously reduced an Incentive Pool pursuant to this clause (vi).



      (b) As soon as administratively feasible after the end of a Performance Period, the Committee
shall determine the amount of the Incentive Pool with respect to such Performance Period. If the
financial information for such Performance Period is not final at the time that the Committee meets
to determine the amount of the Incentive Pool, the Committee may use the then best available
estimates of such financial information to determine the amount of the Incentive Pool. Such
determination shall be in writing and shall be filed with the appropriate records of the Company.



V.

Grant of Awards




      (a) Subject to Article VIII(a), the aggregate amount of Awards granted to Eligible Employees
with respect to a particular Performance Period shall be equal to the lesser of (i) the amount of
the Incentive Pool for such Performance Period and (ii) an amount recommended by the Chief
Executive Officer of the Company that is no less than 85% of the amount of the Incentive Pool for
such Performance Period.



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      (b) At any time and from time to time after the determination of the Incentive Pool with
respect to a Performance Period and prior to the February 28 following the end of the such
Performance Period, the Committee shall grant Awards to those Eligible Employees that the
Committee, in its discretion, determines should receive Awards. Subject to paragraph (a) above,
the amount of such Awards shall be determined by the Committee in its discretion. The Committee
shall consider the recommendations of the Chief Executive Officer of the Company in making such
determinations.



      (c) Each Award shall be designated as a Current Award or a Deferred Award. An Eligible
Employee may be granted both a Current Award and a Deferred Award with respect to a single
Performance Period.



VI.

Deferred Award Accounts




      (a) The Company shall maintain a separate Deferred Award Account for each employee who has
been granted a Deferred Award under this Plan. If an employee receives more than one Deferred
Award, a separate Deferred Award Account shall be maintained for each Award. An employee’s
Deferred Award Account shall be debited and credited as provided in this Article VI and in Article
VII.



      (b) Promptly after the determination by the Committee of the amount of any Deferred Award to
an Eligible Employee, there shall be credited to the Deferred Award Account of such employee the
amount of such award.



      (c) The balance in each Deferred Award Account shall accrue interest, beginning on the March 1
following the Performance Period for which the related Deferred Award was granted and continuing
for so long as any balance remains in such Deferred Award Account, at the Designated Rate from time
to time in effect. Interest shall be computed on a daily basis using a 365 or 366 day year, as the
case may be, applied to the balance in such Deferred Award Account. Interest shall be credited to
Deferred Award Accounts as of November 30 of each year unless otherwise provided by this Plan.



VII.

Payment of Deferred Awards




      (a) Subject to paragraph (b) below, each Deferred Award shall be paid in four annual
installments, with each installment consisting of 25% of such Deferred Award plus interest credited
to the applicable Deferred Award Account with respect to such amount. The first installment shall
be paid on the next December 1 following the end of the Performance Period with respect to which
the Award was granted (the “First Installment Date”). The second, third and fourth installments
shall be paid on the first, second and third anniversaries, respectively, of the First Installment
Date. The applicable Deferred Award Account shall be debited for all amounts paid pursuant to this
paragraph (a).



      (b) If an employee terminates employment with the Company or any Subsidiary prior to receiving
payment of all Deferred Awards granted to such employee (together with any



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interest credited with respect thereto), the following provisions shall govern the payment or
forfeiture of such amounts:





     (i) Each Grandfathered Employee who voluntary terminates employment or who is involuntarily
terminated other than for Cause shall be vested in the full amount (including interest to the date
of payment) remaining, if any, in all Deferred Award Accounts for such employee at the time of such
employee’s termination of employment.




     (ii) Each Retiring Employee shall be vested in the full amount (including interest to the date
of payment) remaining, if any, in all Deferred Award Accounts at the time of such employee’s
retirement.




     (iii) Unless otherwise expressly provided by the Committee, each employee who (A) is not a
Grandfathered Employee or a Retiring Employee who terminates employment with the Company or any
Subsidiary for any reason other than death or permanent disability or (B) is a Grandfathered
Employee who is involuntarily terminated for Cause shall forfeit any and all Deferred Awards
remaining to be paid to such employee under this Plan and any credited but unpaid interest in any
Deferred Award Account for such employee and such employee shall not be entitled to receive any
further payments under this Plan.




     (iv) If an employee’s employment with the Company or any Subsidiary terminates by reason of
such employee’s death or permanent disability, the Company shall pay to the estate of such employee
or to such employee, as the case may be, the full amount (including interest to the date of payment
of such amount) remaining, if any, in all Deferred Award Accounts for such employee at the time of
such employee’s death or permanent disability. Such payment shall be made within 90 days after the
Company is notified of such employee’s death or permanent disability.




     (v) If a former employee dies while still eligible to receive payment for Deferred Awards, the
Company shall pay to the estate of such former employee the full amount (including interest to the
date of payment of such amount) remaining, if any, in all Deferred Award Accounts for such employee
at the time of such employee’s death. Such payment shall be made within 90 days after the Company
is notified of such employee’s death.




     (vi) A leave of absence authorized by the Company or any Subsidiary shall not be considered a
termination of employment for purposes of this Article VII or the definition of Grandfathered
Employee.




     (vii) All affected Deferred Award accounts shall be debited for all amounts paid or forfeited
pursuant to this paragraph (b).




     (viii) Any amount remaining in any Deferred Award Account for a former employee not forfeited
pursuant to clause (iii) above shall be paid no later than the time that such amount would have
been paid pursuant to paragraph (a) above but may, at the option of the Company, be paid (together
with interest to the date of payment) earlier.



      (c) All amounts (including interest to the date of payment of such amounts) remaining, if any,
in each Deferred Award Account at the time of a Change of Control shall



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(i) automatically vest, (ii) not be subject to forfeiture pursuant to paragraph (b) above and
(iii) be paid to the employee to which each such Deferred Award Account relates at the time of such
Change of Control.




      (d) An employee may provide the Company with a written designation of a beneficiary or
beneficiaries to receive any payments of Awards that would otherwise be paid to such employee’s
estate hereunder. Any such designation may be changed or revoked by written notice to the Company.



VIII.

Duration, Amendment and Termination




      (a) The Board shall have the right to amend this Plan from time to time, to terminate it
entirely or to direct the discontinuance of Awards either temporarily or permanently. The Board
may make any amendment to any outstanding Award that it believes is necessary or helpful to comply
with any applicable law including, without limitation, Section 409A of the Code. However, no
amendment, discontinuance or termination of this Plan shall operate to annul an outstanding Award
unless otherwise provided by the terms of this Plan. The term of this Plan shall be from its
Effective Date until terminated by the Board.



      (b) In furtherance, and not in limitation, of paragraph (a) above, at any time determined by
the Board, this Plan may be restructured by the Board to, among any other alterations or changes
determined by the Board in its sole discretion, (i) alter the eligibility requirements for awards
under such plan, (ii) provide for a Performance Period that is shorter or longer, (iii) change the
provisions regarding the forfeiture of Deferred Awards, (iv) change the definition of Adjusted Net
Income, (v) change the percentage of Adjusted Net Income included in the Incentive Pool or (vi)
provide that less than all of the Incentive Pool must be paid in Awards to Eligible Employees.



      (c) Notwithstanding any provision of this Plan to the contrary, on the date of a Change of
Control (as defined in paragraph (f) of Article II and without regard to Article X), (i) all Plan
bonus obligations accrued to such date on the books of the Company that are not the subject of
previous Awards shall be paid in cash to such employees of the Company and its Subsidiaries, and in
such amounts with respect to each such employee, as the Committee shall determine in its sole
discretion based upon recommendations from the Chief Executive Officer of the Company and (ii) upon
payment of all such Plan obligations, this Plan shall terminate.



IX.

Miscellaneous




      (a) Neither this Plan nor any grant of Awards under this Plan shall confer on any employee the
right to continued employment by the Company or any Subsidiary, or affect in any way the right of
the Company or such Subsidiary to terminate the employment of such employee at any time. Any
question as to whether and when there has been a termination of an employee’s employment and the
cause of such termination shall be determined by the Committee, and its determination shall be
final.



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      (b) Except to the extent set forth herein as to the rights of the estates or beneficiaries of
employees to receive payments, Awards under this Plan are non-assignable and non-transferable and
are not subject to anticipation, adjustment, alienation, encumbrance, garnishment, attachment or
levy of any kind.



      (c) None of the establishment of this Plan, the granting of Awards or the establishment of
Deferred Award Accounts shall be deemed to create a trust. This Plan and all unpaid awards shall
constitute an unfunded, unsecured liability of the Company to make payments in accordance with the
provisions of this Plan, and no person or entity shall have any security or other interest in any
assets of the Company, in any Deferred Award Account or otherwise.



      (d) The existence of this Plan and the Awards granted hereunder shall not affect in any way
the right or power of the Board or the stockholders of the Company to authorize or consummate any
merger or consolidation of the Company, the dissolution or liquidation of the Company or any sale,
lease, exchange or other disposition of all or any part of its assets or business or any other
corporate act or proceeding.



      (e) Neither the officers nor the directors of the Company nor the members of the Committee
shall under any circumstances have any liability with respect to this Plan or its administration
except for gross and intentional malfeasance. The officers and directors of the Company and the
members of the Committee may rely upon opinions of counsel as to all matters, including the
creation, operation and interpretation of this Plan.



      (f) No portion of this Plan shall be effective at any time when such portion violates an
applicable state or federal law, regulation or governmental order or directive which is subject to
sanctions, whether direct or indirect.



X.

Compliance with Code Section 409A



Notwithstanding any provision of this Plan to the contrary, with respect to Awards granted
under this Plan after December 31, 2004, and with respect to Deferred Awards granted under
this Plan prior to January 1, 2005 and Deferred Incentive Compensation Awards granted under
the 1993 Plan, that are subject to Section 409A of the Code, the following provisions shall
apply:




      (a) For purposes of this Plan, the defined term “Change of Control” means a change in
the ownership or effective control of the Company, or in the ownership of a substantial
portion of the assets of the Company, as provided under Section 409A(a)(2)(A)(v) of the
Code and any regulations or other administrative guidance issued thereunder.



      (b) Payment of Deferred Award Accounts may not be accelerated at the option of the
Company as provided in clause (viii) of paragraph (b) of Article VII of this Plan.



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      (c) References in this Plan and in the 1993 Plan to the “permanent disability” of an
employee mean that such employee has become “disabled” within the meaning of Section
409A(a)(2)(C) of the Code.



      (d) The Board may make any amendment to the 1993 Plan or with respect to any Award (as
defined in the 1993 Plan) granted under the 1993 Plan that it believes is necessary or
helpful to comply with any applicable law including, without limitation, Section 409A of
the Code.




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